<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
----------------------
FORM 10-K/A
AMENDMENT NO. 3
(Mark One)
/ / Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
OR
/x/ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from November 1, 1992 to April 30, 1993*
Commission file number 1-5404
PARAMOUNT COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 74-1330475
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
15 Columbus Circle, New York, New York 10023-7780
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-373-8000
----------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $1 par value )
7% Subordinated Debentures, Series A due 2003 ) New York Stock Exchange
7% Subordinated Debentures, Series B due 2003 )
Common Stock Purchase Rights )
----------------------
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes /x/. No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the registrant's voting stock held by
nonaffiliates of the registrant was approximately $6.1 billion at August 23,
1993.**
At August 23, 1993, 118,417,196 shares of the registrant's Common Stock,
$1 par value, were outstanding.
- ----------
* Paramount Communications Inc. has changed its fiscal year end from October
31 to April 30. This transition report is for the six months ended April 30,
1993.
** Calculated by excluding all shares held by executive officers and directors
of registrant without conceding that all such persons are "affiliates" of
registrant for purposes of the Federal securities laws.
================================================================================
<PAGE> 2
1
PARAMOUNT COMMUNICATIONS INC.
The registrant hereby amends the following items, financial statements,
exhibits or other portions of its Transition Report on Form 10-K for the six
months ended April 30, 1993, as set forth in the pages attached hereto:
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 7 is found on pages F-6 through F-14 and Item
8 is found on pages F-4 through F-31, exclusive of pages F-6 through F-14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements--See index to financial statements on Page
F-1.
2. Financial Statement Schedules Index:
Report of Independent Auditors
Schedule I -- Marketable Securities--Other Investments
Schedule II -- Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other
Than Related Parties
Schedule VII -- Guarantees of Securities of Other Issuers
Schedule VIII -- Valuation and Qualifying Accounts
Schedule X -- Supplementary Income Statement Information
Schedules other than those listed above are omitted for the reason
that they are not required or are not applicable, or the required
information is included in the financial statements or in the
notes to financial statements or is not significant.
The above listed financial statement schedules were previously
filed as part of this Transition Report on Form 10-K for the six
months ended April 30, 1993, as amended.
3. Exhibits--
(3)(a) -- Restated Certificate of Incorporation and
Amendments thereto (Incorporated by
reference to Exhibit (4)(i)(A) of Paramount
Communications' post-effective amendment No.
3 to the registration statement on Form S-3
No. 2-83427).
*(3)(b) -- Amended and restated By-laws.
<PAGE> 3
2
(4)(a) -- Instruments with respect to issues of
long-term debt have not been filed as
exhibits to this Annual Report on Form 10-K
as the authorized principal amount on any
one of such issues does not exceed 10% of
the total assets of Paramount Communications
and its subsidiaries on a consolidated
basis. Paramount Communications agrees to
furnish a copy of each such instrument to
the Commission upon request.
(4)(b) -- Shareholder rights agreement dated as of
September 7, 1988, as amended, between
Paramount Communications Inc. and Chemical
Bank, as Rights Agent (Incorporated by
reference to Paramount Communications'
registration statement on Form 8-A dated
September 14, 1988 and to Amendment No. 1 to
Form 8-A on Form 8 dated June 8, 1989,
Amendment No. 2 to Form 8-A on Form 8-A/A
dated September 22, 1993, Amendment No. 3 to
Form 8-A on Form 8-A/A dated November 5,
1993, Amendment No. 4 to Form 8-A on Form
8-A/A dated November 15, 1993, Amendment
No. 5 to Form 8-A on Form 8-A/A dated
January 5, 1994, Amendment No. 6 to Form 8-A
on Form 8-A/A dated January 31, 1994 and
Amendment No. 7 to Form 8-A on Form 8-A/A
dated March 2, 1994).
(10)(i)(a) -- Amended and Restated Agreement and Plan of
Merger, dated as of February 4, 1994,
between Paramount Communications Inc. and
Viacom Inc. (Incorporated by reference to
Exhibit 105 of Amendment No. 34, dated
February 7, 1994, to the Schedule 14D-9
filed by Paramount Communications Inc. with
respect to the tender offer by Viacom
Inc.).
(10)(i)(b) -- Voting Agreement dated as of January 21,
1994, between National Amusements, Inc. and
Paramount Communications Inc. (Incorporated
by reference to Exhibit 81 of Amendment No.
28, dated January 24, 1994, to the Schedule
14D-9 filed by Paramount Communications
Inc. with respect to the tender offer by
Viacom Inc.).
(10)(ii)(A)(1) -- Agreement, dated as of September 9, 1992,
between Paramount Communications and
Stanley R. Jaffe (Incorporated by reference
to Exhibit (10)(ii)(A)(2) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended July 31, 1992).
(10)(ii)(A)(2) -- Agreement, dated as of March 17, 1991,
between Paramount Pictures Corporation
and Stanley R. Jaffe (Incorporated by
reference to Exhibit (10)(ii)(A)(8) of
Paramount Communications' Annual Report on
Form 10-K for the fiscal year ended October
31, 1991).
+(10)(iii)(A)(1) -- Amended and restated agreement, dated as of
October 1, 1985 and restated as of June
23, 1989, between Paramount Communications
and Martin S. Davis (Incorporated by
reference to Exhibit (10)(ii)(A)(1) of
Paramount Communications' Annual Report on
Form 10-K for the fiscal year ended October
31, 1989).
+(10)(iii)(A)(2) -- Amendment dated as of February 11, 1994, to
the Amended and Restated Agreement dated
as of October 1, 1985 and restated as of
June 23, 1989 between Paramount
Communications and Martin S. Davis
(Incorporated by reference to Exhibit
(10)(iii)(A)(1) of Paramount Communications'
Quarterly Report on Form 10-Q for the
quarter ended January 31, 1994).
<PAGE> 4
3
+(10)(iii)(A)(3) -- Agreement, dated as of March 18, 1991,
between Paramount Communications and
Stanley R. Jaffe (Incorporated by reference
to Exhibit (10)(ii)(A)(1) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended April 30, 1991).
+(10)(iii)(A)(4) -- Amendment, dated as of September 9, 1992, to
the Agreement, dated as of March 18,
1991, between Paramount Communications and
Stanley R. Jaffe (Incorporated by reference
to Exhibit (10)(ii)(A)(1) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended July 31, 1992).
+(10)(iii)(A)(5) -- Amended and restated agreement, dated as of
November 17, 1987 and restated as of
June 23, 1989, between Paramount
Communications and Ronald L. Nelson
(Incorporated by reference to Exhibit
(10)(ii)(A)(2) of Paramount Communications'
Quarterly Report on Form 10-Q for the
quarter ended January 31, 1990).
+(10)(iii)(A)(6) -- Amendment, dated as of December 21, 1992, to
the amended and restated agreement,
dated as of November 17, 1987 and restated
as of June 23, 1989, between Paramount
Communications and Ronald L. Nelson
(Incorporated by reference to Exhibit
(10)(iii)(A)(5) of Paramount Communications'
Annual Report on Form 10-K for the fiscal
year ended October 31, 1992).
+(10)(iii)(A)(7) -- Agreement, dated as of January 12, 1993,
between Paramount Communications and
Ronald L. Nelson (Incorporated by reference
to Exhibit (10)(iii)(A)(1) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended January 31,
1993).
+(10)(iii)(A)(8) -- Amendment dated as of February 11, 1994, to
the Agreement dated as of January 12,
1993 between Paramount Communications and
Ronald L. Nelson (Incorporated by reference
to Exhibit (10)(iii)(A)(2) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended January 31,
1994).
+(10)(iii)(A)(9) -- Amended and restated agreement, dated as of
October 1, 1985 and restated as of June
23, 1989, between Paramount Communications
and Donald Oresman (Incorporated by
reference to Exhibit (10)(ii)(A)(1) of
Paramount Communications' Quarterly Report
on Form 10-Q for the quarter ended January
31, 1990).
+(10)(iii)(A)(10) -- Amendment dated as of February 11, 1994, to
the Amended and Restated Agreement dated
as of October 1, 1985 and restated as of
June 23, 1989 between Paramount
Communications and Donald Oresman
(Incorporated by reference to Exhibit
(10)(iii)(A)(3) of Paramount Communications'
Quarterly Report on Form 10-Q for the
quarter ended January 31, 1994).
<PAGE> 5
4
+(10)(iii)(A)(11) -- Agreement, dated as of September 10, 1992,
between Paramount Communications and
Earl H. Doppelt (Incorporated by reference
to Exhibit (10)(iii)(A)(7) of Paramount
Communications' Annual Report on Form 10-K
for the fiscal year ended October 31, 1992).
+(10)(iii)(A)(12) -- Agreement, dated as of September 10, 1992,
between Paramount Communications and
Rudolph L. Hertlein (Incorporated by
reference to Exhibit (10)(iii)(A)(8) of
Paramount Communications' Annual Report on
Form 10-K for the fiscal year ended October
31, 1992).
+(10)(iii)(A)(13) -- Agreement, dated as of June 2, 1989, between
Paramount Communications and Lawrence E.
Levinson (Incorporated by reference to
Exhibit (10)(ii)(A)(1) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended July 31, 1989).
+(10)(iii)(A)(14) -- Agreement, dated as of June 2, 1989, between
Paramount Communications and Eugene I.
Meyers (Incorporated by reference to Exhibit
(10)(ii)(A)(2) of Paramount Communications'
Quarterly Report on Form 10-Q for the
quarter ended July 31, 1989).
+(10)(iii)(A)(15) -- Agreement, dated as of February 25, 1992,
between Paramount Communications and
Jerry Sherman (Incorporated by reference to
Exhibit (10)(ii)(A)(1) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended January 31,
1992).
+(10)(iii)(A)(16) -- Agreement, dated April 5, 1993, between
Paramount Communications and Robert
Greenberg (Incorporated by reference to
Exhibit (10)(iii)(A)(1) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended April 30, 1993).
+(10)(iii)(A)(17) -- 1992 Stock Option Plan (the "1992 Plan")
(Incorporated by reference to Exhibit I of
Paramount Communications' Proxy Statement
dated January 27, 1992 for the 1992 Annual
Meeting of Stockholders).
+(10)(iii)(A)(18) -- 1989 Stock Option Plan, as amended (the "1989
Plan") (Incorporated by reference to
Exhibit (10)(iii)(A)(2) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended April 30, 1992).
+(10)(iii)(A)(18)(a) -- Form of Stock Option Agreement pursuant to
the 1989 Plan--Incentive Stock Option
(Incorporated by reference to Exhibit
(10)(iii)(A)(1)(a) of Paramount
Communications' Annual Report on Form 10-K
for the fiscal year ended October 31, 1989).
+(10)(iii)(A)(18)(b) -- Form of Stock Option Agreement pursuant to
the 1989 Plan--Nonqualified Stock Option
(Incorporated by reference to Exhibit
(10)(iii)(A)(1)(b) of Paramount
Communications' Annual Report on Form 10-K
for the fiscal year ended October 31, 1989).
<PAGE> 6
5
+(10)(iii)(A)(19) -- 1984 Stock Option Plan, as amended (the "1984
Plan") (Incorporated by reference to
Exhibit (10)(iii)(A)(1) of Paramount
Communications' Quarterly Report on Form
10-Q for the quarter ended April 30, 1992).
+(10)(iii)(A)(19)(a) -- Form of Stock Option Agreement pursuant to
the 1984 Plan--Incentive Stock Option
(Incorporated by reference to Exhibit
(10)(iii)(A)(1)(a) of Paramount
Communications' Annual Report on Form 10-K
for the three months ended October 31,
1985).
+(10)(iii)(A)(19)(b) -- Form of Stock Option Agreement pursuant to
the 1984 Plan--Incentive Stock Option
with a Stock Appreciation Right
(Incorporated by reference to Exhibit
(10)(iii)(A)(1)(b) of Paramount
Communications' Annual Report on Form 10-K
for the three months ended October 31,
1985).
+(10)(iii)(A)(19)(c) -- Form of Stock Option Agreement pursuant to
the 1984 Plan--Nonqualified Stock Option
(Incorporated by reference to Exhibit
(10)(iii)(A)(1)(c) of Paramount
Communications' Annual Report on Form 10-K
for the three months ended October 31,
1985).
+(10)(iii)(A)(19)(d) -- Form of Stock Option Agreement pursuant to
the 1984 Plan--Nonqualified Stock Option
with a Stock Appreciation Right
(Incorporated by reference to Exhibit
(10)(iii)(A)(1)(d) of Paramount
Communications' Annual Report on Form 10-K
for the three months ended October 31,
1985).
+(10)(iii)(A)(20) -- 1973 Key Employees Stock Purchase Plan
(Incorporated by reference to Exhibit
(10)(c)(i) of Paramount Communications'
Annual Report on Form 10-K for the fiscal
year ended July 31, 1981).
+(10)(iii)(A)(21) -- Amended and Restated Supplemental Executive
Retirement Plan (Incorporated by
reference to Exhibit (10)(iii)(A)(1) of
Paramount Communications' Quarterly Report
on Form 10-Q for the quarter ended July 31,
1992).
+(10)(iii)(A)(22) -- Deferred Compensation Plan for Board of
Directors (Incorporated by reference to
Exhibit (10)(iii)(A)(6) of Paramount
Communications' Annual Report on Form 10-K
for the fiscal year ended July 31, 1984).
+(10)(iii)(A)(23) -- Long-Term Performance Plan, as amended
(Incorporated by reference to Exhibit
(10)(iii)(A)(6) of Paramount Communications'
Annual Report on Form 10-K for the fiscal
year ended October 31, 1989).
+(10)(iii)(A)(24) -- Corporate Annual Performance Plan, as amended
(Incorporated by reference to Exhibit
(10)(iii)(A)(7) of Paramount Communications'
Annual Report on Form 10-K for the fiscal
year ended October 31, 1989).
+(10)(iii)(A)(25) -- Retirement Plan for non-employee directors
(Incorporated by reference to Exhibit
(10)(iii)(A)(1) of Paramount Communications'
Quarterly Report on Form 10-Q for the
quarter ended January 31, 1990).
<PAGE> 7
6
+(10)(iii)(A)(26) -- Non-qualified retirement plan (Incorporated
by reference to Exhibit (10)(iii)(A)(1)
of Paramount Communications' Quarterly
Report on Form 10-Q for the quarter ended
April 30, 1991).
*(11) -- Computation of Earnings (Loss) per Share.
*(22) -- List of Subsidiaries.
