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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1996
COMMISSION FILE NUMBER 33-64546
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NEW WORLD TELEVISION INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 59-2813891
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3200 WINDY HILL ROAD
SUITE 1100 - WEST
ATLANTA, GEORGIA 30339
(Address of principal executive offices)
(770) 955-0045
(Registrant's telephone number, including area code)
-------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS
AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT. YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
AS OF MAY 8, 1996 THE REGISTRANT HAD 100 SHARES OF COMMON STOCK, PAR
VALUE $0.01 PER SHARE, OUTSTANDING, ALL OF WHICH WERE INDIRECTLY HELD BY NEW
WORLD COMMUNICATIONS GROUP INCORPORATED.
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NEW WORLD TELEVISION INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
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<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet
- March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . I-1
Condensed Consolidated Statement of Operations
- Three months ended March 31, 1996 and 1995 . . . . . . . . . . . . . I-2
Consolidated Statement of Common
Stockholder's Equity . . . . . . . . . . . . . . . . . . . . . . . . I-3
Condensed Consolidated Statement of Cash Flows
- Three months ended March 31, 1996 and 1995 . . . . . . . . . . . . I-4
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . I-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . I-7
</TABLE>
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PART II. OTHER INFORMATION
<TABLE>
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Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . II-1
Item 4. Submission of Matters to a
Vote of Security-Holders . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . II-1
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-2
</TABLE>
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NEW WORLD TELEVISION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 9,023 $ 20,391
Receivables . . . . . . . . . . . . . . . . . . . . . . 51,239 62,062
Television program contract rights . . . . . . . . . . . 10,862 15,529
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 2,769 1,615
Deferred income taxes . . . . . . . . . . . . . . . . . 3,120 3,120
--------- ---------
Total current assets . . . . . . . . . . . . . . 77,013 102,717
Property, plant and equipment . . . . . . . . . . . . . . . . . . 113,610 114,928
Television program contract rights . . . . . . . . . . . . . . . 5,100 4,134
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . 571,043 576,539
Note receivable from related party and other assets . . . . . . . 26,585 25,608
--------- ---------
$ 793,351 $ 823,926
========= =========
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses . . . . . . . . . $ 18,188 $ 27,632
Income taxes payable . . . . . . . . . . . . . . . . . . 3,392 3,978
Payable to related parties . . . . . . . . . . . . . . . 999 3,647
Television program contracts payable . . . . . . . . . . 13,641 18,262
Current portion of long-term debt . . . . . . . . . . . 5,967 5,967
--------- ---------
Total current liabilities . . . . . . . . . . . 42,187 59,486
Non-current television program contract payable . . . . . . . . . 4,732 4,499
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 505,002 509,767
Other non-current liabilities . . . . . . . . . . . . . . . . . . 18,647 20,049
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 76,615 78,360
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, 40,000,000 shares
authorized, 100 shares issued and outstanding .
Additional paid-in capital . . . . . . . . . . . . . . . 184,696 184,696
Accumulated deficit . . . . . . . . . . . . . . . . . . (38,528) (32,931)
--------- ---------
Total stockholder's equity . . . . . . . . . . . 146,168 151,765
--------- ---------
$ 793,351 $ 823,926
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-1
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NEW WORLD TELEVISION INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,235 $ 55,093
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . 37,541 44,853
Depreciation and amortization of intangible assets . . . . . . . 8,955 9,501
Corporate expenses . . . . . . . . . . . . . . . . . . . . . . . 1,846 1,634
-------- --------
Income (loss) from operations . . . . . . . . . . . . . 4,893 (895)
-------- --------
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . 808 777
Interest expense . . . . . . . . . . . . . . . . . . . . (13,086) (15,190)
Gain on sale of WSBK-TV . . . . . . . . . . . . . . . . - 40,993
Other . . . . . . . . . . . . . . . . . . . . . . . . . - 7
-------- --------
Other income (expense), net . . . . . . . . . . . (12,278) 26,587
-------- --------
Income (loss) before income taxes . . . . . . . . . . . . . . . . (7,385) 25,692
Benefit (provision) for income taxes . . . . . . . . . . . . . . 1,788 (33,881)
-------- --------
Net loss . . . . . . . . . . . . . . . . . . . . $ (5,597) $ (8,189)
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-2
