-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aE/pGxPHHKXI5Ms6UfjYlyomY8AG2xXbFv6iJHlXBjVkp9urXuj7Zyd6rdGE4eEu zVRpS3SueFtJcIS+xtEPjg== 0000950144-94-001488.txt : 19940815 0000950144-94-001488.hdr.sgml : 19940815 ACCESSION NUMBER: 0000950144-94-001488 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TURNER BROADCASTING SYSTEM INC CENTRAL INDEX KEY: 0000100240 STANDARD INDUSTRIAL CLASSIFICATION: 4833 IRS NUMBER: 580950695 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08911 FILM NUMBER: 94543836 BUSINESS ADDRESS: STREET 1: ONE CNN CENTER STREET 2: 100 INTERNATIONAL BLVD CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4048271700 MAIL ADDRESS: STREET 1: P O BOX 105366 CITY: ATLANTA STATE: GA ZIP: 30348-5366 FORMER COMPANY: FORMER CONFORMED NAME: TURNER COMMUNICATIONS CORP DATE OF NAME CHANGE: 19791016 FORMER COMPANY: FORMER CONFORMED NAME: RICE BROADCASTING CO INC DATE OF NAME CHANGE: 19700909 10-Q/A 1 TURNER BROADCASTING SYSTEM, INC. FORM 10-Q AMEND. 1 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 OR - --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ---------------- Commission File No. 0-9334 TURNER BROADCASTING SYSTEM, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Georgia 58-0950695 - ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) One CNN Center Atlanta, Georgia 30303 ---------------------- ---------- (Address of principal (Zip Code) executive offices) (404) 827-1700 ---------------------------------------------------- (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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class June 30, 1994 - ------------------------- ----------------- Class A Common Stock, par value $0.0625 68,330,388 Class B Common Stock, par value $0.0625 137,306,567 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TURNER BROADCASTING SYSTEM, INC. CONSOLIDATED CONDENSED BALANCE SHEETS UNAUDITED (IN THOUSANDS)
JUNE 30, DECEMBER 31, 1994 1993 ---------- ---------- ASSETS Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 124,469 $ 162,858 Accounts receivable, less allowance of $26,860 and $23,083 Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468,949 378,228 Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,606 94,011 Film costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490,399 314,637 Installment contracts receivable, less allowance of $12,359 and $11,915 . . . . . . . . . . . . . . . . . . . 41,219 56,563 Prepaid expense and other current assets . . . . . . . . . . . . . . . . . 75,420 68,196 ---------- ---------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 1,264,062 1,074,493 Film costs, less current portion . . . . . . . . . . . . . . . . . . . . . 1,696,627 1,633,731 Property and equipment, less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,523 225,228 Installment contracts receivable, less discount of $586 and $1,123 . . . . . . . . . . . . . . . . . . . . . 8,419 15,077 Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . 394,796 111,202 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,041 185,131 ---------- ---------- TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,833,468 $3,244,862 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . $ 235,827 $ 168,975 Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,825 106,496 Participants' share and royalties payable . . . . . . . . . . . . . . . . . 47,610 33,922 Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,912 32,128 Film contracts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 27,861 28,096 Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 1,965 2,051 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 108,901 42,240 ---------- ---------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . 582,901 413,908 Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . 2,357,160 2,294,557 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 399,005 395,668 Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . 164,770 141,832 ---------- ---------- TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3,503,836 3,245,965 TOTAL STOCKHOLDERS' EQUITY (DEFICIT) . . . . . . . . . . . . . . . . . 329,632 (1,103) ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) . . . . . . . . . . . . . . . . . . . . . . . . . . $3,833,468 $3,244,862 ========== ==========