**(24) -- Consent of Ernst & Young.
*(25) -- Powers of Attorney.
(b) Registrant filed no reports on Form 8-K during the period covered by
this report.
- -------------
* These exhibits were previously filed as part of this Transition Report on
Form 10-K for the six months ended April 30, 1993, as amended.
** Filed herewith.
+ This exhibit constitutes a management contract or compensatory plan or
arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
PARAMOUNT COMMUNICATIONS INC.
Date: March 21, 1994 By /s/: RUDOLPH L. HERTLEIN
-----------------------------------
Rudolph L. Hertlein
Senior Vice President and
Controller
<PAGE> 8
F-1
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS F-2
SELECTED FINANCIAL DATA F-3
CONSOLIDATED STATEMENT OF EARNINGS F-4
FINANCIAL REPORTING BY
BUSINESS SEGMENTS --
REVENUES AND OPERATING
INCOME (LOSS) F-5
MANAGEMENT'S DISCUSSION AND
ANALYSIS F-6
CONSOLIDATED BALANCE SHEET F-15
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS'
EQUITY F-16
CONSOLIDATED STATEMENT OF
CASH FLOWS F-17
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS F-18
<PAGE> 9
F-2
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Paramount Communications Inc.
We have audited the accompanying consolidated balance sheet of Paramount
Communications Inc. as of April 30, 1993 and October 31, 1992 and 1991, and the
related consolidated statements of earnings, changes in stockholders' equity,
and cash flows for the six-month period ended April 30, 1993 and for each of
the three years in the period ended October 31, 1992. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Paramount
Communications Inc. at April 30, 1993 and October 31, 1992 and 1991, and the
consolidated results of its operations and its cash flows for the six-month
period ended April 30, 1993 and for each of the three years in the period ended
October 31, 1992 in conformity with generally accepted accounting principles.
As discussed in Notes A and J, in the six-month period ended April 30,
1993, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." As discussed in Notes A and I, effective May 1, 1993, the Company
adopted SFAS No. 109, "Accounting for Income Taxes."
Ernst & Young
New York, New York
August 27, 1993,
except for Notes A and I, as to which the date is
September 10, 1993
<PAGE> 10
F-3
SELECTED FINANCIAL DATA
The table below summarizes recent financial information for Paramount
Communications. For further information, refer to the audited financial
statements and the notes thereto contained elsewhere herein.
<TABLE>
<CAPTION>
Six Months Ended or at April 30 Year Ended or at October 31
------------------------------- ---------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
(Dollar amounts in millions, except per share)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,898.1 $1,998.5 $4,264.9 $3,895.4 $3,869.0 $3,391.6 $3,055.9
Earnings (loss) from continuing
operations before income taxes (16.8) 68.7 397.3 179.7 381.0 19.1 268.7
Earnings (loss) from continuing
operations before extraordinary
item and cumulative effect of
accounting changes (9.1) 48.7 274.2 127.6 264.4 17.3 152.8
Discontinued operations 1,453.9 231.9
Extraordinary item (8.8)
Cumulative effect of accounting
changes (66.9) (56.5)
Net earnings (loss) (76.0) 48.7 265.4 127.6 264.4 1,414.7 384.7
Earnings (loss) per share
Earnings (loss) from continuing
operations before extraordinary
item and cumulative effect of
accounting changes (.08) .41 2.31 1.08 2.20 .14 1.27
Discontinued operations 12.12 1.94
Extraordinary item (.08)
Cumulative effect of accounting
changes (.57) (.48)
Net earnings (loss) (.65) .41 2.23 1.08 2.20 11.78 3.21
Cash dividends declared per common
share .40 .375 .775 .70 .70 .70 .675
Working capital 1,461.6 1,864.8 2,141.8 2,119.0 2,787.3 1,066.4
Total assets 6,874.8 7,057.0 6,654.7 6,541.0 7,060.0 5,378.1
Current maturities of long-term debt 109.8 10.0 198.3 21.7 20.6 117.2
Long-term debt, net of current
maturities 707.3 812.1 519.9 712.1 723.8 1,390.3
Stockholders' equity 3,902.1 4,015.5 3,854.8 3,783.8 3,666.8 2,266.2
Book value per common share 33.01 34.19 32.73 32.24 30.56 19.50
Capital expenditures (including
capitalized leases) 55.9 120.0 172.9 187.9 94.2 64.8
Number of common stockholders 26,000 26,000 29,000 30,000 30,000 31,000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Reference is made to Note A to the consolidated financial statements for a
description of the accounting changes.
<PAGE> 11
F-4
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Six Months Ended April 30 Year Ended October 31
-------------------------- ------------------------------
1993 1992 1992 1991 1990
- ----------------------------------------------------------------------------------------------
(Unaudited)
(In millions, except per share)
<S> <C> <C> <C> <C> <C>
REVENUES $1,898.1 $1,998.5 $4,264.9 $3,895.4 $3,869.0
Cost of goods sold 1,286.8 1,383.1 2,739.8 2,638.7 2,542.6
Selling, general and
administrative expenses 621.4 537.6 1,129.0 1,098.9 1,022.2
- ----------------------------------------------------------------------------------------------
1,908.2 1,920.7 3,868.8 3,737.6 3,564.8
- ----------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) (10.1) 77.8 396.1 157.8 304.2
Other income (expense) -- Note C (3.7) (6.6) (6.6) 0.1 (2.0)
Interest and other investment
income (expense)
-- net -- Note K
Interest expense (47.9) (59.8) (113.8) (112.0) (123.9)
Interest and other investment
income 44.9 57.3 121.6 133.8 202.7
- ----------------------------------------------------------------------------------------------
(3.0) (2.5) 7.8 21.8 78.8
- ----------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES (16.8) 68.7 397.3 179.7 381.0
Provision (benefit) for income taxes
-- Notes A and I (7.7) 20.0 123.1 52.1 116.6
- ----------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (9.1) 48.7 274.2 127.6 264.4
Extraordinary item -- Note D (8.8)
Cumulative effect of accounting
change -- Note A (66.9)
- ----------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $(76.0) $48.7 $265.4 $127.6 $264.4
- ----------------------------------------------------------------------------------------------
Average common and common equivalent
shares outstanding -- Note A 118.8 119.0 119.2 118.5 120.1
Earnings (loss) per share -- Note A
Earnings (loss) before
extraordinary item and cumulative
effect of accounting change $(.08) $.41 $2.31 $1.08 $2.20
Net earnings (loss) (.65) .41 2.23 1.08 2.20
- ----------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 12
F-5
FINANCIAL REPORTING BY BUSINESS SEGMENTS
A summary description of the Company's business segments is as follows. See
Note M for additional disclosures related to business segments.
ENTERTAINMENT
Produces, finances and distributes motion pictures, television programming and
prerecorded videocassettes and operates motion picture theaters, independent
television stations, sports and entertainment facilities and regional theme
parks.
PUBLISHING
Publishes and distributes hardcover and paperback books, educational textbooks
and materials, and provides information services for business and professions.
REVENUES AND OPERATING INCOME (LOSS)
<TABLE>
<CAPTION>
Revenues
------------------------------------------------------------
Six Months Ended April 30 Year Ended October 31
------------------------- ---------------------------
1993 1992 1992 1991 1990
- ----------------------------------------------------------------------------------
(Unaudited)
(In millions)
<S> <C> <C> <C> <C> <C>
Business Segments
Entertainment $1,280.8 $1,408.3 $2,657.4 $2,380.2 $2,446.7
Publishing 617.3 590.2 1,607.5 1,515.2 1,422.3
- ----------------------------------------------------------------------------------
Total $1,898.1 $1,998.5 $4,264.9 $3,895.4 $3,869.0
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss)
------------------------------------------------------------
Six Months Ended April 30 Year Ended October 31
------------------------- ---------------------------
1993 1992 1992 1991 1990
- ----------------------------------------------------------------------------------
(Unaudited)
(In millions)
<S> <C> <C> <C> <C> <C>
Business Segments
Entertainment $121.9 $164.9 $279.6 $66.2 $212.5
Publishing (90.9) (55.0) 182.0 156.2 155.5
- ----------------------------------------------------------------------------------
Total 31.0 109.9 461.6 222.4 368.0
Corporate Expenses (41.1) (32.1) (65.5) (64.6) (63.8)
- ----------------------------------------------------------------------------------
$(10.1) $77.8 $396.1 $157.8 $304.2
- ----------------------------------------------------------------------------------
</TABLE>
During the six months ended April 30, 1993, the Company recorded a $35-million
and a $5-million charge, respectively, against Publishing's operating loss and
Corporate Expenses and during the year ended October 31, 1991, recorded a
$52-million charge against Entertainment's operating income. For further
details related to these charges see Management's Discussion and Analysis.
Revenues by business segment include revenues that are directly associated with
a particular segment. Revenues between business segments (amounts are
insignificant), which are accounted for on substantially the same basis as
revenues from unaffiliated customers, have been eliminated. No single customer
accounts for 10% or more of consolidated revenues.
Export sales to unaffiliated customers were $290.7, $336.4 (unaudited), $606.8,
$690.7 and $609.2 million, respectively, for the six months ended April 30,
1993 and 1992 and the years ended October 31, 1992, 1991 and 1990. These sales
were principally made in Europe, Asia and Canada.
<PAGE> 13
F-6
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
ENTERTAINMENT
SIX MONTHS 1993 VERSUS 1992
Revenues decreased 9% to $1,280.8 million from $1,408.3 million and operating
income decreased 26% for the six months ended April 30, 1993, compared with the
same prior-year period.
Features
Revenues from features product decreased 28% in the six months ended April 30,
1993, to $503.3 million from $696.5 million. The theatrical revenue component
of features declined 48% principally because of the release of fewer successful
pictures. Home video revenues decreased 29% in the current-year period despite
strong contributions from the domestic and foreign videocassette sales of
Patriot Games, Star Trek VI: The Undiscovered Country and Boomerang, and the
continued international success of Ghost. Pay cable revenues decreased 24% in
the current six- month period because strong contributions from the
availability of The Addams Family, Star Trek VI: The Undiscovered Country and
Wayne's World were more than offset by the absence of recognition of additional
license fees recorded in the prior-year six-month period for films made
available in prior periods. Revenues from network features rose 61% because of
the availability of more successful titles.
Features operating income decreased 94% in the current six-month period
compared with the same prior-year period. Theatrical results declined
primarily because of the release of fewer profitable pictures. Theatrical
results included higher feature write-downs, primarily related to the releases
of Leap of Faith, Jennifer Eight and The Temp, which more than offset
contributions from the international box office performances of Patriot Games
and Boomerang. Theatrical results also decreased in the current period due to
the absence of recognition of a one-time payment received in the prior-year
period in connection with the signing of a long-term film processing agreement,
and from higher scenario reserves. Home video operations registered lower
profits and pay cable results decreased in the current-year period primarily
because of the decline in revenues described above. Operating income from
network features rose primarily because of the increase in revenues. Income
from domestic and international features syndication increased in the
current-year period because of 30% higher revenues along with a more profitable
mix of titles.
Television
Television programming revenues increased 8%, to $345.7 million in the six
months ended April 30, 1993, compared with $319.2 million for the same
prior-year period. Revenues from the network series decreased 14% despite
higher syndication sales of Cheers. Revenues from first-run series were up
19%; higher sales of Star Trek: The Next Generation, Entertainment Tonight and
Hard Copy, along with contributions from Star Trek: Deep Space Nine, were
partially offset by lower revenues from The Arsenio Hall Show.
Television programming results increased significantly, posting an operating
profit in the current-year period compared with an operating loss in the same
prior-year period. Profits from network series rose because of the
aforementioned higher revenues from Cheers and the domestic licensing of Wings
to USA Network. Income from first-run syndication increased, generated by the
higher revenues previously noted. In addition, the current-year period
reflects higher income from library products, principally Star Trek, as well as
from television movies-of- the-week.
Station and Network
Operating results at the Station and Network group declined 22% in the six
months ended April 30, 1993. Paramount Stations Group registered higher
profits, principally due to an 11% increase in revenues, to $82.9 million from
$74.8 million resulting from higher advertising sales. At USA Networks
(jointly owned with MCA Inc.), operating income declined primarily because of
start-up costs incurred for the Sci-Fi Channel.
Theaters
Theatrical exhibition revenues decreased 12% in the current-year period, to
$95.7 million from $108.3 million. International theater operations recorded
higher revenue primarily because of increased attendance levels, principally
from operations in Europe. Revenues at Famous Players, the Company's Canadian
chain, declined 16% in the current six-month period. At Cinamerica, the
Company's 50%-owned domestic theater operation (jointly owned with Time Warner
Inc.), results for the six months equaled the prior year. Theatrical
exhibition operating income rose 28%, primarily because of the increase in
revenues and profitability from international theater operations.
<PAGE> 14
F-7
MANAGEMENT'S DISCUSSION AND ANALYSIS
Madison Square Garden
Revenues for Madison Square Garden increased 9% in the current-year period, to
$203.4 million from $185.8 million. The sports teams registered increased
revenues of 6%, as higher ticket sales and National Basketball Association
licensing and promotion revenues for the Knickerbockers were partially offset
by lower revenues from the Rangers, where the absence of playoff income and the
absence of league expansion revenues recorded in the prior-year period more
than offset higher regular season ticket sales. The current period also
included higher revenue from live entertainment events in the Arena as well as
increased boxing telecast revenues and MSG Network affiliate sales.
Operating income decreased 12% in the current-year period, primarily due to
lower results from the Rangers resulting from the decrease in revenues and
higher team compensation. Results at MSG Network declined, as the increase in
sales was more than offset by higher programming and operating expenses. These
results were partially offset by higher income from the Knickerbockers and
lower operating expenses.
Paramount Parks
Results for the current period include modest seasonal losses from Paramount
Parks, the Company's theme park operations, which were acquired in the fourth
quarter of fiscal 1992. Paramount Parks' operating season began in late March
1993.
FISCAL 1992 VERSUS FISCAL 1991
Revenues increased 12% to $2,657.4 million from $2,380.2 million and operating
income increased 322% in fiscal 1992 compared with fiscal 1991. Results for
the prior year included a $52-million charge, the majority of which was related
to a provision for write-downs of certain motion picture and television
development commitments and entertainment reorganization costs.
