United States
Securities and Exchange Commission
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1994 For the transition period
from _____ to _____
Commission file number 0-6265
MULTIMEDIA, INC.
____________________________________________________
(Exact name of registrant as specified in its charter)
South Carolina 57-0173540
______________________________ _________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
305 South Main Street, Greenville, South Carolina 29601
_________________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 298-4373
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
____________________________
(Title of Class)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing require-
ments 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 voting stock held by nonaffiliates (share-
holders holding as of December 31, 1994, less than 5% of the outstanding common
stock, excluding directors and officers), computed by reference to the average
bid and asked prices of such stock, as of March 3, 1995, was $966,254,000.
The number of shares outstanding of the Registrant's common stock, $.10 par
value, was 37,628,478 at March 3, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Incorporated Documents Location in Form 10-K
---------------------- ---------------------
Portions of 1994 Annual Report to Shareholders Parts I and II
Portions of Proxy Statement dated March 15, 1995 Part III
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PART I.
ITEM 1. BUSINESS.
Multimedia, Inc. (the "Company") is a diversified media company with
corporate headquarters in Greenville, South Carolina. The Company is a South
Carolina corporation which began using its current name in 1968; however, its
predecessor newspaper and broadcasting companies date back as early as 1888.
The Company publishes 11 daily and approximately 50 non-daily newspaper
publications; owns and operates five television and two radio stations;
serves approximately 432,000 cable television subscribers in five states;
monitors approximately 65,000 security alarm customers; and produces and
syndicates television programming.
The Company's industry segments are newspaper publishing, broadcasting, cable
television, entertainment and security alarms. Financial information for
these segments is presented in Note 14 of the Notes to Consolidated Financial
Statements in the 1994 Annual Report, which material is incorporated herein
by reference.
Further information relating to the development of the business since the
beginning of the fiscal year covered by this report is included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth on pages 17 through 21 in the 1994 Annual Report and in
the Notes to Consolidated Financial Statements in the 1994 Annual Report,
which material is incorporated herein by reference.
RECAPITALIZATION MERGER
On September 20, 1985, the Company's shareholders approved a Recapitalization
Agreement and Plan of Merger providing for the merger of MM Acquiring Corp.,
a new corporation which had been organized for purposes of the merger, with
and into the Company (the "Recapitalization Merger"). The purpose of the
Recapitalization Merger was to recapitalize the Company and thereby provide
the Company's shareholders with an opportunity to receive a premium over
historical prices for a significant portion of their shares while retaining
an ongoing equity interest in the Company and to provide performance
incentives to members of senior management of the Company by providing them
with increased equity participation in the Company. The Recapitalization
Merger was consummated on October 1, 1985. Further information relating to
the Recapitalization Merger is included in Note 2 of the Notes to
Consolidated Financial Statements in the 1994 Annual Report, which material
is incorporated herein by reference.
SUBSEQUENT EVENT
On February 22, 1995, the Company announced that its board of directors had
authorized management, together with Goldman, Sachs & Co., to explore
strategic alternatives to enhance shareholder value, including the sale of
Multimedia, Inc., the spin-off of one or more of its divisions, a business
combination or any similar transaction. No decision has been
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made to pursue any particular strategic alternative, and there can be no
assurance that any transaction will result from the Company's exploration
process.
NEWSPAPER OPERATIONS
The Company publishes the only daily newspapers in Greenville, South
Carolina; Asheville, North Carolina; Montgomery, Alabama; Clarksville,
Tennessee; Gallipolis and Pomeroy, Ohio; Point Pleasant, West Virginia;
Staunton, Virginia; Moultrie, Georgia; and one of the two dailies in Mountain
Home, Arkansas. It also publishes Sunday newspapers in each market except
Moultrie, Point Pleasant and Mountain Home. The Company also publishes
approximately 50 non-daily publications in Alabama, Arkansas, Georgia, North
Carolina, Ohio, South Carolina, Virginia and Tennessee, including the monthly
MUSIC CITY NEWS and THE GOSPEL VOICE.
In April 1993, the Company's Montgomery newspaper merged its morning and
afternoon newspapers. Prior year linage comparisons have not been restated.
However, if restated, billed advertising linage would have increased 2.2%
from 1992 to 1993. The increase is primarily due to a strong rebound in
classified advertising. Classified continued to grow in 1994, increasing by
17.6%
Substantially all of the Company's newspaper revenues are obtained from
advertising and circulation. Advertising rates and rate structures vary
depending upon circulation and type of advertising (local, classified,
national, etc.). The following table indicates billed newspaper advertising
linage and advertising revenues for 1994, 1993 and 1992.
1994 1993 1992
Advertising linage 158,600,000 144,928,000 146,172,000
Advertising revenues $ 110,223,000 $ 99,173,000 $ 98,254,000
The Company's newspapers are primarily home-delivered and are generally sold
by independent carriers and circulation dealers. Certain non-daily
publications are distributed free of charge, using both mail and carrier
delivery. The following table indicates total paid newspaper circulation at
year-end and circulation revenues for 1994, 1993 and 1992.
1994 1993 1992
Circulation:
Daily 321,000 323,000 325,000
Sunday 357,000 352,000 351,000
Non-daily 165,000 202,000 159,000
Circulation revenues $32,824,000 $30,233,000 $ 28,491,000
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The percentages of the Company's newspaper revenues contributed by
advertising, circulation and other operating revenues for the five years
ended December 31, 1994, were:
1994 1993 1992 1991 1990
Advertising revenues 73% 73% 74% 76% 78%
Circulation revenues 22 22 22 20 19
Other operating revenues 5 5 4 4 3
100% 100% 100% 100% 100%
Newsprint represents approximately 20% of the newspaper division's operating
expenses. The basis weight of newsprint used by the Company is 30 pound
paper. The price of newsprint remains volatile and is expected to increase
in 1995. The average cost per ton may vary depending upon the competitive
discount allowance throughout the year. Two newsprint suppliers provide the
majority of the Company's newsprint. The Company believes that its newsprint
supply sources under existing arrangements are adequate.
The Company's newspapers compete for advertising principally on the basis of
readership and compete for circulation principally on the basis of content.
With the exception of Mountain Home, Arkansas, the Company's daily newspapers
do not compete directly with any other general circulation daily newspaper
published in that community. Most of the Company's newspapers compete with
other newspapers published in nearby cities and towns, or with free
distribution advertising weeklies. Further, all of the Company's newspapers
compete with newspapers having national or regional circulation, as well as
with magazines, radio, television, outdoor and other advertising media.
BROADCASTING OPERATIONS
The Company wholly owns and operates four VHF television stations located in
St. Louis, Missouri (KSDK, a NBC affiliate); Cincinnati, Ohio (WLWT, a NBC
affiliate); Knoxville, Tennessee (WBIR-TV, a NBC affiliate); and Macon,
Georgia (WMAZ-TV, a CBS affiliate). In addition, the Company owns a 51%
majority interest in WKYC-TV (a NBC affiliate) in Cleveland, Ohio, and has
operating control of the station.
Television stations operate under five and six year network affiliation
contracts. The network provides programs to its affiliated stations and
sells commercial time in the programs to national advertisers. The stations
also sell commercial time in the programs to national and local advertisers.
Generally, a network affiliation agreement can be canceled prior to the
expiration of the contract by either party with 180 days notice. The Company
has experienced no difficulties in the past with such affiliation renewals.
The Company's television stations' affiliation renewal dates follow:
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Television Station Network Affiliation Renewal
KSDK August 29, 2000
WLWT August 29, 2000
WBIR August 29, 2000
WKYC August 29, 2000
WMAZ February 1, 2000
Each television station transmits live, filmed or taped programs purchased
from others or produced by the station. For both television and radio, the
Company endeavors to present a balanced schedule of programs, including
entertainment, news, public affairs, sports and other programs of public
service and public interest.
The Company owns and operates an AM and FM radio broadcasting station in
Macon, Georgia. The stations are authorized to operate 24 hours per day, and
each maintains a daily operating schedule of at least 18 hours.
The principal sources of the Company's television and radio revenues consist
of payments from national, regional and local advertisers or agencies for
program time or advertising announcements, payments from the networks for
broadcasting network programming and payments by advertisers and other
broadcasters for services such as the production of films or the taping of
advertising material.
The percentages of the Company's broadcasting revenues contributed by
television and radio and other for the five years ended December 31, 1994,
were:
1994 1993 1992 1991 1990
Television revenues 96% 94% 91% 91% 89%
Radio and other revenues 4 6 9 9 11
100% 100% 100% 100% 100%
During 1994, the Company sold its radio stations in Milwaukee, Wisconsin;
Shreveport, Louisiana; and in Greenville and Spartanburg, South Carolina, for
a total of $13.2 million. This resulted in a gain of approximately $8.2
million before taxes.
In January 1993, the Company sold its mobile video production business for
$4.5 million, which resulted in a gain of approximately $2.3 million before
taxes. Revenues from the mobile video production business are included in
the above table under other revenues.
Excluding the results of the properties sold during 1993 and 1994,
broadcasting revenues would have increased approximately 11% and operating
profit would have increased approximately 33.8% from 1993 to 1994. After the
same exclusion, broadcasting revenues would have decreased approximately 1%
and operating profit would have increased approximately 5% from 1992 to 1993.
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The market size, rank and share for the Company's television stations are
presented below:
Rank Share
WKYC (Market #13)
1994 1 (tied) 20
1993 2 17
1992 3 17
KSDK (Market #18)
1994 1 26
1993 1 26
1992 1 24
WLWT (Market #31)
1994 2 18
1993 2 19
1992 3 17
WBIR (Market #63)
1994 1 29
1993 1 28
1992 1 27
WMAZ (Market #124)
1994 1 36
1993 1 42
1992 1 43
Note: Information represents station DMA TV Household share sign-on/
sign-off for the November Arbitron or Nielsen of the respective period.
The Company's television and radio stations compete for revenues principally
on the basis of ratings. The Company's television and radio stations compete
for revenues with other advertising media such as newspapers, magazines and
other television and radio stations. Other sources of present and potential
competition include cable television ("CATV"), pay cable and subscription TV
operations. CATV systems currently operate in most of the market areas
served by the Company's communications media. In addition, franchises for
CATV systems have been granted by various communities in these market areas,
and additional CATV franchises may be considered and granted from time to
time. The future of broadcasting depends on a number of factors, including
the general strength of the economy, population growth, overall advertising
revenues, relative efficiency compared to other competing advertising media
and existing and future governmental regulations and policies.
The business strategy of the Company's broadcasting division focuses on
providing quality local programming and service to each of its respective
communities. The most important local programming segment to the Company's
broadcasting division is local news programming. Local news programming
typically has the highest rating of any local programming segment, and
television stations usually receive a significant portion of their
advertising revenues from the local news segments. Quality local news
coverage is also important in establishing a local station's public service
reputation.
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Further information regarding the Company's broadcasting operations is
presented under "Federal Regulation of Broadcasting".
CABLE OPERATIONS
The Company operates cable television systems serving subscribers in Kansas,
Oklahoma, Illinois, Indiana and North Carolina. The following table shows
homes passed, basic and pay subscribers, basic penetration, pay-to-basic
ratio and average monthly revenue per cable subscriber at the end of 1994,
1993 and 1992.
1994 1993 1992
Homes passed 710,000 694,000 688,000
Basic subscribers 432,000 417,000 410,000
Pay subscribers 339,000 323,000 333,000
Basic penetration 60.8% 60.1% 59.6%
Pay-to-basic ratio 78.4% 77.5% 81.2%
Average monthly revenue
per cable subscriber $32.56 $33.29 $32.13
Cable television is the distribution of television signals and special
information programs to subscribers within the community by means of a
coaxial cable system. A cable system may also offer pay television services
which provide, for an extra charge, special programs such as recently
released movies, entertainment programs or selected sports events.
Subscribers receive these programs on a designated channel of the cable
system which is restricted with electronic security devices to isolate the
pay television signal so that only subscribers to the service can receive it.
The Company holds approximately 140 franchises from local governing
authorities which permit the Company to operate a CATV system in the granting
community (see Federal Regulation of Cable Television). These franchises,
which expire at varying dates ranging from one to 20 years, are generally
non-exclusive and may be terminated for failure to comply with specified
conditions. In most cases, the Company is required to pay fees generally
ranging from three to five percent of the system's revenues to the particular
local governing authority granting the franchise. At the end of 1994,
approximately 58 systems, which account for more than 73% of the Company's
subscribers, have franchise agreements expiring in the year 2000 and beyond.
During 1993, the Company began a five-year $150 million investment in the
technological upgrade of its cable television operations. The investment
will allow the Company to replace the coaxial wire in its cable systems with
fiber and will include the integration of digital compression and the
installation of interactive converter boxes in the homes of approximately 50%
of the Company's customers. The Company believes the technological upgrade
will prepare it for new competitors and potential revenue opportunities.
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The Company may compete with other companies and individuals in the
submission of applications for additional franchises, the renewal of existing
franchises and in seeking to acquire operating CATV systems and
under-developed franchises. Since most franchises are granted on a
non-exclusive basis, other applicants may obtain franchises in areas where the
Company presently operates systems or holds franchises. The Company's cable
television division competes for revenues principally on the basis of quality
of service, a variety of programming options and pricing.
The Company's strategy is to develop clusters of cable television systems in
suburban communities of major metropolitan markets and other areas with
favorable demographics. Management believes that the clustering of cable
systems produces operating, marketing and servicing efficiencies.
On February 22, 1994, and November 19, 1994, the Federal Communications
Commission ("FCC" or "Commission") announced several decisions relating to
cable rates (see Federal Regulation of Cable Television).
During the first quarter of 1995, the Company completed the trade of certain
of the Company's cable systems in Oklahoma and Illinois with 40,500 cable
subscribers for Telecommunications, Inc.'s cable systems in Wichita, Kansas,
with 50,400 subscribers. The Company paid $12.4 million in cash as part of
this transaction.
Wireless Cable Service
In August 1994, the Company sold its wireless cable operations for $35.1
million resulting in a gain of $22.0 million before taxes.
SECURITY ALARM OPERATIONS
The Company sells or leases and installs residential and commercial alarm
equipment and provides monitoring services for the alarm owner or lessee.
These accounts are monitored through a central computer located in Wichita,
Kansas. At year-end, the Company provided security monitoring services for
approximately 65,000 customers (both residential and commercial) primarily
located in the midwest and western United States. These accounts were
obtained through acquisitions and through in-house sales efforts.
The following table shows the number of subscribers and the average recurring
monthly revenue per security subscriber at the end of 1994, 1993 and 1992.
1994 1993 1992
Number of subscribers 65,000 52,000 35,000
Average recurring monthly
revenue per subscriber $26.32 $25.13 $23.09
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The Company's security alarm division generates revenues from the installation,
monitoring and servicing of security alarm systems. Monitoring fees, which
represent approximately 80% of the division's revenues, consist of payments
from customers for the surveillance of the security devices in their home or
business. These devices transmit a signal through telephone lines or radio
waves to the monitoring station whenever the customer's alarm is triggered.
Generally, monitoring contracts between the Company and alarm customers are
for at least three years.
There are many security companies competing in the same markets with the
Company. The Company may also compete with other companies in the
acquisition of existing security accounts.
The Company's security division competes for revenues with many other
security companies on the basis of quality of service, ability to monitor and
service security systems and price.
ENTERTAINMENT OPERATIONS
The Company's entertainment division produces television programming for
broadcast both in the U.S. and internationally. The division derives
virtually all of its operating profits and approximately 45% and 30%,
respectively, of its revenues from the production and syndication of two
daytime television talk shows, the "Donahue" and "Sally Jessy Raphael" shows.
Both of these shows are primarily distributed via satellite to the stations
for showing. The Company contracts with television stations for exclusive
rights to air these programs in their respective markets. The length of
these contracts generally range from one to three years. Fees from these
sales to stations and the sale of advertising in these shows are the
principal sources of revenue for the Company's entertainment division.
The "Donahue" show, hosted by Phil Donahue, is in its twenty-seventh year of
production and syndication. The show is currently seen in 170 U.S. markets
and in 55 foreign countries. Phil Donahue is currently under contract with
the Company through August 31, 1996.
The "Sally Jessy Raphael" show is currently in its eleventh season of
production and syndication and is broadcast in 178 U.S. markets and in 28
foreign countries. Sally Jessy Raphael is currently under contract with the
Company through September 1998.
The "Jerry Springer" show is currently in its fourth season of production and
syndication and is currently seen in 147 U.S. markets and 19 foreign
countries. Jerry Springer is currently under contract with the Company
through September 1997.
"Rush Limbaugh, The Television Show," a late-night talk show, premiered in
September 1992 and is currently seen in 224 U.S. markets. "Rush Limbaugh,
The Television Show" is a joint venture between Ailes Communications, Rush
Limbaugh and the Company. Rush Limbaugh is currently under contract with the
Company through August 1998.
In September 1994, the Company introduced two new talk shows, "Susan Powter"
and "Dennis Prager". These shows are cleared in 184 and 154 markets,
respectively.
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In 1994, the Company discontinued the operations of Multimedia Motion
Pictures, Inc., its made-for-television movie business, resulting in a loss
of $3.4 million.
The entertainment division's primary business is the production of talk shows
for syndication to television stations across the country. There has been
a significant increase in competition in this area. At the end of 1994,
there were over 15 talk shows in syndication with more scheduled to debut in
1995. The increase in the number of shows increases competition not only for
viewers but also for advertising dollars, station clearances, guests and
production talent. The impact has been a decline in ratings for many talk
shows. The "Donahue" and "Sally Jessy Raphael" shows have experienced
ratings declines from 15-30%. These declines have resulted in station
license renewals at lower amounts than in years past and lower advertising
revenues.
In October 1994, the Company launched "NewsTalk Television," a cable channel
in the news-talk format, to diversify the entertainment division so that
results are not as dependent on personality-driven talk shows. This venture
will require several years of investment before it is expected to achieve
profitability. The Company's current projections are to invest approximately
$20 million in "NewsTalk Television" in 1995 compared with $7.7 million in
1994.
The Company expects the above two factors to result in a reduction in
operating profit of approximately 50% for the Company's entertainment
division for 1995.
EMPLOYEE RELATIONS
The Company employs approximately 3,700 full-time employees and has contracts
with local collective bargaining agents representing approximately 5% of its
employees. Employees of the Company receive various supplemental benefits
including group life and health insurance, pension and salary deferral thrift
plans. The Company considers its relationship with employees excellent.
REGULATION OF BROADCASTING AND CABLE OPERATIONS
Federal Regulation of Broadcasting
The Company's television and radio broadcasting operations are subject to the
jurisdiction of the FCC under the Communications Act of 1934 as amended (the
"Act"). The Act empowers the FCC, among other things, to issue, revoke or
modify broadcasting licenses, to assign frequency bands, to determine the
location of stations, to regulate the apparatus used by stations, to
establish areas to be served, to adopt such regulations as may be necessary
to carry out the provisions of the Act and to impose certain penalties for
violation of its regulations.
The Act would prohibit the Company or its subsidiaries from continuing as
broadcast licensees if more than one-fifth of the Company's stock were to be
owned of record or voted
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by aliens or foreign governments, or their representatives, or if an officer or
director of the Company were an alien.
Under the Act, radio and television broadcast licenses may be granted for
maximum periods of seven and five years, respectively. Upon application, and
in the absence of conflicting applications or adverse findings as to the
licensee's qualifications, existing radio and television licenses will be
renewed without hearing by the FCC for additional seven and five year terms,
respectively.
If a valid competing application is timely filed against a licensee's renewal
application, the Act requires a full comparative hearing. The U.S. Court of
Appeals for the District of Columbia Circuit affirmed a significant FCC
decision in a comparative television renewal proceeding which recognized an
incumbent licensee's "renewal expectancy" based on substantial service to its
community. The Court's decision indicated that a renewal expectancy, if
proven by sound past performance, should be considered by the FCC along with
other standard comparative factors applicable to both the incumbent and the
competing applicants such as (i) the applicants' other media holdings (in
this context, FCC policy disfavors owners of multiple properties); (ii)
subject to the ultimate outcome of a pending FCC rulemaking proceeding on
comparative licensing criteria, the applicants' plans for management of the
facility by their respective owners (which is normally not present in the
case of a publicly owned broadcasting company); and (iii) other factors,
including local residency, minority ownership, civic involvement and
provision of signals to under-served populations. The FCC has established
procedures placing strict limitation on settlement payments made to competing
applicants in return for dismissal of their applications. These rules were
intended to reduce the potential for abuse of the FCC's comparative renewal
procedures. The FCC currently has pending a rulemaking and inquiry
proceeding to develop specific standards for determining whether an incumbent
is entitled to a renewal expectancy and for comparing incumbent licensees
with competing applicants as well as to establish procedures for determining
entitlement to renewal expectancy.
Petitions to deny broadcast station license renewal applications (as well as
other types of broadcast applications) have been filed in recent years by
various parties asserting programming, employment and other complaints. Most
such petitions have been denied by the FCC on the basis of pleadings and
without formal hearings. The Company's applications for the renewal of its
broadcast licenses for the regular term have heretofore been granted without
hearing; however, there is no assurance that this experience will be repeated
in the future.
The Company's television stations' FCC license renewal dates follow:
Television Station FCC License Renewal
WMAZ April 1, 1997
WBIR August 1, 1997
WKYC October 1, 1997
WLWT October 1, 1997
KSDK February 1, 1997
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The Act also prohibits the assignment of a license or the transfer of control
of a licensee or significant modification of broadcast transmission
facilities without prior approval of the FCC. Moreover, FCC multiple
ownership regulations prohibit the common ownership or control of most
communications media (i.e., television and radio, television and daily
newspapers, radio and daily newspapers or television and cable television
operations ("Cable")) serving common or overlapping market areas. The
Company owns AM and FM radio stations and a television station in Macon,
Georgia. These ownership interests pre-dated the FCC's multiple ownership
rules and thus are "grandfathered," and divestiture by the Company is not
required. In the case of a sale or transfer of control (other than a "pro
forma" or non-substantial transfer of control), however, the buyer or
transferee would not be able to continue the common ownership of the relevant
properties absent a waiver of the FCC's rules.
In addition, FCC multiple ownership regulations generally limit the number
of attributable broadcast interests which may be owned by an entity or
individual. Attributable interests under FCC multiple ownership rules
include 5% or greater voting stockholder interests (10% or more for
investment companies, bank trust departments and insurance companies),
general (and some types of limited) partnership interests and positions as
officers or directors. FCC multiple ownership regulations generally permit
the common ownership of up to 12 television stations (without regard to
whether they are in the UHF or VHF band), provided the total audience reach
of commonly owned television stations is less than 25% of the nation's
television households. (For purposes of calculating the total percentage of
national television households, only 50% of each UHF station's audience reach
is counted.) Rulemaking proceedings are currently pending before the FCC
looking toward possible modifications in existing television ownership rules
and in standards for determining the types of interests which will be
considered to be attributable for purposes of FCC ownership rules. There can
be no assurance, however, that any of these rules will be changed. In any
event, the Company's broadcast operations will continue to be subject to the
FCC's ownership rules and any changes the agency may adopt. The Company does
not believe that the FCC multiple ownership regulations for television
stations will restrict its growth except in areas with overlapping coverage
to its existing newspaper or cable properties. In 1992 the FCC relaxed its
"duopoly" rule governing ownership by a single entity of multiple radio
stations in the same market. In local markets with 15 or more stations, one
entity is permitted to own two AM and two FM stations, so long as the
combined audience share of these stations does not exceed 25% of the market
at the time of acquisition. In markets with fewer than 15 stations,
ownership of up to three radio stations is permitted, no more than two of
which may be in the same service (AM or FM), provided that the total number
of stations owned (if other than a single AM-FM combination) comprises less
than 50% of the total number of stations in the market. The number of
stations which may be owned by a single entity on a national basis has
increased to 20 AM and 20 FM stations.
The 1992 Act contains two provisions that fundamentally alter the
relationship that has existed in recent years between cable television
systems and television broadcast stations whose signals are distributed to
cable subscribers. The first deals with the rights of "local" commercial and
non-commercial television broadcasters to mandatory carriage of their signals
on cable systems ("must-carry"). The second, in certain defined
circumstances, prohibits cable operators from carrying the signals of
television stations without first obtaining their
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consent ("retransmission consent"). The two provisions are related in that,
with respect to local cable carriage, broadcasters must make a choice once
every three years on a system by system basis whether to proceed under the
must-carry rules or whether to insist upon retransmission consent in order for
their signal to be carried. The FCC's implementing regulations required broad-
casters to elect between must-carry and retransmission consent by June 17,
1993, with the choice binding for three years. A broadcast station has the
right to choose must-carry, assuming it can deliver a signal of specified
strength and will be responsible for payment of copyright costs associated with
its carriage, with regard to cable systems in its Area of Dominant Influence
as defined by the audience measurement service, Arbitron. Stations electing to
grant retransmission consent were expected to conclude their consent
agreements with cable systems by October 6, 1993, the date on which systems'
authority to carry broadcast signals without consent expired. In June 1993,
the Company elected retransmission consent on the majority of its cable
systems that carry the signals of the stations in the stations' markets.
Must-carry was elected on a small percentage of systems.
On April 8, 1993, a special three-judge federal district court for the
District of Columbia issued a decision upholding the constitutional validity
of the must-carry signal carriage requirements. This decision was vacated
by the United States Supreme Court on June 27, 1994, and remanded to the
district court for further development of a factual record. The Company
cannot predict the outcome of the case. A separate challenge to the
retransmission consent provision of the 1992 Act was rejected by a federal
district court. An appeal of that decision is pending.
The FCC's syndicated exclusivity and network non-duplication rules enable
television broadcast stations, that have obtained exclusive distribution
rights for programming in their market, to require cable systems (with more
than 1,000 subscribers) to delete or "black-out" such programming from
certain other television stations which are carried by the cable system. A
pending FCC rulemaking proceeding involves issues related to relaxing or
abolishing the geographic limitations on program exclusivity contained in its
rules so as to allow parties to set by contract the geographic scope of
exclusive distribution rights.
In addition to full service television broadcast stations, the FCC, under its
rules, provides for authorization of low power television stations ("LPTV"),
subscription television stations ("STV"), multipoint distribution services
("MDS"), multichannel multipoint distribution services ("MMDS") and direct
satellite-to-home broadcast services ("DBS"). These services have the
technical capability to distribute television programming to viewers' homes
and, thus, to compete with conventional full service television stations.
Technological developments in broadcasting and related fields, such as High
Definition Television ("HDTV") or Advanced Television Systems ("ATV"),
Satellite Digital Audio Radio Services ("DARS") as well as changes in FCC
regulations, may affect the competitiveness of new and existing alternatives
to conventional radio and television services or otherwise affect the market
for radio and television broadcast services. For example, the FCC favors
relaxation of the cross-ownership ban on telephone companies providing cable
television services in their telephone service area and has authorized
telephone companies to provide cable service on a "video dialtone" basis.
(See Federal Regulation of Cable Television.) Several federal district
courts have struck down the 1984 Cable Act's telco/cross-ownership provision
as facially invalid and
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inconsistent with the First Amendment. The United States Courts of Appeals for
the Fourth and the Ninth Circuits have upheld the appeals of two of these
district court decisions, and the United States Justice Department is expected
to request the United States Supreme Court to review these cases.
Congressional legislation to eliminate or modify this cross-ownership ban has
also been proposed. The FCC also has proposed the establishment of a local
multipoint distribution service ("LMDS") that could offer multiple channels of
video programming using very high-frequency microwave signals in the 28 GHz
band. Under the proposal, two service providers in each of 489 markets across
the country would be licensed to distribute video, data and other tele
communications services. There are potential spectrum sharing problems with
the LMDS proposal, and a September 1994 report issued by a FCC Negotiated
Rulemaking Committee was inconclusive as to whether the 28 GHz band could be
shared by terrestrial LMDS and satellite users. The FCC is currently
considering whether to seek further public comment via a Notice of Proposed
Rulemaking. The Company cannot predict the outcome of the FCC's proceeding,
nor can the Company assess the effect which future technological developments
or changes in FCC regulations or policies may have on the Company's
operations.
There are additional FCC regulations and policies, and regulations and
policies of other federal agencies, regulating network-affiliate relations,
political broadcasts, advertising practices, program content, equal
employment opportunities, application procedures and other areas affecting
the business or operation of broadcast stations. Proposals for additional
or revised regulations or legislation are pending and considered by federal
regulatory agencies and Congress from time to time. The Company cannot
predict the effect of existing and proposed federal regulations, legislation
and policies on its broadcasting business.
The foregoing does not purport to be a complete summary of all the provisions
of the Act or the regulations and policies of the FCC thereunder.