See accompanying Notes to Consolidated Condensed Financial Statements. 2 3 TURNER BROADCASTING SYSTEM, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, ------------------------ ----------------------- 1994 1993 1994 1993 --------- -------- ---------- --------- Revenue Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 579,640 $387,955 $1,048,744 $ 696,864 Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,007 98,906 196,207 188,421 --------- -------- ---------- --------- 677,647 486,861 1,244,951 885,285 --------- -------- ---------- --------- Cost of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,811 235,989 799,073 428,034 Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . 175,815 139,339 331,446 258,372 Gain on sale of equity investment . . . . . . . . . . . . . . . . . . . . . . (21,746) - (21,746) - Depreciation of property and equipment and amortization of goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,815 9,082 27,109 17,765 Interest expense, net of interest income . . . . . . . . . . . . . . . . . . 53,633 44,830 105,376 89,934 Equity in loss of unconsolidated entities . . . . . . . . . . . . . . . . . . 1,710 5,284 4,878 3,697 ---------- -------- ---------- --------- 657,038 434,524 1,246,136 797,802 ----------- -------- ---------- --------- Income (loss) before provision for income taxes and the cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . . . . . . . . . . 20,609 52,337 (1,185) 87,483 Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . 7,690 21,266 (480) 36,277 ----------- -------- ----------- --------- Income (loss) before the cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . . . . 12,919 31,071 (705) 51,206 Cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - (306,000) ----------- -------- ---------- --------- Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,919 $ 31,071 $ (705) (254,794) =========== ======== ========== ========= Earnings (loss) per common share and common stock equivalents Income before the cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . . . . . . $ 0.05 $ 0.12 $ 0.00 $ 0.20 Cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - (1.16) ----------- -------- ---------- --------- Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.05 $ 0.12 $ 0.00 $ (0.96) =========== ======== ========== ========= Weighted average number of common shares outstanding, including conversion of common stock equivalents, when diluted . . . . . . . . . . . . . . . . . . . . 282,626 264,360 202,847 264,302
See accompanying Notes to Consolidated Condensed Financial Statements. 3 4 TURNER BROADCASTING SYSTEM, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS UNAUDITED (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ---------------------------- 1994 1993 ------------- --------- Cash provided by operations before changes in film costs and liabilities, net, interest payments and debt issue costs . . . . . . . . . . . . . . . . . . . . . . . . $ 117,591 $ 236,491 Change in film costs and liabilities, net Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . . . 40,390 33,327 Produced programming . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,412) (3,996) Licensed program rights . . . . . . . . . . . . . . . . . . . . . . . . . . (366) (12,356) Interest payments, net of interest received . . . . . . . . . . . . . . . . (80,389) (66,967) Debt issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,675) (526) ---------- ---------- Net cash provided by operations . . . . . . . . . . . . . . . . . . . . . . . . . 34,139 185,973 Cash provided by (used for) investing activities Sale of equity investment . . . . . . . . . . . . . . . . . . . . . . . . . 107,978 - Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (144,882) (19,205) Additions to property and equipment . . . . . . . . . . . . . . . . . . . . (55,578) (22,471) ---------- ---------- Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . (92,482) (41,676) Cash provided by (used for) financing activities Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599,610 - Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (575,623) (72,618) Payments of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . (4,901) (9,193) Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . 868 865 --------- --------- Net cash provided by (used for) financing activities . . . . . . . . . . . . . . 19,954 (80,946) Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . (38,389) 63,351 Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 162,858 126,256 --------- --------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 124,469 $ 189,607 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES: Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,506 $ 9,152 Dividends declared but unpaid . . . . . . . . . . . . . . . . . . . . . . . . . . 4,901 - The Company acquired New Line Cinema Corporation and assumed and incurred liabilities as of January 28, 1994 (in thousands) as follows: Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 667,600 - Less: common stock issued or issuable . . . . . . . . . . . . . . . . . . . . . . 416,700 - Less: cash paid for debt and other acquisition costs . . . . . . . . . . . . . . 139,600 - --------- Liabilities assumed and incurred . . . . . . . . . . . . . . . . . . . . . . . . $ 111,300 - =========