Features
Revenues from features increased 6% to $1,259.4 million in the year ended
October 31, 1992 from $1,190.3 million in the prior year. The theatrical
revenue component of features declined 3% from those achieved in the comparable
prior-year period, despite the strong domestic box office performance of
Wayne's World, The Addams Family, Star Trek VI: The Undiscovered Country and
Patriot Games, as well as the success of The Naked Gun 2 1/2: The Smell of Fear
in foreign markets. Home video revenues in the current year equaled the prior
year, benefiting from the release of Wayne's World and The Addams Family in the
domestic videocassette market, sales of Ghost in the international
videocassette market and The Naked Gun 2 1/2: The Smell of Fear in the domestic
and foreign markets. Pay cable revenues increased 42% in fiscal 1992
principally because of the recognition of additional license fees for films
made available in prior periods. Revenues from network features rose 14% in the
current year, led by the availability of Indiana Jones and the Last Crusade.
Features recorded operating income in fiscal 1992 compared with an operating
loss in fiscal 1991. Theatrical results for the current year increased
significantly from those achieved in the prior year, primarily attributable to
lower feature write-downs, the contributions from the performances of the above
mentioned pictures, as well as lower scenario reserves and a one-time payment
received in connection with the signing of a long-term film processing
agreement. Home video operations registered higher profits in the current
year, benefiting from the profitability of the aforementioned releases. Pay
cable profitability increased significantly because of the higher revenues
described above. Operating income from network features increased slightly in
the current year on the increase in revenues. Domestic and international
features syndication posted increased profits over the prior year because of
26% higher revenues on titles available for showing.
Television
Television programming revenues increased 13% to $655.0 million in fiscal 1992
from $578.5 million in the prior-year. Revenues from first-run syndication
increased 20%, as higher sales from Star Trek: The Next Generation,
Entertainment Tonight, Hard Copy and The Maury Povich Show were partially
offset by lower sales from Geraldo and The Arsenio Hall Show. Revenues from
network series approximated the prior year. Television product also benefited
from increased syndication and licensing revenues from library products,
principally Star Trek.
Television programming profits were up 87% in fiscal 1992 from the prior year,
led by the increases in revenues from first-run syndication and library
products. These results were partially offset by a decline in income from
network series, reflecting lower Cheers syndication renewal sales and increased
investments in new programming.
<PAGE> 15
F-8
MANAGEMENT'S DISCUSSION AND ANALYSIS
Station and Network
Operating income at the Station and Network group rose 6% in fiscal 1992
compared to the prior year. Paramount Stations Group registered lower profits,
primarily stemming from higher programming costs occasioned by the use of more
conservative film amortization assumptions, which were partially offset by a 7%
increase in revenues, to $157.2 million from $147.1 million resulting from
higher advertising sales. Profits were higher at USA Networks because of
increased revenues at USA Network, primarily due to higher advertising and
affiliate revenues, which were partially offset by start-up costs incurred for
the Sci-Fi Channel.
Theaters
Theatrical exhibition revenues decreased 2%, from $196.7 million in fiscal 1991
to $192.7 million in fiscal 1992, stemming principally from lower attendance
levels. Operating income declined 5%, primarily because of lower results at
Cinamerica stemming principally from the decreased attendance levels.
Additionally, results at Famous Players declined slightly. These results were
partially offset by higher profits at international theater operations which
benefited from continued circuit expansion, higher average admission and
concession prices and increased attendance levels.
Madison Square Garden
Revenues for Madison Square Garden increased by 28% in fiscal 1992, to $288.9
million from $225.6 million in fiscal 1991. The sports teams registered
increased revenues of 26% because of higher ticket sales, additional playoff
games, National Hockey League expansion revenues and National Basketball
Association licensing and promotional revenues. Fiscal 1992 also included
higher revenue from live entertainment events at The Paramount, higher suite
license and concession revenues, improved revenues from SRO/Pace, increased MSG
Network affiliate and advertising sales and revenues from the Democratic
National Convention.
Madison Square Garden registered operating income in fiscal 1992 compared with
an operating loss in fiscal 1991. Results for the Knickerbockers were up
primarily because of increased revenues, which were partially offset by higher
operating expenses. The Rangers registered lower profits; increased team
compensation and higher operating expenses more than offset the increase in
revenues. Results at MSG Network benefited from the increase in sales, which
were partially offset by increases in programming and production costs. In
addition to the increased profits arising from the other higher revenues
described above, Madison Square Garden's results for fiscal 1992 include lower
operating expenses.
Paramount Parks
Operating results for the current year reflect contributions from Kings
Entertainment Company and Kings Island Company, later renamed Paramount Parks,
which were acquired in August and October 1992, respectively.
FISCAL 1991 VERSUS FISCAL 1990
Revenues decreased 3% to $2,380.2 million from $2,446.7 million and operating
income decreased 69% in fiscal 1991 compared with fiscal 1990. Results for
fiscal 1991 included the $52-million charge described above.
Features
Revenues from features decreased 11%, to $1,190.3 million in the year ended
October 31, 1991 from $1,330.2 million in the prior year. Theatrical revenues
for fiscal 1991 decreased 17% from those achieved in the prior year because of
a less successful product flow, despite the international box office
performance and continued domestic success of Ghost and the release of The
Naked Gun 2 1/2: The Smell of Fear in domestic and foreign theatrical markets.
Home video revenues rose 5%, benefiting from strong videocassette sales of
Ghost, The Hunt for Red October and Another 48 HRS. in both domestic and
foreign markets. Pay cable revenues decreased 20%, domestic and international
features syndication revenues fell 29% and sales of features to network
television declined 28% because of the mix of available titles in fiscal 1991.
Features incurred operating losses in fiscal 1991 compared with operating
income in fiscal 1990. Theatrical results for fiscal 1991 decreased from those
achieved in the prior year because of lower revenues combined with an increase
in feature write-downs, primarily related to the release of Flight of the
Intruder, Frankie and Johnny, Almost an Angel, The Butcher's Wife and The
Godfather Part III. However, theatrical results benefited from lower scenario
reserves. Home video operations registered higher profits due to the increased
revenues. Pay cable and domestic and international features syndication
profits decreased due to the lower revenues and lower average profit rates of
titles available for showing. Operating income
<PAGE> 16
F-9
MANAGEMENT'S DISCUSSION AND ANALYSIS
from network features declined in the current year because of the decrease in
revenues. Results also include expenses related to a direct satellite
pay-per-view service, in which the Company had an investment in fiscal 1991.
Television
Revenues from television product declined 6% to $578.5 million in fiscal 1991
from $615.9 in the prior-year principally because of lower syndication sales of
library product. Network series revenues increased 8%, as strong gains from
the renewal of Cheers in syndication markets were partially offset by lower
sales from MacGyver. In first-run syndication, revenues decreased 6% as higher
sales from Entertainment Tonight and Star Trek: The Next Generation were more
than offset by lower revenues from Geraldo and The Arsenio Hall Show.
Operating income from television product fell 58% principally because of the
decline in syndication sales and profitability of library products along with
lower income from Dear John and MacGyver.
Station and Network
Station and Network group results rose 72% in fiscal 1991 compared to the prior
year. Fiscal 1991 results reflect the consolidation of a full twelve months of
operations versus six months in the prior year of the Paramount Stations Group
(formerly TVX Broadcast Group Inc.), which was carried on an equity basis prior
to May 1990. Profits at USA Network rose because of an increase in sales,
which was primarily due to higher advertising and affiliate revenues, and
settlement of outstanding litigation.
Theaters
Theatrical exhibition revenues decreased 6%, to $196.7 million from $208.6
million in fiscal 1990. Revenues at Famous Players declined 11% primarily
because of lower attendance levels and average admission prices. International
theater operations posted 13% lower revenues despite the continued expansion of
operations in the United Kingdom. Operating income decreased 18%. Results at
Famous Players declined primarily because of lower revenues partially offset by
lower film rental costs. Operating income from international theater
operations declined because of the absence of gains recorded in the prior year
on the sale of theater interests as well as operating losses in the current
year attributable to the start-up of operations in Germany, partially offset by
contributions from the aforementioned expansion in the United Kingdom.
Cinamerica recorded increased profits because of higher average admission and
concession prices, lower film rental and operating costs and a gain on the sale
of theaters.
Madison Square Garden
Revenues for Madison Square Garden increased by 20% in fiscal 1991, to $225.6
million from $188.0 million in fiscal 1990. MSG Network revenues increased as
affiliate and advertising sales rose in fiscal 1991. Revenues for the
Knickerbockers increased 5% as higher broadcast revenues and ticket sales were
partially offset by the absence of league expansion revenues recorded in the
prior year. The Rangers posted 19% higher revenues, primarily because of
increased league expansion revenues and ticket sales. Madison Square Garden's
results also include higher suite license revenues.
Madison Square Garden experienced an operating loss in fiscal 1991 compared
with operating income in fiscal 1990. Higher revenues at MSG Network were more
than offset by higher programming and operating costs. The Knickerbockers
registered lower profits; increased team compensation, higher operating
expenses and lower playoff income were partially offset by the increase in
revenues. The Rangers posted improved profits, as higher revenues were
partially offset by increased team compensation, higher operating expenses and
lower playoff income. Fiscal 1991 operating results were negatively impacted
by lower results from SRO/Pace, pre-opening advertising and promotional
expenses for the renovated Madison Square Garden facility and higher operating
expenses.
PUBLISHING
SIX MONTHS 1993 VERSUS 1992
Revenues for publishing operations rose 5% to $617.3 million in the current
period compared with $590.2 million in the prior-year period. Publishing
operations, which traditionally record profits in the quarters ended July 31
and October 31, posted 65% higher operating losses for the six months ended
April 30, 1993, compared with the prior-year period. The current-year period
includes a $35-million charge, related to the write-down of certain real estate
sites, expected to be sold, to fair value and relocation costs for several
operating sites.
<PAGE> 17
F-10
MANAGEMENT'S DISCUSSION AND ANALYSIS
Consumer
Revenues increased 7% in the current-year period to $178.2 million from $167.0
million in the prior year; stronger frontlist and backlist sales of hardcover
titles and increased international sales along with increased frontlist
paperback sales, were partially offset by lower sales of children's books and
backlist sales of certain reference books.
Consumer publishing posted higher operating results in the current-year period
as increased revenues were partially offset by increased product support and
development and operating expenses.
Business, Technical and Professional
Revenues of $154.5 million increased 6% from $145.1 million in the prior-year
period as higher sales of computer titles, multimedia programs and medical
publications were partially offset by lower tax software and professional
service revenues.
Operating income approximated the comparable year-earlier period as improved
revenues were partially offset by increased product support and development and
operating expenses.
Education
Revenues rose slightly in the current-year period to $226.2 million from $224.9
million in the prior-year period. Elementary education revenues declined 3%
from $74.4 million to $71.8 million as lower sales of prior years' programs and
fewer new product releases were partially offset by increased sales of computer
learning stations. At secondary education, revenues were flat as higher sales
from social studies programs were more than offset by decreased sales in
mathematics, science and language arts programs. Higher education revenues
rose by 3% to $133.8 million in the current-year period from $129.7 million in
the prior-year period because of increased sales of vocational books, from the
success of new editions, and frontlist sales of college texts.
Operating losses increased 25% in the current-year period primarily because of
increased seasonal operating losses at the elementary and secondary education
groups. The slight improvement in education group revenues was more than
offset by increased product support expenses, primarily due to the acceleration
of promotional spending for elementary programs and increased state adoption
opportunities for secondary programs, along with higher product development and
operating expenses.
International
Revenues of $68.0 million improved 8% from $63.2 million in the prior-year
period from sales gains at all units, led by Asia, Canada, Mexico and Japan.
Operating income declined slightly despite the increased revenues, due to
higher expenses.
Additionally, overall publishing operations benefited from lower corporate
administrative expenses.
FISCAL 1992 VERSUS FISCAL 1991
Revenues increased 6% to $1,607.5 million in fiscal 1992 compared with $1,515.2
million in fiscal 1991, while operating income rose 17%.
Consumer
Revenues of $387.2 million increased 6% from $364.1 million in fiscal 1991
primarily because of a stronger publishing program of paperback books which
resulted in higher sales of initial releases and reorders, combined with
stronger frontlist and reorder sales and a greater number of bestsellers for
hardcover titles and higher sales of certain reference titles.
Operating income rose 108% primarily because of the increased revenues.
Business, Technical and Professional
Revenues rose 29% to $320.1 million in fiscal 1992 from $247.4 million in
fiscal 1991 primarily because of contributions from recently acquired Prentice
Hall Computer Publishing.
Operating income increased by 166% because of the higher revenues.
Education
Revenues for fiscal 1992 of $760.5 million were 2% lower compared with fiscal
1991. Elementary education group revenues declined by 9% to $328.3 million
from $362.3 million in fiscal 1991 as decreased sales of textbooks, principally
due to fewer adoption opportunities, reduced funding at the local and state
levels and lower sales of prior years'
<PAGE> 18
F-11
MANAGEMENT'S DISCUSSION AND ANALYSIS
programs, as well as reduced sales from educational film and video products,
were partially offset by sales increases on volume growth of learning stations
and increased frontlist sales of workbooks and kits. Secondary education
revenues decreased by 2% to $133.4 million in the current year principally due
to fewer adoption opportunities. Revenues of $298.8 million at higher
education rose 6% in the current year from $280.9 million in fiscal 1991
because of strong sales gains from college books, reflecting the effect of
volume improvements, and vocational publications.
Operating income increased 5% as decreased revenues were more than offset by
lower product support and operating expenses, despite expansion costs incurred
in anticipation of planned growth at Computer Curriculum Corporation.
International
Revenues improved by 12% in the current year to $154.9 million from $138.7
million in the prior year primarily because of sales gains from acquired
Prentice Hall Computer Publishing titles as well as volume improvements of
locally produced products.
Operating income rose by 20% as improved revenues were partially offset by
increased product support and development and operating expenses incurred
primarily to service and promote the acquired Prentice Hall Computer Publishing
products.
Additionally, overall publishing operations reflect higher corporate
administrative expenses.
FISCAL 1991 VERSUS FISCAL 1990
Revenues improved by 7% to $1,515.2 million from $1,422.3 million in fiscal
1990, while operating income increased slightly in fiscal 1991 compared with
fiscal 1990.
Consumer
Revenues of $364.1 million increased 7% from $340.0 million in fiscal 1990
because of higher sales of paperback reorders and initial releases and a strong
frontlist performance of hardcover titles.
Operating income decreased by 21% as higher sales were more than offset by a
corresponding increase in revenue related expenses, primarily operating and
product development expenses and lower distribution fees.
Business, Technical and Professional
Revenues of $247.4 million equalled the prior year as lower software license
and service fees and lower sales resulting from the timing of the release of
1991 annual editions, were offset by increased subscription sales at Bureau of
Business Practice.