Federal Regulation of Cable Television
The cable television industry is subject to extensive government regulation
at the federal and local levels and, in some cases, at the state level. The
relationship of various levels of government in regulating cable television
and the extent of such regulation is established by the Cable Communications
Policy Act of 1984 (the "1984 Act") and the recent amendment thereto, the
1992 Act. The FCC has had and will continue to have principal federal
responsibility for regulating cable television. The 1992 Act has greatly
expanded the regulatory framework of the FCC within which cable operators
must operate. Under this new framework, the FCC was required to adopt new
regulations implementing Congressional policies for such aspects of cable
operations as rates, customer service obligations, carriage of television
broadcast signals and other types of programming, technical matters, leased
access, franchise issues, consumer electronics equipment standards, ownership
and employment practices. The FCC has completed initial rulemaking
proceedings in accordance with timetables imposed by the 1992 Act; however,
several of the new rules remain under reconsideration by the FCC. In
addition, provisions of the 1992 Act and some of the FCC's implementing
regulations have been challenged in court. Thus, there remains an element
of uncertainty as to the ultimate nature and scope of the new requirements.
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A. Television Signal Carriage and Programming. The 1992 Act contains
two elements that fundamentally alter the relationship between cable systems
and television broadcast stations. The first reinstates the mandatory
carriage of certain local over-the-air television stations ("must-carry"
rules). Such rules have previously been held unconstitutional as violative
of cable operators' First Amendment Rights. The second element provides that
in certain circumstances television stations may prohibit the carriage by
cable systems absent consent ("retransmission consent"). The two provisions
are related in that broadcast stations must elect either must-carry or
retransmission consent on local cable systems. Election must be made every
three years. For the current three-year election period, the Company's cable
systems have succeeded in maintaining desirable channel line-ups by
accommodating those stations electing mandatory carriage and entering into
retransmission consent agreements with others. On April 8, 1993, a special
three-judge federal district court of the District of Columbia issued a
decision upholding the constitutional validity of the must-carry signal
carriage requirements. This decision was vacated by the United States
Supreme Court on June 27, 1994, and remanded to the district court for
further development of a factual record. A separate challenge to the
retransmission consent provision of the 1992 Act was rejected by a federal
district court. An appeal of that decision is pending. (See also, Federal
Regulation of Broadcasting, above.)
The FCC's syndicated exclusivity and network non-duplication rules enable
television broadcast stations, that have obtained exclusive distribution
rights for programming in their market, to require cable systems (with more
than 1,000 subscribers) to delete or "black-out" such programming from other
television stations which are carried by the cable system. The extent of
such deletions varies from market to market but generally makes distant
broadcast signals less attractive sources of programming. The FCC also is
studying whether to relax or abolish the geographic limitations on program
exclusivity contained in its rules so as to allow parties to set by contract
the geographic scope of exclusive distribution rights. This could result in
even more extensive program black-outs.
The FCC has recommended to Congress that it repeal at least part of the cable
industry's compulsory copyright license which Congress established in 1976
to serve as a means of compensating program suppliers for cable
retransmission of broadcast signals. (See Copyright discussion, below.) The
FCC determined that the statutory compulsory copyright license for distant
broadcast signals no longer served the public interest and that private
negotiations between the applicable parties would better serve the public.
The FCC has deferred a decision on whether to recommend the repeal of the
statutory compulsory copyright license for retransmission of local broadcast
signals. Legislation has been proposed to repeal the compulsory copyright
license law. Without the compulsory license, cable operators might need to
negotiate rights from the copyright owners for each program carried on each
broadcast station in the channel lineup. Such negotiated agreements could
increase the cost to cable operators of carrying broadcast signals.
The FCC requires that non-broadcast cable origination programming comply with
FCC standards similar to those imposed on broadcasters. These standards
include regulations governing political advertising and programming,
advertising during children's programming, prohibition of lottery information
and sponsorship identification requirements.
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The 1992 Act imposes certain restrictions on cable operators which have an
attributable ownership interest in satellite programming services.
Vertically-integrated companies are prohibited from unreasonably refusing to
deal with a multichannel distributor and from discriminating in price, terms
and conditions in the sale of programming to multichannel distributors if the
effect is to hinder or prevent competition. As required by the 1992 Act, the
FCC issued rules governing distribution practices and contractual
relationships between vertically-integrated programmers and cable systems in
an effort to promote competition and diversity in the programming market and
to increase its availability to consumers. However, the rules allow
programmers to: establish credit, financial or technical qualifications;
establish different prices, terms and conditions based on actual and
reasonable differences; and enter into exclusive arrangements if in the
public interest. This provision has withstood judicial challenge, but an
appeal of the court's decision is pending. In addition, the FCC is
reconsidering the rules it adopted to implement statutory policy.
B. Cable Television Ownership. As a result of the 1984 Act, the FCC
is, with a few exceptions, the only governmental agency authorized to
prescribe rules relating to cable system ownership or control by persons with
interest in other mass media communications. The 1984 Act prohibits common
ownership or control of a television station and a cable system in the
station's Grade B signal coverage area (typically an area approximately 15-75
miles from the station's transmitting antenna). The 1992 Act imposes
restrictions on common ownership or control of MMDS and Satellite Master
Antenna Television ("SMATV") operations in a cable service area. (SMATV is
a video delivery system that receives programming through a satellite earth
station for distribution to viewers (without using public rights of way) in
multiple dwelling complexes such as apartment buildings and hotels.)
Existing ownership interests of MMDS or SMATV services are unaffected. The
1992 Act directed the FCC to implement horizontal and vertical ownership
limitations on cable operators. With regard to horizontal ownership, the FCC
adopted rules limiting the number of subscribers a cable operator is
authorized to reach to no more than 30 percent of all homes passed by cable
nationwide. The horizontal ownership limits were invalidated by a federal
court, and the FCC has stayed its rule pending further judicial appeal. The
FCC's new vertical integration rules limit to 40 percent of a system's
capacity the number of channels that can be occupied by a commonly-owned
programmer. These rules are undergoing FCC reconsideration. The 1992 Act
grants local franchising authorities certain rights to deny franchise awards
or transfer approvals upon a finding of common ownership by the applicant of
another system in the same service area or that competition would be reduced
or eliminated by such award or transfer.
Except for rural telephone companies as defined by the FCC, federal law
restricts the ability of telephone companies to engage in cable television
operations within their local service areas. Specifically, local telephone
companies may not provide video programming, channels of communication, pole
or conduit space or other rental arrangements to an affiliate. The FCC
favors relaxation of this ban and authorizes telephone companies to provide
cable service on a "video dialtone" basis by furnishing transmission
facilities to customers who would distribute programming.
The FCC amended its rules in 1992 to permit local telephone companies to
offer "video dialtone" service for video programmers, including channel
capacity for the carriage of video programming and certain noncommon carrier
activities such as video
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processing, billing and collection and joint marketing arrangements. In its
video dialtone order, which was part of a comprehensive proceeding examining
whether and under what circumstances telephone companies should be allowed to
provide cable television services, including video programming to their
customers, the FCC concluded that neither the 1984 Cable Act nor its rules
apply to prohibit the interexchange carriers (i.e., long distance telephone
companies such as AT&T) from providing such services to their customers.
Additionally, the FCC also concluded that where a local exchange carrier
("LEC") makes its facilities available on a common carrier basis for the
provision of video programming to the public, the 1984 Cable Act does not
require the LEC or its programmer customers to obtain a franchise to provide
such service. This aspect of the FCC's video dialtone order was upheld on
appeal by the U.S. Court of Appeals for the D.C. Circuit. The FCC recently
issued an order reaffirming its initial decision, and this order has been
appealed. Because cable operators are required to bear the costs of complying
with local franchise requirements, including the payment of franchise fees, the
FCC's decision could place cable operators at a competitive disadvantage vis-
a-vis services offered on a common carrier basis over local telephone company
provided facilities. In it Reconsideration Order, the FCC, among other
actions, refused to require telephone companies to justify cost allocations
prior to the construction of video dialtone facilities and indicated that it
would provide guidance on costs that must be included in proposed video
dialtone tariffs. The FCC also established dual federal/state jurisdiction
over video dialtone services based on the origination point of the video
dialtone programming service. In a separate proceeding, the FCC has proposed
to increase the numerical limit on the population of areas qualifying as
"rural" and in which LECs can provide cable service without a FCC waiver.
On January 12, 1995, the FCC adopted a Fourth Further Notice of Proposed
Rulemaking in its video dialtone docket. The FCC tentatively concluded that
it should not ban telephone companies from providing their own video
programming over their video dialtone platforms in those areas in which the
cable/telephone cross-ownership rules have been found unconstitutional. The
FCC requested comments on this issue and on further refinements of its video
dialtone regulatory framework concerning, among other issues, telephone
programmer affiliation standards, the establishment of structural safeguards
to prevent cross-subsidization of video dialtone and programming activities,
and the continuation of the FCC's ban prohibiting telephone companies from
acquiring cable systems within their telephone service areas for the provision
of video dialtone services. The FCC will also consider whether a LEC offering
video dialtone service must secure a local franchise if that LEC also engages
in the provision of video programming carried on its video dialtone platform.
The FCC has also proposed to broadly interpret its authority to waive the
cable/telephone cross-ownership ban upon a showing by telephone companies that
they comply with the safeguards which the FCC establishes as a condition of
providing video programming.
A number of bills that would have permitted telephone companies to provide
cable television service within their own service areas were considered
during the last Congress, but none were adopted. These bills would have
permitted the provision of cable television service by telephone companies
in their own service areas conditioned on the establishment of safeguards to
prevent cross-subsidization between telephone and cable television
operations.
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Similar legislation is expected to be considered by Congress during its current
session. The outcome of these FCC, legislative or court proceedings and
proposals or the effect of such outcome on cable system operations cannot be
predicted.
In 1992 the FCC modified its regulations governing common ownership or
control of cable systems with national television networks. The new rules
allow national television networks to own cable systems if such a system
(when aggregated with all other cable systems in which the network holds such
an interest) does not pass (i) more than 10 percent of homes passed on a
nationwide basis, and (ii) 50 percent of the homes passed within any one
Arbitron area of dominant influence (ADI).
The 1992 Act prohibits, with some exceptions, cable operators from selling
a system within 36 months of acquisition or construction. Franchise
authorities must act within a certain time period to act on a request for
transfer by a cable operator. The FCC has adopted rules dealing with both
of these matters and has them under consideration.
C. Leased Access. Cable systems with more than 36 activated channels
are required by the 1984 Act to make a certain number of those channels
available for commercial leased access by third parties unaffiliated with the
system operator. (This provision does not, however, require a system in
operation on or before December 29, 1984, to delete existing programming that
was on the system before July 1, 1984, to accommodate potential lessees.)
Under the 1992 Act, the FCC must determine maximum reasonable rates for
commercial use of designated channel capacity and establish reasonable terms
and conditions for such use. Parties who believe they have been denied
access wrongfully may petition the FCC for relief or seek relief in Federal
Court.
Under the 1992 Act, Cable operators may prohibit the carriage of any material
deemed to be obscene or otherwise patently offensive on commercial access
channels. Alternatively, cable operators may place all "indecent" leased
access programming on a single channel and must block the channel unless
otherwise requested by a subscriber. FCC implementing rules allowing cable
operators to ban such programming from access channels were struck down by
the court, which remanded to the FCC regulations dealing with operators'
rights and obligations to sequester certain programming on a separate
channel. The FCC has obtained a rehearing from the court.
D. Other Non-Programming Requirements. The 1992 Act mandates that the
FCC modify and adopt new rules regarding frequency utilization standards for
cable systems. The FCC has preempted, except upon a FCC-granted waiver,
state and local authorities from enforcing technical standards which are more
stringent than the FCC's guidelines.
The 1992 Act requires the FCC to issue regulations to ensure compatibility
between cable systems and television receivers and video cassette recorders
("VCR"). Regulations shall include, among other things, requirements that
cable operators notify subscribers if certain functions of television
receivers and VCRs are not compatible with converter boxes. Regulations must
also be adopted to promote the commercial availability of converter boxes and
remote control devices. The FCC will also determine whether, and under what
circumstances, to permit cable operators to scramble signals.
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The FCC issues licenses for microwave relay stations, mobile radios and
receive-only earth stations, all of which are commonly used in the operation
of cable systems. A cable system's failure to comply with any FCC
requirements may result in a variety of sanctions including monetary fines
or revocation or suspension of licenses for stations used in connection with
the system. A cable system's inability to use a microwave relay station or
a mobile radio due to license revocation could adversely affect system
operations, particularly if the relay microwave is used to provide service
to distant communities or to relay distant television signals to the system.
The FCC rules contain signal leakage monitoring standards which must be
complied with by all cable systems annually. These requirements pertain to
cable operators' use of certain frequencies at specified power levels and
involve specific testing which must be completed each year to test for signal
leakage.
The FCC currently regulates the rates and conditions imposed by public
utilities for use of their poles, unless under the Federal Pole Attachment
Act state public service commissions are able to demonstrate that they
regulate the cable television pole attachment rates. Nineteen states
(including Illinois among those served by the Company) have certified to the
FCC that they regulate the rates, terms and conditions for pole attachments.
In the absence of state regulation, the FCC administers such pole attachment
rates through use of a formula which it has devised. The validity of this
FCC function was upheld by the U.S. Supreme Court.
The 1992 Act and FCC implementing rules expand the cable industry's Equal
Employment Opportunity obligations by requiring cable companies to provide
additional information on race, sex, hiring, promotion and recruitment
practices for six employment positions that the FCC has identified as
performing key management functions.
E. Rate Regulation. The 1992 Act establishes a mechanism for
regulation of the rates charged by a cable operator for its service. Local
regulation of basic (that level of service which includes broadcast signals)
cable rates will be permitted for those cable systems not subject to
"effective competition." The definition of "effective competition" (fewer
than 30 percent of the households in the service area subscribe; or at least
50 percent of the households in the service area are served by two
multichannel video programming distributors and at least 15 percent subscribe
to the smaller operator; or a franchising authority serves as a multichannel
video programming distributor and offers service to at least 50 percent of
the households) ensures that virtually all cable systems are now subject to
rate regulation. In order to regulate rates for the basic tier of service
and related equipment, local officials must request FCC certification and
must follow detailed FCC guidelines and procedures to determine whether the
rates in question conform to a highly complex, FCC-approved "benchmark" or,
if rates exceed the benchmark, whether the operator can justify them with a
cost-of-service showing. FCC rules also limit related rates, including those
for set-top converters, additional outlets and home wiring, to cost, plus a
modest element of profit. Rates for expanded tiers of service (other than
pay channels or pay-per-view) are subject to the same benchmark or
cost-of-service standards as basic rates, but compliance is enforced by the
FCC in response to complaints by subscribers or the local franchising
authority. The new rules permit cable companies periodic rate increases for
inflation and certain external costs.
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On February 22, 1994, the FCC adopted several rate orders including an order
which revised its benchmark regulatory scheme. The FCC's new regulations
generally require rate reductions (absent a successful cost-of-service
showing) of 17% of September 30, 1992, rates (the "Full Reduction Rate"),
adjusted for inflation, channel modifications, equipment costs, and increases
in programming costs. However, rate reductions will be held in abeyance for
those systems whose rates are already below the revised benchmark levels, or
pending the completion of cost studies by the FCC of various types of
representative systems, of those systems that would be required to be reduced
below the revised benchmark levels in order to achieve the Full Reduction
Rate. Further rate reductions to the Full Reduction Rate would be required
if validated by the cost studies. The new regulations became effective on
May 15, 1994, but operators were permitted to elect to defer a rate reduction
prior to July 14, 1994, absent a change in their rates or restructuring of
service offerings between May 15 and July 14.
Among other issues addressed by the FCC in its February rate orders was the
treatment of packages of la carte channels upon the fulfillment of certain
conditions. On February 22, 1994, the FCC adopted rules which revised its
treatment of la carte programming offerings by applying various criteria to
determine whether a cable operator's la carte packages should be subject to
rate regulation. Local franchising authorities have the authority under the
FCC rules, subject to review by the FCC, to determine whether an la carte
offering should be subject to rate regulation. If an operator is found to
have bundled channels in an la carte package to evade rate regulation, the
FCC may impose forfeitures or other sanctions. On November 10, 1994, the FCC
reversed its policy regarding rate regulation of packages of la carte
services. la carte services that are offered in a package will now be
subject to rate regulation by the FCC, although the FCC indicated that it
cannot envision circumstances in which any price for a collective offering
of premium channels that have traditionally been offered on a per-channel
basis would be found to be unreasonable. Rate increases for regulated
services will be indexed for inflation, and operators will also be permitted
to increase rates in response to increases in costs beyond their control,
such as taxes and increased programming costs.
On November 10, 1994, the FCC announced a revision to its regulations
governing the manner in which cable operators may charge subscribers for new
cable programming services. In addition to the present formula for
calculating the permissible rate for new services, the FCC instituted a
three-year flat fee mark-up plan for charges relating to new channels of
cable programming services. Commencing on January 1, 1995, operators may
charge for new channels of cable programming services added after May 14,
1994, at a rate of up to 20 cents per channel, but may not make adjustments
to monthly rates totalling more than $1.20 plus an additional 20 cents for
programming license fees per subscriber over the first two years of the
three-year period for these new services. Operators may charge an additional
20 cents in the third year only for channels added in that year plus the
costs for the programming. Operators electing to use the 20 cent per channel
adjustment may not also take a 7.5% mark-up on programming cost increases,
which is permitted under the FCC's current rate regulations. The FCC
indicated that it would request further comment on whether cable operators
should continue to receive the 7.5% mark-up on increases in license fees on
existing programming services.
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The FCC also announced that it will permit operators to offer a "new product
tier" ("NPT"). Operators will be able to price this tier as they elect so
long as, among other conditions, other channels that are subject to rate
regulation are priced in conformity with applicable regulations and operators
do not remove programming service from existing service tiers and offer them
on the NPT.
On February 22, 1994, the FCC also adopted interim cost-of-service
regulations. Rate reductions will not be required where it is demonstrated
that rates for basic and other regulated programming services are justified
and reasonable using cost-of-service standards. The FCC established an
interim industry-wide 11.25% rate of return, and requested comments on
whether this standard and other interim cost-of-service standards should be
made permanent. The FCC also established a presumption that acquisition
costs above a system's book value should be excluded from the rate base, but
the FCC will consider individual showings to rebut this presumption. The
need for special rate relief will also be considered by the FCC if an
operator demonstrates that the rates set by a cost-of-service proceeding
would constitute confiscation of investment, and that, absent a higher rate,
the credit necessary to operate and to attract investment could not be
maintained. The FCC will establish a uniform system of accounts for
operators that elect cost-of-service rate regulation, and the FCC has adopted
affiliate transaction regulations.
Taken as a whole, the new regulations have compelled significant changes in
the Company's operations including restructuring of the Company's service
offerings and reduced rates for the reconstituted basic service. In many
systems the Company instituted la carte service offerings in conformity
with FCC guidelines. The FCC currently is reviewing several of these
restructurings, and it is difficult to predict what action, if any, will
result. In addition, the ultimate impact of these regulations cannot be
predicted at this time because many aspects of the regulatory scheme are
under reconsideration by the FCC, are under judicial challenge, or have yet
to be adopted by the FCC.
F. Franchise Fees and Access. Although franchising authorities may
impose franchise fees under the 1984 Act, such payments cannot exceed five
percent of system revenues per year. Franchising authorities are also
empowered to require that the operator provide certain cable-related
facilities, equipment and services to the public and to enforce operator
compliance with franchise requirements and voluntary commitments. The 1992
Act permits cable operators to itemize on its subscriber bills amounts
assessed as a franchise fee or dedicated to certain franchisor-imposed
requirements. When changed circumstances render compliance with such
requirements commercially impracticable, the 1984 Act requires franchising
authorities to renegotiate performance standards and, under certain
conditions, permits the operator to make changes in program commitments
without local approval.
Although franchising authorities are permitted to require and enforce the
dedication of system channels for non-commercial public, educational and
governmental access use, they must permit the operator to make other use of
such channels until the demand for use of designated access purposes is
sufficient to occupy the dedicated capacity. In addition, if the franchising
authority requires or the operator volunteers to provide free services or
financial support for non-commercial access users, the value of such
commitments must be credited toward the franchise fee payment.
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G. Local Franchising. Because a cable distribution system uses local
streets and rights-of-way, cable television systems have been subject to
state and local regulation, typically imposed through the franchising
process. State and local officials have been involved in franchisee
selection, system design and construction, safety, service rates, consumer
relations and billing practices and community-related programming and
services. Except for cable systems lawfully operating without a franchise
on or before July 1, 1984, the 1984 Act requires that a cable operator obtain
a franchise prior to instituting service. Under the 1992 Act, franchising
authorities may not award an exclusive franchise or unreasonably deny a
competitive franchise. Local authorities may, without obtaining a franchise,
operate their own cable system, notwithstanding the granting of one or more
franchises by a local authority.
The FCC has adopted rules which, upon adoption by a local franchising
authority, establish minimum customer service requirements. However, the
1992 Act permits local franchising authorities to establish, in excess of or
in addition to those of the FCC, certain customer service requirements
regarding such matters as office hours, telephone availability and service
calls.
H. Renewal. The 1992 Act did not significantly alter the procedures
for the renewal of cable television franchises which provide an incumbent
franchisee certain protections against having its franchise renewal
application denied. These procedures are designed to provide the incumbent
franchisee with a fair hearing on past performance, an opportunity to present
a renewal proposal and to have it fairly and carefully considered, and a
right of appeal if the franchising authority either fails to follow the
procedures or denies renewal unfairly. Nevertheless, renewal is not assured,
as the franchisee must meet certain statutory and franchise standards.
Moreover, even if a franchise is renewed, the franchising authority may
attempt to impose new and more onerous requirements such as significant
upgrading of facilities and services or higher franchise fees as a condition
of renewal.
I. Theft of Cable Service and Unauthorized Reception of Satellite
Programming. The 1984 Act addresses the problem of unauthorized connections
to cable systems and the use of private earth stations capable of receiving
many of the attractive satellite-delivered program services offered by cable
systems without payment to or authorization of the program owner. Both of
these practices are potential sources of significant revenue loss for cable
systems. The 1992 Act has raised the penalties for engaging in theft of
service and the manufacturing or sale of devices used to assist theft of
service. However, it is not a violation to receive satellite-delivered
programming by private earth stations without permission, if the program
signal in question is not scrambled (transmitted in an encoded form which
cannot be received without special decoding equipment), and the program owner
has no specific marketing arrangement in place for granting such user
permission.
J. Copyright. Cable television systems are subject to a federal
copyright licensing scheme covering carriage of television broadcast signals.
In exchange for contributing a percentage of their revenues to a federal
copyright royalty pool, cable operators receive blanket permission (a
"compulsory license") to retransmit copyrighted material in broadcast
signals. The amount of this royalty payment varies depending on the amount
of system
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revenues from certain sources, the number of distant signals carried and the
location of the cable system with respect to over-the-air television markets.
Royalty rates paid by operators are subject to periodic adjustment by a copy-
right arbitration royalty panel, which can be convened by the Librarian of
Congress when necessary in order to compensate for the effects of national
monetary inflation and for FCC rule changes that increase the amount of
television broadcast signals that cable systems carry. Legislative proposals
have been and continue to be made to simplify or eliminate the compulsory
license. The FCC has recommended to Congress that the compulsory license for
the carriage of distant broadcast signals be eliminated. In addition, the full
impact of the 1992 Act's retransmission consent provision is unclear. There-
fore, the nature or amount of future payments for broadcast signal carriage
cannot be predicted at this time. For the copyrighted materials they use in
carriage or origination of non-broadcast programming, cable systems, like
broadcasters, must have the permission of each copyright holder. System
compliance with both the statutory copyright license and provisions of the
Copyright Act of 1976 requiring private clearance is enforced through copyright
infringement litigation brought by either the copyright holder or its
representative or, in the case of violations of the statutory copyright
license, by a local broadcaster or the copyright holder.
K. Regulatory Change. Since its adoption in 1984, the Cable Act has
been shaped by FCC regulations and by judicial interpretation. The 1992 Act
has resulted in significant changes in the operation of cable television
systems. As discussed above, the FCC has been charged with adopting rules
and regulations and implementing the new provisions, although at present it
is difficult to predict the ultimate course of such rules and regulations.
Additionally, major provisions of the 1992 Act have been challenged in the
courts, most significantly, the must-carry, retransmission consent and rate
regulation provisions. It is likely that FCC regulations will also be
challenged in court. Until the FCC has concluded its rulemaking proceedings
and the courts have adjudicated the issues presented to them, it would be
premature to assess the full impact of the 1992 Act on the Company.
The foregoing does not purport to be a complete summary of all present and
proposed federal, state and local regulations relating to the cable industry.
ITEM 2. PROPERTIES.
The Company owns all of its newspaper publishing plants and properties;
139,500 square feet in Greenville, South Carolina; 100,000 square feet in
Montgomery, Alabama; 113,400 square feet in Asheville, North Carolina; 94,500
square feet in Clarksville, Tennessee; 24,800 square feet in Staunton,
Virginia; 16,000 square feet in Gallipolis, Ohio; 12,500 square feet in
Moultrie, Georgia; and 18,000 square feet in Mountain Home, Arkansas. In
addition, the Company leases approximately 42,500 square feet of newspaper
production, alternate delivery and office space in Alabama, North Carolina,
South Carolina and Tennessee.
The Company's Montgomery, Alabama, newspaper has begun a $15 million capital
project to purchase a new press and build a new production plant with $11
million of this to be invested in 1995.
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In its broadcasting operations, the Company owns buildings with approximately
68,000 square feet in St. Louis, Missouri; 12,000 square feet in Cincinnati,
Ohio; 50,000 square feet in Knoxville, Tennessee; and 28,000 square feet in
Macon, Georgia. The Company leases its studio buildings in Cincinnati and
Cleveland.
The Company owns all of its cable television systems and equipment. The
Company leases certain offices and tower sites. The Company owns the offices
in Wichita, Great Bend and McPherson, Kansas; Edmond and Bixby, Oklahoma; Oak
Lawn and Harvey, Illinois; Rocky Mount, New Bern, Greenville, Washington and
Kinston, North Carolina; and Laporte, Indiana.
In its entertainment operations, the Company leases approximately 16,000
square feet in New York, New York, and 13,000 square feet in Los Angeles,
California. The Company also leases studio facilities in New York, New York,
where "NewsTalk Television" is produced.
In its security operations, the Company leases office space in Oklahoma City,
Oklahoma; Dallas and Houston, Texas; Miami, Florida; St. Louis, Missouri;
Phoenix, Arizona; and Anaheim, California. The central monitoring station
is located in the Company's new security headquarters in Wichita, Kansas.
Except as noted above, the Company generally owns the equipment used in its
newspaper, broadcasting, cable, entertainment and security operations.
The Company believes that all of its properties are in good condition, well
maintained and adequate for its current operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company from time to time becomes involved in litigation incidental to
its business, including libel actions. In the opinion of management, the
Company carries adequate insurance against any judgments of material amounts
which are likely to be recovered in such actions. At the present time, the
Company is not a party to any litigation in which it is anticipated that the
amount of any likely recovery would have a material adverse effect on its
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded in the National Market System
over-the-counter market and appears on The National Association of Securities
Dealers Automated Quotation ("NASDAQ") under the symbol MMEDC.
23
<PAGE>
The following table sets forth the range of closing high and low bid prices
for the Company's Common Stock in the over-the-counter market by quarter
since January 1, 1993. The prices were reported by The NASDAQ Information
Exchange System. These prices represent prices between dealers in securities
and, as such, do not include retail mark-ups, mark-downs, or commissions and
do not necessarily represent actual transactions.
Low Bid High Bid
1994:
First Quarter $28.50 $37.25
Second Quarter $27.00 $32.50
Third Quarter $28.75 $32.25
Fourth Quarter $25.75 $29.75
1993:
First Quarter $32.00 $36.25
Second Quarter $32.00 $38.00
Third Quarter $30.75 $36.75
Fourth Quarter $33.50 $39.00
The Company's Credit and Note Agreements limit the payment of dividends on
any capital stock of the Company. Currently the most restrictive of these
limits the annual payment of dividends to 25% of annualized net income. No
dividends were declared or paid during 1994 or 1993. The Company has no
intention of paying any cash dividends in the foreseeable future. (See Note
6 to the Consolidated Financial Statements included in the 1994 Annual
Report, which material is incorporated herein by reference.)
As of March 3, 1995, there were approximately 1,200 record holders of the
Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
The required information is set forth on pages 22 and 23 of the accompanying
1994 Annual Report, which material is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The required information is set forth on pages 17 through 21 of the
accompanying 1994 Annual Report, which material is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following information is set forth in the accompanying 1994 Annual
Report, which material is incorporated herein by reference:
24
<PAGE>
All Consolidated Financial Statements of Multimedia, Inc. and Subsidiaries
(pages 24 through 27); all Notes to Consolidated Financial Statements (pages
28 through 37); and the "Independent Auditors' Report" (page 38).
With the exception of the information herein expressly incorporated by
reference, the 1994 Annual Report of the Registrant is not deemed filed as
part of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The required information is incorporated herein by reference from the
information in the Company's definitive proxy statement dated March 15, 1995,
for the Annual Meeting of Shareholders to be held April 19, 1995, under the
headings "Election of Directors" and "Executive Officers".
ITEM 11. EXECUTIVE COMPENSATION.