See accompanying Notes to Consolidated Condensed Financial Statements. 4 5 TURNER BROADCASTING SYSTEM, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS UNAUDITED NOTE 1. PREPARATION OF INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The consolidated condensed financial statements included herein have been prepared by Turner Broadcasting System, Inc. (the "Company" or "Turner") pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments, which are of a normal recurring nature, necessary for a fair presentation of such financial statements. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, management believes that the disclosures are adequate to make the information presented not misleading. For further information, reference is made to the consolidated financial statements and the notes thereto in the Company's Form 10-K for the year ended December 31, 1993. Certain prior year amounts have been reclassified to conform to the current year presentation. NOTE 2. FILM COSTS The following table sets forth the components of unamortized film costs (in thousands):
June 30, December 31, 1994 1993 ----------------- ----------- Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . $ 1,142,296 $ 1,172,921 Produced programming Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,424 166,768 Completed and not released . . . . . . . . . . . . . . . . . . . . . 53,768 17,654 In process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,483 153,630 Episodic television . . . . . . . . . . . . . . . . . . . . . . . . 101,848 89,077 Licensed program and distribution rights . . . . . . . . . . . . . . . 241,039 231,385 Prepaid licensed program rights . . . . . . . . . . . . . . . . . . . 117,168 116,933 ---------------- ------------ 2,187,026 1,948,368 Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . 490,399 314,637 ---------------- ------------ $ 1,696,627 $ 1,633,731 ================ ============
Episodic television includes serial television episode program costs. Prepaid licensed program rights represent licensed program rights for which payments have been made but the films are not currently available for use. As these programs become available for use they are reclassified to licensed program rights. On the basis of the Company's anticipated total gross revenue estimates, over 82% of released and episodic television produced programming costs at June 30, 1994 will be amortized within the three-year period ending June 30, 1997. Amortization of film costs included in Cost of Operations is composed of the following (in thousands):
Three months ended Six months ended June 30, June 30, -------------------------- ----------------------- 1994 1993 1994 1993 --------- --------- -------- -------- Purchased program rights . . . . . . . . . . . . . . . . $ 21,962 $ 18,942 $ 44,339 $ 37,859 Produced programming . . . . . . . . . . . . . . . . . . 210,739 68,565 377,515 124,403 Licensed program and distribution rights . . . . . . . . . . . . . . . . . . . . . . . 19,468 17,313 39,181 34,696 Participants' share and royalties . . . . . . . . . . . . 8,060 7,049 23,399 15,011 --------- --------- -------- -------- $ 260,229 $ 111,869 $484,434 $211,969 ========= ========= ======== ========
5 6 NOTE 3. EARNINGS (LOSS) PER COMMON SHARE AND COMMON STOCK EQUIVALENT Net income (loss) per common share and common stock equivalent is computed by dividing net income (loss) applicable to common stock by the weighted average number of outstanding shares of common stock and common stock equivalents, when dilutive, during the applicable periods in 1994 and 1993. In 1993 and for the three months ended June 30, 1994 common stock equivalents are principally the incremental shares associated with the Class C Convertible Preferred Stock (the "Class C Preferred Stock") and the outstanding stock options. Fully-diluted income (loss) per share amounts are similarly computed, but include the effect, when dilutive, of the Company's other potentially dilutive securities. For the six-month period ended June 30, 1994, no common stock equivalents are included in the calculation of primary earnings per share, due to their anti-dilutive effect. The Company's zero coupon subordinated convertible notes due 2007 and 2004 and the convertible subordinated debentures of a wholly-owned subsidiary are excluded from the fully-diluted calculations of net income (loss) per common share for the three-month and six-month periods ended June 30, 1994 and 1993 (when applicable) due to their anti-dilutive effect. The difference between the primary and fully-diluted earnings per share is not significant. NOTE 4. LONG-TERM DEBT Long-term debt is summarized as follows (in thousands):
JUNE 30, DECEMBER 31, 1994 1993 -------------------- --------------- Bank credit facilities . . . . . . . . . . . . . . . . . . . $ 800,000 $ 1,225,000 12% senior subordinated debentures . . . . . . . . . . . . . 536,886 536,732 8 3/8% Senior Notes . . . . . . . . . . . . . . . . . . . . . 297,352 297,325 Zero coupon subordinated convertible notes . . . . . . . . . 236,978 228,688 7.4% Senior Notes . . . . . . . . . . . . . . . . . . . . . . 249,624 - 8.4% Senior Debentures . . . . . . . . . . . . . . . . . . . 199,844 - Convertible subordinated debentures of a wholly-owned subsidiary . . . . . . . . . . . . . . . . . 29,125 - Obligations under capital leases . . . . . . . . . . . . . . 7,260 6,353 Other long-term debt . . . . . . . . . . . . . . . . . . . . 2,056 2,510 ---------------- ----------- 2,359,125 2,296,608 Less current portion . . . . . . . . . . . . . . . . . . . . 1,965 2,051 ---------------- ----------- $ 2,357,160 $ 2,294,557 ================ ===========