Operating income declined 29% because of higher operating and product
development expenses which were partially offset by lower product support
expenses, primarily at professional publishing.
Education
Revenues increased 7% to $779.5 million in fiscal 1991 compared with $725.7
million in fiscal 1990. Elementary education revenues were $362.3 million in
fiscal 1991 or 9% higher than the $331.9 million achieved in fiscal 1990
because of strong sales of current-year programs, primarily math, science,
social studies and reading, along with the inclusion of a full twelve months of
operations versus eight months in the prior year from Computer Curriculum
Corporation, which was acquired in March 1990. Secondary education revenues
rose 6% to $136.3 million from $128.5 million because of sales gains in
language arts and social studies due to increased state adoptions. Higher
education posted a 6% increase in revenues of $280.9 million in fiscal 1991
versus $265.3 million in fiscal 1990 on sales gains stemming principally from
college books and vocational publications.
Operating income decreased 4% as improved revenues were more than offset by
increased product support and development and operating expenses, due in part
to expansion costs at Computer Curriculum Corporation incurred in anticipation
of planned growth, along with lower profits from the group's educational film
and video operations.
International
Revenues of $138.7 million rose 8% from $128.8 million in fiscal 1990 as higher
educational sales, primarily from the United Kingdom, Asia, Australia and
Mexico more than offset lower Canadian trade sales.
Profits from international operations decreased slightly as increased sales
were more than offset by higher product support and development expenses.
<PAGE> 19
F-12
MANAGEMENT'S DISCUSSION AND ANALYSIS
Additionally, overall publishing operations reflect lower corporate
administrative expenses.
INTEREST AND OTHER INVESTMENT INCOME
(EXPENSE) -- NET
Net interest and other investment expense increased slightly in the current six
months ended April 30, 1993, compared with the same prior-year period. The
current six-month period benefited from lower interest expense primarily
because lower average effective interest rates on the Company's debt more than
offset the effect of higher average debt outstanding. Interest and other
investment income declined in the current six-month period due to lower average
cash equivalents and short-term investments. The lower average cash
equivalents and short-term investments were primarily a result of acquisitions,
the repurchase of shares of the Company's Common Stock and the funding of the
working capital requirements of the Company.
In addition to the results of the operating units, earnings reflect lower net
interest and other investment income for the year ended October 31, 1992
compared with 1991, and 1991 compared with 1990. These decreases stem from
lower average cash equivalents, short-term investments and interest rates. The
lower average cash equivalents and short-term investments were primarily a
result of expenditures for acquisitions, the repurchase of shares of the
Company's Common Stock and the funding of the working capital requirements of
the Company, and in 1991, because of a March 1990 income tax payment related to
the October 1989 sale of Associates First Capital Corporation, the Company's
former consumer/commercial finance business, and a reduction of outstanding
debt.
OTHER
The pre-tax loss of $16.8 million in the six months ended April 30, 1993 gives
rise to an income tax benefit at an effective rate of 45.8%. For the
comparable prior year period, the effective rate for income taxes on pre-tax
earnings of $68.7 million was 29.1%. The increase in the effective rate is the
result of less income subject to tax at lower foreign rates, increases in
income subject to state and local income taxes and the adoption of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Corporate expenses include a $5-million charge in the current six-month period
in connection with the Company's planned relocation of its corporate
headquarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company depended primarily on internal cash flow and external borrowings
to finance its operations during the six months ended April 30, 1993, and
expects to continue to do so. In connection with the tender offers and merger
proposals described in Note O to the consolidated financial statements,
subsequent to its January 1994 dividend, the Company has discontinued its
regular quarterly dividend payment.
In May 1993, the Company purchased the remaining 80% it did not own of Canada's
Wonderland, Inc., later renamed Paramount Canada's Wonderland, Inc., a Canadian
theme park, for approximately $52 million. The Company subsequently liquidated
Paramount Canada's Wonderland debt obligations of approximately $31 million.
In June 1993, the Company agreed to sell Prentice Hall Legal and Financial
Services, Prentice Hall Legal Practice Management and Prentice Hall
Professional Software, three of its Publishing software and information
services units, to Information America, Inc. This agreement was terminated in
October 1993. In September 1993, the Company purchased television station
WKBD-TV in Detroit from Cox Enterprises Inc. for approximately $105 million.
In February 1994, the Company acquired Macmillan Publishing Company and certain
other assets of Macmillan Inc., a leading book publisher, for approximately
$553 million.
The Company and BHC Communications, Inc., which is majority-owned by
Chris-Craft Industries, Inc., are forming a joint venture to be known as the
Paramount Television Network which will provide prime-time television
programming primarily to broadcast affiliates nationwide in competition with
the three major networks and the Fox Broadcasting Network. The network is
expected to begin operations in January 1995.
<PAGE> 20
F-13
MANAGEMENT'S DISCUSSION AND ANALYSIS
In July 1993, the Company redeemed $100 million of 8 1/2% senior notes due
1996. Also, in July 1993, the Company completed a public offering of $150
million of 5 7/8% senior notes due 2000 and $150 million of 7 1/2% senior
debentures due 2023. A portion of the net proceeds was used to refinance the
previously mentioned redemption of the Company's 8 1/2% senior notes. The
remainder of such proceeds were used to fund the acquisitions of television
station WKBD-TV in Detroit and the remaining 80% interest in Paramount Canada's
Wonderland theme park. During the current six-month period, the Company
purchased 0.6 million shares of its Common Stock under a 10-million share
repurchase program announced in May 1988, leaving 2.6 million remaining shares
authorized under the program. Total debt as a percentage of total
capitalization was 17% at April 30, 1993 and October 31, 1992. In the past,
the Company has been able to increase its borrowings as required and expects to
be able to continue to do so.
Trade receivables decreased at April 30, 1993 compared to October 31, 1992 by
15%, which is principally attributable to the Company's publishing operations.
Educational publishing, which normally contributes more than half of annual
publishing revenues, records most of its sales in the Company's July and
October quarters, corresponding to the typical school-year buying cycle.
Total inventories increased 17% at April 30, 1993 compared with October 31,
1992; 65% of this increase is attributable to Paramount Pictures due to
production of first-run and network television-series product. In addition,
20% of the overall increase was attributable to New York Yankees broadcast
rights payments at Madison Square Garden in connection with the 1993 major
league baseball season.
The balance sheet at October 31, 1992, reflects the acquisitions of Paramount
Parks and Prentice Hall Computer Publishing, resulting in significant changes
in certain balance sheet accounts as compared to October 31, 1991.
Capital expenditures amounted to $56, $69, $120, $168 and $187 million for the
six months ended April 30, 1993 and 1992 and the years ended October 31, 1992,
1991 and 1990, respectively.
ACCOUNTING CHANGES
Effective November 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires that the projected
future cost of providing postretirement benefits, such as health care and life
insurance, be recognized as an expense as employees render service instead of
when the benefits are paid. The Company's previous practice was to recognize
the cost of such postretirement benefits when paid.
The Company elected to record the cumulative effect of the accounting change as
a charge against income as of November 1, 1992, resulting in a one-time charge
of $66.9 million, net of income taxes of $34.5 million, or $.57 per share. For
further detail, see Notes A and J to the consolidated financial statements.
In February 1992, the Financial Accounting Standards Board issued SFAS No. 109,
"Accounting for Income Taxes." Effective May 1, 1993, the Company adopted the
provisions of this standard by restating its prior period financial statements
beginning November 1, 1988. The effect of adopting SFAS No. 109 was to
decrease the loss before cumulative effect of accounting change and net loss by
$1.8 million ($.01 per share) for the six months ended April 30, 1993; increase
earnings before extraordinary item and net earnings by $4.0 million ($.04 per
share) for the year ended October 31, 1992; and, increase net earnings by $5.4
million ($.05 per share), $5.3 million ($.04 per share) and $2.0 million ($.02
per share) for the years ended October 31, 1991 and 1990 and the six months
ended April 30, 1992, respectively. The cumulative effect of adopting SFAS No.
109 as of October 31, 1989, decreased the beginning balance of 1990's retained
earnings by $50.7 million.
Under SFAS No. 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are
<PAGE> 21
F-14
MANAGEMENT'S DISCUSSION AND ANALYSIS
expected to reverse. Prior to the adoption of SFAS No. 109, income tax expense
was determined using the deferred method. Deferred tax expense was based on
items of income and expense that were reported in different years in the
financial statements and tax returns and were measured at the tax rate in
effect in the year the differences originated. For further detail, see Notes A
and I to the consolidated financial statements.
EFFECTS OF ACCOUNTING FOR
POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," which is effective for the
Company in the year ending April 30, 1995. Under this statement, the cost of
benefits provided to employees after employment but before retirement is to be
recognized in the financial statements on an accrual basis during the service
period of the employee. It is expected that implementation of this statement
will not have a material impact on the financial statements of the Company.
ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES
In May 1993, the Financial Accounting Standards Board issued SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," which is
effective for the Company in the year ending April 30, 1995. This statement
sets forth the accounting for certain investments in debt and equity securities
based upon management's ability and intent, at the time of purchase, to trade,
hold to maturity or make available for sale such investments. The effect of
this statement at the time of adoption will depend upon the Company's ability
and intent with respect to such investments.
EFFECTS OF BUDGET
RECONCILIATION ACT OF 1993
In August 1993, the Budget Reconciliation Act of 1993 (the "Act") was enacted
into law. One of the provisions of the Act increased the corporate income tax
rate to 35% effective January 1, 1993. This increase, from the previous 34%
rate, had no material effect on the Company. The Company expects to benefit
from a section of the Act permitting tax deductions derived from the
amortization of certain intangible assets acquired after July 25, 1991, which
deductions have not previously been claimed on tax returns filed by the
Company. However, the Company believes that any tax benefits generated by the
amortization of intangible assets previously acquired by it will not be
material.
Furthermore, to the extent that the Company is affected by several other
provisions of the Act, the results should not be material.
<PAGE> 22
F-15
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
April 30 October 31
-------- ------------------------
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents -- Notes A and L $372.6 $324.3 $555.3
Short-term investments -- Notes A and L 569.7 912.0 1,020.7
Trade receivables -- net -- Note K 829.6 972.9 904.1
Inventories -- Notes A and E 617.3 580.2 590.4
Prepaid income taxes 131.7 139.7 115.4
Prepaid expenses and other -- Note K 400.2 342.7 407.9
- ----------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,921.1 3,271.8 3,593.8
- ----------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT -- Note A
Land 210.8 210.4 130.8
Buildings 591.4 590.6 537.3
Machinery, equipment and other 606.9 573.8 358.2
- ----------------------------------------------------------------------------------------------------------
1,409.1 1,374.8 1,026.3
Less allowance for depreciation 336.1 315.5 268.2
- ----------------------------------------------------------------------------------------------------------
1,073.0 1,059.3 758.1
- ----------------------------------------------------------------------------------------------------------
OTHER ASSETS
Investment in affiliated companies -- Notes A and F 243.9 228.9 204.4
Noncurrent receivables and inventories -- Notes A and E 689.8 604.7 483.0
Intangible assets -- net -- Note A 1,517.5 1,528.1 1,239.3
Deferred costs and other -- Note A 429.5 364.2 376.1
- ----------------------------------------------------------------------------------------------------------
2,880.7 2,725.9 2,302.8
- ----------------------------------------------------------------------------------------------------------
$6,874.8 $7,057.0 $6,654.7
- ----------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $109.8 $10.0 $198.3
Trade accounts payable 194.7 143.7 119.8
Income taxes payable 26.6 139.2 131.4
Accrued expenses and other -- Notes K and L 1,128.4 1,114.1 1,002.5
- ----------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,459.5 1,407.0 1,452.0
- ----------------------------------------------------------------------------------------------------------
DEFERRED LIABILITIES -- Note K 805.9 822.4 828.0
LONG-TERM DEBT, net of current maturities -- Notes A, G and L 707.3 812.1 519.9
STOCKHOLDERS' EQUITY -- Note H
Common Stock, recorded at $1.00 par value; 600,000,000 shares
authorized; shares outstanding, 118,199,396 at April 30,
1993 (excluding 29,665,980 shares held in treasury),
117,459,926 at October 31, 1992 (excluding 30,405,450
shares held in treasury) and 117,757,018 at October 31,
1991 (excluding 30,108,358 shares held in treasury) 118.2 117.5 117.8
Paid-in surplus 712.8 665.7 629.5
Retained earnings -- Notes A, F and I 3,082.5 3,228.6 3,096.4
Cumulative translation adjustments (11.4) 3.7 11.1
- ----------------------------------------------------------------------------------------------------------
3,902.1 4,015.5 3,854.8
- ----------------------------------------------------------------------------------------------------------
$6,874.8 $7,057.0 $6,654.7
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 23
F-16
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Three Years and Six Months Ended April 30, 1993
----------------------------------------------------------------
Cumulative Total
Common Paid-in Retained Translation Stockholders'
Stock Surplus Earnings Adjustments Equity
- ---------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1989, NET OF TREASURY
-- AS REPORTED $120.0 $539.0 $3,054.7 $3.8 $3,717.5
Cumulative effect of accounting change
-- Note A (50.7) (50.7)
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1989, NET OF TREASURY
-- AS ADJUSTED 120.0 539.0 3,004.0 3.8 3,666.8
Common Stock issued
Exercise of stock options and grants
to employees 0.4 37.6 38.0
Dividend reinvestment and stock
purchase plan 0.1 3.1 3.2
Acquisition of stock for the treasury (3.1) (14.6) (110.0) (127.7)
Common Stock dividends ($.70 per share) (83.4) (83.4)
Translation adjustments 11.7 11.7
Tax benefit from exercise of stock options 10.8 10.8
Net earnings for the year 264.4 264.4
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1990, NET OF TREASURY 117.4 575.9 3,075.0 15.5 3,783.8
Common Stock issued
Exercise of stock options and grants
to employees 1.0 51.8 52.8
Dividend reinvestment and stock
purchase plan 0.1 3.3 3.4
Acquisition of stock for the treasury (0.7) (3.7) (23.8) (28.2)
Common Stock dividends ($.70 per share) (82.4) (82.4)
Translation adjustments (4.4) (4.4)