The required information is incorporated herein by reference from the
information in the Company's definitive proxy statement dated March 15, 1995,
for the Annual Meeting of Shareholders to be held April 19, 1995, under the
headings "Management Compensation" and "Compensation Committee Interlocks and
Insider Participation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The required information is incorporated herein by reference from the
information in the Company's definitive proxy statement dated March 15, 1995,
for the Annual Meeting of Shareholders to be held April 19, 1995, under the
headings "Election of Directors," "Principal Shareholders of the Company" and
"Executive Officers".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The required information is incorporated herein by reference from the
information in the Company's definitive proxy statement dated March 15, 1995,
for the Annual Meeting of Shareholders to be held April 19, 1995, under the
headings "Election of Directors," "Management Compensation" and "Compensation
Committee Interlocks and Insider Participation".
25
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) The following consolidated financial statements are incorporated by
reference from the 1994 Annual Report attached hereto:
Consolidated Statements of Earnings, years ended December 31, 1994,
1993 and 1992
Consolidated Statements of Stockholders' Equity (Deficit), years
ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows, years ended December 31,
1994, 1993 and 1992
Consolidated Balance Sheets, December 31, 1994 and 1993
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) (2) The following auditors' report and financial schedules for the
years ended December 31, 1994, 1993 and 1992 are submitted
herewith:
Independent Auditors' Report on 10-K Schedules
Schedule VIII - Valuation and Qualifying Accounts
All other schedules are omitted as the required information is
inapplicable or the information is presented in the consolidated
financial statements or related notes.
(a) (3) Exhibits:
(2) See Exhibit 10.8.
(3.1) Restated Articles of Incorporation of the Company filed on
December 22, 1967, in the office of the Secretary of State of
South Carolina: Incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-3, No. 33-9622.
(3.2) Amendments to the Company's Restated Articles of Incorporation
filed on June 27, 1969; April 20, 1972; April 25, 1978; May 1,
1980; and May 13, 1983, in the office of the Secretary of State
of South Carolina: Incorporated by reference to Exhibit 4.5 to
the Company's Registration Statement on Form S-3, No. 33-9622.
26
<PAGE>
(3.3) Amendment to the Company's Restated Articles of Incorporation
attached as Annex B to Articles of Merger filed on October 1,
1985, in the office of the Secretary of State of South Carolina:
Incorporated by reference to Exhibit 4.6 to the Company's
Registration Statement on Form S-3, No. 33-9622.
(3.4) Articles of Amendment filed February 8, 1990, in the office of
the Secretary of State of South Carolina: Incorporated by
reference to Exhibit 3.4 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989 (File No. 0-6265).
(3.5) Articles of Amendment to the Company's Restated Articles of
Incorporation filed April 18, 1991, in the office of the
Secretary of State of South Carolina: Incorporated by reference
to Exhibit 4.1.4 to the Company's Registration Statement on Form
S-8, File No. 33-40050 ("S-8 No. 33-40050").
(3.6) By-laws of the Company, as amended: Incorporated by reference
to Exhibit 4 to the Company's Form 10-Q for the quarter ended
March 31, 1994 (File No. 0-6265).
(4.1) See Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 10.5 and 10.7.
(4.2) Form of Certificates for Common Stock: Incorporated by reference
to Exhibit 4.2 to the Company's Form 10-K for the year ended
December 31, 1992 ("1992 Form 10-K") (File No. 0-6265).
(4.3) Rights agreement, dated as of September 6, 1989, by and between
the Company and South Carolina National Bank, Rights agent:
Incorporated by reference to Exhibit 1 to Form 8-K of the Company
dated September 6, 1989 (File No. 0-6265).
(4.4) The Company hereby agrees to furnish to the Securities and
Exchange Commission, upon request of the Commission, a copy of
any instrument with respect to long-term debt not being
registered in a principal amount less than 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis.
(10.1)* Performance Stock Option Plan of the Company: Incorporated by
reference to Exhibit 10.2 to the Company's Form 10-K for the year
ended December 31, 1987 (File No. 0-6265).
(10.2)* Amendment of Performance Stock Option Plan: Incorporated by
reference to Exhibit 10.2.1 to the Company's Form 10-K for the
year ended December 31, 1988 ("1988 Form 10-K") (File No. 0-6265).
(10.3)* Key Executive Stock Option Plan of the Company: Incorporated by
reference to Exhibit 28.1 to the Company's Registration Statement
on Form S-8, No. 33-17234.
27
<PAGE>
(10.3.1)* Amendment to Key Executive Stock Option Plan, adopted April 21,
1993.
(10.4)* Director Stock Option Plan: Incorporated by reference to Exhibit
10.20 to the 1992 Form 10-K.
(10.5) Credit Agreement between the Company and the Chase Manhattan Bank
(National Association) and Citibank, N.A. as Lead Agents, the
First National Bank of Chicago, First Union National Bank of
North Carolina and the Toronto-Dominion Bank, Cayman Islands
Branch, as Co-Agents and the Chase Manhattan Bank (National
Association), as Administrative Agent, and various banks
(excluding schedules and certain exhibits): Incorporated by
reference to Exhibit 4.1 of the Company's 1990 second quarter
Form 10-Q (File No. 0-6265). The Registrant agrees to furnish
supplementally to the Securities and Exchange Commission a copy
of any omitted Schedule or Exhibit upon request of the Commission.
(10.5.1) List of Lenders under Credit Agreement as of March 3, 1995.
(10.6) Contract for Services between Multimedia Entertainment, Inc. and
Phillip J. Donahue, dated as of April 15, 1982, as amended by
letter agreements dated April 15, 1982, February 10, 1984, and
August 6, 1985: Incorporated by reference to Exhibit 10.6 to the
Company's Annual Report of Form 10-K for the year ended December
31, 1985 (File No. 0-6265). Portions of this exhibit have been
omitted and are the subject of an order of the United States
Securities and Exchange Commission granting the Company's request
for confidential treatment.
(10.6.1) Amendment to Contract for Services: Incorporated by reference
to Exhibit 10.6.1 to the Company's 1988 Form 10-K. Portions of
this exhibit have been omitted and are the subject of an order
of the United States Securities and Exchange Commission granting
the Company's request for confidential treatment.
(10.6.2) Amendment to Contract for Services: Incorporated by reference
to Exhibit 10.6.2 to the Company's quarterly report on Form 10-Q
for the quarter ended June 30, 1991 (File No. 0-6265). Portions
of this exhibit have been omitted and are the subject of an order
of the United States Securities and Exchange Commission granting
the Company's request for confidential treatment.
(10.6.3) 1993 Amendment to Contract for Services: Incorporated by
reference to Exhibit 10.6.3 to the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1993 (File No. 0-6265).
Portions of this exhibit have been omitted and are the subject
of an order of the United States Securities and Exchange
Commission granting the Company's request for confidential
treatment.
28
<PAGE>
(10.6.4) 1994 Amendment to Contract for Services: Incorporated by
reference to Exhibit 10.6.4 to the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 1994 (File No.
0-6265). Portions of this exhibit have been omitted and are the
subject of an order of the United States Securities and Exchange
Commission granting the Company's request for confidential
treatment.
(10.7) Form of Note Agreement between the Company and various
institutional holders (excluding schedules and certain exhibits):
Incorporated by reference to Exhibit 4.2 of the Company's 1990
second quarter Form 10-Q (File No. 0-6265). The Registrant
agrees to furnish supplementally to the Securities and Exchange
Commission a copy of any omitted schedule or exhibit upon request
of the Commission.
(10.8) Recapitalization Agreement and Plan of Merger, dated May 1, 1985,
as amended and restated between MM Acquiring Corp. and the
Company: Incorporated by reference to Exhibit 2 to the Company's
Registration Statement on Form S-14 dated August 20, 1985
(Registration No. 2-99786).
(10.9)* Executive Salary Protection Plan: Incorporated by reference to
Exhibit 10.15 to the Company's Form 10-K for the year ended
December 31, 1986 (File No. 0-6265).
(10.10)* Executive Salary Protection Agreement - First Amendment:
Incorporated by reference to Exhibit 10.10 to the Company's Form
10-K for the year ended December 31, 1991 ("1991 Form 10-K")
(File No. 0-6265).
(10.11) Purchase Agreement by and between Multimedia, Inc. and National
Broadcasting Company, Inc.: Incorporated by reference to Exhibit
10.1 to the Company's Form 10-Q for the quarter ended September
30, 1990 (File No. 0-6265).
(10.12) Exchange Agreement between National Broadcasting Company, Inc.
and Multimedia, Inc.: Incorporated by reference to Exhibit 10.2
to the Company's Form 10-Q for the quarter ended September 30,
1990 (File No. 0-6265).
(10.13)* 1991 Stock Option Plan: Incorporated by reference to Exhibit
10.15 to the Company's Form 10-K for the year ended December 31,
1990 (File No. 0-6265).
(10.13.1)* Amendment to 1991 Stock Option Plan: Incorporated by reference
to Exhibit 28.2 to S-8 No. 33-40050.
(10.13.2)* Amendments to 1991 Stock Option Plan, dated as of February 24,
1993: Incorporated by reference to Exhibit 10.13.2 to the 1992
Form 10-K.
29
<PAGE>
(10.14)* Management Committee Incentive Plan: Incorporated by reference
to Exhibit 10.14 to the 1991 Form 10-K.
(10.15)* Executive Incentive Plan: Incorporated by reference to Exhibit
10.15 to the 1991 Form 10-K.
(10.16)* Summary of Supplemental Executive Retirement Program for Messrs.
Bartlett and Sbarra: Incorporated by reference to Exhibit 10.16
to the 1991 Form 10-K.
(10.17)* Portion of Board resolution amending Supplemental Executive
Retirement Program for Mr. Bartlett, effective June 16, 1994.
(10.17.1)* Agreement with Douglas J. Greenlaw, dated July 20, 1994:
Incorporated by reference to Exhibit 10.21 to the Company's Form
10-Q for the quarter ended June 30, 1994 (File No. 0-6265).
(10.18)* Agreement with Walter E. Bartlett, dated June 16, 1994:
Incorporated by reference to Exhibit 10.22 to the Company's Form
10-Q for the quarter ended June 30, 1994 (File No. 0-6265).
(10.19) Agreement between Multimedia Entertainment, Inc. and Wonderland
Entertainment, f/s/o Sally Jessy Raphael, dated as of August 17,
1993: Incorporated by reference to Exhibit 10.19.1 to the
Company's Form 10-Q for the quarter ended September 30, 1993
(File No. 0-6265). Portions of this exhibit have been omitted
and are the subject of an order of the United States Securities
and Exchange Commission granting the Company's request for
confidential treatment.
(10.20) Asset Purchase and Sale Agreement by and between Prime Cable
Income Partners, L.P., as seller and Tar River Communications,
Inc., as buyer, relating to Valparaiso and Laporte, Indiana
systems dated as of July 30, 1992, as amended by letter
supplement dated as of December 3, 1992: Incorporated by
reference to Exhibits to Form 8-K dated December 16, 1992 (File
No. 0-6265).
(11) Computation of Primary and Fully Diluted Earnings per Share.
(13) 1994 Annual Report.
(21) Subsidiaries of the Registrant.
(23) Accountants' Consent to incorporate by reference in Registration
Statements No. 2-68069, 33-17234, 33-40050, 33-40253, 33-61574
and 33-61462, on Form S-8, and in Registration Statements No.
33-42179 and 33-46557 on Form S-3.
30
<PAGE>
(27) Financial Data Schedule
(99) Proxy Statement dated March 15, 1995.
________________________
* This is a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
Items reported on Form 8-K dated October 5, 1994:
(5) Other Events
(7) Exhibits
Items reported on Form 8-K dated October 12, 1994:
(5) Other Events
(7) Exhibits
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MULTIMEDIA, INC.
By:
Signature Title Date
SIGNATURE APPEARS HERE Chairman, Chief March 24, 1995
------------------------ Executive Officer
Donald D. Sbarra
SIGNATURE APPEARS HERE Senior Vice President March 24, 1995
------------------------ Finance and Administration
Robert E. Hamby, Jr. and Chief Financial
Officer
SIGNATURE APPEARS HERE Vice President- March 24, 1995
------------------------ Controller
Frederick G. Lohman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and as of the dates indicated.
By:
SIGNATURE APPEARS HERE Director March 24, 1995
------------------------
Rhea T. Eskew
SIGNATURE APPEARS HERE Director March 24, 1995
------------------------
David L. Freeman
SIGNATURE APPEARS HERE Director March 24, 1995
------------------------
Douglas J. Greenlaw
SIGNATURE APPEARS HERE Director March 24, 1995
------------------------
Robert E. Hamby, Jr.
SIGNATURE APPEARS HERE Director March 24, 1995
------------------------
M. Dexter Hagy
SIGNATURE APPEARS HERE Director March 24, 1995
------------------------
Donald D. Sbarra
SIGNATURE APPEARS HERE Director March 24, 1995
------------------------
Elizabeth P. Stall
<PAGE>
Independent Auditors' Report on 10-K Schedule
The Board of Directors and Stockholders
Multimedia, Inc.:
Under the date of February 10, 1995, we reported on the consolidated
balance sheets of Multimedia, Inc. and subsidiaries as of December 31, 1994
and 1993 and the related consolidated statements of earnings, stockholders'
equity (deficit), and cash flows for each of the years in the three-year
period ended December 31, 1994, as contained in the 1994 annual report to
stockholders. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for
the year 1994. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the financial
statement schedule as listed in Item 14(a)(2). The financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.
(Signature of KPMG Peat Marwick LLP appears here)
Greenville, South Carolina
February 10, 1995
<PAGE>
<TABLE>
<CAPTION>
MULTIMEDIA, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1994, 1993 and 1992
Additions
Balance at Charged to Collection Deductions Balance at
Beginning Costs and of from End of
of Year Expenses Writeoffs Reserves Year
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for discounts $ 118,000 990,000 -- 1,018,000 90,000
Allowance for doubtful
accounts 3,595,000 3,543,000 1,104,000 3,515,000 4,727,000
$ 3,713,000 4,533,000 1,104,000 4,533,000 4,817,000
Year ended December 31, 1993:
Allowance for discounts $ 54,000 850,000 -- 786,000 118,000
Allowance for doubtful
accounts 3,891,000 3,875,000 620,000 4,791,000 3,595,000
$ 3,945,000 4,725,000 620,000 5,577,000 3,713,000
Year ended December 31, 1992:
Allowance for discounts $ 14,000 902,000 -- 862,000 54,000
Allowance for doubtful
accounts 3,371,000 4,112,000 584,000 4,176,000 3,891,000
$ 3,385,000 5,014,000 584,000 5,038,000 3,945,000
</TABLE>
Exhibit 10.3.1
AMENDMENT TO
KEY EXECUTIVE STOCK OPTION PLAN
ADOPTED APRIL 21, 1993
1. Section 2 of the Plan is amended by adding the following at the end
of such section:
"If the Board includes members who are not
'disinterested persons' (as defined in Rule
16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any
applicable successor rule or regulation
("Rule 16b-3")), then all authority of the
Board under the Plan shall be exercised by a
committee of the Board composed solely of all
individuals thereof who are 'disinterested
persons' (as so defined)."
Exhibit 10.5.1
LIST OF LENDERS UNDER CREDIT AGREEMENT
AS OF MARCH 3, 1995
Commitments
Bank Current %
Bank of America $ 13,710,000 3.00%
Bank of California, N.A. 9,792,857 2.14%
Bank of Hawaii 9,792,857 2.14%
Bank of Montreal 13,710,000 3.00%
Bank of New York 13,710,000 3.00%
Bank of Nova Scotia 13,710,000 3.00%
Bankers Trust Company 9,792,857 2.14%
Banque Paribas 9,792,857 2.14%
Chase Manhattan Bank, N.A. 13,057,143 2.86%
Citibank, N.A. 9,792,857 2.14%
Corestates Philadelphia National Bank 9,792,857 2.14%
Credit Lyonnais 19,585,715 4.29%
Crestar Bank 9,792,857 2.14%
First National Bank of Chicago 13,057,143 2.86%
First Union National Bank of NC 22,850,000 5.00%
Industrial Bank of Japan 20,238,572 4.43%
LTCB Trust Company 9,792,857 2.14%
Mellon Bank 9,792,857 2.14%
Mitsubishi Trust & Banking Corp. 13,057,143 2.86%
National Westminster Bank USA 9,792,857 2.14%
NationsBank of Georgia, N.A. 9,792,857 2.14%
NationsBank of Texas, N.A. 13,710,000 3.00%
Nippon Credit Bank, Ltd. 11,751,429 2.57%
PNC Bank, N.A. 9,792,857 2.14%
Royal Bank of Canada 9,792,857 2.14%
Sakura Bank, Ltd. 9,792,857 2.14%
Shawmut Bank Connecticut, N.A. 22,850,000 5.00%
Sumitomo Bank, Ltd. 13,057,143 2.86%
Tokai Bank, Ltd. 9,792,857 2.14%
Toronto-Dominion Bank 35,907,143 7.86%
Union Bank 9,792,857 2.14%
Wachovia Bank of NC 36,560,000 8.00%
Wachovia Bank of SC 9,792,857 2.14%
$457,000,000 100.00%
Exhibit 10.17
MULTIMEDIA, INC.
BOARD OF DIRECTORS RESOLUTION
RESPECTING RETIREMENT OF WALTER E. BARTLETT
AND RELATED MATTERS
Section 3.1 of Article III of the Supplemental Executive Retirement for Walter
E. Bartlett (effective as of July 1, 1991) is hereby amended to provide for
eligibility for the full amount of the retirement benefit provided under such
plan, the period for measuring eligibility to run from July 1, 1991 through the
present date, in lieu of the period ending December 31, 1994 as originally
provided under such plan. Mr. Bartlett shall be entitled to the full amount
of the retirement benefit in 120 installments as provided under such plan,
commencing February 1, 1995.
Exhibit 11
MULTIMEDIA, INC.
Computation of Primary and Fully Diluted Earnings per Share
Twelve Months Ended
12/31/94 12/31/93 12/31/92
Primary
Net earnings applicable to
common and common
equivalent shares $90,029,000 99,850,000 60,504,000
Shares:
Weighted average number of
common and common
equivalent shares outstanding 38,279,000 38,374,000 37,593,000
Primary earnings per common and
common equivalent shares $ 2.35 2.60 1.61
Fully Diluted
Net earnings applicable to
common and common equivalent
shares $90,029,000 99,850,000 60,504,000
Shares:
Weighted average number of
common and common equivalent
shares assuming ending
market price 38,277,000 38,422,000 37,673,000
Fully diluted earnings
per share $ 2.35 2.60 1.61
EXHIBIT 13
MULTIMEDIA, INC.
1994
ANNUAL REPORT
<PAGE>
MULTIMEDIA,INC.is a diversified media company with corporate headquarters in
Greenville, South Carolina.Founded in 1968, Multimedia, Inc. is comprised of
five operating divisions. Multimedia Newspaper Company publishes 11 daily and 49
non-daily newspapers;Multimedia Broadcasting Company owns and operates five
network-affiliated television stations and two radio stations;Multimedia
Cablevision Company operates more than 125 cable television franchises in
Kansas, Oklahoma, Illinois, Indiana and North Carolina; Multimedia Security
Service monitors approximately 65,000 security alarm customers; and Multimedia
Entertainment produces and syndicates quality television programming, including
Donahue;Sally Jessy Raphael; Jerry Springer;Rush Limbaugh, The Television
Show;Susan Powter; Dennis Prager;and NewsTalk Television, a cable television
network.
Operations Highlights 2
A Letter to Our Shareholders 4
Multimedia Newspaper Company 6
Multimedia Broadcasting Company 8
Multimedia Cablevision Company 10
Multimedia Entertainment Company 12
Multimedia Security Service 14
Multimedia, Inc.and Subsidiaries 16
Shareholder Information IBC
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands except per-share data) 1994 1993 1992
<S> <C> <C> <C>
Earnings Per Share $ 2.35 2.60 1.61
Revenues 630,483 611,891 553,440
Operating Profit 189,443 184,403 173,105
Net Earnings 90,029 99,850 60,504
Total Assets 683,978 655,174 627,945
Long-term Debt 572,557 664,997 745,995
Capital Expenditures 83,028 47,378 37,493
Depreciation 39,025 35,422 31,710
Shares Outstanding 37,620 37,210 36,803
Operating Profit Margin 30.0% 30.1% 31.3%
</TABLE>
STOCK PERFORMANCE
<TABLE>
<CAPTION>
1994 1993
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
Quarter 1 $37.25 28.50 $36.25 32.00
Quarter 2 $32.50 27.00 $38.00 32.00
Quarter 3 $32.25 28.75 $36.75 30.75
Quarter 4 $29.75 25.75 $39.00 33.50
</TABLE>
MULTIMEDIA STOCK IS TRADED IN THE NATIONAL MARKET SYSTEM OVER-THE-COUNTER
(NASDAQ SYMBOL: MMEDC).
LISTED ABOVE ARE THE HIGH AND LOW BIDS BY QUARTER FOR 1994 AND 1993. NO
DIVIDENDS WERE DECLARED OR PAID DURING 1994 OR 1993.
(Operating Revenues bar chart appears here. The plot points are listed
below)
OPERATING REVENUES
(in thousands)
92 $553,440
93 $611,891
94 $630,483
(Net Earnings bar chart appears here. The plot points are listed
below)
NET EARNINGS
(in thousands)
92 $ 60,504
93 $ 99,850
94 $ 90,029
(Net Earnings bar chart appears here. The plot points are listed
below)
EARNINGS PER SHARE
92 $ 1.61
93 $ 2.60
94 $ 2.35
** 1994 EARNINGS FROM ONGOING OPERATIONS EXCLUDING NET GAINS ON SALES OF
PROPERTIES WERE $78.3 MILLION OR $2.05 PER SHARE.
** 1993 EARNINGS FROM ONGOING OPERATIONS EXCLUDING ACCOUNTING CHANGES,
INCOME TAX ADJUSTMENTS AND THE SALE OF PROPERTY WERE $72.2 MILLION OR $1.88 PER
SHARE.
1
<PAGE>
OPERATIONS
DIVISIONS OPERATIONS
(Photo of paper on a press appears here)
MULTIMEDIA NEWSPAPER COMPANY
Multimedia Newspaper Company, headquartered in Greenville, S.C., publishes
11 daily and six Sunday newspapers in 10 cities in nine states.The division also
publishes over 49 non-daily products, including a variety of newsweeklies,
shoppers and two monthly magazines.The three largest properties are in
Greenville, S.C., Asheville, N.C., and Montgomery, Ala.
(Photo of satelite dish appears here)
MULTIMEDIA BROADCASTING COMPANY
Multimedia Broadcasting Company, based in Knoxville,Tenn., owns and operates
five network-affiliated television stations:WKYC (NBC), Cleveland;KSDK (NBC),
St.Louis;WLWT (NBC), Cincinnati; WBIR (NBC), Knoxville;and WMAZ (CBS), Macon,
reaching over 4% of the U.S.The division also owns WMAZ/WAYS, an AM/FM
combination in Macon.
(Photo of cable wire appears here)
MULTIMEDIA CABLEVISION COMPANY
Multimedia Cablevision Company operates more than 125 cable television
franchises in Kansas, Oklahoma, Illinois, Indiana and North Carolina, with major
clusters of subscribers located in and around Wichita, Oklahoma City, suburban
Chicago and eastern North Carolina.At year-end 1994, Multimedia had
approximately 432,000 basic and 339,000 pay subscribers and passed approximately
710,000 homes.The division's headquarters are in historic Union Station in
Wichita, Kansas.
(Photo of a hand holding a microphone appears here)
MULTIMEDIA ENTERTAINMENT COMPANY
Multimedia Entertainment Company, located at Rockefeller Center in New York
City, established a reputation as the originator of the television talk show
format.Multimedia now produces and/or syndicates six daily talk shows: Donahue;
Sally Jessy Raphael; Jerry Springer; Rush Limbaugh, The Television Show; Susan
Powter;and Dennis Prager.NewsTalk Television, a cable network with a news-driven
talk format, was launched in October 1994.
(Close-up photo of a security system keyboard appears here)
MULTIMEDIA SECURITY SERVICE
Multimedia Security Service, founded in 1982, is one of the 20 largest
security companies in America with offices in Wichita, Oklahoma City, Miami,
Dallas, Chicago, Houston, St.Louis, Phoenix and Los Angeles. The division owned
65,000 security alarm accounts at the end of 1994.Multimedia Security moved into
its new state-of-the-art headquarters and central monitoring facility in Wichita
in August 1994.
2
<PAGE>
<TABLE>
<CAPTION>
in millions
HIGHLIGHTS OPERATING REVENUES OPERATING PROFITS
<S> <C> <C>
Multimedia newspapers have no daily competition for (Bar chart appears here. (Bar chart appears here.
readership in any of the three major market areas.Seven The plot points are listed The plot points are listed
of nine newspaper operations are located in southeastern as follows: as follows:
markets predicted to grow faster in households and
average income than the U.S.overall.Multimedia ranks 32nd 92 93 94 92 93 94
in the country in total daily circulation. $132.5 $135.9 $150.1 $37.7 $37.7 $45.4
Multimedia stations are the news leaders in three of five (Bar chart appears here. (Bar chart appears here.
broadcasting market areas and are competitive demographi- The plot points are listed The plot points are listed
cally in the other two.In four of five markets, Multimedia as follows: as follows:
provides more local news than any of its competitors. 92 93 94 92 93 94
The division now offers weekend morning newscasts at $137.2 $133.0 $142.8 $38.2 $38.8 $51.8
each of its stations and ranks first in weekend news in all
five markets.
Multimedia recently traded approximately 40,500 subscribers (Bar chart appears here. (Bar chart appears here.
in Illinois and Oklahoma for approximately 50,400 TCI The plot points are listed The plot points are listed
subscribers in Wichita, Kansas, giving Multimedia access as follows: as follows:
to 95% of Wichita's cable households.This market position 92 93 94 92 93 94
enables Multimedia to increase advertising revenues and $144.4 $164.6 $165.4 $50.7 $56.6 $52.6
offer telephony.
Multimedia's programs continue to be among the leaders (Bar chart appears here. (Bar chart appears here.
in their dayparts, despite a dramatic increase in competition The plot points are listed The plot points are listed
in the talk show genre in recent years.The division as follows: as follows:
introduced two new daily programs - Susan Powter ad 92 93 94 92 93 94
Dennis Prager- in September 1994.The division continues $129.1 $161.6 $147.5 $55.8 $63.3 $52.0
to work aggressively to increase its subscriber base for the
recently introduced NewsTalk Television.
The fastest growing of Multimedia's five divisions, Security (Bar chart appears here. (Bar chart appears here.
opened one new full-service office and converted two The plot points are listed The plot points are listed
maintenance and repair facilities to full-service offices in as follows: as follows:
1994.Subscribers increased 24% over 1993.Response 92 93 94 92 93 94
times are among the industry's best. $10.3 $16.7 $24.6 $1.8 $1.8 $3.0
3
<PAGE>
A LETTER TO OUR
SHAREHOLDERS
MULTIMEDIA IS
FACING SOME TOUGH
CHALLENGES, AND
CONTINUES TO PURSUE
VIABLE ALTERNATIVES
TO ENHANCING
SHAREHOLDER VALUE.
Multimedia's 1994 operating results reflected another year of growth in
revenues and operating profit for the Company. Net earnings for 1994 were $90
million and earnings per share were $2.35. These amounts include net after-tax
gains of $16.2 million or $.42 per share on the sales of Multimedia's wireless
cable systems and radio stations in three markets, as well as losses associated
with the closing of its television movie production business. The results also
include $4.5 million or $.12 per share in after-tax start-up costs related to
our launch of NEWSTALK TELEVISION (previously The Talk Channel). Excluding
these items, 1994 earnings from ongoing operations were $78.3 million or $2.05
per share, a 9% increase over 1993 earnings from ongoing operations of $72.2
million or $1.88 per share.
Consolidated operating revenues were $630.5 million in 1994, up 3% from
$611.9 million in 1993. Operating profit rose 3% to $189.4 million from $184.4
million last year. Debt was reduced by $92.4 million this year - $43.9 million
of which came from operations and $48.5 million from the sale of properties - to
$572.6 million.
RECORD RESULTS This was a banner year for Multimedia's Newspaper and
Broadcasting divisions, and both segments posted significant revenue gains
compared with last year. Newspaper revenues advanced 10% in 1994, fueled by a
12% increase in advertising revenues. Broadcasting revenues, which grew 7%,
benefited from over $7 million in political advertising revenues. The challenge
for both divisions, of course, will be to sustain this momentum in 1995. A
dramatic retail expansion in our two largest newspaper markets should produce an
increase in advertising volume in 1995. Although it will be difficult for
Broadcasting to replace the revenues from political advertising, the division's
television stations are well-positioned to take advantage of station affiliation
changes in the Cleveland and St. Louis markets and should experience an increase
in advertising revenues in 1995.