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NEW WORLD TELEVISION INCORPORATED
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDER'S EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 . . . . . $ $ 184,696 $ (32,931) $ 151,765
Net loss . . . . . . . . . . . . . . . - - (5,597) (5,597)
---------- ---------- ---------- ----------
Balance at March 31, 1996 . . . . . . . $ $ 184,696 $ (38,528) $ 146,168
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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NEW WORLD TELEVISION INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1996 1995
---------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,597) $ (8,189)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of WSBK-TV . . . . . . . . . . . . . . . . . - (40,993)
Deferred tax (benefit) provision . . . . . . . . . . . . . (1,745) 26,930
Depreciation and amortization of intangible assets . . . . 8,955 9,501
Television program contract rights
amortization over (under) payments . . . . . . . . . . (687) 1,110
Noncash interest expense . . . . . . . . . . . . . . . . . 88 292
Decrease in receivables and other assets . . . . . . . . . 9,691 7,415
Decrease in liabilities . . . . . . . . . . . . . . . . . (14,168) (7,573)
--------- ----------
Total adjustments . . . . . . . . . . . . . . . . . . 2,134 (3,318)
--------- ----------
Net cash used in operating activities . . . . . . . . . . . . (3,463) (11,507)
Cash flow from investing activities:
Proceeds from sale of WSBK-TV . . . . . . . . . . . . . . . . - 107,500
Investment in Program Co. . . . . . . . . . . . . . . . . . . (1,000) -
Capital expenditures . . . . . . . . . . . . . . . . . . . . . (2,140) (4,048)
--------- ----------
Net cash provided by (used in) investing activities . . . . . (3,140) 103,452
Cash flow from financing activities:
Increase in restricted cash . . . . . . . . . . . . . . . . . - (77,318)
Repayment of debt . . . . . . . . . . . . . . . . . . . . . . (4,765) (27,469)
--------- ----------
Net cash used in financing activities . . . . . . . . . . . . (4,765) (104,787)
--------- ----------
Net decrease in cash . . . . . . . . . . . . . . . . . . . . . . . . . (11,368) (12,842)
Cash balance, beginning of period . . . . . . . . . . . . . . . . . . . 20,391 28,823
--------- ----------
Cash balance, end of period . . . . . . . . . . . . . . . . . . . . . . $ 9,023 $ 15,981
========= ==========
Supplemental disclosures:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . $ 23,162 $ 25,309
========= ==========
Purchase of film program contract rights . . . . . . . . . . . $ 1,769 $ 1,478
========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-4
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NEW WORLD TELEVISION INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(unaudited)
New World Television Incorporated ("NW Television" or the "Company"),
is a wholly-owned subsidiary of New World Communications Group Incorporated
("NWCG").
The Company owns the capital stock and other assets of six broadcast
television stations (the "Stations") and certain related companies (the
"Broadcast Subsidiaries").
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM REPORTING
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and the rules and regulations of the Securities
and Exchange Commission. In the opinion of management the statements
reflect all adjustments, which are of a normal recurring nature,
necessary to present fairly the Company's financial position, results
of operations and cash flows for the unaudited interim periods
presented. Results for the interim periods presented are not
necessarily indicative of the results which might be expected for the
entire year. The unaudited condensed consolidated financial
statements should be read in conjunction with the audited financial
statements for the year ended December 31, 1995.
2. SALE OF THE BOSTON STATION AND PRO FORMA FINANCIAL INFORMATION
In March 1995 the Company sold its investment in WSBK-TV (the "Boston
Station") for gross proceeds of $107.5 million. The Company repaid
$19.5 million of the Bank Credit Agreement Loans in March 1995 and
$77.3 million of the Step-up Notes in April 1995 from the net proceeds
of the Boston Station sale.
I-5
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NEW WORLD TELEVISION INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(unaudited)
The following condensed pro-forma financial information gives
effect, as of January 1, 1995, to the sale of the Boston Station and
the repayment of debt with the net proceeds from the sale. The pro
forma financial information does not necessarily reflect the future
results or the results that would have occurred had these transactions
actually occurred on January 1, 1995.
<TABLE>
<CAPTION>
Pro Forma Three months ended
March 31, 1995
----------------------------
<S> <C>
Net revenue $ 49,352
Net loss $ (12,298)
=========
</TABLE>
I-6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of the Company should be read in conjunction with the
accompanying unaudited condensed consolidated financial statements and related
notes of the Company and its annual report for the year ended December 31, 1995.