Tax benefit from exercise of stock options 2.2 2.2
Net earnings for the year 127.6 127.6
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1991, NET OF TREASURY 117.8 629.5 3,096.4 11.1 3,854.8
Common Stock issued
Exercise of stock options and grants to employees 0.7 38.1 38.8
Dividend reinvestment and stock
purchase plan 0.1 3.6 3.7
Acquisition of stock for the treasury (1.1) (6.4) (41.7) (49.2)
Common Stock dividends ($.775 per share) (91.5) (91.5)
Translation adjustments (7.4) (7.4)
Tax benefit from exercise of stock options 0.9 0.9
Net earnings for the year 265.4 265.4
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1992, NET OF TREASURY 117.5 665.7 3,228.6 3.7 4,015.5
Common Stock issued
Exercise of stock options and grants
to employees 1.3 41.6 42.9
Dividend reinvestment and stock
purchase plan 1.9 1.9
Acquisition of stock for the treasury (0.6) (3.5) (22.9) (27.0)
Common Stock dividends ($.40 per share) (47.2) (47.2)
Translation adjustments (15.1) (15.1)
Tax benefit from exercise of stock options 7.1 7.1
Net loss for the six months ended April 30, 1993 (76.0) (76.0)
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT APRIL 30, 1993, NET OF TREASURY $118.2 $712.8 $3,082.5 $(11.4) $3,902.1
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 24
F-17
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended April 30 Year Ended October 31
------------------------- ---------------------------------------
1993 1992 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------
(Unaudited)
(In millions)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings (loss) before extraordinary
item and cumulative effect of
accounting change $(9.1) $48.7 $274.2 $127.6 $264.4
Non-cash expenses
Depreciation 37.1 35.2 71.7 59.1 45.8
Deferred income taxes 28.9 1.0 (3.2) (37.5) 23.1
Amortization of intangible assets 4.3 4.0 44.4 39.2 33.6
Amortization of pre-publication costs 24.0 23.5 87.0 88.0 67.2
Provision for real estate write-down and
relocation 40.0
Undistributed net earnings of unconsolidated
affiliates (11.3) (14.1) (19.7) (15.7) (31.2)
Theatrical and television inventories and
broadcast rights
Gross additions (526.8) (472.0) (909.6) (953.6) (863.7)
Amortization 387.0 413.7 834.7 945.2 836.3
Decrease (increase) in network features and
syndication licenses 4.2 (66.5) (78.2) (47.1) (117.5)
Increase in pre-publication costs (39.6) (44.9) (87.7) (77.8) (110.1)
Decrease (increase) in trade receivables 194.6 162.7 (8.4) (44.6) 1.0
Decrease (increase) in inventories (other than
theatrical and television) (23.5) (11.9) 19.4 19.2 (15.0)
Decrease (increase) in prepaid expenses (67.6) 31.2 (13.4) (45.0) (21.8)
Increase (decrease) in trade accounts payable 51.0 (3.4) 8.5 (24.3) 24.9
Increase (decrease) in income taxes payable
(including $667.4 million in 1990 related to
gain on sale of business) (112.6) (41.7) 12.4 (29.8) (634.7)
Increase (decrease) in accrued expenses and other (50.7) (19.6) 34.4 (10.3) (76.4)
Other -- net (91.1) (66.4) (48.4) 91.7 93.9
- ---------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES (161.2) (20.5) 218.1 84.3 (480.2)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTMENT AND OTHER ACTIVITIES
Expenditures for property, plant and equipment
(excluding capitalized leases) (55.9) (68.8) (120.0) (167.5) (186.7)
Proceeds on disposal of property, plant and
equipment 1.1 5.2 11.8 2.2 2.6
Purchase price of acquired businesses (net of
acquired cash) (0.1) (161.5) (585.1) (86.9) (220.9)
Decrease (increase) in investment in affiliated
companies (3.7) 13.3 10.8 8.3
Decrease (increase) in short-term and other
investments 317.1 114.3 209.0 (467.1) (476.8)
Increase in investments maturing after one year (43.6) (211.0)
Decrease in investments maturing after one year 25.6 49.1 205.5
Decrease in notes receivable 1.3 4.7 8.9 17.3 515.8
- ---------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS PROVIDED FROM (USED FOR) INVESTMENT
AND OTHER ACTIVITIES 259.8 (67.2) (415.5) (531.8) (577.0)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of long-term debt 245.7 492.4
Payments of long-term debt (5.9) (214.5) (395.7) (26.9) (138.1)
Loss on early extinguishment of debt (13.4)
Issuance of Common Stock (excluding grants
to employees) 29.8 9.8 23.8 14.5 13.4
Acquisition of stock for the treasury (27.0) (0.7) (49.2) (15.2) (142.3)
Dividends (47.2) (44.2) (91.5) (82.4) (83.4)
- ---------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED FOR FINANCING ACTIVITIES (50.3) (3.9) (33.6) (110.0) (350.4)
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 48.3 (91.6) (231.0) (557.5) (1,407.6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 324.3 555.3 555.3 1,112.8 2,520.4
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $372.6 $463.7 $324.3 $555.3 $1,112.8
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 25
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A-- SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Paramount
Communications Inc. (Company) and its majority-owned affiliates. The
Company's investments in its 20-50% owned investees are carried on the equity
basis. The income taxes of the investees are included in the provision for
income taxes.
Certain amounts in the consolidated financial statements for periods prior to
April 30, 1993 have been reclassified to conform to current presentation for
comparative purposes.
Accounting Changes
Effective November 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires that the projected
future cost of providing postretirement benefits, such as health care and life
insurance, be recognized as an expense as employees render service instead of
when the benefits are paid. The Company's previous practice was to recognize
the cost of such postretirement benefits when paid.
The Company elected to record the cumulative effect of the accounting change as
a charge against income as of November 1, 1992, resulting in a one-time charge
of $66.9 million, net of income taxes of $34.5 million, or $.57 per share. The
incremental effect of this accounting change on each of the quarters in the six
months ended April 30, 1993 was to increase net periodic postretirement benefit
cost by approximately $2.6 million on a pre-tax basis.
In February 1992, the Financial Accounting Standards Board issued SFAS No. 109,
"Accounting for Income Taxes." Effective May 1, 1993, the Company adopted the
provisions of this standard by restating its prior period financial statements
beginning November 1, 1988. The effect of adopting SFAS No. 109 was to
decrease the loss before cumulative effect of accounting change and net loss by
$1.8 million ($.01 per share) for the six months ended April 30, 1993; increase
earnings before extraordinary item and net earnings by $4.0 million ($.04 per
share) for the year ended October 31, 1992; and, increase net earnings by $5.4
million ($.05 per share), $5.3 million ($.04 per share) and $2.0 million ($.02
per share - unaudited) for the years ended October 31, 1991 and 1990 and the
six months ended April 30, 1992, respectively. The cumulative effect of
adopting SFAS No. 109 as of October 31, 1989, decreased the beginning balance
of 1990's retained earnings by $50.7 million.
Under SFAS No. 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption
of SFAS No. 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and
were measured at the tax rate in effect in the year the differences originated.
Change in Fiscal Year End
In June 1993, the Board of Directors approved a change in the Company's fiscal
year end to April 30 from October 31.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments with original maturities
of three months or less.
Short-Term Investments
Short-term investments consist of instruments with original maturities in
excess of three months and are carried at cost, which approximates market.
Inventories
Inventories are generally determined using the lower of cost (first-in,
first-out or average cost method) or net realizable value.
Theatrical and Television Inventories, Revenues and Costs
Feature films are produced or acquired for distribution, normally, first in the
theatrical market followed by videocassettes, pay cable, network television and
syndicated television. On average, the length of the revenue cycle for feature
films approximates four years. Theatrical revenues from domestic and foreign
markets are recognized as films are exhibited, revenues from the sale of
videocassettes are recognized upon delivery of the merchandise and revenues
from all television sources are recognized upon availability of the film for
telecast.
<PAGE> 26
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Television series initially produced for the networks and first-run syndication
are generally licensed to domestic and foreign markets concurrently. The more
successful series are later syndicated in domestic markets and in certain
foreign markets. The length of the revenue cycle for television series will
vary depending on the number of seasons a series remains in active production.
Revenues arising from television license agreements are recognized in the year
that the films or television series are available for telecast.
Inventories related to theatrical and television product (which include direct
production costs, production overhead, capitalized interest, and acquisition
costs) are stated at the lower of cost less amortization or net realizable
value. Inventories are amortized and participations and residuals are accrued
on an individual product basis in the proportion that current revenues bear to
the estimated remaining total lifetime revenues. Domestic syndication and
basic cable revenue estimates are not included in the estimated lifetime
revenues of network series until such sales are probable. Estimates of total
lifetime revenues and expenses are periodically reviewed. The costs of feature
and television films are classified as current assets to the extent such costs
are expected to be recovered through the respective primary markets. Other
costs relating to film production are classified as noncurrent.
The Company estimates that approximately 94% of unamortized film costs at April
30, 1993 will be amortized within the next three years.
Publishing Revenue Recognition
The Company's publishing segment follows standard industry practice of
recognizing revenue when merchandise is shipped and billed.
Broadcast Rights
Broadcast rights are recorded when the license period begins and the program
becomes available for use, and are stated at the lower of cost less
amortization or net realizable value. Broadcast rights for feature films and
syndicated programs are amortized using the straight-line method based on
program usage. Sports rights are generally charged to expense when the event
is telecast. Contract payments are generally made in installments over a term
somewhat shorter than the contract.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Provision for depreciation
on substantially all depreciable assets is computed using the straight-line
method over the estimated useful lives of the assets.
Intangible Assets
Intangible assets primarily represent the excess of cost of purchased
businesses over the value of their net underlying assets (goodwill) and are
being amortized annually by the straight-line method over appropriate periods
not exceeding forty years. Intangible assets are net of accumulated
amortization of $233.9, $230.1 and $186.0 million at April 30, 1993 and October
31, 1992 and 1991, respectively.
Deferred Costs and Other
Deferred costs and other includes certain pre-publication costs being amortized
annually by the straight-line method or an accelerated basis over appropriate
periods, the majority of which is four years.
Unamortized Debt Discount
Debt discount is amortized over the term of the related debt using the interest
method.
Income Taxes
Provision for income taxes includes deferred taxes which represent future tax
effects of items reported for income tax purposes in periods different than for
financial purposes.
Deferred Off-Season Theme Park Expenses
Certain expenses incurred in the off-season to prepare the theme parks for the
operating season are deferred and amortized over the subsequent operating
season, which generally begins in March and finishes in October.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are based on the weighted average common and
dilutive common equivalent (stock options) shares outstanding during the
respective periods. Earnings (loss) per share are computed by dividing the
average common and, where dilutive, common equivalent shares outstanding into
the earnings (loss) applicable to such shares.
NOTE B -- ACQUISITION AND
DISPOSITION OF BUSINESSES
In August and October 1992, the Company acquired Kings Entertainment Company
and Kings Island Company, respectively, later renamed Paramount Parks, which
own and operate regional theme parks, for a total of approximately $400
million.
<PAGE> 27
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In November 1991, the Company acquired Macmillan Computer Publishing, later
renamed Prentice Hall Computer Publishing, a leading publisher of personal
computer and related technical books, for approximately $158 million.
The acquisitions are being accounted for as purchases and the financial
statements include the results of their operations from the dates of
acquisition.
The following table summarizes, on a pro forma basis, the combined results of
operations as though Kings Entertainment Company, Kings Island Company and
Macmillan Computer Publishing had been acquired on November 1, 1990. It
includes estimated amounts for a reduction of interest income due to the use of
short-term investments for the acquisitions, amortization of estimated
intangible assets, additional depreciation expense and an adjustment for income
taxes, at the statutory rate. These pro forma results do not necessarily
reflect the actual results of operations as they would have been had the
acquisitions taken place on that date, nor are they necessarily indicative of
future results.
<TABLE>
<CAPTION>
Year Ended October 31
-----------------------------
1992 1991
- -----------------------------------------------------------------------------
(In millions, except per share)
(Unaudited)
<S> <C> <C>
Revenues $4,464.1 $4,203.5
Earnings before extraordinary item 277.7 133.2
Net earnings 268.9 133.2
Earnings per share
Earnings before extraordinary item 2.34 1.13
Net earnings 2.26 1.13
- -----------------------------------------------------------------------------
</TABLE>
In March 1990, the Company acquired Computer Curriculum Corporation, which
develops and markets computer-based learning systems, for approximately $75
million.
In December 1989, the Company acquired a preferred and common stock equity
interest in Paramount Stations Group (PSG), formerly TVX Broadcast Group Inc.,
which owns and operates independent television stations, for approximately $110
million. The Company also acquired PSG debt obligations for approximately $34
million. In April 1990, the Company was granted the right by the Federal
Communications Commission to assume control of PSG. The Company did so by
converting preferred stock into common stock and, consequently, began
reflecting its operations on a consolidated basis. In July and October 1990,
the Company purchased additional shares of PSG stock for $3.5 million and $4.3
million, respectively. In February 1991, the Company, through a merger,
acquired the remaining outstanding shares of PSG for approximately $62 million.
In May 1993, the Company purchased the remaining 80% it did not own of Canada's
Wonderland, Inc., later renamed Paramount Canada's Wonderland, Inc., a Canadian
theme park, for approximately $52 million.
In June 1993, the Company announced it signed a definitive agreement to
purchase television station WKBD-TV in Detroit from Cox Enterprises Inc. for
approximately $105 million; this acquisition was completed in September 1993.
During the six months ended April 30, 1993 and 1992 and the years ended
October 31, 1992, 1991 and 1990, the Company also acquired or sold certain
other businesses. The contributions of these businesses in the aggregate were
not significant to the Company's results of operations for the periods
presented, nor are they expected to have a material effect on the Company's
results on a continuing basis.
NOTE C -- OTHER INCOME (EXPENSE)
Other income (expense) includes foreign exchange gains (losses), minority
interest and other.
NOTE D -- EXTRAORDINARY ITEM
In September 1992, the Company redeemed $175 million of 9 3/4% senior
debentures due 2016 for $1,061.25 per $1,000 principal amount. The premium
paid by the Company and the write-off of related unamortized discount and
issuance costs resulted in a loss of $8.8 million, net of an income tax benefit
of $4.6 million.