READY FOR THE FUTURE Multimedia Cablevision performed admirably in 1994,
perhaps the most challenging period in its 14-year existence. Despite the
restrictions imposed by the FCC's 1993 rate freeze and 1994 rate rollback, we
are proud to report that Cable revenues increased 1% if the impact of the
divested wireless operations is excluded. Multimedia's fiber optic upgrades of
its cable systems now extend to approximately 35% of its customer base. These
rebuilds give Multimedia the channel capacity needed to tap into new revenue
streams and the technical structure to take advantage of digital compression as
it develops. The Company plans to complete 87% of the upgrades by the end of
1995, with the remaining 13% slated for 1996.
GROWTH OPPORTUNITY Multimedia Security Service's revenues increased 47%
compared with the prior year. The division added more than 12,000 customers in
1994 and opened one new full-service office and converted two maintenance and
repair facilities to full ser-
4
<PAGE>
vice during the year. This business presents a growth opportunity over the
next few years, and we have made a commitment to utilizing the most advanced
technology in the industry as we expand this division.
NEW CHALLENGES We've stated throughout the year that the Entertainment
division poses the greatest challenge to the Company today. Multimedia created
the talk show phenomenon when it introduced THE PHIL DONAHUE SHOW 27 years ago.
SALLY JESSY RAPHAEL made its debut in 1984, and as the show grew in popularity,
Multimedia had two of the top three syndicated talk shows. Today the appeal of
this genre has escalated dramatically, resulting in the introduction of many new
talk programs and the fragmentation of ratings for the established shows due to
the increased competition. DONAHUE and SALLY JESSY RAPHAEL both experienced a
ratings decline of 15-30% in 1994, which in turn reduced station license fees
and advertising revenues.
On the other hand, ratings for JERRY SPRINGER rose 24% in 1994, and RUSH
LIMBAUGH, THE TELEVISION SHOW held its own in the late-night time period despite
the addition of several new shows this season.
The launch of NEWSTALK TELEVISION in October presented an ideal opportunity
to leverage our expertise in talk show and news production. The appetite for our
news-driven talk format appears to be building, and we hope to grow this channel
to approximately five million subscribers in 1995. Multimedia invested around
$7.7 million in NEWSTALK TELEVISION in 1994 and anticipates investing
approximately $20 million in 1995.
EXPERIENCED LEADERSHIP This was also a year of transition for Multimedia's
management team. I was elected chairman and CEO by the board of directors in
June. In July, Douglas J. Greenlaw, formerly chairman and chief executive
officer of the Ventures Division of Whittle Communications, Inc., was appointed
president and chief operating officer.
I am acutely aware of the questions facing our management team and the
Company today. The year 1995 will be a year for deciding where our assets fit in
the converging media-telecommunications market of the future. In keeping with
our commitment to increasing shareholder value, the Company announced on
February 22 that its board of directors had authorized management, together with
Goldman, Sachs & Co., to explore strategic alternatives to enhance shareholder
value, including the sale of Multimedia, Inc., the spin-off of one or more of
its businesses, a business combination or any similar transaction.
Sincerely,
Signature of Donald D. Sbarra appears here)
Donald D. Sbarra
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
March 3, 1995
(Photo of Donald D. Sbarra appears here)
DONALD D. SBARRA
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
(Photo of Douglas J. Greenlaw appears here)
DOUGLAS J. GREENLAW
PRESIDENT AND
CHIEF OPERATING OFFICER
(Photo of Robert E. Hamby Jr.)
ROBERT E. HAMBY JR.
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
5
<PAGE>
HIGHLIGHTS
ADVERTISING
REVENUE GROWTH
Rate and volume gains
in both classified and
retail advertising resulted
in a 12% increase in
advertising revenues.
JOURNALISTIC EXCELLENCE
Multimedia newspapers
continued their tradition
of editorial excellence with
numerous first place finishes
in judged competitions.
GROWING MARKETS
Located near the booming
I-85 corridor between
Atlanta and Charlotte,
Multimedia's Greenville, S.C.,
and Asheville, N.C., newspapers
are benefiting from a dramatic
expansion in retail business.
CIRCULATION
Circulation revenue rose 6%
over 1993 levels through
selective rate increases.
OPERATING MARGINS
Multimedia newspapers
maintain some of the
highest operating
margins in the industry.
MULTIMEDIA
NEWSPAPER
COMPANY
W. deBerniere Mebane (Photo of W. deBerniere Mebane
President, appears here)
Multimedia Newspaper Company posted double-digit growth in advertising
revenues in 1994, the result of a robust economy in its two largest markets. The
division also continued its mission to position its papers for growth in an era
of changing reader and advertiser needs.
Through focus groups, advertiser surveys and traditional readership studies,
Multimedia's three major newspapers this year solicited ideas on how they could
direct their research, sales and reporting efforts to best serve their
customers. Called "customer tracking," the information gained from these
resources produced significant change. The input was used to create several
successful new products, such as Marketview, a custom research service for
advertisers, and also led to the development of new feature sections valued by
both readers and advertisers.
The Home Delivery Network, an alternate distribution service designed to
deliver non-subscriber products that were formerly mailed, was launched in
Greenville in selected zip codes. The main purpose of the service is to provide
advertisers with an additional marketing and distribution program, and several
major customers have already converted from mail delivery of their products. The
new system allows the Greenville papers to target customers with free samples,
catalogs, coupons and more delivered directly to their homes. An added benefit
to the advertiser is cost control, as postal rate increases are avoided.
Multimedia will break ground this year on a new $15 million production
facility at THE MONTGOMERY (Ala.) ADVERTISER. At the same time, THE ADVERTISER
will install a page-maker system able to use software from virtually any source,
making it the largest newspaper in the country to achieve total electronic
composition.
Two newsprint price increases have been announced recently, with at least
one more forecast for early 1995. Although these rising prices demand careful
budgeting, Multimedia's centralized purchasing of newsprint at the corporate
level should help moderate the effects of the increases.
The division anticipates that 1995 should be another year of good
advertising results, based on rate increases at its largest property and the
expansion of business in Greenville and Asheville, where several new retailers
and a new grocery chain have entered the market, and plans for construction and
expansion of area shopping malls are in progress.
6
<PAGE>
(Two photos of presses printing newspapers appear on this page.)
NEWSPAPERS
24% of revenues
$45.4 million
in operating profit
MAKING MULTIMEDIA'S NEWSPAPERS
INDISPENSABLE TO OUR CUSTOMERS
IS OUR TOP PRIORITY. KNOWING
THEIR CHANGING NEEDS IS STEP
ONE IN THE PROCESS. BEING READY
TO CHANGE IS THE NEXT STEP.
<PAGE>
HIGHLIGHTS
WKYC (NBC), CLEVELAND
WKYC completed
its fourth full year under
Multimedia ownership in
1994.The station posted
increases in almost every
major daypart in the
November Nielsen ratings
and is now tied for the
market's number one
position, sign-on to sign-off.
KSDK (NBC), ST. LOUIS
KSDK was again
rated the number one
station in the top 30 markets,
sign-on to sign-off, as well
as for its 5:00 p.m.and
10:00 p.m.newscasts, in the
November Nielsen survey.
WLWT (NBC), CINCINNATI
WLWT won the Associated
Press award for Ohio's
best newscast in 1994.
WBIR (NBC), KNOXVILLE
WBIR's 6:00 p.m.
newscast maintained its
position as the highest
rated newscast in
the country's top100
markets in November.
WMAZ (CBS), MACON
WMAZ received the Georgia
Association of Broadcasters'
Television News Excellence
Award, given for the best over-
all news organization
in the state.
MULTIMEDIA
BROADCASTING
COMPANY
James M. Hart (Photo of James M. Hart
President, appears here)
Multimedia Broadcasting Company
Multimedia Broadcasting benefited from a strong advertising market and the
renewal of successful key syndicated programming in 1994, enabling the division
to continue its investment in its stations and substantially surpass its
financial projections at the same time.
Multimedia's five television stations - four NBC affiliates and one CBS
station-all negotiated favorable long-term agreements with their respective
networks this year. The stability provided by these new contracts will allow the
Broadcasting division to concentrate on maintaining its news leadership in St.
Louis, Knoxville and Macon and to improve its newscasts in Cleveland and
Cincinnati. Audience confusion resulting from affiliation changes at competing
stations in Cleveland and St. Louis should enhance the ratings of our local
newscasts.
Multimedia made a strategic decision to exit the radio business last year
and has sold all of its radio stations except WMAZ-AM/WAYS-FM in Macon. These
stations share facilities with WMAZ-TV.
Multimedia Broadcasting entered into a landmark venture when TNi, East
Tennessee's first regional news-talk cable channel, was launched in May by WBIR
and Scripps Howard Cable in the Knoxville market. TNi offers 18 hours of
original news and information programming daily, as well as delayed broadcasts
of WBIR's award-winning news and Multimedia's daily talk shows.
Throughout 1994, Multimedia's television and radio stations were repeatedly
recognized by local and industry organizations for their community service
activity. Projects designed to promote and enhance local education were
sponsored by all of the stations. In addition, the Multimedia stations sponsored
or participated in events raising hundreds of thousands of dollars for their
communities.
The Broadcasting division's strategic plan for 1995 will continue to focus
on the dual objectives of local news leadership and in-depth community service.
This commitment to "localism" - providing viewers with the most valuable news
and entertainment programming - will differentiate Multimedia's stations as
viewers are confronted with additional video options in the home.
8
<PAGE>
(Two photos appear on this page. The Top photo shows three people in
a television newsroom with a camerman. The bottom photo is of a
satellite dish.)
BROADCASTING
23%of revenues
$51.8 million
in operating profit
MULTIMEDIA'S BROADCASTING STRATEGY IN
THE INCREASINGLY COMPETITIVE MEDIA
WORLD IS BEST DESCRIBED BY THE WORD
"LOCALISM."THIS REFERS TO PRODUCING
LOCAL NEWS, INFORMATION AND ENTER-
TAINMENT PROGRAMS OF THE HIGHEST
POSSIBLE RELEVANCE TO VIEWERS.
<PAGE>
HIGHLIGHTS
SUBSCRIBER GROWTH
Basic subscribers increased
by approximately 15,000
to 432,000 in 1994.
EFFICIENT CLUSTERS
Multimedia's "clustering" strategy
has allowed the Company to
maintain some of the best oper-
ating margins in the industry,
while expanding ancillary
services to subscribers.
NEW TECHNOLOGIES
At year-end, approximately
35% of Multimedia's customers
were being served by an
upgraded fiber optic system.
ENHANCED BASIC SERVICE
Multimedia plans to launch
new programming on basic
tiers to increase revenues and
enhance value to our customers.
NEW SERVICES
Multimedia has introduced
The Sega Channel and
has begun offering HBO,
Cinemax and Showtime in a
multiple channel configuration.
MULTIMEDIA
CABLEVISION
COMPANY
Michael C. Burrus (Photo of Michael C. Burrus
President, appears here)
Multimedia Cablevision Company
Multimedia Cablevision assimilated the effects of the second round of FCC
rate regulations, continued the fiber optic upgrade of its cable systems and
launched or planned the introduction of a myriad of new products and services in
1994. Despite the restrictions imposed by the FCC's rate freeze and rollback,
Multimedia's 1994 cable revenues increased slightly compared with 1993.
Multimedia continues to capitalize on the strategic advantage of its tightly
clustered operations. In May, the acquisition of a cable system inWilliamston,
North Carolina, serving 2,900 customers and situated immediately adjacent to two
other Multimedia systems, was completed. And in January 1995, Multimedia
completed the trade of approximately 40,500 subscribers in Illinois and Oklahoma
for 50,400 cable subscribers in communities in the Wichita, Kansas, area. The
completion of this transaction means Multimedia now serves 95% of the cable
households in the Wichita metropolitan area.
In order to maintain its position and to allow for the launch of new
products and services, Multimedia Cablevision continued the upgrade of its cable
systems in 1994. These rebuilds utilize state-of-the-art fiber optic technology
and provide the platform for the coming digital environment, as well as an
immediate increase in channel capacity, better quality video and audio and
greater system reliability.
Multimedia also entered the alternate access telephony business during 1994
in partnership with Hyperion Telecommunications, Inc. Multimedia-Hyperion is now
offering access for long distance signals to commercial customers in the Wichita
area. Multimedia's fiber optic system, with its highly reliable backup features,
allows the Company to compete with the regional telephone company on the basis
of both quality and price.
One of Multimedia Cablevision's top priorities for 1995 is to grow revenues.
As additional channel capacity becomes available, the division plans to increase
its pay-per-view offerings substantially, add new networks to its basic
programming packages and launch new services including The Sega Channel and
premium channels such as HBO in a multichannel configuration. All of these
services will expand choice for the Company's subscribers and should provide
additional revenue opportunities for the division.
10
<PAGE>
(Two photos appear on this page, one showing a television studio
room with two people and tv monitors. The second photo is of a
cable wire.)
CABLE
26% of revenues
$52.6 million
in operating profit
MULTIMEDIA CABLEVISION'S
MANAGEMENT HAS TURNED ITS
ATTENTION TO COMPETING IN THE NEW
TELECOMMUNICATIONS ENVIRONMENT
AND TO DEVELOPING NEW PRODUCTS
AND SERVICES TO AUGMENT THE
TRADITIONAL CABLE VIDEO FARE.
<PAGE>
HIGHLIGHTS
DONAHUE AND LIMBAUGH
RENEW CONTRACTS
Phil Donahue, now in his
27th year, extended his
contract to host the Donahue
show through the 1995-96
season.Rush Limbaugh also
renewed his contract in 1994
and will continue his show
through the 1997-98 season.
Rush Limbaugh,The Television
Showcontinued to be the
top-rated syndicated program in
the late-night time period.
SALLY JESSY RAPHAEL
AND JERRY SPRINGER
Sally Jessy Raphael remained
among the top three daytime
talk shows in her delivery of the
key women demographics
in the November 1994 sweeps.
Jerry Springer began his third
full season and was one of the
fastest growing talk shows
according to Nielsen.
TWO NEW SHOWS
Susan Powter, a daytime
show featuring topics of
interest to women, and
Dennis Prager, an issues-
oriented, late-night discussion
program, premiered with
the new television
season in September.
MULTIMEDIA
ENTERTAINMENT
COMPANY
Robert L. Turner (Photo of Robert L. Turner
President, appear here)
Multimedia Entertainment Company
Multimedia Entertainment again capitalized on its expertise in talk
television production in 1994 as it introduced two daily television programs and
launched a news-talk cable network. SUSAN POWTER and DENNIS PRAGER complement
Multimedia's four established programs - DONAHUE, SALLY JESSY RAPHAEL, JERRY
SPRINGERand RUSH LIMBAUGH, THE TELEVISION SHOW.
No other company has achieved the success that Multimedia has with talk
shows, but never before has the competition in this genre escalated so
dramatically. The number of shows now vying for audience shares has eroded
ratings for last year's top-ranked programs. DONAHUE and SALLY JESSY RAPHAEL's
ratings declined 29% and 19%, respectively, compared with 1993, but Multimedia
has taken steps to improve and protect its audience shares and station
clearances.
NEWSTALK TELEVISION, Multimedia's new cable network, premiered on October 1
to a positive response. Based on a live, audience-driven format, NEWSTALK
TELEVISION utilizes Multimedia's most significant assets - its knowledge and
success in talk television and news. The Company's goal is to establish a long-
term appreciating asset for its shareholders by expanding these assets from a
base of personality-oriented programs to a new foundation in an enduring cable
network. The new channel ended 1994 with approximately one million subscribers
and will strive to grow its subscriber base to around five million by the end of
1995.
As the leading American talk show producer, Multimedia has also exported its
expertise worldwide. Production partnerships have been formed in more than 10
territories in Europe and Asia to develop American-style talk shows using local
talent and production facilities. Multimedia is now receiving license fees for
co-produced series in the United Kingdom, Germany and Israel and expects to
conclude similar arrangements in at least three other territories in 1995.
Multimedia Entertainment is committed to growing and strengthening its
existing talk show franchises to more effectively compete in 1995. The division
will continue to lay the groundwork for the future with development of
programming for various dayparts, production of foreign talk shows and expanding
affiliation agreements to increase subscriber counts for NEWSTALK TELEVISION.
12
<PAGE>
(Seven photos appear on this page. The top half is divided with six photos
of Multimedia's entertainment hosts which include, Phil Donahue, Sally
Jessy Raphael, Jerry Springer, Rush Limbaugh, Susan Powter and Dennis
Prager. The seventh photo shows a hand holding a microphone.)
ENTERTAINMENT
23% of revenues
$52.0 million
in operating profit
MULTIMEDIA'S PROGRAMS CONTINUE
TO BE AMONG THE LEADERS IN THEIR
DAYPARTS DESPITE A TOTAL OF MORE
THAN 15 COMPETING TALK SHOWS IN
DAYTIME AND THE ADDITION OF FIVE
NEW PROGRAMS IN THE LATE-NIGHT MIX.
<PAGE>
HIGHLIGHTS
RAPID GROWTH
Security continued to
be the fastest growing
of the Company's five
divisions in 1994.
THREE NEW OFFICES
The opening of a new
full-service operation in
St.Louis and the conversion
of maintenance and repair
facilities to full service in
Phoenix and Los Angeles is
consistent with Multimedia's
philosophy of establishing
operations where it has
accumulated a critical
mass of accounts.
NEW CENTRAL STATION
A new headquarters building
in Wichita houses a state-
of-the-art central monitoring
station and also consolidates
customer service and
administrative functions.
EXCELLENT
RESPONSE TIMES
Multimedia's average
response time is 15 seconds,
and more than 95% of
alarms are handled in
less than 30 seconds.
CUSTOMER SERVICE
Multimedia's reputation for
outstanding customer service
has proved to be an asset
in growing this division.
MULTIMEDIA
SECURITY
SERVICE
Michael C. Burrus (Photo of Michael C. Burrus
President, appears here)
Multimedia Security Service
By the end of the year, Multimedia Security Service owned and monitored
65,000 accounts, an increase of 24% over 1993 levels, positioning it well within
the top 20 security companies in the country.
The division now has a total of nine full-service offices located in
Wichita, Oklahoma City, Miami, Dallas, Houston, Chicago, Phoenix, St. Louis and
Los Angeles.
In August, the Security Division moved into its new national headquarters
building in Wichita. This state-of-the-art facility is vital as the Company
works towards its goal of being one of the largest and most reputable security
companies in the nation. The new office was designed to serve as many as 250,000
customers, with expansion plans designed to go beyond that level when necessary.
The central monitoring station is the lifeblood of any security operation,
and Multimedia Security has made a significant commitment to having one of the
most sophisticated central stations in the industry. But the real measure of the
value of a security service to the customer is its alarm response time. At
present, Multimedia's average response time is less than fifteen seconds; in
addition, more than 95% of the alarms are handled in less than thirty seconds.
The Company intends to more effectively communicate this excellent performance
to its customers in 1995.
Multimedia plans to continue the growth of its security business through a
three-pronged approach - internal sales, an outside dealer network that produces
accounts for the Company to purchase on an ongoing basis and bulk acquisitions.
In order to reach its planned customer levels, the division expects to generate
roughly one-third of its growth internally and to purchase the other two-thirds.
The security business is one Multimedia understands quite well, having been
in the industry for more than a dozen years. Market demand is at an all-time
high and is predicted to continue to increase well beyond its current level, as
only approximately 11% of the nation's homes now have monitored security
systems. The Company believes there is a significant opportunity for
consolidation of the smaller, local or regional companies, and Multimedia
Security Service has positioned itself as one of the leading participants in
this process.
14
<PAGE>
(Two photos appear on this page. The top photo shows two people working
on security computer systems. The bottom photo shows a close-up of a
security system keyboard.)
SECURITY
4% of revenues
$3.0 million
in operating profit
THE 1994 OPENING OF A STATE-OF-THE-ART
CENTRAL MONITORING STATION HAS
ALLOWED MULTIMEDIA TO ACHIEVE AN
EXCEPTIONAL RECORD IN RESPONDING
TO ALARMS - AND THAT'S THE REAL
MEASURE OF THE VALUE OF OUR SERVICE.
<PAGE>
MULTIMEDIA, INC. AND SUBSIDIARIES
(A map of the United States depicting Multimedia headquarters and
sites appears here with the following legends:)
NEW YORK CITY
Entertainment
Headquarters
KNOXVILLE
Broadcasting
Headquarters
GREENVILLE
Corporate and Newspaper
Headquarters
WICHITA
Cablevision and Security
Headquarters
(box) DAILY NEWSPAPER LOCATIONS
(circle) TV STATION LOCATIONS
(triangle)RADIO STATIONS
(star) STATES WITH MULTIMEDIA CABLE FRANCHISES
(diamond) FULL-SERVICE SECURITY OFFICES
MULTIMEDIA
NEWSPAPER COMPANY
305 S. MAIN ST.
P.O. BOX 1688
GREENVILLE, S.C. 29602
ALABAMA
Daily and Sunday:
The Montgomery Advertiser
ARKANSAS
Daily:
The Baxter Bulletin
(Mountain Home)
GEORGIA
Daily:
The Observer (Moultrie)
NORTH CAROLINA
Daily and Sunday:
Asheville Citizen-Times
OHIO
Dailies:
Gallipolis Daily Tribune
The Daily Sentinel (Pomeroy)
Sunday:
Sunday Times-Sentinel (Gallipolis)
SOUTH CAROLINA
Dailies:
The Greenville News
Greenville Piedmont
Sunday:
The Greenville News
TENNESSEE
Daily:
The Leaf-Chronicle (Clarksville)
Monthly:
Music City News
The Gospel Voice (Nashville)
Television Production
TNN Music City News
Country Awards
VIRGINIA
Daily and Sunday:
The Daily News-Leader (Staunton)
WEST VIRGINIA
Daily:
Point Pleasant Register
Multimedia also publishes
49 non-daily products.
MULTIMEDIA
BROADCASTING COMPANY
RIVERVIEW TOWER, SUITE 1401
900 S. GAY ST.
KNOXVILLE,TENN. 37902
TELEVISION
GEORGIA
Macon:WMAZ-TV (CBS)
MISSOURI
St. Louis: KSDK (NBC)
OHIO
Cincinnati: WLWT (NBC)
Cleveland:WKYC (NBC)
TENNESSEE
Knoxville:WBIR-TV (NBC)
RADIO
GEORGIA
Macon:WAYS (FM)
WMAZ-AM
MULTIMEDIA
CABLEVISION COMPANY
701 E. DOUGLAS AVE.
P.O. BOX 3027
WICHITA, KS. 67202
Multimedia operates more than
125 cable television franchises
In Kansas, Illinois, Indiana, North
Carolina and Oklahoma and
serves approximately 432,000
basic subscribers.
MULTIMEDIA
ENTERTAINMENT COMPANY
45 ROCKEFELLER PLAZA
35TH FLOOR
NEW YORK, N.Y. 10111
Donahue / Sally Jessy Raphael /
Pozner & Donahue / Jerry Springer /
Rush Limbaugh, The Television Show/
Susan Powter / Dennis Prager
NewsTalk Television
MULTIMEDIA SECURITY SERVICE
800 E.WATERMAN
WICHITA, KS. 67202
Multimedia serves more than
65,000 security alarm customers.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The Company had net earnings for 1994 of $90.0 million compared with $99.9
million for 1993. Net earnings per share for 1994 were $2.35 compared with $2.60
for 1993. The 1994 results include net after-tax gains of $16.2 million or $.42
per share from the sales of the Company's wireless cable systems and radio
stations in three markets offset by losses associated with the closing of its
made-for-television movie production business. The results also include $4.5
million or $.12 per share in after-tax start-up costs associated with NEWSTALK
TELEVISION (previously The Talk Channel), the Company's cable channel launched
in October 1994. Earnings from ongoing operations in 1994 (excluding the above
items) were $78.3 million or $2.05 per share. The 1993 net earnings reflect a
net benefit of $14.3 million resulting from the cumulative effect of the
adoption of Statements of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for IncomeTaxes" and No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." In addition, net earnings in 1993
reflect a net reduction in income tax expense of approximately $12.0 million due
to the resolution of the IRS examination of the Company's 1982 through 1986
consolidated federal income tax returns and the changes in tax rates and
amortization of intangible assets resulting from the Budget Reconciliation Act
of 1993.The 1993 earnings also included an after-tax gain of approximately $1.4
million resulting from the sale of the Company's mobile video production unit in
January 1993. 1993 earnings from ongoing operations (excluding the above items)
were $72.2 million or $1.88 per share.
OPERATING REVENUES
The following table shows the percentage increases (decreases) in the
Company's revenues for the years 1994 and 1993.
Division 1994 vs.1993 1993 vs.1992
Newspapers 10% 3%
Broadcasting 7% (3%)
Cable 14%
Entertainment (9%) 25%
Security 47% 63%
Total operating revenues 3% 11%
NEWSPAPERS
The increase in newspaper revenues for 1994 and 1993 resulted from increases
in circulation revenues, advertising revenues and other revenues. Circulation
revenues increased 6% in both 1994 and 1993, principally due to price increases.
Advertising revenues increased 12% in 1994 and 1% in 1993. Advertising revenues
represent approximately 75% of total newspaper operating revenues. Linage
increased 13% in 1994 and 2% in 1993. The 1994 annual average net paid
circulation decreased 1% for daily publications to 327,000 and increased 1% for
Sunday papers to 362,000. At December 31, 1994, daily circulation was 321,000, a
1% decrease from the prior year, and Sunday circulation was 357,000, a 1%
increase. The 1993 annual average net paid circulation increased 2% for daily
papers to 330,000, and 1% for Sunday papers to 359,000. At December 31, 1993,
daily circulation was 323,000, a slight decrease from the prior year, and Sunday
circulation was 352,000, flat with the prior year. The Company's three largest
newspapers, which are in Greenville, South Carolina, Asheville, North Carolina,
and Montgomery, Alabama, account for approximately 75% of the division's
revenues.
BROADCASTING
Broadcasting revenues increased 7% in 1994. Local and national revenues
increased $8.2 million, and political revenues increased $7.0 million. In
addition, revenues decreased by $3.9 million as a result of the sale of the
Company's Milwaukee, Wisconsin, and Shreveport, Louisiana, radio stations.
Broadcasting revenues decreased 3% in 1993. Local and national revenues
increased approximately $5.2 million in 1993, and political revenues were
approximately $6.6 million less than in 1992. The 1993 revenues decreased by
approximately $3.4 million as a result of the sale of the Company's mobile video
production unit.Television operating revenues represent over 95% of the total
broadcasting revenues. Local time sales account for approximately 50% and
national time sales account for approximately 33% of the total television
operating revenues.The remainder of television operating revenues is accounted
for by political, network and other revenues.
MULTIMEDIA, INC. AND SUBSIDIARIES
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
CABLE
Cable revenues increased less than 1% in 1994. Excluding the impact of the
sale of the wireless cable operations, cable revenues rose 1%. Increases in
revenue resulting from continued subscriber growth were offset by a decline in
the average monthly revenue per subscriber as a result of the FCC's second round
of cable rate regulations, which began on July 15, 1994.
Cable revenues increased 14% in 1993, of which 7% related to the acquisition
of the Indiana Cable systems; 4% related to rate increases; 1% related to
subscriber growth; and 2% related to growth in ancillary services.
The average monthly revenue per cable subscriber at the end of 1994 was
$32.56 versus $33.29 in 1993 and $32.13 in1992. Multimedia Cablevision increased
its basic cable subscriber counts to 432,000 in 1994 from 417,000 in 1993 and
410,000 in 1992.
ENTERTAINMENT
Entertainment revenues decreased 9% or $14.1 million in 1994. The Company's
made-for-television movie business, Multimedia Motion Pictures (MMP), which was
closed during the year, accounted for a decrease in revenues of $19.9 million.
Revenues from the Company's talk shows increased $3.3 million. Increases in
revenues from the SALLY JESSY RAPHAEL show, JERRY SPRINGER show, RUSH LIMBAUGH,
THE TELEVISION SHOW and two new shows, DENNIS PRAGER and SUSAN POWTER, offset a
reduction in revenues from the DONAHUE show. Revenues from the DONAHUE show
decreased 9% for the year. Revenues from other sources increased $2.7million.
Entertainment revenues increased 25% in 1993 primarily due to increases in
revenues from the SALLY JESSY RAPHAEL show, the first full year of revenues for
the division's talk television shows, JERRY SPRINGER and RUSH LIMBAUGH, THE
TELEVISION SHOW, and an increase in movie production from six hours in 1992 to
16 hours in 1993.
Excluding the impact of MMP and new shows in 1994 and 1993, the revenue
increase would have been 3% and 5%, respectively.
The DONAHUE and SALLY JESSY RAPHAEL shows account for virtually all of the
division's profit and represent approximately 45% and 30%, respectively, of the
entertainment division's revenues.
In 1994, Phil Donahue signed a new contract with the Company to host the
DONAHUE show through August 1996. Rush Limbaugh signed a new contract in 1994 to
continue RUSH LIMBAUGH, THE TELEVISION SHOW through 1998. Sally Jessy Raphael
signed a new contract in 1993 to continue to host the SALLY JESSY RAPHAEL show
through August 1998.