RESULTS OF OPERATIONS
Three months ended March 31, 1996 Compared to 1995. Net revenue
decreased $1.9 million or 3.4% in 1996 over 1995. The decrease reflects an
increase of $3.8 million for the six original stations owned for both periods
offset by a decrease of $5.7 million reflecting the sale of the Boston Station
in March of 1995. The increase for the six original stations is due to
political advertising and the recovery of a portion of the market share enjoyed
prior to the Fox conversion. The Company had expected the conversion to Fox to
result in an initial decline in revenues.
Operating expenses decreased $7.3 million due to a decrease of $6.2
million reflecting the sale of the Boston Station in March of 1995 and a
decrease of $1.1 million for the original six stations due primarily to lower
programming costs in 1996.
The decrease in interest expense of $2.1 million reflects the reduced
principal balance of debt due to debt payments.
The income tax expense in 1995 resulted primarily from the recognition
of income taxes on the sale of the Boston Station. The liability associated
with these taxes will be offset by utilization of pre-Plan Effective Date net
operating losses. The utilization was reflected as a reduction of excess
reorganization value.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company has total outstanding debt of $511.0
million. The decrease in debt from December 31, 1995 reflects the repayment of
$4.8 million of the Step-up Notes as a scheduled payment.
In order to service the currently outstanding debt, the primary source
of funds will be broadcasting operating cash flow. The Company believes that
broadcasting operating cash flow and financing activities permitted under
existing debt agreements will be sufficient to enable the Company to satisfy
current requirements for operating, investing and financing activities of the
Company and its subsidiaries, including debt service prior to final maturity.
In order to meet principal payments upon the final maturity of its various debt
facilities outstanding, the earliest
I-7
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of which occurs in 1998, the Company will be required to adopt one or more
alternatives, such as refinancing or restructuring its indebtedness, selling
material assets or operations or seeking additional capital contributions.
There can be no assurance that any of such actions could be effected on
satisfactory terms, that they would enable the Company to continue to satisfy
the Company's capital requirements or that they would be permitted by the terms
of existing or future debt agreements.
The Company's capital budget for 1996 is approximately $11.1 million.
In connection with the broadcast stations' change in affiliation to the Fox
Network, the stations provide more locally-produced programming which requires
additional capital expenditures and operating expenses.
Under the terms of its debt agreements, under certain circumstances,
the Company may invest up to an aggregate of $7.5 million annually in a venture
involved in production of first-run television programming, the syndication of
such programming, the operation of a national sales representative firm or
other television programming and distribution activities. The Company made an
investment of preferred stock and debt in an affiliated company aggregating
$23.5 million as of March 31, 1996.
I-8
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The registrant and its subsidiaries are defendants in a number of
lawsuits which have arisen in the ordinary course of business. The registrant
is insured for a substantial portion of any potential losses and believes the
ultimate resolution of these matters will not have a material adverse affect on
the registrant.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
(a) Not applicable.
(b) Not applicable.
Item 4. Submission of Matters to a Vote of Security-Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.1 Employment Agreement, dated as of January 1, 1996, by
and between the Company and Farrell Reynolds (incorporated by
reference to exhibit 10.1 of the New World Communications
Group Incorporated Form 10-Q for the quarter ended March 31,
1996).
27.1 Financial Data Schedule (for SEC use only).
(b) Reports filed on Form 8-K:
None
II-1
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
NEW WORLD TELEVISION INCORPORATED
(Registrant)
By: /s/ Joseph P. Page
--------------------------------
Joseph P. Page
Vice President and
Chief Financial Officer
Dated: May 13, 1996
II-2
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.1 Employment Agreement, dated as of January 1, 1996,
by and between the Company and Farrell Reynolds
(incorporated by reference to exhibit 10.1 of the
New World Communications Group Incorporated form
10-Q for the quarter ended March 31, 1996).
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,023
<SECURITIES> 0
<RECEIVABLES> 51,239
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77,013
<PP&E> 113,610
<DEPRECIATION> 0
<TOTAL-ASSETS> 793,351
<CURRENT-LIABILITIES> 42,187
<BONDS> 505,002
0
0
<COMMON> 0
<OTHER-SE> 146,168
<TOTAL-LIABILITY-AND-EQUITY> 793,351
<SALES> 0
<TOTAL-REVENUES> 53,235
<CGS> 0
<TOTAL-COSTS> 0<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,086
<INCOME-PRETAX> (7,385)
<INCOME-TAX> (1,788)
<INCOME-CONTINUING> (5,597)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,597)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>
TOTAL COSTS AND EXPENSES APPLICABLE TO SALES AND REVENUES ARE NOT SEPARATELY
DISCLOSED ON THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 1996 (UNAUDITED).
</FN>
</TABLE>