On May 6, 1993, the Company filed a shelf registration statement with the Securities and Exchange Commission (the "Shelf Registration") to allow the Company to offer, from time to time, for sale up to $1,100,000,000 of unsecured senior debt or unsecured senior subordinated debt securities, consisting of notes, debentures or other evidences of indebtedness. On February 3, 1994, the Company sold $250,000,000 of 7.4% Senior Notes due 2004 (the "Senior Notes") and $200,000,000 of 8.4% Senior Debentures due 2024 (the "Senior Debentures" and, together with the Senior Notes, the "Securities") under the Shelf Registration. The net proceeds to the Company were approximately $246,282,000 and $196,680,000, respectively, after market and underwriting discounts. The Senior Notes and Senior Debentures bear interest at the rate of 7.4% and 8.4% per annum, respectively, payable semi-annually on February 1 and August 1 of each year, commencing on August 1, 1994. The Senior Notes are not redeemable at the option of the Company. The Senior Debentures are redeemable, at the Company's option, at any time after February 1, 2004, at a redemption price of 104.161% of the principal amount, plus accrued and unpaid interest to the date of redemption, which redemption price reduces over 10 years to a redemption price of 100% of the principal amount in 2014 and thereafter. Each holder has the right to require the Company to repurchase such holder's Securities in whole, but not in part, at a redemption price, payable in cash, equal to 101% of the principal amount, plus accrued and unpaid interest to the date fixed for redemption, upon the occurrence of certain triggering events, including, a change in control, certain restricted payments or certain consolidations, mergers, conveyances or transfers of assets, each as defined in the indenture relating to the Securities. The Company is not required to make 6 7 mandatory redemption or sinking fund payments with respect to the Securities prior to maturity. The Company has received firm commitments from banks participating in its unsecured revolving credit facility (the "1993 Credit Agreement") to provide a new $500 million unsecured revolving credit facility. The terms and convenants that govern the new facility are identical to those associated with the 1993 Credit Agreement. The new facility will be finalized in the third quarter of 1994. NOTE 5. STOCKHOLDERS' EQUITY (DEFICIT) Stockholders' equity (deficit) consists of the following components (in thousands, except share data):
JUNE 30, DECEMBER 31, 1994 1993 --------------- -------------- Class C Convertible Preferred Stock, par value $0.125; authorized 12,600,000 shares; issued and outstanding 12,396,976 shares . . . . . . . . . . $ 260,438 $ 260,438 Class A Common Stock, par value $0.0625; authorized 75,000,000 shares; issued and outstanding 68,330,388 shares . . . . . . . . . . . . . . . . 4,271 4,271 Class B Common Stock, par value $0.0625; authorized 300,000,000 shares; issued and outstanding 137,306,567 and 120,887,672 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,582 7,555 Capital in excess of par value . . . . . . . . . . . . . . . . 1,071,126 731,042 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (1,014,785) (1,004,409) --------------- -------------- Total stockholders' equity (deficit) . . . . . . . . . . . $ 329,632 $ (1,103) =============== ==============
See Note 6 of the Notes to Consolidated Condensed Financial Statements for a discussion of the increase of approximately 16,000,000 shares of outstanding Class B Common Stock in connection with the merger of New Line Cinema Corporation with a wholly-owned subsidiary of the Company in the first quarter of 1994, which increased Class B Common Stock and Capital in excess of par value by approximately $1,000,000 and $340,000,000, respectively. On March 15, 1994, and June 15, 1994, the Board of Directors declared a cash dividend on the Company's outstanding shares of Class A Common Stock and Class B Common Stock, payable at the rate of $0.0175 for each share held on the record date. In addition, holders of the Company's outstanding Class C Convertible Preferred Stock were entitled to an equivalent cash dividend of $0.105 for each share held on the record date based on the number of shares of Class B Common Stock which would be receivable upon conversion of each share of Class C Convertible Preferred Stock. Cash dividends of $4,901,000 and $4,901,000 were paid on