The entertainment division's primary business is the production of talk
shows for syndication to television stations across the country. There has been
a significant increase in competition in this area. At the end of 1994, there
were over 15 talk shows in syndication with more scheduled to debut in 1995. The
increase in the number of shows increases competition not only for viewers but
also for advertising dollars, station clearances, guests and production talent.
The impact has been a decline in ratings for many talk shows. The DONAHUE and
SALLY JESSY RAPHAEL shows have experienced ratings declines from 15-30%. These
declines have resulted in station license renewals at lower amounts than in
years past and lower advertising revenues.
In October 1994, the Company launched NEWSTALK TELEVISION, a cable channel
in the news-talk format, to diversify the entertainment division so that results
are not as dependent on personality-driven talk shows.This venture will require
several years of investment before it is expected to achieve profitability.The
Company's current projections are to invest approximately $20 million in
NEWSTALK TELEVISION in 1995 compared with $7.7million in 1994.
The Company expects the above two factors to result in a reduction in
operating profit of approximately 50% for the Company's entertainment division
for 1995.
MULTIMEDIA, INC. AND SUBSIDIARIES
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
SECURITY
Security revenues increased 47% in 1994 and 63% in 1993 primarily due to the
increase in the number of security subscribers. The number of security
subscribers at year-end increased to 65,000 in 1994 from 52,400 in 1993 and
35,300 in 1992. Of the increase in the number of subscribers in 1994, 43% was
due to acquisitions, and 57% was due to internally generated sales. Monitoring
fees from security customers represent approximately 80% of the division's
operating revenues. Installation and maintenance fees account for the remainder
of the division's operating revenues.
OPERATING COSTS AND EXPENSES
Operating costs and expenses are comprised of production costs, selling,
general and administrative expenses, and depreciation and amortization expenses.
The following table shows the percentage increases (decreases) in the Company's
operating costs and expenses for the years 1994 and 1993.
Division 1994 vs.1993 1993 vs.1992
Newspapers 7% 4%
Broadcasting (3%) (5%)
Cable 5% 15%
Entertainment (3%) 34%
Security 44% 77%
Total operating costs 3% 12%
NEWSPAPERS
The majority of the operating costs and expenses increases in 1994 and 1993
were due to increases in newsprint costs and production and selling costs
associated with increased advertising revenue. Newsprint represents
approximately 20% of the total newspaper division's operating costs and
expenses. Newsprint costs are expected to increase approximately 20% in 1995.
BROADCASTING
The 1994 decrease in broadcasting operating expenses was principally due to
decreases in programming costs and a reduction of approximately $4.1 million
resulting from the sale of the Company's radio stations.
The 1993 decrease in broadcasting operating costs and expenses was
principally due to decreases in programming costs and a reduction of
approximately $2.4 million in costs due to the sale of the Company's mobile
video production unit.
CABLE
The 1994 increase in cable operating costs and expenses is primarily
attributable to increases in depreciation expense associated with cable rebuilds
and increases in programming expenses.
The 1993 costs and expenses include the results of the Indiana Cable systems
purchased in December 1992. Excluding the results of the Indiana Cable systems,
operating costs and expenses would have increased approximately 6% in 1993,
principally due to increases in programming costs.
ENTERTAINMENT
The 1994 decrease in entertainment operating costs and expenses is primarily
due to the closing of MMP, offset by $7.7million in start-up costs associated
with the launch of NEWSTALK TELEVISION and costs associated with the two new
talk shows.
The 1993 increase is primarily attributable to the costs related to the
increase in the number of hours of programming by MMP and increases in costs
associated with the first full year of the production of JERRY SPRINGER and
RUSH LIMBAUGH, THE TELEVISION SHOW.The number of hours of programming
produced and sold by MMP increased from six hours in 1992 to 16 hours in 1993.
Excluding the effect of the specific costs mentioned above, operating costs
increases for 1994 and 1993 would have been approximately 7% and 6%,
respectively.
SECURITY
The security operating costs and expenses increases in 1994 and 1993 were
principally due to the expansion of the Company's security alarm business. The
majority of the costs and expenses increases in 1994 and 1993 were due to the
opening of new full-service offices and the increases in
MULTIMEDIA, INC. AND SUBSIDIARIES
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
central station monitoring costs and depreciation and amortization expense
related to the subscriber growth. The division opened two full-service offices
during 1993 and three additional full-service offices in 1994. The start-up
costs associated with the opening of offices and the increase in depreciation
and amortization expense are more than offset by the related revenue increases.
OPERATING PROFIT
The above changes in operating revenues and operating costs and expenses
resulted in the following increases (decreases) in the Company's operating
profits for the years 1994 and 1993.
Division 1994 vs.1993 1993 vs.1992
Newspapers 21% ---
Broadcasting 33% 2%
Cable (7%) 12%
Entertainment (18%) 13%
Security 66% 1%
Total operating profit 3% 7%
INTEREST EXPENSE
Interest expense was $59 million in 1994, $62 million in 1993 and $72
million in 1992. The decreases in expense in 1994 and 1993 were principally due
to interest savings from debt payments offsetting a slight increase in interest
rates related to the Company's floating rate debt.
The Company's debt financing included a $457 million unsecured bank
facility, under which $135.5 million was outstanding at December 31, 1994, and
$400 million of unsecured Senior Notes. The borrowings under the bank facility
bear a floating interest rate over applicable prime, CD or LIBOR rates based on
the Company's debt to annualized operating cash flow ratio. The Senior Notes
bear interest at a composite rate of 10.7%.
The Company has interest rate swap agreements which effectively fix LIBOR on
$75 million of its floating rate debt at approximately 5.7%. The interest rate
swap agreements expire at various times from June 1996 through November 1996.
The Company has an interest rate cap agreement which caps LIBOR at 7% on $25
million, which expires in December 1995, and an interest rate cap agreement
which caps LIBOR at 7% on $25 million, which begins in 1996 and expires in 1997.
The bank Credit Agreement required the Company to maintain interest rate
protection agreements until December 31, 1993, of not less than 40% of the
outstanding balance under the bank credit facility.
The Company's Board of Directors approved interest rate guidelines in
October 1990 to maintain interest rate protection on a minimum of 70% of
outstanding debt. The purpose of the Company's involvement in interest rate
swaps and caps is to minimize the Company's exposure to interest rate
fluctuations on its floating rate debt. The Company believes that it has no
material concentration of credit or market risk with respect to these interest
rate protection agreements.
In addition to purchasing a 51% equity interest in WKYC from NBC, the
Company purchased a 51% interest in a $75 million principal promissory note of
WKYC which was held by NBC. As a result, 51% of the note is now due to the
Company, and NBC retained a 49% interest in the note ($36.8 million) which bears
interest at a rate of 10% and is due in full on December 26, 1997.
The composite interest rate on all debt was 10.3%, 9.2% and 8.6% at the end
of 1994, 1993 and 1992, respectively.
INCOME TAXES
The effective income tax rates were 41%, 32% and 41% for 1994, 1993 and
1992, respectively. The resolution of the Internal Revenue Service ("IRS")
examination of the Company's 1982 through 1986 consolidated federal income tax
returns and changes in tax rates and amortization of intangible assets from the
Budget Reconciliation Act of 1993 occurred in the third quarter of 1993. The
cumulative effect of the above mentioned items was a decrease in tax expense of
approximately $12 million. The Company expects the 1995 tax rate to be between
41% and 42%.
The Company is contesting certain proposed deficiencies for 1987through
1989. The deficiencies principally involve various acquisition issues related
primarily to the cable division. The Company is continuing to vigorously contest
the assessments, but the ultimate resolution of these matters cannot be
ascertained at this time. The Company believes that it has adequately provided
for agreed upon and potential deficiencies, including interest.
MULTIMEDIA, INC. AND SUBSIDIARIES
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
MINORITY INTEREST
Minority interest represents the minority shareholders' proportionate share
of the income or loss of certain consolidated subsidiaries, primarily WKYC-TV,
Inc.
INFLATION
Historically, the Company has competitively priced its products and services
to more than offset price increases to the Company by vendors and others. The
Company was able to implement price increases for many of its products and
services in 1994, 1993 and 1992, during periods of low inflation. The Company
anticipates this trend of price increases to be sustained through 1995.
The FCC released guidelines in late March of 1994 relating to its second
round of cable rate regulation. While these regulations did not have a material
negative impact on the Company's cable operations, certain planned rate
increases could not be implemented. In November 1994, the FCC issued "going
forward" rules with regard to future rates. The Company will be allowed to
increase cable rates under these regulations as it adds new services.
LIQUIDITY AND CAPITAL RESOURCES
The Company defines liquidity in terms of its ability to fund its current
operations, make capital expenditures and service its debt. Internally generated
funds and the bank Credit Agreement are the Company's primary sources of
liquidity. In addition, in 1994 the Company generated $48.5 million in proceeds
from the sale of its wireless cable business and radio stations in Milwaukee,
Wisconsin; Shreveport, Louisiana; and Greenville, South Carolina. The primary
uses of funds have been for capital expenditures, taxes, acquisitions, debt
repayments and program rights payments.
The bank Credit Agreement and/or Senior Notes contain covenants which limit
(i) payment of dividends; (ii) purchase of capital stock of the Company; (iii)
incurrence of indebtedness; (iv) acquisitions outside the Company's current
lines of business; (v) liens; (vi) investments; (vii) transactions with
affiliates; (viii) sales of assets; and (ix) certain extraordinary transactions.
In addition, one or both of the agreements require the Company to maintain
specific ratios of debt to annualized operating cash flow, annualized operating
cash flow to interest expense and annualized operating cash flow to fixed
charges. Management believes the Company is in compliance with all covenants.
Principal payment schedules for the Credit Agreement and Senior Notes are
provided in Note 6 of the Notes to Consolidated Financial Statements. For 1995,
the Company estimates its cash interest expense requirements to be approximately
$60 million, capital expenditure requirements to be approximately $103 million
and the required principal payments to be approximately $30 million. At December
31, 1994, the Company had approximately $230 million unused availability under
the bank Credit Agreement.
The bank facility provides, among other things, working capital funds and
additional available funds for future acquisitions and repurchase of the
Company's stock within certain limitations.
During the first quarter of 1995, the Company completed the trade of certain
of the Company's cable systems in Oklahoma and Illinois with 40,500 cable
subscribers for Telecommunications, Inc.'s cable systems in Wichita, Kansas,
with 50,400 subscribers. The Company paid $12.4 million in cash as part of this
transaction.
ACCOUNTING CHANGES
As is more fully explained in the Notes to Consolidated Financial
Statements, effective January 1, 1993, the Company adopted SFAS No. 106,
"Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109,
"Accounting for Income Taxes." A net gain, after tax, of $14.3 million,
representing the cumulative effect of these changes in accounting principles,
was reported in 1993. Financial statements for 1992 were not restated to apply
the provisions of these statements.
SUBSEQUENT EVENT
On February 22, 1995, the Company announced that its board of directors had
authorized management, together with Goldman, Sachs & Co., to explore strategic
alternatives to enhance shareholder value, including the sale of Multimedia,
Inc., the spin-off of one or more of its divisions, a business combination or
any similar transaction.
MULTIMEDIA, INC. AND SUBSIDIARIES
21
<PAGE>
ELEVEN YEAR REVIEW
YEARS ENDED DECEMBER 31,
</TABLE>
<TABLE>
<CAPTION>
(In thousands except per-share data) 1994 1993 1992
<S> <C> <C> <C>
Operating revenues $630,483 611,891 553,440
Operating expenses 387,638 377,288 337,353
Depreciation and amortization 53,402 50,200 42,982
Total operating costs and expenses 441,040 427,488 380,335
Operating profit 189,443 184,403 173,105
Interest expense 59,142 61,996 71,820
Other income (expense), net 25,584 1,494 (447)
Earnings before income taxes, minority interest
and other items1 155,885 123,901 100,838
Income taxes 64,693 38,703 41,343
Minority interest in subsidiaries'losses (income), net (1,163) 320 1,009
Earnings (loss) before other items 90,029 85,518 60,504
Other items 14,332
Net earnings (loss) $ 90,029 99,850 60,504
Earnings (loss) per share before other items $ 2.35 2.23 1.61
Earnings (loss) per share $ 2.35 2.60 1.61
Cash dividends per share $
Average common shares outstanding2 38,279 38,374 37,593
Long-term debt, including current installments $572,557 664,997 745,995
Total assets $683,978 655,174 627,945
</TABLE>
1 OTHER ITEMS CONSIST OF THE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES IN 1993 AND AN EXTRAORDINARY ITEM IN 1990.
2 INCLUDES DILUTIVE COMMON STOCK EQUIVALENTS IN 1987 THROUGH 1994.
SHARE AND PER-SHARE AMOUNTS HAVE BEEN RETROACTIVELY ADJUSTED TO REFLECT THE
3-FOR-1 STOCK SPLIT EFFECTED APRIL 1991.
MULTIMEDIA, INC. AND SUBSIDIARIES
22
<PAGE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C> <C> <C>
502,260 461,314 442,632 419,037 390,709 353,239 319,867 290,103
308,006 260,377 249,470 243,120 231,390 213,582 204,973 187,756
38,448 30,655 29,492 28,572 27,744 25,487 24,275 21,523
346,454 291,032 278,962 271,692 259,134 239,069 229,248 209,279
155,806 170,282 163,670 147,345 131,575 114,170 90,619 80,824
79,315 88,289 102,109 108,340 110,999 111,890 36,378 8,289
643 (873) (56) 3,522 6,573 159 (6,323) (8,368)
77,134 81,120 61,505 42,527 27,149 2,439 47,918 64,167
30,254 32,462 22,845 15,650 14,660 7,100 26,280 30,479
1,517
48,397 48,658 38,660 26,877 12,489 (4,661) 21,638 33,688
(3,078)
48,397 45,580 38,660 26,877 12,489 (4,661) 21,638 33,688
1.30 1.32 1.04 .73 .34 (.14) .47 .67
1.30 1.23 1.04 .73 .34 (.14) .47 .67
.16 .20
37,253 36,984 37,263 36,579 36,450 33,000 46,350 49,995
757,125 798,877 747,776 793,569 841,379 882,108 880,541 80,831
556,285 535,535 404,142 405,000 409,279 408,765 399,037 402,820
</TABLE>
MULTIMEDIA, INC. AND SUBSIDIARIES
23
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
(In thousands except per-share data) 1994 1993 1992
<S> <C> <C> <C>
Operating revenues:
Newspapers $150,140 135,920 132,485
Broadcasting 142,841 133,035 137,188
Cable 165,406 164,598 144,383
Entertainment 147,512 161,588 129,122
Security 24,584 16,750 10,262
Total operating revenues 630,483 611,891 553,440
Operating costs and expenses:
Production 229,390 229,385 202,865
Selling, general and administrative 158,248 147,903 134,488
Depreciation and amortization 53,402 50,200 42,982
Total operating costs and expenses 441,040 427,488 380,335
Operating profit 189,443 184,403 173,105
Interest expense 59,142 61,996 71,820
Other income (expense), net 25,584 1,494 (447)
Earnings before income taxes, minority
interest and
cumulative effect of changes in
accounting principles 155,885 123,901 100,838
Income taxes 64,693 38,703 41,343
Minority interest in subsidiaries'losses (income), net (1,163) 320 1,009
Earnings before cumulative effect of changes
in accounting principles 90,029 85,518 60,504
Cumulative effect of changes in accounting principles 14,332
Net earnings $ 90,029 99,850 60,504
Earnings per share before cumulative effect of changes
in accounting principles $ 2.35 2.23 1.61
Cumulative effect of changes in accounting principles .37
Earnings per share $ 2.35 2.60 1.61
Weighted average shares 38,279 38,374 37,593
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
MULTIMEDIA, INC. AND SUBSIDIARIES
24
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Common Stock:
Balance at beginning of year $ 3,721 3,680 3,507
Stock options exercised 41 41 173
Balance at end of year 3,762 3,721 3,680
Additional paid-in capital:
Balance at beginning of year 177,689 164,367 140,435
Stock options exercised 4,453 6,882 7,676
Tax benefit from exercise of employee stock
options 2,691 2,084 12,875
Amortization of stock options 3,391 4,356 3,381
Balance at end of year 188,224 177,689 164,367
Retained earnings (deficit):
Balance at beginning of year (358,930) (458,780) (519,284)
Net earnings 90,029 99,850 60,504
Balance at end of year (268,901) (358,930) (458,780)
$ (76,915) (177,520) (290,733)
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
MULTIMEDIA, INC. AND SUBSIDIARIES
25
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 90,029 99,850 60,504
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 53,402 50,200 42,982
Amortization of program rights 13,189 14,035 18,277
Amortization of debt issue costs 1,112 1,117 1,058
Cumulative effect of changes in accounting
principles (14,332)
Minority interest in subsidiaries'(losses)
income, net 1,163 (320) (1,009)
Amortization of stock options 3,391 4,356 3,381
Gain on disposal of assets, net (25,001) (739)
Increase (decrease) in deferred income taxes 9,559 (3,516) 788
(Increase) decrease in current assets:
Trade accounts receivable (9,075) (6,276) (6,830)
Inventories, deferred income tax
benefits,
deferred program costs and prepaid
expenses and other (4,670) (7,972) 12
Increase (decrease) in current liabilities:
Accounts payable, accrued payroll
and accrued expenses 10,514 8,144 6,133
Accrued interest (328) (5,412) (1,887)
Income taxes payable (2,539) 17,199 7,884
Unearned income 1,354 1,714 1,299
Net cash flows provided by operating
activities 142,100 158,048 132,592
Cash flows from investing activities:
Additions to property, plant and equipment (83,028) (47,378) (37,493)
Proceeds from disposal of assets 48,475 4,678
Acquisitions of properties (11,045) (13,170) (78,710)
Other (1,077) (4,485) 1,224
Net cash (used for) investing activities (46,675) (60,355) (114,979)
Cash flows from financing activities:
Addition (reduction) in revolving credit, net (28,000) (59,000) 20,500
Long-term debt retired (64,440) (21,998) (31,630)
Program rights payments (12,777) (17,454) (16,463)
Proceeds from exercise of employee stock options 4,363 6,923 7,849
Other 597 272 10
Net cash (used for) financing activities (100,257) (91,257) (19,734)
Increase (decrease) in cash and cash equivalents (4,832) 6,436 (2,121)
Cash and cash equivalents, beginning of year 11,034 4,598 6,719
Cash and cash equivalents, end of year $ 6,202 11,034 4,598
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
MULTIMEDIA, INC. AND SUBSIDIARIES
26
<PAGE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
(In thousands except share data) 1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,202 11,034
Trade accounts receivable, less allowances for
discounts and
uncollectible accounts of $4,818 in1994 and
$3,713 in1993 93,426 85,756
Inventories 4,643 4,408
Deferred income tax benefits 9,581 8,856
Program rights 7,570 8,476
Deferred program costs 10,923 9,670
Prepaid expenses and other 6,795 5,516
Total current assets 139,140 133,716
Property , plant and equipment, at cost:
Land and land improvements 5,295 5,313
Buildings 42,701 39,155
Broadcasting equipment 52,294 53,898
Publishing equipment 60,857 58,599
Cable equipment 309,718 272,899
Other equipment and fixtures 83,698 68,559
Construction in progress 4,186 1,710
558,749 500,133
Less accumulated depreciation 283,522 259,371
Net property, plant and equipment 275,227 240,762
Intangible assets, net 242,078 251,356
Other assets 27,533 29,340
$ 683,978 655,174
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt $ 30,254 393
Accounts payable 24,512 20,557
Accrued interest 2,671 2,999
Accrued payroll 8,386 5,884
Accrued expenses 38,148 30,465
Income taxes payable 10,202 15,432
Program rights payable 7,793 8,540
Unearned income 20,556 19,416
Total current liabilities 142,522 103,686
Long-term debt, excluding current installments 542,303 664,604
Deferred income taxes 54,090 44,046
Other liabilities 3,294 2,837
Minority interest 18,684 17,521
Stockholders'equity (deficit):
Common stock of $.10 par value per share.
Authorized100,000,000 shares and issued
37,620,000
shares in1994 and 37,210,000 shares
in1993 3,762 3,721
Additional paid-in capital 188,224 177,689
Retained earnings (deficit) (268,901) (358,930)
Total stockholders'equity (deficit) (76,915) (177,520)
$ 683,978 655,174
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
MULTIMEDIA, INC. AND SUBSIDIARIES
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts
of Multimedia, Inc. and subsidiaries. Significant inter-
company items are eliminated in consolidation.
REVENUE RECOGNITION
Revenue is recognized when programming and advertising
are aired or printed, or when services are rendered.
CASH EQUIVALENTS
Cash equivalents include investments with banks with origi-
nal maturities of three months or less. Cash investments
totaled $11,345,000 at December 31, 1994. Cash investments
with banks totaled $11,135,000 at December 31, 1993.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out)
or market (net realizable value) and include newsprint
and supplies.
DEPRECIATION
Depreciation for financial reporting purposes is calculated
principally on a straight-line basis over the estimated useful
lives of the respective assets. Depreciation expense for 1994,
1993 and 1992 was $39,025,000, $35,422,000 and
$31,710,000, respectively.
OTHER ASSETS
DEFERRED LOAN COSTS
Deferred loan costs include amounts incurred in connection
with raising bank and Senior Note debt. The costs are
amortized using the interest method over periods up
to 10 years.
DEFERRED COSTS
Deferred costs include amounts deferred during the start-
up and prematurity periods for cable systems under
development and costs associated with the acquisition of
security accounts. These costs are amortized on a straight-
line basis over periods up to 15 years.
PROGRAM RIGHTS
Program rights represent agreements with programming
syndicators for television program material. When the
program or film becomes available for telecasting, the cost
of the contract is recorded as an asset and the correspond-
ing contractual obligation as a liability. The cost is
amortized over the expected number of telecasts. The
portion of the cost to be amortized within one year and after
one year is reflected in the consolidated balance sheets as
current and noncurrent assets, respectively.The payments
under these contracts due within one year and after one year
are similarly classified as current and noncurrent liabilities.
INTANGIBLE ASSETS
Intangible assets, which include cable television franchise
rights, represent the excess of the cost of properties acquired
over the amounts assigned to the net tangible assets at
dates of acquisition. Intangible assets arising from acqui-
sitions after October 31, 1970, are amortized on a
straight-line basis over periods up to 40 years. Intangibles
acquired prior to October 31, 1970, will be amortized only
to the extent there is a permanent decline in value. The
Company assesses the recoverability of these intangible
assets by determining whether the amortization of the
balance over its remaining life can be recovered through
projected undiscounted future cash flows.
INTEREST RATE SWAP AND CAP AGREEMENTS
The interest rate swap agreements are being accounted for
as a hedge of the obligation, and accordingly, the net swap
settlement amount is recorded as an adjustment to interest
expense in the period incurred. The net swap settlement
amounts for 1994, 1993 and 1992 resulted in charges to
interest expense of $1.1 million, $2.1 million and $7.8
million, respectively.
The interest rate swap and cap agreements expire at
various times from 1995 through 1997. The Company
believes that the sellers of the swap and cap agreements will
be able to meet their obligations under the agreements. The
purpose of the Company's involvement in interest rate
swaps and caps is to minimize the Company's exposure to
interest rate fluctuations on its floating rate debt. The
Company believes that it has no material concentration of
credit or market risks with respect to these interest rate
protection agreements.
INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS
No. 109, "Accounting for Income Taxes." Deferred tax
assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax
MULTIMEDIA, INC. AND SUBSIDIARIES
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
rates in effect for the year in which those temporary differ-
ences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date.
In 1992, pursuant to APB Opinion 11, deferred
income taxes were recognized for income and expense items
that were reported in different years for financial reporting
purposes and income tax purposes using the tax rate applic-
able for the year of the calculation.
EARNINGS PER SHARE
Earnings per share are computed based on the weighted
average number of shares of common stock and common
stock equivalents outstanding during each year. Common
stock equivalents are dilutive stock options determined
by using the treasury stock method.
MINORITY INTEREST
Minority interest represents the minority shareholders'
proportionate share of the equity and the income or loss of
certain consolidated subsidiaries, primarily WKYC-TV,
Inc. The Company owns 51% of WKYC-TV, Inc.
ACCOUNTING CHANGES
Effective January 1, 1993, the Company adopted SFAS
No. 109, "Accounting for Income Taxes." SFAS No. 109
required a change from the deferred method, under
APB Opinion 11, to the asset and liability method of
accounting for income taxes. The cumulative effect of this
change in accounting ($15.4 million) was determined as of
January 1, 1993.
The Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than
Pensions," as of January 1, 1993, which requires accrual,
during an employee's active years of service, of the expected
costs of providing postretirement benefits to employees
and their beneficiaries and dependents. The Company's
accumulated postretirement benefit obligation as of
December 31, 1992, based upon calculations performed
by the Company's actuarial consultant, was $1.1 million,
net of tax.
The net cumulative effect of the above changes
($14.3 million) is reported separately in the 1993 consoli-
dated statement of earnings.The effect of these changes on
earnings before cumulative effect of changes in accounting
principles in 1993 was not material. Financial statements
for years prior to 1993 have not been restated.
Beginning January 1, 1994, the Company began
reporting operating revenues for its television and radio
stations net of agency commissions and national represen-
ation fees. The prior years' consolidated statements of
earnings have been restated to reflect this change. This
change has no impact on net earnings or earnings per share.
(2) RECAPITALIZATION MERGER
On September 20, 1985, the Company's shareholders
approved a Recapitalization Agreement and Plan of Merger
(the "Recapitalization Merger"). The Recapitalization
Merger was consummated on October 1, 1985, and was
accounted for as a redemption not subject to purchase
accounting. This resulted in a charge to retained earnings
of approximately $887 million.
(3) ACQUISITIONS
In 1994, the Company purchased the accounts of existing
security alarm monitoring companies for approximately
$7,200,000 in cash. The purchase price has been assigned
to property, plant and equipment ($3,500,000) and
other assets ($3,700,000). Other acquisitions for 1994
included a small cable television system and the purchase
of the remaining 20% interest in certain Illinois cable
franchises. The purchase price of these other acquisitions is
considered immaterial.
In 1993, the Company purchased the accounts of
existing security alarm monitoring companies for approx-
imately $12,100,000 in cash. The purchase price has been
assigned to property, plant and equipment ($6,100,000)
and other assets ($6,000,000). Other acquisitions for 1993
included the purchase of the remaining 20% interest in an
existing Illinois cable television franchise. The purchase
price is considered immaterial.
On December 3, 1992, the Company purchased
Indiana cable television systems with approximately
28,000 subscribers for approximately $58,000,000 in cash.
The purchase price has been assigned to property, plant and
equipment ($18,700,000), intangibles ($37,100,000) and
other assets ($2,200,000).
The following unaudited pro forma summary
presents the results as if the acquisition of Indiana cable
television systems had occurred on January 1, 1992, after
giving effect to certain adjustments including interest
expense on the acquisition debt. The pro forma results do
not necessarily represent results which would have occurred
MULTIMEDIA, INC. AND SUBSIDIARIES
29
<PAGE> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) ACQUISITIONS (CONTINUED)
if the acquisition had occurred on the date indicated nor
does it indicate results which may occur in the future.
<TABLE>
<CAPTION>
(In thousands except per-share data) 1992
<S> <C>
Total operating revenues $585,878
Net earnings 58,105
Earnings per share 1.55
</TABLE>
In February 1992, the Company also purchased an
Illinois cable television system with approximately 5,000
subscribers for approximately $9,500,000 in cash. The pur-
chase price has been assigned to property, plant and
equipment ($8,400,000) and intangibles ($1,100,000).
In 1992, the Company also purchased the accounts of
existing security alarm monitoring companies for approx-
imately $8,500,000 in cash. The purchase price has been
assigned to property, plant and equipment ($4,200,000)
and other assets ($4,300,000). Other acquisitions for 1992
included purchases of the remaining 20% interest in two
existing Illinois cable television franchises. The purchase
price of these interests is considered immaterial.
The operations of all acquired businesses for the
three year period ended December 31, 1994, have been
included in the consolidated statements of earnings since
the dates of acquisition. Other than the Indiana cable tele-
vision systems, the pro forma effects of the acquisitions on
operating revenues, net earnings and net earnings per share
for the year of acquisition and for the year immediately
preceding the year of acquisition are not significant and are
not presented.