<PAGE> 28
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E -- INVENTORIES
Inventories as described in Note A are stated as follows
(in millions):
<TABLE>
<CAPTION>
April 30 October 31
-------- ----------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT
Finished goods $248.3 $230.1 $229.8
Work in process 12.8 10.6 20.3
Materials and supplies 29.5 26.4 20.8
- -----------------------------------------------------------------------------------------------
290.6 267.1 270.9
- -----------------------------------------------------------------------------------------------
Theatrical and television productions
Released 176.9 169.1 161.2
Completed, not released 32.7 35.7 43.3
In process and other 61.8 75.9 84.4
- -----------------------------------------------------------------------------------------------
271.4 280.7 288.9
- -----------------------------------------------------------------------------------------------
Broadcast rights 55.3 32.4 30.6
- -----------------------------------------------------------------------------------------------
617.3 580.2 590.4
- -----------------------------------------------------------------------------------------------
NONCURRENT
Theatrical and television productions
Released 155.3 103.9 71.1
In process and other 247.0 174.8 119.2
- -----------------------------------------------------------------------------------------------
402.3 278.7 190.3
- -----------------------------------------------------------------------------------------------
Broadcast rights 107.0 104.4 111.5
- -----------------------------------------------------------------------------------------------
509.3 383.1 301.8
- -----------------------------------------------------------------------------------------------
$1,126.6 $963.3 $892.2
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTE F--INVESTMENT IN
AFFILIATED COMPANIES
Investments in affiliated companies primarily include the Company's interest in
USA Networks, national advertiser-supported basic cable television networks
(50% owned); Cinamerica, a domestic motion picture theater operation (50%
owned); United Cinemas International Multiplex B.V., engaged in theatrical
exhibition of motion pictures in the United Kingdom, Ireland, Germany and Spain
(49% owned); Cinema International Corporation N.V., which owns motion picture
screens in seven countries (49% owned); and as of August 1992, Canada's
Wonderland, Inc., a Canadian theme park (20% owned).
Summarized financial information for the above companies is as follows
(in millions):
<TABLE>
<CAPTION>
Six Months Ended Year Ended
or at April 30 or at October 31
---------------- ----------------------------
1993 1992 1992 1991 1990
- -----------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $372.6 $354.7 $783.2 $683.0 $548.3
Gross profit 129.0 139.8 321.6 226.3 208.3
Net earnings 36.2 49.3 83.2 74.4 52.1
Current assets $326.7 $337.8 $227.8
Noncurrent assets 855.8 934.2 741.2
Current liabilities 223.7 248.8 167.6
Noncurrent liabilities 493.4 595.4 430.4
- -----------------------------------------------------------------------------------
</TABLE>
Included in the operating income of the Company's Entertainment operations are
equity in earnings for the above affiliated companies of $24.0, $34.1
(unaudited), $58.7, $47.6 and $43.7 million, respectively, for the six months
ended April 30, 1993 and 1992 and the years ended October 31, 1992, 1991 and
1990. Dividends received from these affiliated companies were $7.8, $10.5
(unaudited), $22.0, $32.5 and $10.8 million, respectively, for the six months
ended April 30, 1993 and 1992 and the years ended October 31, 1992, 1991 and
1990.
Included in consolidated retained earnings at April 30, 1993 is $161.7 million
of undistributed earnings of affiliates.
<PAGE> 29
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G-- LONG-TERM DEBT
Long-term debt includes (in millions):
<TABLE>
<CAPTION>
April 30 October 31
-------- ----------------
1993 1992 1991
- -----------------------------------------------------------------------
<S> <C> <C> <C>
8-1/2% senior notes due 1996 (prepaid
July 1993) $99.8 $99.8 $99.7
7-1/2% senior notes due 2002 246.3 246.0
8-1/4% senior debentures due 2022 246.8 246.7
11-5/8% senior notes due 1992 125.0
9.55% note payable to an institutional
investor due 1999 (prepaid 1992) 62.6
9-3/4% senior debentures due 2016
(prepaid 1992) 173.6
12-3/8% subordinated notes due 1995
(prepaid 1992) 19.5
7% subordinated debentures due 2003,
net of unamortized discount of $53.7
at April 30, 1993, $55.1 at
October 31, 1992 and $57.8 at
October 31, 1991 (effective average
interest rate of 11%) 177.7 176.3 173.6
Other notes and debentures due
1993 to 1996 (effective average
interest rate of 8.22%) 12.2 12.2 17.4
Obligations under capital leases 34.3 41.1 46.8
- -----------------------------------------------------------------------
817.1 822.1 718.2
Less current maturities 109.8 10.0 198.3
- -----------------------------------------------------------------------
$707.3 $812.1 $519.9
- -----------------------------------------------------------------------
</TABLE>
Maturities of long-term debt (including the present value of obligations under
capital leases as set forth in Note J) during the five years ending April 30,
1998 are (in millions):
<TABLE>
- --------------------------------------------------------
<S> <C>
1994 $109.8
1995 10.7
1996 20.1
1997 3.1
1998 0.4
- --------------------------------------------------------
</TABLE>
The Company has complied with restrictions and limitations required under terms
of various loan agreements.
In July 1993, the Company completed a public offering of $150 million of 5 7/8%
senior notes due 2000 and $150 million of 7 1/2% senior debentures due 2023.
NOTE H -- CAPITAL STOCK
The authorized capital stock of the Company includes 75,000,000 shares of
Preferred Stock, all of which are undesignated.
Each share of Common Stock outstanding has a related Common Stock purchase
right which will become exercisable after a specified period of time only if a
person or group acquires beneficial ownership of 15% or more of the outstanding
Common Stock of the Company or announces or commences a tender or exchange
offer that would result in the offeror acquiring 30% or more of the Company's
Common Stock. Once exercisable, each right would entitle its registered holder
to purchase one share of the Company's Common Stock at a price of $200 per
share, subject to adjustment to prevent dilution. Upon the occurrence of
certain events or transactions specified in the rights agreement, the rights
holder is entitled to receive for $200 per right a number of shares of the
Company's or an acquiring company's common stock having a market value equal to
twice the right's exercise price. The rights may be redeemed by the Company
for $.01 per right prior to the tenth day after a person or group acquires 15%
or more of the outstanding Common Stock of the Company. The rights expire on
September 30, 1998, unless redeemed earlier by the Company. On March 1, 1994
the rights were amended to permit consummation of the tender offer by Viacom
Inc., without causing the rights to become exercisable. In addition, the
rights have been amended to provide that the rights expire immediately prior to
the merger between the Company and Viacom. See Note O.
Common Stock outstanding at April 30, 1993, does not include 2,127,817 shares
reserved under the 1984 Stock Option Plan; 4,469,718 shares reserved under the
1989 Stock Option Plan; 5,750,000 shares reserved under the 1992 Stock Option
Plan; and 3,130,018 shares reserved under the Long-Term Performance Plan.
The Company's 1973 Key Employees Stock Purchase Plan and 1984, 1989 and 1992
Stock Option Plans provide for the issuance of options to key employees to
purchase Common Stock of the Company at a price not less than fair market value
on the date of grant. Options may not be granted under these plans that expire
more than ten years from the date of grant. The Company may establish
installment exercise terms for a stock option so that the option becomes fully
exercisable in a series of cumulative portions. The Company may also
accelerate the period for the exercise of any stock option or portion thereof.
Each option granted under the Company's 1984, 1989 and 1992 Stock Option Plans
contains a Limited Right which entitles the holder thereof, only upon the
occurrence of certain specified events constituting a change in control of the
Company and only after the Compensation Committee of the Board of Directors of
the Company so determines, to receive cash in lieu of exercising the option.
<PAGE> 30
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Transactions involving outstanding stock options under these plans were:
<TABLE>
<CAPTION>
Number of Common Shares Option Price
--------------------------------------------- --------------------------------
1973 Plan 1984 Plan 1989 Plan Per Share Aggregate
- ----------------------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
Outstanding at October 31, 1989 100,000 4,585,753 498,700 $7.75- $55.63 $172.1
Granted 1,275,155 34.63- 55.00 66.1
Issued (309,887) 15.38- 39.56 (10.1)
Rescinded (32,675) (56,550) 31.69- 55.00 (4.4)
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at October 31, 1990 100,000 4,243,191 1,717,305 7.75- 55.63 223.7
Granted 2,967,650 36.94- 42.13 119.9
Issued (30,000) (750,710) 11.80- 43.13 (24.1)
Rescinded (320,700) (487,970) 31.69- 55.00 (36.1)
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at October 31, 1991 70,000 3,171,781 4,196,985 7.75- 55.63 283.4
Granted 468,500 37.50- 47.13 20.0
Issued (40,000) (295,198) (221,183) 7.75- 41.81 (20.1)
Rescinded (45,075) (325,825) 20.19- 55.00 (15.7)
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at October 31, 1992 30,000 2,831,508 4,118,477 13.94- 55.63 267.6
Granted 442,500 44.19- 50.69 19.7
Issued (30,000) (703,091) (309,099) 13.94- 45.81 (27.8)
Rescinded (600) (36,035) 33.88- 55.00 (1.9)
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at April 30, 1993 -0- 2,127,817 4,215,843 15.25- 55.63 $257.6
- ----------------------------------------------------------------------------------------------------------------------------------
Exercisable at
October 31, 1991 70,000 3,159,281 1,077,475
October 31, 1992 30,000 2,831,508 2,287,869
April 30, 1993 -0- 2,127,817 2,238,430
Reserved for future grants at
October 31, 1991 803,015
October 31, 1992 660,340
April 30, 1993 253,875
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
No options have been granted under the 1992 Stock Option Plan, and at April 30,
1993, 5,750,000 shares were reserved for future grants under this plan.
The Company follows the practice of recording amounts received upon the
exercise of options by crediting Common Stock and paid-in surplus. No charges
are reflected in the consolidated statement of earnings as a result of the
grant or exercise of stock options. The Company records compensation expense
related to stock appreciation rights of each plan and share unit features of
the 1973 Plan based on the change in the quoted market price of the Common
Stock for the period. The exercise prices of options are subject to
anti-dilution provisions. The Company realizes an income tax benefit from the
exercise or early disposition of certain stock options. This benefit results
in a decrease in current income taxes payable and an increase in paid-in
surplus.
During the six months ended April 30, 1993 and the year ended October 31, 1991,
125,000 and 200,000 shares, respectively, of Common Stock of the Company were
granted to certain key employees subject to restrictions which will lapse on
certain dates through February 1997. The average market price of these shares
on the dates on which they were granted ranged from $43.06 to $44.19. During
the six months ended April 30, 1993 and the years ended October 31, 1991 and
1990, 50,000, 292,000 and 125,000, respectively, of previously granted shares
were rescinded. At April 30, 1993, the unvested portion of previously granted
shares totaling $34.1 million is included as a reduction of stockholders'
equity. Compensation expense is recorded over the period during which services
are performed.
During the six months ended April 30, 1993 and the years ended October 31, 1992
and 1991, 61,094, 64,205 and 138,485 shares, respectively, of Common Stock of
the Company were granted to employees at an average market price of $43.50 ,
$37.63 and $41.88 under the terms of the Company's Long-Term Performance Plan.
At April 30, 1993 and October 31, 1992 and 1991, there were 3,130,018,
3,191,112 and 3,255,317 shares, respectively, of Common Stock reserved for
future grants under this plan.
<PAGE> 31
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I--INCOME TAXES
As described in Note A, effective May 1, 1993, the Company adopted SFAS No.
109, "Accounting for Income Taxes" by restating its prior period financial
statements beginning November 1, 1988.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred income tax assets and liabilities were as follows (in
millions):
<TABLE>
<CAPTION>
April 30 October 31
-------- -------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Costs of motion picture and
television production $89.2 $75.0 $50.4
Employee compensation and other
payroll related expenses 44.5 60.7 53.2
Provisions for real estate
write-down, relocation and
prior year publishing charge 40.5 24.8 26.9
Sales returns and allowances 46.4 45.8 38.2
Discontinued operations 34.2 29.0 37.8
Postretirement benefit obligation 34.5
Preacquisition net operating loss
carryforwards of subsidiaries
and other 50.0 60.3 66.0
Other 32.1 42.0 54.8
- -----------------------------------------------------------------------------------------------
371.4 337.6 327.3
- -----------------------------------------------------------------------------------------------
Valuation allowance for deferred
tax assets (50.0) (60.3) (66.0)
- -----------------------------------------------------------------------------------------------
Total deferred tax assets 321.4 277.3 261.3
- -----------------------------------------------------------------------------------------------
Deferred tax liabilities:
Income on motion picture and
television production (12.4) (13.1) (16.8)
Expenses related to renovation
project (9.2) (9.2) (9.2)
Self insurance (10.5) (3.1)
Deferred seasonal expenses (41.9) (26.8)
Other (18.4) (17.9) (21.7)
- -----------------------------------------------------------------------------------------------
Total deferred tax liabilities (92.4) (70.1) (47.7)
- -----------------------------------------------------------------------------------------------
Net deferred tax assets $229.0 $207.2 $213.6
- -----------------------------------------------------------------------------------------------
</TABLE>
Provision (benefit) for income taxes includes (in millions):
<TABLE>
<CAPTION>
Six Months
Ended April 30 Year Ended October 31
--------------- ----------------------------
1993 1992 1992 1991 1990
- -----------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Current
Federal $(54.1) $(16.7) $62.4 $26.1 $37.3
Foreign 16.1 31.1 55.1 47.5 49.0
State and other 1.4 4.6 8.8 16.0 7.2
- -----------------------------------------------------------------------------------------------
(36.6) 19.0 126.3 89.6 93.5
- -----------------------------------------------------------------------------------------------
Deferred
Federal 27.7 1.0 4.0 (28.0) 20.3
Foreign 1.2 (7.2) (4.2) (1.3)
State and other (5.3) 4.1
- -----------------------------------------------------------------------------------------------
28.9 1.0 (3.2) (37.5) 23.1
- -----------------------------------------------------------------------------------------------
$(7.7) $20.0 $123.1 $52.1 $116.6
- -----------------------------------------------------------------------------------------------
</TABLE>
The components of earnings (loss) before income taxes were as follows (in
millions):
<TABLE>
<CAPTION>
Six Months
Ended April 30 Year Ended October 31
-------------- ----------------------------
1993 1992 1992 1991 1990
- -----------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Domestic $ (47.8) $7.7 $301.8 $68.0 $218.4
Foreign 31.0 61.0 95.5 111.7 162.6
- -----------------------------------------------------------------------------
$ (16.8) $68.7 $397.3 $179.7 $381.0
- -----------------------------------------------------------------------------
</TABLE>
<PAGE> 32
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between the provision (benefit) for income taxes computed by
applying the statutory Federal income tax rate to earnings (loss) before income
taxes and the actual provision (benefit) for income taxes is as follows (in
millions):
<TABLE>
<CAPTION>
Six Months
Ended April 30 Year Ended October 31
--------------------- ---------------------------------------
1993 1992 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Provision (benefit)
for income taxes
at statutory rate $ (5.7) $23.4 $135.1 $61.1 $129.5
Increase (decrease) in
taxes arising from
effect of
Income (principally
foreign) taxed at
lower rates (1.2) (7.4) (13.4) (19.6) (34.5)
Amortization of
intangible assets 1.3 1.0 13.1 8.8 9.6
U. S. state and local
income taxes 1.0 3.0 5.3 7.0 7.8
Tax exempt interest (5.4) (8.0)
Restoration of reserves
no longer required (3.9) (21.4)
Other 0.8 4.4 0.2 12.2
- ----------------------------------------------------------------------------------------------------------------------
Provision (benefit) for
income taxes $ (7.7) $20.0 $123.1 $52.1 $116.6
- ----------------------------------------------------------------------------------------------------------------------
Effective tax rate 45.8% 29.1% 31.0% 29.0% 30.6%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Total income tax payments were $59.6, $43.5 (unaudited), $120.0, $103.8 and
$720.4 million (including $667.4 million resulting from the fiscal 1989 sale of
Associates First Capital Corporation), respectively, for the six months ended
April 30, 1993 and 1992 and the years ended October 31, 1992, 1991 and 1990.