April 15, 1994 and July 15, 1994 to shareholders of record at the close of business on March 30, 1994 and June 30, 1994, respectively. The Company's ability to pay cash dividends to holders of shares of the Class A and Class B common stock and the Class C Convertible Preferred Stock is subject to certain covenants in the Company's outstanding debt instruments, currently the most restrictive of which limits the maximum aggregate amount of dividends permitted to be paid annually to such holders to $30,000,000. NOTE 6. ACQUISITION The Company and New Line Cinema Corporation ("New Line"), a motion picture production company, completed a merger of New Line with a wholly-owned subsidiary of the Company on January 28, 1994 (the "Merger"). As a result of the Merger, each share of New Line Common Stock has been converted into the right to receive 0.96386 of a share of the Company's Class B Common Stock. The valuations used by New Line and the Company for purposes of arriving at the exchange ratio were $20 per share of New Line Common Stock and $20.75 per share of the Company's Class B Common Stock. The maximum number of shares of Class B Common Stock issuable pursuant to the Merger is approximately 21,300,000 valued at approximately $442,000,000. Cash will be distributed in lieu of any fractional shares. At June 30, 1994 7 8 approximately 16,200,000 shares of the Company's Class B Common Stock had been issued in connection with the Merger. The remaining shares are issuable upon the exercise of New Line stock options and warrants and the conversion of the New Line convertible subordinated debentures discussed below. Additionally, the Company assumed and incurred liabilities of approximately $111,000,000 and paid debt and certain other acquisition costs of approximately $140,000,000 in connection with the Merger. Liabilities assumed in the Merger included $29,125,000 of convertible subordinated debentures (the "Convertible Debentures") which bear interest at the rate of 6 1/2% per annum. The Convertible Debentures are convertible at the option of the holders into a total of approximately 1,700,000 shares of Class B Common Stock. At the time of the Merger, New Line owned a 37.4% equity interest in RHI Entertainment, Inc. ("RHI"). In April 1994, New Line entered into an agreement to tender for cash its equity interest in RHI which totaled approximately 3,000,000 shares, to an unaffiliated entity for $36 per share. In June 1994, the Company received approximately $108,000,000 in cash in connection with the transaction and recognized a pre-tax gain of approximately $22,000,000. The Merger was accounted for by the purchase method of accounting. Goodwill and other intangible assets in the amount of approximately $290,000,000 was recognized in the transaction, and is amortized using a straight-line basis over 40 years. The Company has not yet received appraisals or valuations from independent third parties of the assets or properties of New Line. Therefore, goodwill and other intangible asset amounts may be adjusted once complete information on the fair value of all of New Line's assets and liabilities is developed and once a more thorough review of New Line's operating and accounting policies and procedures has been completed. The following unaudited pro forma condensed combined results of operations for the three and six months ended June 30, 1993 are not intended to reflect results of operations which would have actually resulted had the Merger been effective on the date indicated. Moreover, this information is not intended to be indicative of results of operations which may be obtained in the future. The pro forma condensed combined results of operations for the three and six months ended June 30, 1993 include the Merger and the December 1993 acquisitions of Castle Rock Entertainment ("Castle Rock") and the remaining 50% interest in Hanna-Barbera Holding Co. ("Hanna-Barbera") assuming the Company acquired all of the outstanding stock of New Line pursuant to the Merger and completed the acquisitions at January 1, 1993. The pro forma effect of the Merger for the three and six months ended June 30, 1994 is not considered significant. 8 9 The unaudited pro forma condensed combined results of operations for the three and six months ended June 30, 1993 are as follows (in thousands):
Three months Six months ended ended June 30, June 30, 1993 1993 ---------------- -------------- Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 595,326 $ 1,137,609 ================ ============== Income before the cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . . . . . . . $ 26,867 $ 37,100 Cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . - (306,000) ---------------- -------------- Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 26,867 $ (268,900) ================ ============== Earnings (loss) per common share and common stock equivalents Income before the cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . $ 0.09 $ 0.13 Cumulative effect of a change in accounting for income taxes . . . . . . . . . . . . . . . . . . - (1.09) ---------------- -------------- Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 0.09 $ (0.96) ================ ==============