(4) OTHER ASSETS
Other assets include:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Deferred loan costs, net of accumulated
amortization of $5,505 in1994 and
$4,372 in 1993 $ 5,646 6,780
Deferred costs, net of accumulated
amortization of $12,232 in 1994
and $9,995 in1993 14,740 14,376
Program rights 56 318
Other 7,091 7,866
Total $27,533 29,340
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets include:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Excess of cost over net tangible assets:
30-40 year life $205,597 209,149
10-20 year life 7,810 7,804
Franchise costs:
30-40 year life 43,986 41,266
10-20 year life 38,867 37,899
Less accumulated amortization (73,038) (63,803)
Amounts not being amortized 18,856 19,041
Total $242,078 251,356
</TABLE>
(6) LONG-TERM DEBT
A summary of long-term debt follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Bank credit facility:
Term loan $102,000 166,000
Revolving credit 33,500 61,500
Senior notes 400,000 400,000
Note payable 36,750 36,750
Notes payable in quarterly or annual
installments through June 1998 307 747
Total long-term debt 572,557 664,997
Less current installments 30,254 393
Long-term debt, excluding
current installments $542,303 664,604
</TABLE>
BANK CREDIT FACILITY
The bank credit facility is comprised of a $355 million
revolving credit line and a $102 million term loan. The
commitment levels which remain in effect during the years
ended are as follows:
<TABLE>
<CAPTION>
(In thousands) Revolving Term
Date Credit Loan Total
<S> <C> <C> <C>
December 31,1994 $355,000 102,000 457,000
December 31,1995 290,000 76,000 366,000
December 31,1996 225,000 50,000 275,000
December 31,1997 160,000 24,000 184,000
December 31,1998 90,000 90,000
December 31,1999 30,000 30,000
June 30, 2000
</TABLE>
The bank credit facility has a floating interest rate
based on the Company's debt to annualized operating cash
flow ratio. At December 31, 1994, the interest rate (approx-
imately 6.8%) for these bank notes was the LIBOR rate
plus 5/8% or the prime rate. A commitment fee of 3/8% per
annum on the unused portion of the revolving credit
MULTIMEDIA, INC. AND SUBSIDIARIES
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
commitment must be paid quarterly.The Company has the
option under the bank Credit Agreement to seek bids
from the various banks for alternative interest rates. The
Company has interest rate swap agreements which effec-
tively fix the LIBOR rate on $75 million of its floating rate
debt at approximately 5.7%. These interest rate swap agree-
ments expire at various times between June 1996 and
November 1996. The Company also has an interest rate cap
agreement which effectively caps LIBOR on $25 million of
its floating rate debt at approximately 7.0%, which expires
in December 1995. In addition, the Company has an inter-
est rate cap which caps LIBOR at 7% on $25 million,
which begins in 1996 and expires in 1997.
SENIOR NOTES
The Senior Notes are comprised of five series which have
maturities from 1995 through 2005 with an original aver-
age life of 10 years and bear interest at a composite rate of
approximately 10.7%. The remaining average life is 5.5
years. Information regarding each series follows:
<TABLE>
<CAPTION>
Principal Interest
(In thousands) Due Dates Amount Rate2
<S> <C> <C> <C>
Series A June 29,1995 $ 30,000 10.23%
Series B June 29,1996 30,000 10.36%
Series C June 29,1997 30,000 10.50%
Series D June 29,1998 70,000 10.61%
Series E1 June 29,1999 240,000 10.92%
through
June 29, 2005
$400,000
</TABLE>
1One-seventh of the principal amount due each June 29 for the years
1999 to 2005.
2Interest is payable semi-annually on June 29 and December 29.
COVENANTS
The bank Credit Agreement and/or Senior Notes contain
covenants which limit (i) payment of dividends;
(ii) purchase of capital stock of the Company; (iii) incur-
rence of indebtedness; (iv) acquisitions outside of the
Company's current lines of business; (v) liens; (vi) invest-
ments; (vii) transactions with affiliates; (viii) sales of assets;
and (ix) certain extraordinary transactions. In addition, one
or both of the agreements require the Company to maintain
specific ratios of debt to annualized operating cash flow,
annualized operating cash flow to interest expense and
annualized operating cash flow to fixed charges.
Management believes it is in compliance with all covenants.
NOTE PAYABLE
In 1990, in addition to purchasing a 51% equity interest in
WKYC from NBC, the Company purchased a 51% interest
in a $75 million principal promissory note of WKYC
which was held by NBC. As a result, 51% of the note is
now due to the Company, and NBC retained a 49% interest
in that note ($36.8 million), which bears interest at a rate of
10% payable semi-annually on January 15 and July 15. The
principal amount is due in full on December 26, 1997.
OTHER
The other notes payable include a $20,000,000 commit-
ment to the Company which expires on July 28, 1995.
There were no outstanding borrowings at December 31,
1994, under this commitment. The interest rate on this
commitment is the overnight Federal Funds rate plus
1.50% or competitive bid rates, as available. A commit-
ment fee of 1/16% per annum on the unused portion of
the commitment must be paid quarterly. The remaining
notes payable have fixed interest rates ranging from
8% to 11.25%.
The minimum aggregate annual repayments of
long-term debt during the next five years, excluding the
bank credit facility, are as follows (in thousands): 1995,
$30,254; 1996, $30,062; 1997, $66,777; 1998, $70,012;
1999, $34,286.
(7) DISCLOSURES ABOUT FAIR VALUE
OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, trade
accounts receivable, accounts payable and accrued expenses
approximates fair value because of the short maturity of
these instruments. The fair value of the interest rate swaps
or caps is the estimated amount that the Company would
receive or pay to eliminate the swap or cap agreements at
the reporting date, taking into account current interest
rates and the current credit-worthiness of the swap
counterparties. The fair value of the Company's long-term
debt is based on estimates of market prices for the same or
similar issues and on the current rates offered to the
Company for debt of the same remaining maturities. The
fair value of program rights payable is the present value of
the future obligations.
MULTIMEDIA, INC. AND SUBSIDIARIES
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) DISCLOSURES ABOUT FAIR VALUE
OF FINANCIAL INSTRUMENTS (CONTINUED)
Estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994
Carrying Fair
Assets: Amount Value
<S> <C> <C>
Interest rate cap agreements $ 524 654
Interest rate swap agreements - 2,564
Liabilities:
Long-term debt:
Bank credit facility 135,500 135,500
Senior notes 400,000 429,638
Note payable 36,750 37,856
Other notes payable 307 307
Program rights payable 7,793 7,514
</TABLE>
(8) INCOME TAXES
Total income tax expense for the years ended December 31,
1994 and 1993 was allocated as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Income from continuing operations $64,693 38,703
Cumulative effect of change in
accounting principle- adoption
of SFAS No. 106 - (755)
Stockholders' equity- additional paid-in
capital for compensation expense
for tax purposes in excess of
amounts recognized for financial
reporting purposes (2,691) (2,084)
Total income tax expense $62,002 35,864
</TABLE>
<TABLE>
Income tax expense (benefit) includes:
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Federal:
Current $46,260 28,905 33,821
Deferred 7,827 1,844 263
54,087 30,749 34,084
State:
Current 9,114 7,783 7,369
Deferred 1,492 171 (110)
10,606 7,954 7,259
Total $64,693 38,703 41,343
</TABLE>
The items comprising the difference in taxes on
income computed at the U.S. statutory rates (35% in
1994 and 1993 and 34% in 1992) and the amounts
provided follow:
(In thousands) 1994 1993 1992
[S] [C] [C] [C]
Computed expected tax expense $54,560 43,365 34,285
Increase (reduction) in tax expense
resulting from:
State income taxes, net of
Federal income tax benefit 6,894 5,170 4,791
Amortization 1,822 1,796 1,756
Reduction for settlement
of IRS exam (12,372)
Additional provision for
(reduction in) income taxes 902 (365) 799
Other, net 515 1,109 (288)
Actual tax expense $64,693 38,703 41,343
The significant components of deferred income tax
expense attributable to income from continuing opera-
tions for the years ended December 31, 1994 and 1993 are
as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Deferred tax expense (exclusive of
the effect of the f ollowing item) $9,319 1,195
Adjustment to deferred tax assets
and liabilities for enacted
changes in tax laws and rates 820
$9,319 2,015
</TABLE>
For the year ended December 31, 1992, deferred
income tax expense (benefit) of $153,000 resulted from
timing differences in the recognition of income and expense
for income tax and financial reporting purposes. The
sources and tax effects of these timing differences are
presented below:
<TABLE>
<CAPTION>
(In thousands) 1992
<S> <C>
Accelerated depreciation $ 304
Amortization (1,108)
Accrued expenses and allowances (717)
Other, net 1,674
</TABLE>
$ 153
MULTIMEDIA, INC. AND SUBSIDIARIES
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give
rise to significant portions of the deferred tax assets and
deferred tax liabilities at December 31, 1994 and 1993 are
presented below:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Deferred tax assets:
Amortization of stock options $ 4,225 3,214
Accrued expenses and allowances 10,249 10,294
Total gross deferred tax assets 14,474 13,508
Less-valuation allowance
Net deferred tax assets 14,474 13,508
Deferred tax liabilities:
Accelerated depreciation 51,661 38,911
Amortization 6,856 9,018
Other, net 466 769
Total gross deferred tax liabilities 58,983 48,698
Net deferred tax liability $44,509 35,190
</TABLE>
Management believes that a valuation allowance
is not necessary based upon the level of historical tax-
able income and the projections for future taxable income
over the periods during which the deferred tax assets
are deductible.
The Internal Revenue Service (IRS) has examined the
Company's federal consolidated income tax returns through
1989. In 1993 the Company reached an agreement with the
IRS as to the 1982 through 1986 tax liabilities. The agreed
to settlement principally involved purchase price alloca-
tions related to cable acquisitions and characterization of
professional fees incurred in 1985 and was less than the
amounts previously accrued. This agreement resulted in a
reduction in income taxes.
The IRS has issued notices of deficiency with regard
to the Company's tax returns for 1987through 1989. The
Company is contesting these deficiencies. The deficien-
cies principally involve various acquisition issues related
primarily to the cable division. The Company is continu-
ing to vigorously contest the assessments, but the ultimate
resolution of these matters cannot be ascertained at this
time. The Company believes that it has adequately
provided for agreed-upon and potential deficiencies,
including interest.
(9) COMMON STOCK, STOCK OPTIONS
AND PREFERRED STOCK
The Company has adopted five stock option plans (the
Restricted Option Plan, Performance Option Plan, New
Key Executive Plan, 1991 Stock Option Plan and Director's
Option Plan) and signed stock option agreements with
Phillip J. Donahue and Sally Jessy Raphael. Each option is
for one share of common stock.
All of the 1,513,494 authorized options, exercisable
at $.33 per share, under the Restricted Option Plan were
granted in 1985. Fair market value of the stock on the
date of grant was $3.33 per share. Options for 679,810
shares were outstanding on December 31, 1991, all of
which were exercised in 1992. No options remain outstand-
ing under this plan.
All of the 1,032,498 authorized options, exercisable
at $3.33 per share, under the Performance Option Plan
were granted in 1985. Fair market value of the stock on the
date of grant was $3.33 per share. The Performance
Options became exercisable as defined operating cash flow
goals of the Company were equaled or exceeded. Options
for 264,555 shares were outstanding on December 31,
1991. Options for 64,555 shares were exercised in 1992,
and options for 200,000 shares were exercised in 1994. No
options remain outstanding under this plan.
The forfeited shares from the Restricted Option Plan
and the Performance Option Plan are now available for
options which may be granted under the New Key
Executive Plan.
The New Key Executive Plan, 1991 Stock Option
Plan, Director's Stock Option Plan and agreements with
Phillip J. Donahue and Sally Jessy Raphael authorize the
granting of 8,085,372 options. Generally, options granted
under these plans are exercisable to the extent of 20% per
year, beginning approximately one year following date of
grant, provided the holder of the option is still an employee
of or is rendering services to the Company at such time.
Option prices, which are established by the Board of
Directors or a committee thereof, have been determined
based on the market values on dates of grant, except for
1,542,400 options granted in 1987through 1992 at prices
ranging from $3.33 to $23.00 per share. Information
regarding options under the New Key Executive Plan,
MULTIMEDIA, INC. AND SUBSIDIARIES
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) COMMON STOCK, STOCK OPTIONS
AND PREFERRED STOCK (CONTINUED)
1991 Stock Option Plan, Director's Stock Option Plan and
Donahue and Sally Jessy Raphael agreements follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Outstanding at January 1:
Options 2,555,640 2,755,700 3,340,173
Price $ 3.33- $ 3.33- $ 3.33-
$ 35.00 $ 29.00 $ 28.67
Granted:
Options 827,500 385,000 448,000
Price $ 26.25- $ 32.13- $ 15.00-
$ 34.25 $ 35.00 $ 29.00
Forfeited or cancelled:
Options 162,300 178,280 38,550
Price $ 15.00- $ 3.33- $ 15.21-
$ 34.25 $ 35.00 $ 27.10
Exercised:
Options 200,560 406,780 993,923
Price $ 9.92- $ 3.33- $ 3.33-
$ 29.00 $ 27.10 $ 27.10
Outstanding at December 31:
Options 3,020,280 2,555,640 2,755,700
Price $ 3.33- $ 3.33- $ 3.33-
$ 35.00 $ 35.00 $ 29.00
Exercisable at December 31:
Options 1,685,347 1,365,698 1,171,770
Price $ 3.33- $ 3.33- $ 3.33-
$ 34.75 $ 35.00 $ 28.67
</TABLE>
Compensation expense of $3,390,750, $4,356,000
and $3,381,000 is included in selling, general and admin-
istrative expense in 1994, 1993 and 1992, respectively,
related to the amortization of the deferred compensation on
the options issued under the above plans.
The Company has 600,000 shares of authorized but
unissued 5% convertible cumulative preferred stock of
$20 par value per share.
(10) SHAREHOLDER RIGHTS PLAN
In September 1989, the Company declared a dividend
distribution of one common share purchase Right for each
outstanding share of the Company's common stock. The
Rights are designed to assure that all the Company's share-
holders, other than an acquiring shareholder, receive equal
treatment in the event of any proposed takeover of the
Company. Each Right will entitle shareholders to buy one
share of common stock at an exercise price of $133.33.
The Rights will be exercisable only if a person or
group acquires 15% or more of the Company's common
stock or announces a tender offer, the consummation of
which would result in ownership by a person or group of
15% or more of the common stock. If a person or group
acquires 15% or more of the Company's outstanding
common stock, each holder of a Right, other than Rights
beneficially owned by the acquiring person, will have the
right to purchase common shares of the Company having a
market value of twice the exercise price of the Right. If the
Company is acquired in a merger or other business combi-
nation transaction, each holder of a Right will thereafter
have the right to purchase common shares of the acquiring
company which at the time of such transaction will have a
market value of twice the exercise price of the Right.
Prior to the acquisition by a person or group of bene-
ficial ownership of 15% or more of the Company's common
stock, the Rights are redeemable for one-third of one cent
per Right at the option of the Board of Directors. If unexer-
cised, the Rights expire September 6, 1999.
(11) OTHER INCOME (EXPENSE)
Other income (expense) includes:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Gain on disposal of assets , net $25,001 739 ---
Interest income 779 904 82
Other, net (196) (149) (529)
$25,584 1,494 (447)
</TABLE>
In August 1994, the Company sold its wireless cable
operations for $35.1 million resulting in a gain of $22.0
million before taxes. In addition, throughout 1994, the
Company sold its radio properties in Milwaukee,
Wisconsin; Shreveport, Louisiana; and Greenville, South
Carolina. The proceeds from these transactions were $13.3
million resulting in gains of $8.1 million before taxes.
The Company also discontinued its made-for-television
movies business in 1994, resulting in losses of $3.4 million
before taxes.
In January 1993, the Company sold its mobile video
production business for $4.5 million, which resulted in a
gain of $2.3 million before taxes.
Gain on disposal of assets, net, is net of approxi-
mately $3.0 and $1.0 million in 1994 and 1993,
respectively, in writeoffs of cable equipment related to
rebuilds. Interest income includes $.5 and $.8 million,
respectively, in 1994 and 1993, in refunds received from the
IRS related to the settlement of its audits of the Company's
1982 through 1986 federal consolidated income tax returns.
MULTIMEDIA, INC. AND SUBSIDIARIES
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company and its subsidiaries have noncontributory
pension plans which cover substantially all employees who
meet age and service requirements. The pension plans
provide defined benefits that are based on years of credited
service, average compensation (as defined) and the primary
social security benefit. Contributions to the plans are based
on the Entry Age Normal actuarial funding method and are
limited to amounts that are currently deductible for tax
reporting purposes. Assets held by the pension plans
include equity securities, corporate and government bonds,
and cash and short term assets.
The weighted average discount rate and the rate of
increase in future compensation levels used in determining
the actuarial present value of the projected benefit obliga-
tion were 8.0% and 6.5%, respectively, in 1994, and 7.25%
and 6.5%, respectively, in 1993. The expected long-term
rate of return on assets was 8% in 1994 and 1993.
The following tables set forth the pension plans'
funded status and amounts recognized in the Company's
consolidated financial statements at December 31, 1994,
1993 and 1992:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation, including vested
benefits of $35,218 in 1994 and
$36,308 in 1993 $36,846 37,854
Projected benefit obligation $48,698 50,603
Plan assets at fair value 57,127 59,817
Excess of plan assets over the
projected benefit obligation $ 8,429 9,214
Unrecognized net gain (2,341) (2,704)
Unrecognized net asset being amortized
over an average of 17 years (4,605) (5,180)
Other (1,601) (1,298)
Prepaid (accrued) pension costs
included in other assets $ (118) 32
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Net pension expense (income)
included the following
components:
Service cost $ 2,183 2,206 1,942
Interest cost 3,528 3,312 3,029
Actual return on plan assets 583 (5,310) (3,547)
Net deferral and amortization (6,099) 20 (1,654)
Net pension expense (income) $ 195 228 (230)
</TABLE>
THRIFT PLAN
The Company and its subsidiaries have a salary deferral
thrift plan for all eligible employees. The Company and
its subsidiaries match contributions by employees up to 2%
of their salaries. Company contributions charged to
operations in 1994, 1993 and 1992 were $1,405,000,
$1,359,000 and $1,216,000, respectively. Thrift plan costs
are funded biweekly.
OTHER POSTRETIREMENT BENEFITS
The Company sponsors unfunded postretirement benefit
plans that provide health care, life insurance and other
postretirement benefits to certain retired employees. The
health care plans generally include participant contribu-
tions, co-insurance provisions, limitations on the Company's
obligation and service-related eligibility requirements. The
net postretirement benefit liability and periodic post-
retirement benefit cost associated with these plans are
not material.
SUPPLEMENTAL RETIREMENT PROGRAM
The Company has an unfunded Supplemental Retirement
Program ("SERP"), not included in the above table, for
certain executive officers. The actuarial present value of
accumulated benefit obligation at December 31, 1994 and
1993 was $2,058,000 and $1,355,000, respectively. The
expense for 1994, 1993 and 1992 was $703,000, $606,000
and $519,000, respectively.
MULTIMEDIA, INC. AND SUBSIDIARIES
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13) QUARTERLY OPERATING RESULTS (UNAUDITED)
The Company's quarterly operating results for 1994 and 1993 are presented below.
<TABLE>
<CAPTION>
(In thousands except per-share data)
Quarter Ended March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1994
Operating revenues $146,419 159,231 152,650 172,183
Operating profit 40,918 49,851 47,713 50,961
Net earnings 17,334 19,443 30,469 22,783
Net earnings per share .45 .51 .80 .59
1993
Operating revenues $139,521 157,062 147,816 167,492
Operating profit 38,130 46,605 45,737 53,931
Earnings before cumulative effect of changes in accounting
principles 15,198 18,267 30,241 21,812
Net earnings 29,530 18,267 30,241 21,812
Earnings per share be ore cumulative effect
of changes in accounting principles .40 .48 .79 .56
Net earnings per share .77 .48 .79 .56
</TABLE>
(14) INDUSTRY SEGMENTS
Financial information by industry segment for each of the years
in the three-year period ended December 31, 1994, is summarized below:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Operating revenues:
Newspapers $150,140 135,920 132,485
Broadcasting 142,841 133,035 137,188
Cable 165,406 164,598 144,383
Entertainment 147,512 161,588 129,122
Security 24,584 16,750 10,262
$630,483 611,891 553,440
Operating profit:
Newspapers 45,427 37,667 37,698
Broadcasting 51,756 38,816 38,191
Cable 52,555 56,645 50,692
Entertainment 52,074 63,285 55,841
Security 3,048 1,838 1,818
204,860 198,251 184,240
Less corporate expenses (15,417) (13,848) (11,135)
$189,443 184,403 173,105
Depreciation and amortization:
Newspapers 5,868 6,049 5,962
Broadcasting 8,600 9,031 9,888
Cable 31,569 28,817 22,387
Entertainment 1,158 2,024 1,960
Security 6,050 4,140 2,640
53,245 50,061 42,837
Corporate 157 139 145
$ 53,402 50,200 42,982
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Additions to property , plant
and equipment:
Newspapers 6,542 4,611 6,785
Broadcasting 4,892 4,025 5,142
Cable 57,724 32,413 22,159
Entertainment 1,603 497 574
Security 11,881 5,704 2,739
82,642 47,250 37,399
Corporate 386 128 94
$ 83,028 47,378 37,493
Identifiable assets:
Newspapers 91,902 89,473 90,872
Broadcasting 189,344 192,596 200,679
Cable 278,168 256,990 251,700
Entertainment 51,840 50,222 35,792
Security 60,543 47,336 31,894
671,797 636,617 610,937
Corporate 12,181 18,557 17,008
$683,978 655,174 627,945
</TABLE>
MULTIMEDIA, INC. AND SUBSIDIARIES
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company operates principally in five industries:
newspapers, broadcasting, cable television, entertainment
and security alarms. Newspaper operations involve the
publication and distribution of both daily and non-daily
newspapers from which revenues are derived primarily
from circulation and the sale of advertising linage.
Broadcasting operations involve the sale of time to adver-
tisers and network revenue. Cablevision operations involve
the provision of broadcast signals of television and radio
stations owned by others to subscribers whose monthly
payments are the primary source of revenues.
Entertainment operations generate revenue from program-
ming, talent and production operations. Security operations
involve the monitoring, installation and servicing of secu-
rity systems. Operating profit is total revenues less
operating expenses. Interest expense, net other income
(expense) and income taxes have been excluded in comput-
ing operating profit. Identifiable assets by industry
segment represent those assets used in the Company's oper-
ations in that segment.
(15) CASH FLOW INFORMATION
Net cash provided by operating activities is further
analyzed as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
Operating profit plus depreciation,
amortization and amortization
of stock options:
Newspapers $ 51,295 43,716 43,660
Broadcasting 60,356 47,847 48,079
Cable 84,124 85,462 73,079
Entertainment 53,232 65,309 57,801
Security 9,098 5,978 4,458
Corporate (11,869) (9,354) (7,609)
246,236 238,958 219,468
Cash payments for interest (58,358) (61,636) (72,649)
Cash payments for taxes,
net of refunds (58,431) (32,016) (33,275)
Amortization of program rights 13,189 14,035 18,277
Other (536) (1,293) 771
Net cash flows provided by
operating activities $142,100 158,048 132,592
</TABLE>
The Company entered into contracts for program
rights totalling $12,052,000, $12,977,000 and $14,218,000
for 1994, 1993 and 1992, respectively, which are not
reflected in the consolidated statements of cash flows or the
above schedule.
(16) COMMITMENTS
At December 31, 1994, the Company had commitments for
purchases of syndicated television programming of $27.2
million through 2000 and commitments for purchases of
property, plant and equipment of $17.0 million ($13.9
million relates to construction of a new production facility
at the Company's Montgomery, Alabama, newspaper oper-
ation). Commitments relating to rebuilds and upgrades to
cable franchises to be performed through 1996 were approx-
imately $12.7million at year-end.
In addition, the Company periodically enters into
contractual agreements with talent in the entertainment
and broadcasting businesses.
During the first quarter of 1995, the Company com-
pleted the trade of certain of the Company's cable systems
in Oklahoma and Illinois with 40,500 cable subscribers for
Telecommunications, Inc.'s cable systems in Wichita,
Kansas, with 50,400 subscribers. The Company paid $12.4
million in cash as part of this transaction. The transaction
will be accounted for as a nonmonetary transaction.
MULTIMEDIA, INC. AND SUBSIDIARIES
37
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS
MULTIMEDIA, INC.:
We have audited the accompanying consolidated
balance sheets of Multimedia, Inc. and subsidiaries as of
December 31, 1994 and 1993 and the related consolidated
statements of earnings, stockholders' equity (deficit) and
cash flows for each of the years in the three year period
ended December 31, 1994. These consolidated financial
statements are the responsibility of the Company's manage-
ment. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with gener-
ally 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 assess-
ing 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 consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Multimedia, Inc. and subsidiaries
at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the
three year period ended December 31, 1994 in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, the Company changed its method of account-
ing for income taxes in 1993 to adopt the provisions of the
Financial Accounting Standards Board's SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. As discussed in Note 1, the
Company also adopted in 1993 the provisions of the
Financial Accounting Standards Board's SFAS No. 106,
EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER
THAN PENSIONS.
(KPMG Peat Marwick LLP signature appears here)
KPMG Peat Marwick LLP
Greenville, South Carolina
February 10, 1995
MULTIMEDIA, INC. AND SUBSIDIARIES
38
<PAGE>
REPORT OF MANAGEMENT
The accompanying financial statements and other financial
data were prepared by the management of the Company,
which has the responsibility for the integrity of the infor-
mation presented. The financial statements have been
prepared in conformity with generally accepted accounting
principles and, as such, include amounts that are the best
estimates and judgments of management with considera-
tion given to materiality.
Management is further responsible for maintaining a
system of internal control, designed to provide reasonable
assurance that the books and records reflect the transactions
of the Company and that its established policies and proce-
dures are carefully followed. Because of inherent limitations
in any system, there can be no absolute assurance that
errors or irregularities will not occur. Nevertheless, manage-
ment believes that the system of internal control provides
reasonable assurance that assets are safeguarded and that
financial information is objective and reliable.
The internal control system is supported by written
policies and procedures, by careful selection and training of
qualified personnel, and by an internal auditing function
that independently evaluates and formally reports on the
adequacy and effectiveness of the system. In addition, the
Company's business ethics policy requires employees to
maintain the highest level of ethical standards in the con-
duct of the Company's business.
The Company's financial statements have been audited
by KPMG Peat Marwick LLP, independent certified public
accountants. Their Independent Auditor's Report, which is
based on an audit made in accordance with generally accepted
auditing standards, expresses an opinion as to the fair presen-
tation of the financial statements. In performing their audit,
KPMG Peat Marwick LLP considers the Company's internal
control structure to the extent they deem necessary in order to
issue their opinion on the financial statements.
The Board of Directors pursues its oversight role for
the financial statements through the Audit Committee,
which consists solely of outside directors. The Audit
Committee meets periodically with management, the inter-
nal auditors and the independent auditors to review matters
relating to financial reporting, the internal control system
and the nature, extent and results of audit efforts. The
internal auditors and the independent auditors have unre-
stricted access to the Audit Committee, with and without
the presence of management, to discuss accounting, audit-
ing and financial reporting matters. The Audit Committee
also recommends for approval to the Board of Directors the
appointment of the independent auditors.
Multimedia, Inc.
February 10, 1995
MULTIMEDIA, INC. AND SUBSIDIARIES
39
<PAGE>
OFFICERS
DONALD D.SBARRA
Chairman of the Board and
Chief Executive Officer
DOUGLAS J.GREENLAW
President and
Chief Operating Officer
ROBERT E.HAMBY JR.
Senior Vice President-Finance
and Administration, and
Chief Financial Officer
MICHAEL C.BURRUS
Vice President;
President,
Multimedia Cablevision Co.
JAMES M.HART
Vice President;
President,
Multimedia Broadcasting Co.
W.DEBERNIERE MEBANE
Vice President;
President,
Multimedia Newspaper Co.
ROBERT L.TURNER
Vice President;
President,
Multimedia Entertainment Co.
THOMAS L.MAGAHA
Vice President-Development
FREDERICK G.LOHMAN
Vice President-Controller
ALAN D.AUSTIN
Treasurer
J. CLYDE BAUCOM
Vice President-Personnel
and Benefits
CLAUDIA I.PRICE
Vice President-Taxes
DAVID L.FREEMAN
Secretary
SANDRA W.HARBERT
Assistant Secretary
BOARD OF DIRECTORS
DONALD D.SBARRA1
Chairman of the Board and
Chief Executive Officer,
Multimedia, Inc.
GEORGE H.V.CECIL2,5
President,
Biltmore Farms, Inc.
RHEA T.ESKEW4,5
Consultant to the Company;
former President,
Multimedia Newspaper
Company
DAVID L.FREEMAN1,3,6
Secretary of the Company;
attorney, partner,
Parham, P.A.
DOUGLAS J.GREENLAW1
President and
Chief Operating Officer,
Multimedia, Inc.
ROBERT E.HAMBY JR.1
Senior Vice President-Finance
and Administration, and
Chief Financial Officer,
Multimedia Inc.
M.DEXTER HAGY1,2,5
President,
Chairman,
VAXA Corporation
JOHN T.LAMACCHIA3,5
President and
Chief Executive Officer,
Cincinnati Bell Inc.
LESLIE G.MCCRAW2,5
Chairman of the Board and
Chief Executive Officer,
Fluor Corporation
DOROTHY P.RAMSAUR 4,5
Private investments
ELIZABETH P.STALL3,4,5,6
Private investments
WILLIAM C.STUTT1,3,5,6
Limited partner,
Goldman Sachs Group, L.P.