The Company's share of the undistributed earnings of foreign subsidiaries not
included in its consolidated Federal income tax return, that could be subject
to additional income taxes if remitted, was approximately $810 million at April
30, 1993. No provision has been made for taxes that could result from the
remittance of such undistributed earnings since the Company intends to reinvest
these earnings indefinitely; determination of the related unrecognized deferred
U.S. income tax liability is not practicable.
In August 1993, the Budget Reconciliation Act of 1993 (the "Act") was enacted
into law. One of the provisions of the Act increased the corporate income tax
rate to 35% effective January 1, 1993. This increase, from the previous 34%
rate, had no material effect on the Company. The Company expects to benefit
from a section of the Act permitting tax deductions derived from the
amortization of certain intangible assets acquired after July 25, 1991, which
deductions have not previously been claimed on tax returns filed by the
Company. However, the Company believes that any tax benefits generated by the
amortization of intangible assets previously acquired by it will not be
material.
Furthermore, to the extent that the Company is affected by several other
provisions of the Act, the results should not be material.
NOTE J -- COMMITMENTS AND CONTINGENCIES
Leases
Total rental expense was $45.7, $43.1 (unaudited), $87.0, $80.0 and $76.8
million, respectively, for the six months ended April 30, 1993 and 1992 and the
years ended October 31, 1992, 1991 and 1990.
At April 30, 1993, the minimum lease payments under capital leases and
noncancellable operating leases were as follows (in millions):
<TABLE>
<CAPTION>
Year Ending April 30
-------------------------
Capital Operating
Leases Leases
- -----------------------------------------------------------------------
<S> <C> <C>
1994 $14.4 $65.2
1995 13.8 56.7
1996 9.7 44.5
1997 3.8 38.1
1998 0.7 35.9
Thereafter 5.1 388.4
- -----------------------------------------------------------------------
Total minimum lease payments 47.5 $628.8
- -----------------------------------------------------------------------
Less amounts representing interest 13.2
- -----------------------------------------------------------------------
Present value of net minimum lease payments $34.3
- -----------------------------------------------------------------------
</TABLE>
Many of the leases also require the lessee to pay property taxes, insurance and
ordinary repairs and maintenance.
Employee Benefit Plans
The cost of pension benefits for eligible employees, measured by length of
service, compensation and other factors, is currently being funded through
trusts established under the plans. In general, the Company's funding policy
is to make contributions to the plans as necessary to meet minimum funding
requirements.
<PAGE> 33
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of net periodic pension cost for the Company's plans were as
follows (in millions):
<TABLE>
<CAPTION>
Six Months
Ended April 30 Year Ended October 31
--------------------- ---------------------------------------
1993 1992 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Service cost-benefits
earned $9.2 $9.0 $18.1 $17.2 $15.8
Interest cost on projected
benefit obligation 18.9 17.0 34.1 32.4 30.6
Less return on plan assets (25.2) (20.6) (41.2) (59.4) (36.0)
Net amortization
and deferral 3.9 1.1 1.9 19.7 (3.4)
- ----------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $6.8 $6.5 $12.9 $9.9 $7.0
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, the Company had other pension expense for the six months ended
April 30, 1993 and 1992 and the years ended October 31, 1992, 1991 and 1990 of
$5.0, $4.7 (unaudited), $9.2, $9.2 and $10.6 million, respectively, primarily
related to multiemployer pension plans.
The funded status and amounts recognized in the Company's consolidated balance
sheet for its domestic and non-U.S. plans is as follows (in millions):
<TABLE>
<CAPTION>
April 30 October 31
-------- ------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit
obligation
Vested $345.8 $325.6 $307.1
Nonvested 19.4 17.8 16.8
- -----------------------------------------------------------------------------------------------
Accumulated benefit obligation 365.2 343.4 323.9
Effect of projected future salary
increases 57.1 55.8 53.1
- -----------------------------------------------------------------------------------------------
Projected benefit obligation 422.3 399.2 377.0
Plan assets at fair value 453.0 432.1 416.8
- -----------------------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 30.7 32.9 39.8
Unrecognized net gain (34.9) (30.2) (23.8)
Unrecognized prior service cost (8.2) (9.7) (11.2)
Unrecognized net asset at date
of adoption of SFAS No. 87 (9.0) (9.7) (12.7)
- -----------------------------------------------------------------------------------------------
Net pension liability $(21.4) $(16.7) $(7.9)
- -----------------------------------------------------------------------------------------------
</TABLE>
Plan assets consist primarily of marketable equity and fixed income securities
and the Company's Common Stock. At April 30, 1993 and October 31, 1992 and
1991, the Company's plans owned 932,076 shares of the Company's Common Stock
with an aggregate market value of $48.5, $39.3 and $37.4 million, respectively.
In the six months ended April 30, 1993 and the years ended October 31, 1992 and
1991, the weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation for the Company's plans were 8.5% and 6.0%,
respectively. The expected long-term rate of return on assets used for the
majority of the Company's plans was 10.0% for the six months ended April 30,
1993 and 1992 and the years ended October 31, 1992, 1991 and 1990.
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the Company sponsors a welfare plan
which provides certain postretirement health care and life insurance benefits
for substantially all employees and their covered dependents who generally have
worked ten years and are eligible for early or normal retirement under the
provisions of the Company's retirement plan. The welfare plan is contributory
and contains cost-sharing features such as deductibles and coinsurance which
are adjusted annually. The plan is not funded. The Company continues to fund
these benefits as claims are paid.
As described in Note A, effective November 1, 1992, the Company adopted SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Postretirement benefit costs for prior years, which were recorded
on a cash basis, have not been restated.
<PAGE> 34
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the amounts recognized in the Company's consolidated balance
sheet are as follows (in millions):
<TABLE>
<CAPTION>
April 30 November 1
-------- ----------
1993 1992
- ---------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation attributable to:
Current retirees $51.7 $49.2
Fully eligible active plan participants 20.2 19.2
Other active plan participants 34.7 33.0
- ---------------------------------------------------------------
Accumulated postretirement benefit
obligation $106.6 $101.4
- ---------------------------------------------------------------
</TABLE>
The components of net periodic postretirement benefit cost for the six months
ended April 30, 1993, are as follows (in millions):
<TABLE>
- ---------------------------------------------------------------
<S> <C>
Service cost-benefits earned $2.4
Interest cost on accumulated postretirement
benefit obligation 4.2
- ---------------------------------------------------------------
Net periodic postretirement benefit cost $6.6
- ---------------------------------------------------------------
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 8.5%. At April 30, 1993, the assumed weighted average health
care cost trend rates to be used in measuring the accumulated postretirement
benefit obligation for 1994 are 13% for retirees age 65 and over and 15% for
retirees under age 65. Both rates are assumed to decrease gradually each year
to 6.7% in 2011 and thereafter. A one percentage point increase in each year
of these health care cost trend rates would increase the accumulated
postretirement benefit obligation at April 30, 1993 by $19.2 million, and
increase the sum of the service and interest cost components of net periodic
postretirement benefit cost by $1.4 million.
In addition, the Company contributes to multiemployer plans which provide
health and welfare benefits to active as well as retired employees. The cost
of these benefits for the six months ended April 30, 1993, was $5.6 million.
Commitments
At April 30, 1993, the Company is obligated to make future payments for various
feature films, syndicated programs, sports events and other programming
totaling approximately $401 million. This amount includes $327 million related
to Madison Square Garden Network's agreement to televise New York Yankees
baseball games through the year 2000.
Legal Proceedings
The Company is a defendant in various lawsuits wherein substantial amounts are
claimed. In the opinion of counsel, these suits should not result in judgments
that in the aggregate would have a material adverse effect on the Company's
financial statements.
NOTE K -- SUPPLEMENTAL INFORMATION
Trade receivables are net of allowance for doubtful accounts of $64.1, $65.5
and $59.6 million at April 30, 1993 and October 31, 1992 and 1991,
respectively.
Prepaid expenses and other includes royalties advances of $182.8, $161.6 and
$156.4 million at April 30, 1993 and October 31, 1992 and 1991, respectively.
The details of accrued expenses and other are as follows
(in millions):
<TABLE>
<CAPTION>
April 30 October 31
-------- ----------------
1993 1992 1991
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Participations payable and accrued
syndication expenses $334.6 $363.0 $348.2
Deferred television contracts income 90.6 86.9 73.7
Accrued compensation and other
employee benefit related items 114.7 140.6 97.2
Reverse repurchase liability 75.1 50.1
Other 513.4 473.5 483.4
- ---------------------------------------------------------------------
$1,128.4 $1,114.1 $1,002.5
- ---------------------------------------------------------------------
</TABLE>
<PAGE> 35
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred liabilities includes participations payable and deferred syndication
expenses of $193.7, $189.2 and $187.9 million at April 30, 1993 and October 31,
1992 and 1991, respectively.
The details of interest and other investment income (expense) -- net are as
follows (in millions):
<TABLE>
<CAPTION>
Six Months
Ended April 30 Year Ended October 31
-------------- ----------------------
1993 1992 1992 1991 1990
- ------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Interest expense
Interest on
indebtedness
and other $(44.9) $(54.4) $(104.1) $(108.6) $(116.2)
Imputed interest
on long-term
liabilities (5.8) (8.5) (14.7) (14.6) (22.9)
Less capitalized
interest 2.8 3.1 5.0 11.2 15.2
- -------------------------------------------------------------------
(47.9) (59.8) (113.8) (112.0) (123.9)
- -------------------------------------------------------------------
Interest and other
investment income
Interest and other
income on
investments 28.6 40.0 88.4 106.9 180.3
Imputed interest
on long-term
receivables 16.3 17.3 33.2 26.9 22.4
- -------------------------------------------------------------------
44.9 57.3 121.6 133.8 202.7
- -------------------------------------------------------------------
$(3.0) $(2.5) $7.8 $21.8 $78.8
- -------------------------------------------------------------------
</TABLE>
Imputed interest relates principally to network and syndication licenses of
motion picture and television products. Capitalized interest relates to
projects under construction and theatrical and television productions in
process. Interest paid on borrowings was $40.8, $51.0 (unaudited), $91.0,
$99.5 and $105.6 million, respectively, for the six months ended April 30, 1993
and 1992 and the years ended October 31, 1992, 1991 and 1990.
NOTE L -- FINANCIAL INSTRUMENTS
The Company adopted SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments" in the six months ended April 30, 1993. This statement requires
disclosure of estimated fair values for all financial instruments for which it
is practicable to estimate fair value.
The Company has used various methods and assumptions to estimate the fair value
of its financial instruments at April 30, 1993. For cash and cash equivalents,
the carrying amount approximates fair value because of the short maturities of
these instruments. Quoted market prices or dealer quotes for the same or
similar instrument were used for short-term investments and the majority of
long-term debt. Other techniques, such as estimated cash flows and termination
cost have been used to estimate the fair value of the remaining financial
instruments. These values represent a general approximation of possible value
and may not be indicative of the amounts that could be realized in a current
market exchange.
The carrying amounts and fair values of the Company's recorded financial
instruments at April 30, 1993 are as follows (in millions):
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
- ---------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $372.6 $372.6
Short-term investments 569.7 577.4
Long-term debt (including current maturities) (1) 782.8 859.8
Reverse repurchase liability 75.1 75.1
- ---------------------------------------------------------------------------
</TABLE>
(1) Excludes obligations under capital leases classified as long-term debt.
Periodically, the Company enters into interest rate swap agreements. These
agreements generally allow the Company to exchange fixed rates for variable
rates without the exchange of cash with respect to the underlying principal
amounts. Net interest payments or receipts, which were not material, are
recorded as adjustments to interest expense. The fair value of interest rate
swaps at April 30, 1993 was not material.
The Company has guaranteed third party securities and commitments relating
primarily to joint venture obligations, theater leases and standby letters of
credit totaling approximately $320 million at April 30, 1993. These guarantees
had a fair value of $293 million at April 30, 1993.
<PAGE> 36
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE M -- FINANCIAL REPORTING BY BUSINESS SEGMENTS
A summary description of the Company's business segments and their respective
Revenues and Operating Income (Loss) for the six months ended April 30, 1993
and 1992 and the years ended October 31, 1992, 1991 and 1990 is presented
elsewhere herein.
Depreciation, capital expenditures and identifiable assets were as follows
(in millions):
<TABLE>
<CAPTION>
Depreciation Capital Expenditures (1)
----------------------------------------- ------------------------------------------
Six Months Six Months
Ended April 30 Year Ended October 31 Ended April 30 Year Ended October 31
-------------- ---------------------- -------------- ------------------------
1993 1992 1992 1991 1990 1993 1992 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Business Segments
Entertainment $24.6 $23.1 $49.0 $38.1 $28.0 $46.0 $58.6 $94.3 $146.6 $174.7
Publishing 11.6 11.2 20.9 19.1 15.8 8.7 10.0 24.6 25.8 12.6
- ----------------------------------------------------------------------------------------------------------------------
Total 36.2 34.3 69.9 57.2 43.8 54.7 68.6 118.9 172.4 187.3
Corporate and Other
Non-Segment Items 0.9 0.9 1.8 1.9 2.0 1.2 0.2 1.1 0.5 0.6
- ----------------------------------------------------------------------------------------------------------------------
$37.1 $35.2 $71.7 $59.1 $45.8 $55.9 $68.8 $120.0 $172.9 $187.9
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets
---------------------------------------
April 30 October 31
-------- -------------------------
1993 1992 1991 1990
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Business Segments
Entertainment $3,377.8 $3,221.9 $2,493.7 $2,223.0
Publishing 2,321.3 2,396.5 2,226.4 2,191.5
- -------------------------------------------------------------------------
Total 5,699.1 5,618.4 4,720.1 4,414.5
Corporate and Other
Non-Segment Items 1,175.7 1,438.6 1,934.6 2,126.5
- -------------------------------------------------------------------------
$6,874.8 $7,057.0 $6,654.7 $6,541.0
- -------------------------------------------------------------------------
</TABLE>
- -------------
(1) Including capitalized leases.