9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES SOURCES AND USES OF CASH Cash provided by operations for the six months ended June 30, 1994 aggregated $34 million, net of interest payments and debt issue costs of $87 million and a net change in film costs and liabilities of $4 million. Primary sources of cash included proceeds of $108 million from the sale of an equity investment, borrowings under the unsecured revolving credit facility of $150 million, and approximately $250 million and $200 million of gross proceeds from the Senior Notes and Senior Debentures, respectively. Primary uses of cash during the period were payments of indebtedness of $576 million, payments of debt and certain other acquisition costs in connection with the Merger of $140 million and additions to property and equipment of $56 million. See the Consolidated Condensed Statements of Cash Flows for additional details regarding sources and uses of cash and Note 4 of Notes to Consolidated Condensed Financial Statements for additional information about the Company's indebtedness. CREDIT FACILITIES AND FINANCING ACTIVITIES The Company had approximately $2.4 billion of outstanding indebtedness at June 30, 1994, of which $800 million was outstanding under an unsecured revolving credit facility with banks. The Company has received firm commitments from banks participating in its unsecured revolving credit facility (the "1993 Credit Agreement") to provide a new $500 million unsecured revolving credit facility. The terms and convenants that govern the new facility are identical to those associated with the 1993 Credit Agreement. The new facility will be finalized in the third quarter of 1994. Approximately $800 million of the Company's indebtedness bears interest on a floating basis tied to short-term market indices. The Company has interest rate swap agreements having a total notional principal amount of $530 million with commercial banks to mitigate possible rising interest rates. A contract with a total notional principal amount of $250 million expired in March 1994, and the remaining contracts have expiration dates ranging from November 1994 to March 1995. These agreements are designated as hedges of interest rates, and the differential to be paid or received on interest rate swaps is accrued as an adjustment to interest expense as interest rates change. On May 6, 1993, the Company filed a registration statement with the Securities and Exchange Commission (the "Shelf Registration") to allow the Company to offer, from time to time, for sale up to $1.1 billion of unsecured senior debt or unsecured senior subordinated debt securities, consisting of notes, debentures or other evidences of indebtedness. On February 3, 1994, the Company sold $250 million of Senior Notes and $200 million of Senior Debentures under the Shelf Registration. The net proceeds to the Company were approximately $246 million and $197 million, respectively, after market and underwriting discounts. The Senior Notes and Senior Debentures bear interest at the rate of 7.4% and 8.4% per annum, respectively, payable semi-annually on February 1 and August 1 of each year, commencing on August 1, 1994. The Senior Notes are not redeemable at the option of the Company. The Senior Debentures are redeemable, at the Company's option, at any time after February 1, 2004, at a redemption price of 104.161% of the principal amount, plus accrued and unpaid interest to the date of redemption, which redemption price reduces over 10 years to a redemption price of 100% of the principal amount in 2014 and thereafter. Each holder has the right to require the Company to repurchase such 10 11 holder's Securities in whole, but not in part, at a redemption price, payable in cash, equal to 101% of the principal amount, plus accrued and unpaid interest to the date fixed for redemption, upon the occurrence of certain triggering events, including a change in control, certain restricted payments or certain consolidations, mergers, conveyances or transfers of assets, each as defined in the indenture relating to the Securities. The Company is not required to make mandatory or sinking fund payments with respect to the Securities prior to maturity. CAPITAL RESOURCES AND COMMITMENTS During the next 12 months, the Company anticipates making cash expenditures of approximately $260 million for sports programming, primarily rights fees, approximately $730 million for original entertainment programming (excluding promotional and advertising costs) and approximately $100 million for licensed programming. Also, during the next 12 months, the Company expects to make total expenditures of approximately $105 million for additional or replacement property and equipment. Of the anticipated programming and capital expenditures described above, firm commitments exist for approximately $530 million. Other capital resource commitments consist primarily of lease obligations, some of which are contingent on revenues derived from usage. Management expects to continue to lease satellite facilities, sports facilities and office facilities not already owned by the Company. Management expects to finance these commitments from working capital provided by operations and financing arrangements with lessors, vendors, film suppliers and additional borrowings. OTHER On July 28, 1994, members of the Major League Baseball Players Association, which includes the Atlanta Braves players, announced that a strike of major league baseball games would begin on August 12, 1994, unless players and club owners resolve certain collective bargaining agreement issues. The financial impact on the Company is difficult to predict due to the uncertainty as to the length of the strike. However, in the event the strike lasts the remainder of the 1994 season, it could adversely impact anticipated 1994 operating profit by as much as $14 million. RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1994 VS. THREE MONTHS ENDED JUNE 30, 1993 ENTERTAINMENT SEGMENT Entertainment Segment revenue increased $178 million to $459 million, of which $132 million was contributed by New Line, Castle Rock and the consolidated operations of Hanna-Barbera which were not owned as of June 30, 1993. Advertising revenue rose $24 million, or 15%, due primarily to increased rates for Turner Network Television ("TNT") and TBS SuperStation, and an increase in sports revenue associated with coverage of the National Basketball Association (the "NBA") on TNT and the number of Atlanta Braves telecasts aired on TBS SuperStation. The remaining $22 million increase was related to higher subscription, home video and licensing and merchandising revenue. Operating profit for the Entertainment Segment decreased $46 million, principally due to lower than anticipated results from theatrical film releases and $26 million in losses this quarter related to the 1994 Goodwill Games. Total losses for the 1994 Goodwill Games, upon their completion, were $39 million, including amounts expensed in prior periods. In addition, increased combined operating losses of $4 million during the quarter on new networks were offset by operating profit increases in core businesses. 11 12 NEWS SEGMENT News Segment revenue increased $10 million, or 7%, primarily related to increased subscription revenue from the home satellite market and increases associated with CNN International, where advertising and broadcast licensing fees contributed to a 20%, or $5 million, revenue increase for the service. Domestic advertising revenue was essentially flat, due to lower viewership for CNN and Headline News early in the quarter, offset by higher viewership late in the quarter. Revenue increases were offset by increases in operating expenses related to higher newsgathering costs and the expansion of CNN International. As a result, operating profit for the News Segment was unchanged compared to the same period in 1993. OTHER SEGMENT Revenue increased $5 million, or 8%, primarily due to increased home-game revenue for the Atlanta Braves. Operating losses increased $3 million as a result of increased Braves' player salaries and planned investment in the Company's information technology systems. EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED ENTITIES/OTHER CONSOLIDATED INFORMATION Operating losses decreased $4 million, primarily due to increased playoff revenues and the expensing in the prior year of a guaranteed contract for an injured player associated with the Atlanta Hawks. In June 1994, the Company sold its 37.4% equity investment in RHI Entertainment, Inc. for approximately $108 million in cash and recognized a pre-tax gain of approximately $22 million on the transaction. Consolidated depreciation and amortization increased approximately $6 million primarily due to the inclusion of New Line and Castle Rock in 1994. Consolidated interest expense increased approximately $9 million primarily due to the increase in debt associated with the purchase of Castle Rock and Hanna-Barbera as well as assumed debt associated with the New Line acquisition. The increase was somewhat offset by a lower effective interest rate resulting from new debt incurred in 1993 and 1994. As a result of the information discussed above, the Company reported net income of $13 million in the second quarter of 1994 ($0.05 net income per common share and common share equivalent). This compares to net income of $31 million in the second quarter of 1993 ($0.12 net income per common share and common share equivalent). RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1994 VS. SIX MONTHS ENDED JUNE 30, 1993 