1 Executive Committee
2 Audit Committee
3 Compensation Committee
4 Employee Benefits Committee
5 Stock Option Committee
6 Nominating Committee
MULTIMEDIA, INC. AND SUBSIDIARIES
40
SHAREHOLDER INFORMATION
Common Stock
Multimedia's common stock is listed on the NASDAQ National Market System. The
market symbol is MMEDC. Authorized 100,000,000 shares; outstanding at year-end,
37,619,528 shares. On December 31, 1994, there were 1,181 shareholders of
record. The CUSIP number for the common stock is 62545K 10 7. See page one for
stock price history information. No dividends were declared or paid during
1993 or 1994.
Corporate Headquarters
Multimedia, Inc.
305 S. Main St.
Greenville, S.C. 29601
Mailing Address:
P.O. Box 1688
Greenville, S.C. 29602
Investor Information
Requests for the Form 10-K for the year ended December 31, 1994, and other
financial information should be directed to the Corporate Communications
Department at the above address, or telephone (803)298-4203.
Annual Meeting
The annual meeting of shareholders will be held at 2:00 p.m. on Wednesday,
April 19, 1995, in the Roe Cabaret Theatre, Peace Center for the Performing
Arts, 300 South Main Street, Greenville, South Carolina. All shareholders
are cordially invited to attend.
Auditors
KPMG Peat Marwick LLP
Greenville, S.C.
Stock Transfer Agent and Registrar
Wachovia National Bank of North Carolina, N.A.
Corporate Trust Department
P.O. Box 3001
Wintston-Salem, N.C. 27102
1(800)633-4236
(recycle logo appears here) Multimedia Inc. encourages the principle of
recycling and advocates the use of recycled newsprint in the
production of its publications. The 1994 Annual Report is
printed entirely on recycled papers.
<PAGE>
Multimedia, Inc.
P.O. Box 1688
(Multimedia logo appears here) Greenville, South Carolina 29602
(803) 298-4373
*****************************************************************************
APPENDIX
On Page 1 there are three bar graphs that appear where noted with plot points
as noted.
On Page 2 there are 5 photos in the far left column as noted: paper on a press;
a satelite dish; fiber optic wire; a hand holding a microphone; and a security
keyboard.
On Page 3 there are 10 bar graphs that appear where noted with plot points
as noted.
On Page 5 photos of Donald D. Sbarra, Douglas J. Greenlaw and Robert E. Hamby,
Jr. appear in the far right column as noted.
On Page 6 a photo of W. deBerniere Mebane appears as noted.
On Page 7 there are 2 photos of presses printing newspaper; 1 appears across
the top half of the page and 1 in the lower left corner, as noted.
On Page 8 a photo of James M. Hart appears as noted.
On Page 9 a photo of 3 newscaster taping a newscast appears across the top half
of the page and a photo of a satellite dish appears in the lower left corner,
as noted.
On Page 10 a photo of Michael C. Burrus appears as noted.
On Page 11 a photo of a TV studio with monitors and 2 people appears across
the top half of the page and a close-up of fiber optic cable appears in the
lower left corner, as noted.
On Page 12 a photo of Robert L. Turner appears as noted.
On Page 13 the top half of the page is divided into six photos, one of each
talk show host: Phil Donahue, Sally Jessy Raphael, Jerry Springer, Rush
Limbaugh, Susan Powter and Dennis Prager. A photo of a hand holding a micro-
phone appears in the lower left corner. (All as noted.)
On Page 14 a photo of Michael C. Burrus appears as noted.
On Page 15 a photo of 2 people working in a security computer room appear
across the top half of the page and a close-up photo of a security keyboard
appears in the lower left corner, as noted.
On Page 16 a map of the US appears with Multimedia headquarters and properties
indicated. Below the map is a list of properties, as noted.
On the back cover, the Multimedia logo appear half way down the page, at the
left margin, with Multimedia's address and phone number to the right of it,
as noted.
<TABLE>
<CAPTION>
Exhibit 21
Multimedia, Inc.
Subsidiaries of the Registrant
<S> <C> <C>
Name of State of Names under which
Corporation Incorporation does business
Multimedia, Inc. SC Staunton News-Leader
(the Registrant) Spotlight
The Moultrie Observer
The Headliner
Weekly Moultrie Observer
WMAZ-AM/WAYS-FM
Multimedia WBIR, Inc. SC WBIR TV
Multimedia WMAZ, Inc. SC WMAZ TV
Multimedia KSDK, Inc. SC KSDK TV
WKYC Holdings, Inc. (51% DE
owned by the Registrant)
WKYC-TV, Inc. DE WKYC TV
Multimedia Radio, Inc. SC
Multimedia Productions, Inc. OH
Multimedia Publishing of
South Carolina, Inc. SC Greenville News
Greenville Piedmont
The Paper
The Poinsett Register
Food Extra (TMC)
The Tribune-Times
The Golden Strip Times
(TMC)
The New Home Buyers Guide
The Exchange
The Employment Guide
Anderson Real Estate Guide
Multimedia Publishing of
North Carolina, Inc. SC Asheville Citizen-Times
Employment Guide
The Real Estate/Home
Buyers Guide
The Advertiser Company AL Montgomery Advertiser
Real Estate Guide
Wheels
Montgomery This Week
Progress II (TMC)
<PAGE>
Exhibit 21
(Continued)
Multimedia, Inc.
Subsidiaries of the Registrant
Name of State of Names under which
Corporation Incorporation does business
Service Engraving Company,
Inc. AL Autauga Times
The Prattville Progress
Leaf Chronicle Company TN Clarksville Leaf-Chronicle
The Ashland City Times
Cheatham County Money-Saver
Clarksville Money-Saver
The Dickson Herald
The Shopper's Fair
The Nashville Record
The Stewart-Houston Times
The Star News
Robertson County Times
Sumner Times, Inc. TN The News-Examiner
The Sumner County Shopper
Music City News
Publishing Co., Inc. TN Music City News
The Gospel Voice
Baxter County Newspapers, Inc. AR Baxter Bulletin
Twin Lakes Shopper
The Ohio Valley Publishing
Company OH Gallipolis Daily Tribune
The Daily Sentinel
The Tri-County News
Point Pleasant Register Company WV Point Pleasant Register
MNC Direct, Inc. SC
Multimedia Entertainment, Inc. SC WLWT TV
Multimedia Entertainment
Company
Multimedia Entertainment
of South Carolina
Multimedia Programs, Inc. OH
Multimedia of Cincinnati, Inc. OH
Multimedia Motion Pictures, Inc. SC
Multimedia Films, Inc. SC
Multimedia Specials, Inc. SC
<PAGE>
Exhibit 21
(Continued)
Multimedia, Inc.
Subsidiaries of the Registrant
Name of State of Names under which
Corporation Incorporation does business
MPPI, Inc. SC MPPI of South Carolina, Inc.
Multimedia Cablevision, Inc. SC Multimedia Security Service
Red Carpet Cable, Inc. OK
Multimedia Service, Inc. SC
Multimedia Security Service, Inc. SC
Multimedia Cablevision of
Batavia, Inc. IL
Multimedia Cablevision of
Evergreen Park, Inc. IL
Multimedia Cablevision of
Hometown, Inc. IL
Multimedia Cablevision of
Chicago Ridge, Inc. IL
Multimedia Cablevision of
Illinois, Inc. IL
Tar River Communications, Inc. NC Tar River Cable TV
New Bern Cable TV
Greenville Cable TV
Kinston Cable TV
Clinton Cable TV
Valparaiso Cable TV
LaPorte Cable TV
Multimedia Cablevision of
Midwest City, Inc. OK
Multimedia Talk Television, Inc. SC
Multimedia Development, Inc. SC
Teleproductions Corporation SC
Between Friends, Inc. SC
Dazzle, Inc. SC South Carolina Dazzle, Inc.
Visions, Inc. SC Donato Productions
Conspiracy Productions, Inc. SC
MOW Productions, Inc. SC
Multimedia Enterprise, Inc. SC
Multimedia Telecommuni-
cations, Inc. SC
Multimedia Entertainment
Productions, Inc. SC
Multimedia Home Video, Inc. DE
Multimedia Talk Channel, Inc. DE NewsTalk Television
</TABLE>
Exhibit 23
Consent to use of Reports
The Board of Directors and Stockholders
Multimedia, Inc.:
We consent to incorporation by reference in the Registration Statements
No. 2-68069, 33-17234, 33-40050, 33-40253, 33-61574, and 33-61462 on
Forms S-8 and the Registration Statements No. 33-42179 and 33-46557 on
Forms S-3 of Multimedia, Inc. of our reports dated February 10, 1995,
relating to the consolidated balance sheets of Multimedia, Inc. and
subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of earnings, stockholders' equity (deficit) and
cash flows for each of the years in the three-year period ended
December 31, 1994, and the related schedule which reports appear in the
December 31, 1994 annual report on Form 10-K of Multimedia, Inc.
[Signature of KPMG Peat Marwick LLP]
Greenville, South Carolina
March 23, 1995
EXHIBIT 99
MULTIMEDIA, INC.
305 SOUTH MAIN STREET
P.O. BOX 1688
GREENVILLE, SOUTH CAROLINA 29602
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 19, 1995
TO OUR SHAREHOLDERS:
You are cordially invited to the Annual Meeting of Shareholders of
Multimedia, Inc. to be held at 2:00 P.M. on Wednesday, April 19, 1995, at the
Roe Cabaret Theatre, Peace Center for the Performing Arts at 300 South Main
Street in Greenville, South Carolina, for the purpose of considering and acting
upon the following:
1. The election of twelve directors to serve until the next annual meeting
of shareholders or until their successors have been duly elected and
qualified.
2. The ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for 1995.
3. The transaction of such other matters as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 3, 1995, as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
David L. Freeman, SECRETARY
Greenville, South Carolina
March 15, 1995
A FORM OF PROXY IS ENCLOSED. TO ENSURE THAT YOUR SHARES WILL BE VOTED AT
THE ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE AND SIGN THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE PAID, ADDRESSED ENVELOPE. NO
ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. THE GIVING OF A
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN THE EVENT YOU ATTEND THE MEETING.
<PAGE>
[This page left blank intentionally]
<PAGE>
MULTIMEDIA, INC.
305 SOUTH MAIN STREET
POST OFFICE BOX 1688
GREENVILLE, SOUTH CAROLINA 29602
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 19, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Multimedia, Inc. (the "Company") to be
voted at the Annual Meeting of Shareholders of the Company to be held at 2:00
P.M. on Wednesday, April 19, 1995, at the Roe Cabaret Theatre, Peace Center for
the Performing Arts at 300 South Main Street in Greenville, South Carolina. The
approximate date of mailing this Proxy Statement and the accompanying proxy is
March 15, 1995.
Only shareholders of record at the close of business on March 3, 1995, are
entitled to notice of and to vote at the meeting. As of such date, there were
outstanding 37,628,478 shares of Common Stock, $.10 par value per share (the
only voting securities), of the Company. Each share is entitled to one vote.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i)
delivering to the Secretary of the Company, at or before the Annual Meeting, a
written notice of revocation bearing a later date than the proxy, (ii) duly
executing a subsequent proxy relating to the same shares and delivering it to
the Secretary of the Company at or before the Annual Meeting or (iii) attending
the Annual Meeting and giving notice of revocation to the Secretary of the
Company or in open meeting prior to the proxy being voted (although attendance
at the Annual Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice revoking a proxy should be sent to: Multimedia, Inc.,
305 South Main Street, Post Office Box 1688, Greenville, South Carolina 29602,
Attention: Secretary.
All shares represented by valid proxies received pursuant to the
solicitation and prior to voting at the meeting and not revoked before they are
exercised will be voted, and, if a choice is specified with respect to any
matter to be acted upon, the shares will be voted in accordance with such
specification.
1
<PAGE>
ELECTION OF DIRECTORS
The By-laws of the Company provide that the number of Directors to be
elected at any meeting of shareholders shall be determined by the Board of
Directors. The Board has determined that twelve Directors shall be elected at
the Annual Meeting.
The following twelve persons are nominees for election as Directors at the
meeting to serve until the next Annual Meeting of Shareholders of the Company or
until their successors are duly elected and qualified. Unless authority to vote
at the election of Directors is withheld, it is the intention of the persons
named in the enclosed form of proxy to nominate and vote for the persons named
below. Except as otherwise noted below, the business address of each nominee is
Multimedia, Inc., 305 South Main Street, Greenville, South Carolina 29601. Each
such person is a citizen of the United States. There are no family relationships
among the directors and the executive officers of the Company, except for Mrs.
Ramsaur and Mrs. Stall who are cousins.
The Company believes that all of the nominees will be available and able to
serve as Directors, but in the event any nominee is not available or able to
serve, the shares represented by the proxies will be voted for such substitute
as shall be designated by the Board of Directors.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
DIRECTOR OWNED (% OF
NAME PRINCIPAL OCCUPATION SINCE OUTSTANDING) (20)
<S> <C> <C> <C>
George H. V. Cecil Chairman of Biltmore Farms, Inc., 1975 21,000 (*)
P.O. Box 5355, Asheville, North
Carolina 28813 (Real Estate
Development and Investments), Age 70
(1)(15)(17)
Rhea T. Eskew Consultant to the Company, 1979 19,400 (*)
400 Huntington Road
Greenville, South Carolina 29615,
Age 71 (2)(16)(17)
David L. Freeman Secretary of the Company and a 1984 83,800 (*)
member of the law firm of Wyche,
Burgess, Freeman & Parham, P.A., 44
E. Camperdown Way, Greenville, South
Carolina 29601, Age 70
(3)(13)(14)(18)
Douglas J. Greenlaw President and Chief Operating 1994 -- (*)
Officer of the Company, Age 50
(4)(13)
M. Dexter Hagy President of Vaxa Corporation, 1994 7,000 (*)
Nations Bank Plaza, Suite 606,
Greenville, South Carolina 29601
(Investment Holding Company), Age 50
(5)(13)(15)(17)
Robert E. Hamby, Jr. Senior Vice President Finance and 1990 141,231 (*)
Administration and Chief Financial
Officer of the Company, Age 48
(6)(13)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
DIRECTOR OWNED (% OF
NAME PRINCIPAL OCCUPATION SINCE OUTSTANDING) (20)
<S> <C> <C> <C>
John T. LaMacchia President and Chief Executive 1989 6,600 (*)
Officer and Director of Cincinnati
Bell Inc., 201 East 4th Street,
Cincinnati, Ohio 45202 (Telephone
Company), Age 53 (7)(14)(17)
Leslie G. McCraw Chairman of the Board and Chief 1990 6,600 (*)
Executive Officer of Fluor
Corporation, 3333 Michelson Drive,
Irvine, California 92730
(Engineering and Construction), Age
60 (8)(15)(17)
Dorothy P. Ramsaur Homemaker active in the supervision 1986 1,566,822 (4.16%)
of personal and family investments,
1 Rockingham Road, Greenville, South
Carolina 29607, Age 68 (9)(16)(17)
Donald D. Sbarra Chairman of the Board and Chief 1988 31,200 (*)
Executive Officer of the Company,
Age 64 (10)(13)
Elizabeth P. Stall Homemaker active in civic affairs 1986 63,382 (*)
and in the supervision of personal
and family investments, 11 Sirrine
Drive, Greenville, South Carolina
29605, Age 63 (11)(14)(16)(17)(18)
William C. Stutt Limited Partner of Goldman Sachs 1981 28,000 (*)
Group, L.P., 85 Broad Street, New
York, New York 10004 (Investment
Banking), Age 67
(12)(13)(14)(17)(18)
All Directors and Executive 2,289,804 (6.01%)(19)
Officers as a Group (17 persons)
</TABLE>
(*) Less than 1%.
(1) Mr. Cecil is a Director of Carolina Power & Light Co. The number of shares
shown as beneficially owned by Mr. Cecil includes 6,000 shares covered by
options under the Director Stock Option Plan.
(2) Mr. Eskew elected to retire from the Company in December 1989. Prior to his
retirement, Mr. Eskew served as Senior Executive of Multimedia Newspaper
Company from December 1984. The number of shares shown as beneficially
owned by Mr. Eskew includes 6,000 shares covered by options under the
Director Stock Option Plan.
(3) Mr. Freeman was elected Secretary of the Company in April 1990. He served
as Assistant Secretary of the Company from April 1982 to April 1990. Mr.
Freeman is a member of the law firm of Wyche, Burgess, Freeman & Parham,
P.A., general counsel to the Company. The
3
<PAGE>
number of shares shown as beneficially owned by Mr. Freeman includes 8,800
shares covered by options but does not include 8,200 shares covered by
options, which excluded options become exercisable more than 60 days after
the date of this Proxy Statement.
(4) Mr. Greenlaw was elected President and Chief Operating Officer in August
1994. Mr. Greenlaw was Chairman and Chief Executive Officer of the Ventures
Division of Whittle Communications, Ltd. from December 1991 until August
1994. He was Executive Vice President of MTV Networks, Inc., a subsidiary
of Viacom, Inc., from 1987 until December 1991. The number of shares shown
as beneficially owned by Mr. Greenlaw does not include 50,000 shares
covered by options, which excluded options become exercisable more than 60
days after the date of this Proxy Statement.
(5) From 1991 through 1993, Vaxa Corporation owned and Mr. Hagy operated
Siteguard Security Holding Company, a security alarm business headquartered
in Greenville, South Carolina. Mr. Hagy is a Director of Carolina First
Corporation. The number of shares shown as beneficially owned by Mr. Hagy
includes 5,000 shares covered by an option under the Director Stock Option
Plan. Mr. Hagy's initial report on Form 3 under the Securities Exchange Act
of 1934, as amended, was filed late.
(6) Mr. Hamby was elected Senior Vice President Finance and Administration and
Chief Financial Officer in October 1993. He served as Treasurer and Chief
Financial Officer from October 1987 to October 1993. Mr. Hamby is a
Director of Carolina First Corporation. The number of shares shown as
beneficially owned by Mr. Hamby includes 123,000 shares covered by options
but does not include 59,000 shares covered by options, which excluded
options become exercisable more than 60 days after the date of this Proxy
Statement. The number of shares shown as beneficially owned by Mr. Hamby
also includes 1,543 shares held by the Company's Thrift Plan, of which Mr.
Hamby may be deemed a beneficial owner, and 5,700 shares owned by his wife
as custodian for his sons, of which shares owned by his wife he disclaims
beneficial ownership.
(7) Mr. LaMacchia is a Director of the Kroger Co. The number of shares shown as
beneficially owned by Mr. LaMacchia includes 6,000 shares covered by
options under the Director Stock Option Plan.
(8) Mr. McCraw is a Director of Allergan, Inc. The number of shares shown as
beneficially owned by Mr. McCraw includes 6,000 shares covered by options
under the Director Stock Option Plan.
(9) The number of shares shown as beneficially owned by Mrs. Ramsaur includes
1,244,247 shares held by her as trustee under the will of Roger Peace. The
number of shares shown as beneficially owned by Mrs. Ramsaur includes 6,000
shares covered by options under the Director Stock Option Plan.
4
<PAGE>
(10) Mr. Sbarra was elected Chairman of the Board and Chief Executive Officer of
the Company in June 1994. He was elected Senior Vice President of
Operations of the Company in December 1993 and Senior Vice President of the
Company in October 1987. He served as Chairman of Multimedia Cablevision
Company from April 1993 to December 1993 and President of Multimedia
Cablevision Company from April 1981 to April 1993. The number of shares
shown as beneficially owned by Mr. Sbarra includes 25,000 shares covered by
options.
(11) Mrs. Stall is a Director of Carolina First Corporation. The number of
shares shown as beneficially owned by Mrs. Stall includes 750 shares held
by her as personal representative of her husband's estate, of which shares
she disclaims beneficial ownership. The number of shares shown as
beneficially owned by Mrs. Stall includes 6,000 shares covered by options
under the Director Stock Option Plan.
(12) The Goldman Sachs Group, L.P., of which Mr. Stutt is a limited partner, is
the 99% general partner of Goldman, Sachs & Co. The number of shares shown
as beneficially owned by Mr. Stutt includes 1,400 shares owned by his wife
(individually or as custodian for a child), of which he disclaims
beneficial ownership, and 300 shares owned by his daughter and son-in-law,
as to which shares he has investment power but disclaims beneficial
ownership, and 300 shares owned by his stepson, of which he disclaims
beneficial ownership. The number of shares shown as beneficially owned by
Mr. Stutt also includes 6,000 shares covered by options under the Director
Stock Option Plan.
(13) Member of the Executive Committee.
(14) Member of the Compensation Committee.
(15) Member of the Audit Committee.
(16) Member of the Employee Benefits Committee.
(17) Member of the Stock Option Committee.
(18) Member of the Nominating Committee.
(19) Includes an aggregate of 481,900 shares covered by options which are or may
become exercisable within 60 days; includes 11,106 shares held by the
Company's Thrift Plan of which an executive officer may be deemed a
beneficial owner, and excludes an aggregate of 402,600 shares covered by
options not exercisable within 60 days by executive officers.
(20) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), shares are deemed "beneficially owned" if the
named person has the right to acquire ownership of such shares within 60
days. Percentages are computed on the assumption that unissued shares so
subject to acquisition upon the exercise of options by a given person or
group are outstanding, but no other such shares similarly subject to
acquisition by other persons are outstanding.
5
<PAGE>
The Board of Directors met nine times during the year ended December 31,
1994. The Executive Committee met seven times in 1994 for the purpose of acting
for the Board between Board meetings. The Audit Committee met with
representatives of KPMG Peat Marwick LLP two times during 1994 for the purpose
of reviewing the firm's scope and results of their audit. The Compensation
Committee met five times in 1994 for the purpose of submitting to the Board of
Directors suggested officers' salaries for the ensuing year, incentive bonus
plans and other non-stock compensation. The Stock Option Committee, established
for the purpose of granting options for the Company's common stock to the
Company's executive officers and employees, met three times in 1994. The
Employee Benefits Committee, established for the purpose of reviewing new and
amended employee benefit programs and personnel policies, did not meet in 1994.
The Nominating Committee met twice in 1994 for the purpose of recommending to
the Board nominees for election as directors. Nomination recommendations from
shareholders will be considered by the Nominating Committee and should be sent
to the attention of the Company's Secretary at the Company's address. All
Directors, other than Mrs. Ramsaur, attended at least 75 percent of the meetings
of the Board and Committees on which such Directors serve.
PRINCIPAL SHAREHOLDERS OF THE COMPANY
As of December 31, 1994 (except as noted below), to the extent known to the
Company and based on information provided by the following persons, the
following provides certain information as to the persons or groups who were the
only beneficial owners of 5% or more of the outstanding shares.
<TABLE>
<CAPTION>
NUMBER OF
NAME & ADDRESS SHARES PERCENT
OF BENEFICIAL BENEFICIALLY OF TOTAL
OWNER OWNED OUTSTANDING
<S> <C> <C>
Heine Securities Corporation
Michael F. Price 2,763,400 7.34%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078 (1)
Southeastern Asset Management, Inc.
O. Mason Hawkins 3,813,000 10.13%
6075 Poplar Avenue, Suite 900
Memphis, Tennessee 38119 (2)
Wachovia Corporation, as trustee 1,964,991 5.22%
301 North Main Street
Winston-Salem, North Carolina 27150 (3)
Wellington Management Company 2,701,215 7.18%
75 State Street
Boston, Massachusetts 02109 (4)
</TABLE>
6
<PAGE>
(1) The number of shares shown as beneficially owned by Heine Securities
Corporation ("HSC") is based on information provided as of December 31,
1994. One or more of HSC's advisory clients is the legal owner of 2,763,400
shares. Pursuant to investment advisory agreements with its advisory
clients, HSC has sole investment discretion and voting authority with
respect to such 2,763,400 shares. Michael F. Price is President of HSC, in
which capacity he exercises voting control and dispositive power over the
same shares. Mr. Price disclaims beneficial ownership of the shares
beneficially owned by HSC.
(2) The number of shares shown as beneficially owned by Southeastern Asset
Management, Inc. ("Southeastern") is based upon information provided as of
February 28, 1995. These shares are owned by various investment advisory
clients of Southeastern. Pursuant to investment advisory agreements with its
clients, Southeastern has sole voting power with respect to 2,270,000
shares, shared voting power with respect to 1,403,400 shares, sole
investment power with respect to 2,395,600 shares and shared investment
power with respect to 1,403,400 shares. O. Mason Hawkins is Chairman of the
Board and Chief Executive Officer of Southeastern. Mr. Hawkins disclaims
beneficial ownership of the shares owned by Southeastern.
(3) The number of shares shown as beneficially owned by Wachovia Corporation as
trustee is based on information provided as of December 31, 1994, and are
held by its subsidiary, Wachovia Bank of South Carolina, N.A., as trustee.
With respect to these shares, Wachovia or its subsidiary has sole voting
power with respect to 1,045,341 shares, shared voting power with respect to
110,064 shares, sole investment power with respect to 1,232,815 shares and
shared investment power with respect to 720,486 shares.
(4) The number of shares shown as beneficially owned by Wellington Management
Company ("WMC") is based on information provided as of December 31, 1994.
These shares are owned by various investment advisory clients of WMC or its
subsidiary, Wellington Trust Company, N.A. Pursuant to investment advisory
agreements with such clients, WMC or its subsidiary has shared voting power
with respect to 1,099,240 shares and shared investment power with respect to
all 2,701,215 shares.
7
<PAGE>
EXECUTIVE OFFICERS
The following provides certain information regarding the executive officers
of the Company who are appointed by and serve at the pleasure of the Board:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED (% OF
NAME POSITION OUTSTANDING)(7)
<S> <C> <C>
Michael C. Burrus Vice President of the Company and President of 64,000 (*)
Multimedia Cablevision Company, Age 40 (2)
David L. Freeman Secretary of the Company, Age 70 (1) 83,800 (*)
Douglas J. Greenlaw President and Chief Operating Officer of the -- (*)
Company, Age 50 (1)
Robert E. Hamby, Jr. Senior Vice President -- Finance and Adminis- 141,231 (*)
tration and Chief Financial Officer of the Company,
Age 48 (1)
James M. Hart Vice President of the Company and President of 12,600 (*)
Multimedia Broadcasting Company, Age 52 (3)
Thomas L. Magaha Vice President -- Development of the Company, Age 38,643 (*)
42 (4)
William deB. Mebane Vice President of the Company and President of 78,178 (*)
Multimedia Newspaper Company, Age 46 (5)
Donald D. Sbarra Chairman of the Board and Chief Executive Officer 31,200 (*)
of the Company, Age 64 (1)
Robert L. Turner Vice President of the Company and President of 121,348 (*)
Multimedia Entertainment Company, Age 53 (6)
</TABLE>
(*) Less than 1%.
(1) See information under "ELECTION OF DIRECTORS".
(2) Mr. Burrus joined the Company in 1981 and was named Vice President of the
Company and President of Multimedia Cablevision Company in April 1993. He
served as Executive Vice President of Multimedia Cablevision Company from
March 1992 until April 1993. He served as Vice President of Operations and
Finance of Multimedia Cablevision Company from February 1985 until March
1992. The number of shares shown as beneficially owned by Mr. Burrus
includes 64,000 shares covered by options but does not include 84,100 shares
covered by options, which excluded options become exercisable more than 60
days after the date of this Proxy Statement.
(3) Mr. Hart joined the Company in April 1967 and was named Vice President of
the Company and President of Multimedia Broadcasting Company in September
1994. He served as Vice President and General Manager of WBIR-TV (wholly
owned by the Company) from November 1981 until September 1994. The number of
shares shown as beneficially owned by
8
<PAGE>
Mr. Hart includes 12,600 shares covered by options but does not include
80,000 shares covered by options, which excluded options become exercisable
more than 60 days after the date of this Proxy Statement. Mr. Hart's initial
report on Form 3 under the Exchange Act was filed late.
(4) Mr. Magaha joined the Company in October 1979 and was named Vice
President -- Development of the Company in September 1994. He served as Vice
President -- Finance and Development/Controller of the Company from November
1993 until September 1994, Vice President and Controller from October 1990
until November 1993 and Controller from December 1985 until October 1990.
The number of shares shown as beneficially owned by Mr. Magaha includes
26,700 shares covered by options but does not include 29,100 shares covered
by options, which excluded options become exercisable more than 60 days
after the date of this Proxy Statement. The number of shares shown as
beneficially owned by Mr. Magaha also includes 1,943 shares held by the
Company's Thrift Plan, of which Mr. Magaha may be deemed a beneficial owner.
(5) Mr. Mebane was elected Vice President of the Company and President of
Multimedia Newspaper Company in March 1989. From December 1983 to March
1993, he served from time to time as Publisher of the Greenville News and
the Greenville Piedmont (wholly owned by the Company). He served as Vice
President of Multimedia Newspaper Company from June 1985 to February 1989.
The number of shares shown as beneficially owned by Mr. Mebane includes
53,600 shares covered by options but does not include 45,400 shares covered
by options, which excluded options become exercisable more than 60 days
after the date of this Proxy Statement. The number of shares shown as
beneficially owned by Mr. Mebane also includes 606 shares held for him in an
IRA account and 7,472 shares held by the Company's Thrift Plan, of which Mr.