Identifiable assets are those which can be directly identified or associated
with the segments. Corporate and other non-segment items principally include
cash and cash equivalents, short-term investments, notes receivable, prepaid
income taxes and corporate property and equipment.
<PAGE> 37
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE N -- QUARTERLY RESULTS (UNAUDITED)
The following summarizes the quarterly operating results of the Company for the
six months ended April 30, 1993 and the years ended October 31, 1992 and 1991
(in millions, except per share):
<TABLE>
<CAPTION>
Earnings (Loss) Per Share
--------------------------
Earnings Earnings
(Loss) Before (Loss) Before
Extraordinary Extraordinary
Item and Item and
Cumulative Cumulative
Operating Earnings Effect of Net Effect of Net
Cost of Income (Loss) Before Accounting Earnings Accounting Earnings
Quarter Ended Revenues Goods Sold (Loss) Income Taxes Change (Loss) Change (Loss)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993
January 31 $943.7 $648.8 $1.8 $(1.2) $0.1 $(66.8) $-0- $(.57)
April 30 954.4 638.0 (11.9) (15.6) (9.2) (9.2) (.08) (.08)
- ------------------------------------------------------------------------------------------------------------------------------
$1,898.1 $1,286.8 $(10.1) $(16.8) $(9.1) $(76.0) $(.08) $(.65)
- ------------------------------------------------------------------------------------------------------------------------------
1992
January 31 $1,070.6 $761.4 $27.6 $27.1 $19.4 $19.4 $.16 $.16
April 30 927.9 621.7 50.2 41.6 29.3 29.3 .25 .25
July 31 1,063.9 629.2 156.9 166.6 114.3 114.3 .96 .96
October 31 1,202.5 727.5 161.4 162.0 111.2 102.4 .94 .86
- ------------------------------------------------------------------------------------------------------------------------------
$4,264.9 $2,739.8 $396.1 $397.3 $274.2 $265.4 $2.31 $2.23
- ------------------------------------------------------------------------------------------------------------------------------
1991
January 31 $897.1 $658.3 $(27.0) $(10.8) $(5.9) $(5.9) $(.05) $(.05)
April 30 868.1 646.9 (86.3) (80.8) (53.7) (53.7) (.46) (.46)
July 31 963.9 553.9 149.5 148.8 102.6 102.6 .87 .87
October 31 1,166.3 779.6 121.6 122.5 84.6 84.6 .72 .72
- ------------------------------------------------------------------------------------------------------------------------------
$3,895.4 $2,638.7 $157.8 $179.7 $127.6 $127.6 $1.08 $1.08
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE O -- SUBSEQUENT EVENTS (UNAUDITED)
Tender Offers and Merger Proposals
On December 13, 1993, the Company's Board of Directors adopted procedures (the
"Bidding Procedures") for the purpose of considering proposals to acquire the
Company. Pursuant to the Bidding Procedures, from December 20, 1993 through
February 1, 1994, Viacom Inc. (Viacom) and QVC Network, Inc. (QVC) submitted a
series of bids for the Company. After the initial round of bidding, the
Company entered into a merger agreement with QVC. Prior to the February 1
bidding deadline established by the Bidding Procedures, Viacom substantially
increased its bid and the Company terminated the agreement with QVC and entered
into a merger agreement with Viacom.
On February 1, 1994, both Viacom and QVC submitted their final proposals for
the acquisition of the Company. Viacom's proposal consisted of a tender offer
(the "Viacom Offer") for 50.1% of the outstanding shares of the Company's
Common Stock (the "Shares"), on a fully diluted basis, at $107 per Share to be
followed by a merger (the "Viacom Second-Step Merger") in which each remaining
Share would be converted into the right to receive (i) 0.93065 shares of Viacom
Class B Common Stock, (ii) 0.93065 Contingent Value Rights, (iii) 0.5
three-year Warrants to purchase Viacom Class B Common Stock, (iv) 0.3 five-year
Warrants to purchase Viacom Class B Common Stock and (v) $17.50 in principal
amount of 8% exchangeable subordinated debentures of Viacom.
QVC's proposal consisted of a tender offer (the "QVC Offer") for 50.1% of the
outstanding Shares, on a fully diluted basis, at $104 per Share to be followed
by a merger in which each remaining Share would be converted into the right to
receive (i) 1.2361 shares of QVC Common Stock, (ii) 0.2386 shares of a new
series of 6% cumulative non-convertible exchangeable preferred stock and (iii)
0.32 ten-year Warrants to purchase QVC Common Stock.
At a meeting held on February 4, 1994, the Company's Board of Directors
recommended that stockholders ac-
<PAGE> 38
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cept the Viacom Offer and reject the QVC Offer. At that time, the Company
entered into an Amended and Restated Merger Agreement with Viacom (the
"Restated Viacom Merger Agreement").
As of midnight on February 14, 1994, approximately 74.6% of the outstanding
Shares, on a fully diluted basis, had been validly tendered pursuant to the
Viacom Offer and not withdrawn. As a result, pursuant to the Bidding
Procedures, on February 15, 1994 Viacom waived certain conditions to the Viacom
Offer and extended the offer until March 1, 1994 and QVC terminated the QVC
Offer. Immediately after midnight on March 1, 1994, all conditions to the
Viacom Offer were deemed to have been satisfied and Viacom accepted for payment
61,657,432, of the Shares validly tendered and not withdrawn pursuant to the
Viacom Offer.
Pursuant to the Restated Viacom Merger Agreement, a special meeting of the
Company's stockholders will be called to act on the Viacom Second- Step Merger.
The approval of holders of a majority of all outstanding voting shares of both
Viacom and the Company is required to approve the merger. The approval by
Viacom's stockholders is assured by means of a voting agreement between
Viacom's parent corporation and the Company. The approval by Paramount's
stockholders is assured since Viacom now owns a majority of the outstanding
Shares.
The Restated Viacom Merger Agreement also provides that consummation of the
Viacom Second-Step Merger is subject to certain customary conditions.
Acquisition and Disposition
Of Businesses
In February 1994, the Company acquired Macmillan Publishing Company and certain
other assets of Macmillan Inc., a leading book publisher, for approximately
$553 million.
In June 1993, the Company agreed to sell Prentice Hall Legal and Financial
Services, Prentice Hall Legal Practice Management and Prentice Hall
Professional Software, three of its Publishing software and information
services units, to Information America, Inc. This agreement was terminated in
October 1993.
<PAGE> 39
EXHIBIT INDEX
Exhibits No. Description
- ------------ -----------
(3)(a) Restated Certificate of Incorporation and Amendments
thereto (Incorporated by reference).
*(3)(b) Amended and restated By-laws.
(4)(a) Instruments with respect to issues of long-term debt
have not been filed as exhibits to this Annual
Report on Form 10-K as the authorized principal amount
on any one of such issues does not exceed 10% of the
total assets of Paramount Communications and its
subsidiaries on a consolidated basis. Paramount
Communications agrees to furnish a copy of each such
instrument to the Commission upon request.
(4)(b) Shareholder rights agreement dated as of
September 7, 1988, as amended, between Paramount
Communications Inc. and Chemical Bank, as Rights Agent
(Incorporated by reference).
(10)(i)(a) Amended and Restated Agreement and Plan of Merger dated
as of February 4, 1994, between Paramount
Communications Inc. and Viacom Inc. (Incorporated by
reference).
(10)(i)(b) Voting Agreement dated as of January 21, 1994, between
National Amusements, Inc. and Paramount Communications
Inc. (Incorporated by reference).
(10)(ii)(A)(1) Agreement, dated as of September 9, 1992, between
Paramount Communications and Stanley R. Jaffe
(Incorporated by reference).
(10)(ii)(A)(2) Agreement, dated as of March 17, 1991, between
Paramount Pictures Corporation and Stanley R.
Jaffe (Incorporated by reference).
+(10)(iii)(A)(1) Amended and restated agreement, dated as of
October 1, 1985 and restated as of June 23,
1989, between Paramount Communications and Martin S.
Davis (Incorporated by reference).
+(10)(iii)(A)(2) Amendment dated as of February 11, 1994, to the Amended
and Restated Agreement dated as of October 1,
1985 and restated as of June 23, 1989 between Paramount
Communications and Martin S. Davis (Incorporated by
reference).
+(10)(iii)(A)(3) Agreement, dated as of March 18, 1991, between Paramount
Communications and Stanley R. Jaffe
(Incorporated by reference).
+(10)(iii)(A)(4) Amendment, dated as of September 9, 1992, to the
Agreement, dated as of March 18, 1991, between
Paramount Communications and Stanley R. Jaffe
(Incorporated by reference).
+(10)(iii)(A)(5) Amended and restated agreement, dated as of
November 17, 1987 and restated as of June 23,
1989, between Paramount Communications and Ronald L.
Nelson (Incorporated by reference).
+(10)(iii)(A)(6) Amendment, dated as of December 21, 1992, to the amended
and restated agreement, dated as of November 17,
1987 and restated as of June 23, 1989, between
Paramount Communications and Ronald L. Nelson
(Incorporated by reference).
<PAGE> 40
Exhibits No. Description
- ------------ -----------
+(10)(iii)(A)(7) Agreement, dated as of January 12, 1993, between
Paramount Communications and Ronald L. Nelson
(Incorporated by reference).
+(10)(iii)(A)(8) Amendment dated as of February 11, 1994, to the
Agreement dated as of January 12, 1993 between
Paramount Communications and Ronald L. Nelson
(Incorporated by reference).
+(10)(iii)(A)(9) Amended and restated agreement, dated as of
October 1, 1985 and restated as of June 23,
1989, between Paramount Communications and Donald
Oresman (Incorporated by reference).
+(10)(iii)(A)(10) Amendment dated as of February 11, 1994, to the Amended
and Restated Agreement dated as of October 1,
1985 and restated as of June 23, 1989 between Paramount
Communications and Donald Oresman (Incorporated by
reference).
+(10)(iii)(A)(11) Agreement, dated as of September 10, 1992, between
Paramount Communications and Earl H. Doppelt
(Incorporated by reference).
+(10)(iii)(A)(12) Agreement, dated as of September 10, 1992, between
Paramount Communications and Rudolph L. Hertlein
(Incorporated by reference).
+(10)(iii)(A)(13) Agreement, dated as of June 2, 1989, between Paramount
Communications and Lawrence E. Levinson
(Incorporated by reference).
+(10)(iii)(A)(14) Agreement, dated as of June 2, 1989, between Paramount
Communications and Eugene I. Meyers
(Incorporated by reference).
+(10)(iii)(A)(15) Agreement, dated as of February 25, 1992, between
Paramount Communications and Jerry Sherman
(Incorporated by reference).
+(10)(iii)(A)(16) Agreement, dated April 5, 1993, between Paramount
Communications and Robert Greenberg
(Incorporated by reference).
+(10)(iii)(A)(17) 1992 Stock Option Plan (the "1992 Plan") (Incorporated
by reference).
+(10)(iii)(A)(18) 1989 Stock Option Plan, as amended (the "1989 Plan")
(Incorporated by reference).
+(10)(iii)(A)(18)(a) Form of Stock Option Agreement pursuant to the 1989
Plan--Incentive Stock Option (Incorporated by
reference).
+(10)(iii)(A)(18)(b) Form of Stock Option Agreement pursuant to the 1989
Plan--Nonqualified Stock Option (Incorporated by
reference).
+(10)(iii)(A)(19) 1984 Stock Option Plan, as amended (the "1984 Plan")
(Incorporated by reference).
+(10)(iii)(A)(19)(a) Form of Stock Option Agreement pursuant to the 1984
Plan--Incentive Stock Option (Incorporated by
reference).
+(10)(iii)(A)(19)(b) Form of Stock Option Agreement pursuant to the 1984
Plan--Incentive Stock Option with a Stock
Appreciation Right (Incorporated by reference).
<PAGE> 41
Exhibits No. Description
- ------------ -----------
+(10)(iii)(A)(19)(c) Form of Stock Option Agreement pursuant to the 1984
Plan--Nonqualified Stock Option (Incorporated by
reference).
+(10)(iii)(A)(19)(d) Form of Stock Option Agreement pursuant to the 1984
Plan--Nonqualified Stock Option with a Stock
Appreciation Right (Incorporated by reference).
+(10)(iii)(A)(20) 1973 Key Employees Stock Purchase Plan (Incorporated by
reference).
+(10)(iii)(A)(21) Amended and Restated Supplemental Executive Retirement
Plan (Incorporated by reference).
+(10)(iii)(A)(22) Deferred Compensation Plan for Board of Directors
(Incorporated by reference).
+(10)(iii)(A)(23) Long-Term Performance Plan, as amended (Incorporated by
reference).
+(10)(iii)(A)(24) Corporate Annual Performance Plan, as amended
(Incorporated by reference).
+(10)(iii)(A)(25) Retirement Plan for non-employee directors (Incorporated
by reference).
+(10)(iii)(A)(26) Non-qualified retirement plan (Incorporated by
reference).
*(11) Computation of Earnings (Loss) per Share.
*(22) List of Subsidiaries.
**(24) Consent of Ernst & Young.
*(25) Powers of Attorney.
- ---------
* These exhibits were previously filed as part of this Transition Report on
Form 10-K for the six months ended April 30, 1993, as amended.
** Filed herewith.
+ This exhibit constitutes a management contract or compensatory plan or
arrangement.
<PAGE> 1
EXHIBIT (24)
<PAGE> 2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Numbers 33-48534, 33-48535, 33-46900, 33-28441, 33-22743, 2- 66018, 2-88448
and 33-10554 on Form S-8 and Numbers 2-83427 and 33-51656 on Form S-3) of
Paramount Communications Inc. of our reports dated August 27, 1993, except for
Notes A and I, as to which the date is September 10, 1993, with respect to the
amended consolidated financial statements of Paramount Communications Inc.
included in this Transition Report (Form 10-K/A - Amendment No. 3) for the
six-month period ended April 30, 1993.
ERNST & YOUNG
New York, New York
March 17, 1994