Mebane may be deemed a beneficial owner.
(6) Mr. Turner joined the Company and was named President of Multimedia
Entertainment Company in February 1991 and was elected Vice President of the
Company in April 1991. Mr. Turner was President and Chief Executive Officer
of Orbis Communications, Inc. (a syndicated program and television movie
business) from February 1984 until February 1991. The number of shares shown
as beneficially owned by Mr. Turner includes 121,200 shares covered by
options but does not include 46,800 shares covered by options, which
excluded options become exercisable more than 60 days after the date of this
Proxy Statement. The number of shares shown as beneficially owned by Mr.
Turner also includes 148 shares held by the Company's Thrift Plan, of which
Mr. Turner may be deemed a beneficial owner.
(7) See Note (20) to the table under "ELECTION OF DIRECTORS".
9
<PAGE>
MANAGEMENT COMPENSATION
The following table sets forth certain information respecting the
compensation of each individual who served as the Chief Executive Officer of the
Company during 1994, and the four other most highly compensated executive
officers of the Company in 1994, for the fiscal years ended December 31, 1994,
1993 and 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION (1) SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
<S> <C> <C> <C> <C> <C>
Donald D. Sbarra 1994 $489,930 $ 431,250 25,000 $ 4,215 (2)
Chairman and CEO 1993 323,680 125,000 -- 5,622 (2)
1992 323,680 187,961 -- 5,609 (2)
Walter E. Bartlett 1994 290,178 -- -- 267,564 (3)
Chairman, President and CEO 1993 533,676 236,000 -- 4,444 (2)
(until June 1994) 1992 528,244 325,000 -- 2,739 (2)
Robert L. Turner 1994 394,654 100,000 30,000 3,000 (2)
President MEC 1993 383,776 169,725 -- 4,717 (2)
1992 371,710 213,150 18,000 4,468 (2)
Robert E. Hamby, Jr. 1994 313,680 175,000 42,000 3,094 (2)
Senior VP Finance and CFO 1993 298,680 164,691 -- 4,859 (2)
1992 283,680 182,023 20,000 4,644 (2)
William deB. Mebane 1994 283,680 190,000 31,000 3,010 (2)
President MNC 1993 273,680 96,195 -- 4,761 (2)
1992 260,680 165,236 14,000 4,531 (2)
Douglas J. Greenlaw
President and COO 1994 308,756 100,000 50,000 --
</TABLE>
(1) The Company pays for various perquisites such as club memberships for
executive officers and certain other employees. Such club memberships may
have been used for personal reasons on occasion. However, the Company has
made reasonable inquiry and has concluded that the aggregate amounts of such
and other personal benefits do not, in any event, exceed $50,000 or 10% of
the salary and bonus as to each person.
(2) Amounts contributed by the Company under the Company's Thrift Plan, except
that the amounts shown for Mr. Sbarra also include $1,100 each year for life
insurance that will provide a death benefit of $88,417 payable to his
beneficiary in the event of his death.
10
<PAGE>
(3) Mr. Bartlett resigned as Chairman and Chief Executive Officer in June 1994.
The 1994 amount for Mr. Bartlett includes $264,425 for consulting services
subsequent to his retirement and $3,139 in amounts contributed by the
Company under the Company's Thrift Plan.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth the options granted in 1994 to the named
executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED GRANT DATE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION PRESENT
GRANTED (#) IN FISCAL YEAR PRICE ($/SH)(1) DATE (2) VALUE ($)(3)
<S> <C> <C> <C> <C> <C>
Donald D. Sbarra 25,000 3.3% $ 26.25 12/8/04 $ 390,250
Walter E. Bartlett None -- -- -- --
Robert L. Turner 15,000 2.0% 34.25 2/7/04 296,400
15,000 2.0% 26.25 12/8/04 234,150
Robert E. Hamby, Jr. 20,000 2.6% 34.25 2/7/04 395,200
22,000 2.9% 26.25 12/8/04 343,420
William deB. Mebane 15,000 2.0% 34.25 2/7/04 296,400
16,000 2.1% 26.25 12/8/04 249,760
Douglas J. Greenlaw 50,000 6.5% 29.75 7/19/04 896,500
</TABLE>
(1) The exercise price of the options granted was the fair market value of the
Company's common stock on the date of grant.
(2) Each option becomes exercisable for 20% of the shares covered thereby on the
first anniversary and for an additional 20% of the shares covered thereby on
each anniversary thereof. In addition, options granted to Mr. Sbarra become
exercisable in full on his 65th birthday (May 1995).
(3) The present value determination was made using the Black-Scholes option
pricing model as measured at the date of each grant. The following
assumptions were used in the Black-Scholes option pricing model: expected
volatility based upon the most recent 180 trading days prior to the grant,
expected risk-free rate of return based upon the yield of Treasury
Securities maturing at the same time as the option, dividend yield of 0%,
expected exercise period of 10 years and no adjustments for
nontransferability or risk of forfeiture.
11
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information on option exercises during 1994
by the named executive officers and the value of such officers' unexercised
options at December 31, 1994.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON OPTIONS OPTIONS
EXERCISE VALUE AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(2)
NAME (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Donald D. Sbarra -- $ -- -- 25,000 $ -- $62,500
Walter E. Bartlett 200,000 5,208,400 -- -- -- --
Robert L. Turner -- -- 121,200 46,800 1,753,389 73,191
Robert E. Hamby, Jr. -- -- 123,000 59,000 1,057,149 90,691
William deB. Mebane -- -- 53,600 45,400 223,641 75,691
Douglas J. Greenlaw -- -- -- 50,000 -- --
</TABLE>
(1) The value shown represents the excess of the stock's fair market value on
the exercise date over the exercise price.
(2) The values shown represent the excess of the fair market value at December
31, 1994, over the exercise price of the shares covered by the unexercised
options held by the named executive.
The Board of Directors has approved a plan of Executive Salary Protection
(the "Protection Plan") for selected executive officers, under which the Company
will pay, to each participant's beneficiary, a continuation of income in the
event of the participant's death. In the event of the death of a participant
while still employed prior to age 65, the participant's beneficiary will receive
100% of a specified dollar amount set from time to time by the Board of
Directors for that participant for one year and 50% of such amount for each of
nine additional years or until the employee's sixty-fifth birthday, whichever is
later. The specified dollar amount for Mr. Bartlett was $350,000. The specified
dollar amount for Messrs. Sbarra, Turner, Hamby, Mebane and Greenlaw as of
December 31, 1994, was $250,000 each. In conjunction with the Protection Plan,
the Company purchases life insurance on the life of each participant for the
exclusive benefit of the Company to indemnify the Company for its potential
liabilities under the Protection Plan. The insurance plan is designed so that,
if the assumptions made as to mortality and turnover experience, policy
dividends, tax savings, interest and other actuarial factors are realized, the
Company should recover all its payments, plus a factor for the use of the
Company's money.
12
<PAGE>
The following table sets forth the annual pension benefit payable under the
Company's Retirement Pension Plan (the "Pension Plan") to an employee, including
any employee who is a director or an officer, upon retirement in 1995, at age
65, based on selected periods of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE
ANNUAL YEARS OF SERVICE
EARNINGS 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$100,000 $ 18,750.00 $ 25,000.00 $ 31,250.00 $ 37,500.00 $ 43,750.00
200,000 (2) 37,500.00 50,000.00 62,500.00 75,000.00 87,500.00
300,000 (2) 56,250.00 75,000.00 93,750.00 112,500.00 131,250.00(1)
400,000 (2) 75,000.00 100,000.00 125,000.00(1) 150,000.00(1) 175,000.00(1)
500,000 (2) 93,750.00 125,000.00(1) 156,250.00(1) 187,500.00(1) 218,750.00(1)
600,000 (2) 112,500.00 150,000.00(1) 187,500.00(1) 225,000.00(1) 262,500.00(1)
700,000 (2) 131,250.00(1) 175,000.00(1) 218,750.00(1) 262,500.00(1) 306,250.00(1)
800,000 (2) 150,000.00(1) 200,000.00(1) 250,000.00(1) 300,000.00(1) 350,000.00(1)
</TABLE>
(1) Exceeds the maximum annual amount payable under the Pension Plan of
$120,000.
(2) Exceeds the maximum annual cash compensation counted under the Pension Plan
of $150,000.
The Pension Plan covers all full-time employees of the Company and most of
its subsidiaries. The amount payable each year under the Pension Plan to a
participant is calculated using a percentage of the average of the employee's
cash compensation (including bonuses) during the employee's most recent five
highest consecutive compensation years out of the last 10 worked, which
percentage is based on the employee's years of service, reduced by a factor
reflecting the participant's social security benefits, and is adjusted if
retirement occurs prior to normal retirement age. Under this plan, Mr. Sbarra
has 26 years of service; Mr. Bartlett had 27 years of service; Mr. Greenlaw has
no years of service; Mr. Turner has four years of service; Mr. Hamby has 10
years of service, and Mr. Mebane has 24 years of service.
In April and July 1991, the Board of Directors adopted a Supplemental
Retirement Program for Messrs. Bartlett and Sbarra which provides an annual
supplemental retirement benefit for 10 years. The Program provided for monthly
vesting on a pro-rata basis beginning July 1, 1991, through December 31, 1994.
In connection with Mr. Bartlett's retirement in June 1994, the program was
amended to provide that Mr. Bartlett would receive the full amount of the
Program's Retirement benefit notwithstanding the termination of his employment
prior to December 31, 1994. The fully vested annual supplemental retirement
benefit is $200,000 for Mr. Bartlett and $100,000 for Mr. Sbarra.
13
<PAGE>
OTHER
Douglas J. Greenlaw has an agreement with the Company pursuant to which his
base salary is at the annual rate of $400,000, and he received in 1994 a one
time payment of $150,000 in addition to a bonus of $100,000. The agreement
provides that for 1995 he will be entitled to a bonus equal to the greater of
the bonus due as a participant in the Management Committee Incentive
Compensation Plan or $100,000 plus one-half of the amount he would be due as a
participant in the Management Committee Incentive Compensation Plan. If Mr.
Greenlaw's employment is terminated without cause prior to July 31, 1996, he
will receive a lump sum payment equal to his annual base salary then in effect.
Under a deferred compensation agreement, William deB. Mebane, or his
beneficiary, is entitled to receive $2,500 per year for 10 years in the event of
his pre-retirement death or disability or upon his retirement.
Outside directors receive annual fees of $19,200 each, paid on a monthly
basis, and attendance fees of $1,000 per board meeting and $350 per committee
meeting (other than Executive Committee meetings) in addition to the directors'
fees. Outside directors serving on the Executive Committee receive additional
annual fees of $19,200 and attendance fees of $1,000 per Executive Committee
meeting. Directors receive reimbursement of travel expenses. In addition, under
the Director Stock Option Plan, each non-employee director receives an initial
option for 5,000 shares of the Company's common stock and subsequent annual
option grants for 1,000 shares of the Company's common stock. The exercise price
of each of these options is or will be the common stock's market price on the
date of grant.
14
<PAGE>
NOTWITHSTANDING ANY STATEMENT IN ANY OF THE COMPANY'S PREVIOUS FILINGS
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE ACT INCORPORATING
FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE
FOLLOWING REPORT AND THE PERFORMANCE GRAPH BELOW SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILING.
REPORT OF THE COMPENSATION COMMITTEE
AND STOCK OPTION COMMITTEE
The Compensation Committee of the Board of Directors (the "Compensation
Committee") periodically submits to the Board recommendations respecting the
salary, bonus and other non-stock compensation to be provided to the Company's
executive officers. The Stock Option Committee of the Board (the "Stock Option
Committee") grants options for the Company's common stock to the Company's
executive officers and employees. These Committees provide the following joint
report.
EXECUTIVE OFFICER COMPENSATION
The Committees believe that the Board and its committees must act on the
shareholders' behalf in establishing executive compensation programs, because
the Company's shareholders ultimately bear the cost of these programs. The
Company's executive compensation philosophy and the structure and administration
of the executive compensation programs are adopted and effected in accordance
with that belief. The Committees annually review the Company's corporate
performance and that of its executive officers in determining appropriate
compensation. The Committees strive to sustain a balance between the Company's
need to attract and retain qualified and motivated executives, on the one hand,
and the maximization of the Company's operating performance and the safeguarding
of its assets in order to enhance long-term shareholder value, on the other.
The Committees' executive compensation philosophy is to provide for
risk-based pay opportunities that reflect Company and individual performance. In
addition, the Company's executive compensation is structured to (i) align
executive compensation with Company and individual performance, (ii) ensure
compensation fairness and consistency in accordance with individual
responsibilities and performances and (iii) emphasize both short and long-term
Company performance. The current executive compensation structure consists of
base salary, annual cash incentive bonus programs and stock options.
During the last few years, an increasing portion of each executive's total
compensation has become dependent on annual Company performance. The applicable
performance measurements have broadened from primarily goals relating to
operating cash flow (as defined by the Company) (1985 to 1990) to operating cash
flow goals plus (beginning in 1991) individual performance objectives based on
strategic and operational considerations.
15
<PAGE>
The Compensation Committee's guiding objective in the establishment of base
compensation is to provide a competitive salary in light of the executive's
level and scope of responsibilities, the executive's performance and the
Company's salary budget. The Compensation Committee periodically has the
Company's executive base salaries compared with marketplace information, so that
a near median relation is sought. This comparison is based on the Towers Perrin
Media Industry Compensation Survey of 75 companies (including 14 of the 18
companies in the Company's Peer Group Index). The base level of income is
modified annually, based on subjective judgments, by the Compensation Committee,
considering primarily cost of living increases and any change in the
individual's responsibilities. The executive officers' 1994 base compensation
was increased from the 1993 amounts by a cost of living adjustment in all cases
except one where an additional increase was given to account for an enlargement
of responsibilities.
To motivate and reward the accomplishment of annual corporate, divisional
and individual objectives, the Compensation Committee has approved a Management
Committee Incentive Plan ("MCIP"). This plan provides for annual cash
compensation awards to executive officers (other than the chief executive
officer and chairman of the board) that vary from 0% to 100% of base salary
depending upon the achievement of net operating cash flow levels determined by
the Company's management by reference to the Company's annual budget approved by
the Board and objective and subjective key individual goals specified by the
chief executive officer (in the case of Mr. Greenlaw and of Mr. Hamby) or the
chief operating officer (in the case of the other executive officers covered by
the plan). As a pay-for-performance bonus plan, year-end incentive awards are
paid only if minimum performance thresholds are met. Participants are subject to
two performance measures: (1) corporate/divisional operating cash flow goals
which govern 75% of the possible award and provide for the minimum bonus payment
if 95%, and the maximum bonus payment if 110%, of the applicable cash flow goal
is met, and (2) key individual objectives which are weighted based on their
importance to the Company and account for 25% of the potential award. These
components provide a superior incentive award opportunity if superior results
are achieved. For 1994, each division with the exception of the Entertainment
Division achieved at least 95% of its budgeted cash flow goal, and the Company
achieved 101.4% of its cash flow goal. Each of the officers covered by the MCIP
achieved at least 90% of his key individual objectives during 1994.
The 1994 bonus paid to Mr. Greenlaw was based, and any bonus to be paid to
Mr. Greenlaw in 1995 will be based, upon his contractual agreement with the
Company.
The Stock Option Committee believes that significant executive stock
ownership is a major incentive in building shareholders' wealth and aligning the
interest of executives and shareholders. Stock options are granted to officers
and other employees by the Stock Option Committee and generally vest over a
five-year employment period.
16
<PAGE>
Numerous objective and subjective factors are considered by the Stock
Option Committee in the allocation of stock options among operating divisions,
business units and individual executives. Some of the more important factors
considered are:
(Bullet) Operating cash flow contribution
(Bullet) Operating profit contribution
(Bullet) Operating cash flow contribution less capital expenditures
(Bullet) Number of business locations or staff functions managed
(Bullet) Number of key executives managed
(Bullet) Future potential of the key executive
Commencing in 1994, the Omnibus Budget Reconciliation Act of 1993 denies
publicly traded companies the ability to deduct for federal income tax purposes
certain compensation paid to top executive officers in excess of $1 million per
person. The Compensation Committee has not yet adopted a position with respect
to whether or not the Company's cash bonus plans will be structured to cause
them to be exempt from the $1 million limit of deductibility. In 1994, no
executive officer's cash compensation exceeded $1,000,000. The Stock Option
Committee believes, as a result of certain transition rules, that options
granted prior to the Company's 1997 annual shareholders meeting under the
Company's current stock option plans are not and will not be affected by the $1
million deductibility limitation.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Sbarra assumed the position of Chief Executive Officer of the Company
in June 1994. Prior to that, Mr. Sbarra served as Senior Vice President of
Operations of the Company.
The Chief Executive Officer's base salary is determined by the Compensation
Committee in its sole discretion based on comparisons with marketplace
information as described above under "Executive Officer Compensation". The rate
of Mr. Sbarra's 1994 base compensation was adjusted, upon his becoming Chief
Executive Officer, to the rate of Mr. Bartlett's 1994 base compensation as Chief
Executive Officer before his resignation.
While annual shareholders' total return is important, it is subject to the
vagaries of the market. The annual cash bonus paid to the Company's chief
executive officer is determined by the Compensation Committee in its sole
discretion. In exercising this discretion, the Compensation Committee generally
considers subjective factors, such as the chief executive officer's leadership
in strategic development of the Company, and specific corporate goals that
should ultimately be reflected in higher stock prices, such as operating cash
flow, net earnings and earnings per share. In addition, the Compensation
Committee considers the amount of the cash bonus which the chief executive
officer would have received had he been subject to the MCIP.
17
<PAGE>
The cash bonus paid to Mr. Sbarra in 1994, $300,000, approximated the bonus
he would have received had he been subject to the MCIP. No other factor was
significant in determining Mr. Sbarra's 1994 cash bonus. In addition, Mr. Sbarra
was given in 1994 a stock bonus of 5,000 shares (valued at $131,250 based upon
the fair market value of the Company's stock on the date awarded) and a stock
option grant of 25,000 shares. The exercise price of the stock options granted
was the fair market value of the Company's common stock on the date of grant.
The stock bonus and stock option grants were made based upon the Stock Option
Committee's subjective recognition that Mr. Sbarra had taken on extraordinary
responsibilities in stepping into the Chief Executive Officer position in
mid-year.
Mr. Bartlett, Chairman of the Board, President and Chief Executive Officer
of the Company until his resignation in June 1994, was not granted a bonus at
year-end because his resignation was prior to year-end. In view of the stock
options which Mr. Bartlett received in connection with the Company's 1985
Recapitalization, he was not granted any stock options in 1994. The amount paid
in 1994 to Mr. Bartlett for consulting services after his resignation was equal
to the amount he would have received as base compensation during that period had
he remained the Chief Executive Officer.
<TABLE>
<S> <C>
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
John T. LaMacchia, Chair John T. LaMacchia, Chair
David L. Freeman George H. V. Cecil
Elizabeth P. Stall Rhea T. Eskew
William C. Stutt M. Dexter Hagy
Leslie G. McCraw
Dorothy P. Ramsaur
Elizabeth P. Stall
William C. Stutt
</TABLE>
18
<PAGE>
PERFORMANCE GRAPH
A line graph comparing the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return of the NASDAQ Market Index and a Company selected peer group over
the same period is presented below:
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG MULTIMEDIA, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
ASSUMES $100 INVESTED ON JANUARY 1, 1990 AND DIVIDEND REINVESTMENT
(The Performance Graph appears here. The plot points are listed as follows:)
1989 1990 1991 1992 1993 1994
MULTIMEDIA, INC. 100 72.68 73.28 103.55 109.13 90.81
PEER GROUP 100 80.72 90.08 106.83 133.85 128.34
BROAD MARKET 100 81.12 104.14 105.16 126.14 132.44
Note: The peer group consists of the following companies:
A. H. Belo Corporation
Capital Cities/ABC, Inc.
CBS, Inc.
Comcast Corporation
Dow Jones & Company, Inc.
Gannett Co, Inc.
Knight-Ridder, Inc.
Lee Enterprises
Media General, Inc.
Multimedia, Inc.
New York Times Company
Park Communications, Inc.
TCA Cable TV, Inc.
Tele-Communications, Inc.
Times Mirror Company
Tribune Company
Viacom, Inc.
Washington Post Company
The peer group used in the Company's Performance Graph contained in the
Company's 1994 Proxy Statement included Scripps Howard Broadcasting Company, the
stock of which ceased being publicly traded.
19
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The following directors served on the Compensation Committee during 1994:
John T. LaMacchia, as Chair, David L. Freeman, Elizabeth P. Stall and William C.
Stutt. The following directors served on the Stock Option Committee during 1994:
John T. LaMacchia, as Chair, George H. V. Cecil, Rhea T. Eskew, M. Dexter Hagy,
Leslie G. McCraw, Dorothy P. Ramsaur, Elizabeth P. Stall and William C. Stutt.
During 1994, David L. Freeman served as the Secretary for the Company and
various of its subsidiaries and was employed by the Company in that capacity.
The law firm of Wyche, Burgess, Freeman & Parham, P.A., of which Mr. Freeman is
a member, serves as the Company's general counsel and was paid approximately
$528,000 by the Company in 1994 for its legal services. Prior to 1990, Rhea T.
Eskew was an officer of the Company. William C. Stutt is a limited partner of
The Goldman Sachs Group, L.P., the 99% general partner of Goldman, Sachs & Co.
which has provided investment banking services for the Company on several
occasions in the past. In addition, Goldman Sachs is a market maker in the
Company's shares and from time to time provides other services for the Company.
The Company announced on February 22, 1995, that its Board of Directors had
authorized management, together with Goldman Sachs & Co. to explore strategic
alternatives to enhance shareholder value.
ELECTION OF AUDITORS
The Board of Directors recommends the ratification of the appointment of
KPMG Peat Marwick LLP, independent certified public accountants, as auditors for
the Company and its subsidiaries for 1995 and to audit and report to the
shareholders upon the financial statements as of and for the period ending on
December 31, 1995. Representatives of KPMG Peat Marwick LLP will be present at
the annual meeting, and such representatives will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions which the shareholders may have. KPMG Peat Marwick LLP has
acted for the Company in this capacity since 1969, and neither the firm nor any
of its members has any relation with the Company except in the firm's capacity
as such auditors and tax advisers.
The appointment of auditors is approved annually by the Board of Directors
and subsequently submitted to the shareholders for ratification. The decision of
the Board is based on the recommendation of the Audit Committee.
20
<PAGE>
VOTING AND OTHER SHAREHOLDER RIGHTS
Only holders of the Company's 37,628,478 shares of common stock of record
at the close of business on March 3, 1995, will be entitled to vote at the
Annual Meeting. The shareholders' common stock may not be voted cumulatively in
the election of Directors.
Directors will be elected by a plurality of the votes cast at the meeting.
The affirmative vote of more shares present or represented at the Annual Meeting
voting in favor than voting against will be required to ratify the appointment
of auditors. Abstentions and broker non-votes, which are separately tabulated,
are included in the determination of the number of shares present and voting,
but have no effect on the votes respecting the matters to be voted upon at the
meeting.
In September 1989, the Company declared a dividend distribution of one
common share purchase Right for each then and subsequently outstanding share of
the Company's common stock. The Rights are designed to assure that all the
Company's shareholders, other than an "acquiring person", receive equal
treatment in the event of any proposed takeover of the Company. Each Right will
entitle the holder to buy from the Company one share of common stock at an
exercise price of $133.33.
The Rights will be exercisable only if a person or group acquires 15% or
more of the Company's common stock or announces a tender or exchange offer, the
consummation of which would result in beneficial ownership by a person or group
of 15% or more of the common stock. If a person or group acquires beneficial
ownership of 15% or more of the Company's outstanding common stock, each holder
of a Right, other than Rights beneficially owned by the acquiring person or
group, will have the right to purchase common shares of the Company having a
market value of twice the exercise price of the Right (or such lesser number of
shares for such proportionately lesser purchase price as is permitted by the
amount of the Company's unissued authorized shares). Further, at any time after
a person or group acquires beneficial ownership of 15% or more (but less than
50%) of the Company's outstanding common stock, the Board of Directors may, at
its option, exchange part or all of the Rights (other than Rights beneficially
owned by the acquiring person or group) for shares of the Company's common stock
on a one-for-one basis. If the Company is acquired in a merger or other business
combination transaction or participates in any of certain specified
extraordinary transactions, each holder of a Right, other than Rights
beneficially owned by a person or group beneficially owning 15% or more of the
Company's outstanding common stock, will thereafter have the right to purchase
common shares of the acquiring or surviving company which at the time of such
transaction will have a market value of twice the exercise price of the Right.
Prior to the acquisition by a person or group of beneficial ownership of
15% or more of the Company's common stock, the Rights are redeemable for
one-third of one cent per Right at the option of the Board of Directors. If
unexercised, the Rights expire September 6, 1999.
21
<PAGE>
SOLICITATION OF PROXIES
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by mail, proxies may be solicited by
directors, officers and other regular employees of the Company by telephone,
telegram or personal interview for no additional compensation. Arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
forward solicitation material to beneficial owners of the stock held of record
by such persons, and the Company will reimburse such persons for reasonable
out-of-pocket expenses incurred by them in so doing.
PROPOSALS OF SECURITY HOLDERS
Any shareholder of the Company who desires to present a proposal at the
1996 Annual Meeting of Shareholders for inclusion in the proxy statement and
form of proxy relating to that meeting must submit such proposal to the Company
at its principal executive offices on or before November 15, 1995.
FINANCIAL INFORMATION
THE COMPANY'S 1994 ANNUAL REPORT IS BEING MAILED TO SHAREHOLDERS ON OR
ABOUT THE DATE OF MAILING THIS PROXY STATEMENT. THE COMPANY WILL PROVIDE,
WITHOUT CHARGE TO ANY RECORD OR BENEFICIAL SHAREHOLDER AS OF MARCH 3, 1995, WHO
SO REQUESTS IN WRITING, A COPY OF SUCH 1994 ANNUAL REPORT OR THE COMPANY'S 1994
ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS), INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. ANY SUCH REQUEST SHOULD BE DIRECTED TO MULTIMEDIA, INC.,
305 S. MAIN STREET, POST OFFICE BOX 1688, GREENVILLE, SOUTH CAROLINA 29602,
ATTENTION: CORPORATE COMMUNICATIONS.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors was not
aware that any business not described above would be presented for consideration
at the Annual Meeting. If any other business properly comes before the meeting,
it is intended that the shares represented by proxies will be voted with respect
thereto in accordance with the judgment of the person voting them.
The above Notice and Proxy Statement are sent by order of the Board of
Directors.
David L. Freeman, SECRETARY
Greenville, South Carolina
March 15, 1995
22
*******************************************************************************
APPENDIX
<PAGE>
<TABLE>
<S> <C>
PROXY MULTIMEDIA, INC.
P.O. Box 1688
Greenville, S.C. 29602
</TABLE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Donald D. Sbarra and Robert E. Hamby, Jr. and
each of them as Proxies, each with the power to appoint his substitute and
hereby authorizes each of them to represent and to vote, as designated below,
all the shares of common stock of Multimedia, Inc. held of record by the
undersigned on March 3, 1995 at the annual meeting of shareholders to be held
April 19, 1995 or any adjournment thereof.
1. Election of Directors
FOR all nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(EXCEPT AS MARKED TO THE CONTRARY BELOW) TO VOTE FOR ALL NOMINEES LISTED BELOW
G. H. V. Cecil, R. T. Eskew, D. L. Freeman, D. J. Greenlaw, M. D. Hagy, R. E.
Hamby, Jr., J. T. LaMacchia,
L. G. McCraw, D. P. Ramsaur, D. D. Sbarra, E. P. Stall and W. C. Stutt
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for 1995.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED IN FAVOR OF PROPOSALS 1 AND 2.
Please sign exactly as name appears on
this proxy. When shares are held by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Signature
Signature if held jointly
DATED , 1995
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-K and qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,202
<SECURITIES> 0
<RECEIVABLES> 98,244
<ALLOWANCES> 4,818
<INVENTORY> 4,643
<CURRENT-ASSETS> 139,140
<PP&E> 558,749
<DEPRECIATION> 283,522
<TOTAL-ASSETS> 683,978
<CURRENT-LIABILITIES> 142,522
<BONDS> 542,303<F1>
<COMMON> 3,762
0
0
<OTHER-SE> (80,677)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 683,978
<SALES> 0
<TOTAL-REVENUES> 630,483
<CGS> 0
<TOTAL-COSTS> 441,040
<OTHER-EXPENSES> (25,584)<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,142
<INCOME-PRETAX> 155,885
<INCOME-TAX> 64,693
<INCOME-CONTINUING> 90,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,029
<EPS-PRIMARY> 2.35
<EPS-DILUTED> 2.35
<FN>
<F1>Bonds - Represents total long-term debt.
<F2>Other-SE - Represents total paid-in-capital and retained earnings.
<F3>Other Expenses - Represents net other (income)/expense.
</FN>
</TABLE>