ENTERTAINMENT SEGMENT Entertainment Segment revenue increased $337 million to $852 million, of which $263 million was contributed by New Line, Castle Rock and the consolidated operations of Hanna-Barbera which were not owned as of June 30, 1993. Advertising revenue rose $37 million, or 13%, due primarily to increased rates for TNT and TBS SuperStation, and an increase in sports revenue associated with the coverage of the NBA on TNT and in the number of Atlanta Braves telecasts aired on TBS SuperStation. The remaining $37 million increase was related to higher subscription, home video and licensing and merchandising revenue. Operating profit for the Entertainment Segment decreased $84 million, principally due to lower than anticipated results from theatrical film releases, $32 million related to TNT's telecast of the Winter Olympics in February, 12 13 $31 million in losses related to the 1994 Goodwill Games and increased combined operating losses of $9 million on new networks. NEWS SEGMENT News Segment revenue increased $18 million, or 6%, primarily related to increased subscription revenue from the home satellite market and increases associated with CNN International, where advertising and broadcast licensing fees contributed to a 16%, or $7 million, revenue increase for the service. Domestic advertising revenue was essentially unchanged, due to lower viewership for CNN and Headline News in the first quarter, offset by higher viewership late in the second quarter. Revenue increases were primarily offset by increases in operating expenses related to higher newsgathering costs and the expansion of CNN International. As a result, operating profit for the News Segment was relatively unchanged compared to the same period in 1993. OTHER SEGMENT Revenue increased $7 million, or 8%, primarily due to increased home-game revenue for the Atlanta Braves. Operating losses increased $7 million as a result of increased Braves' player salaries and planned investment in the Company's information technology systems. EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED ENTITIES/OTHER CONSOLIDATED INFORMATION Operating losses remained flat at $4 million, primarily due to the improved financial performance of the Atlanta Hawks, offset by the Company's investment in a German news network which was acquired on March 31, 1993 and the effect of moving Hanna-Barbera to the Entertainment Segment following Turner's purchase of the remaining portion of the company at the end of 1993. In June 1994, the Company sold its 37.4% equity investment in RHI Entertainment, Inc. for approximately $108 million in cash and recognized a pre-tax gain of approximately $22 million on the transaction. Consolidated depreciation and amortization increased approximately $9 million primarily due to the inclusion of New Line and Castle Rock in 1994. Consolidated interest expense increased approximately $15 million primarily due to the increase in debt associated with the purchase of Castle Rock and Hanna-Barbera as well as assumed debt associated with the New Line acquisition. The increase was somewhat offset by a lower effective interest rate resulting from new debt incurred in 1993 and 1994. As a result of the information discussed above, the Company reported a net loss of $705 thousand in the first six months of 1994 ($0.00 net loss per common share). This compares to a net loss of $255 million in the first six months of 1993 ($0.96 net loss per common share and common share equivalent), which included a non-recurring charge for the cumulative effect of adopting Statement of Financial Accounting Standards No. 109 in the amount of $306 million ($1.16 per share). 13 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Turner Broadcasting System, Inc. v. Federal Communications Commission and The United States of America As last updated in the Company's Form 10-Q for the quarter ended March 31, 1994, on October 5, 1992, the Company filed a lawsuit in the United States District Court for the District of Columbia challenging the provisions of the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Act") that would require cable television operators to devote up to one-third of their channel capacity to the carriage of local broadcast stations and provide certain channel positioning rights to local broadcast stations. The Company's complaint alleges that these provisions violate the First Amendment of the United States Constitution. Under a provision of the 1992 Act, the case was heard by a three-judge court. On April 8, 1993, the Court upheld the constitutionality of these provisions by a 2-1 vote. On May 3, 1993, the Company filed its Notice of Appeal of that decision to the United States Supreme Court. On September 28, 1993, the United States Supreme Court noted probable jurisdiction and heard oral argument on this case on January 12, 1994. On June 27, 1994, the United States Supreme Court vacated the District Court's ruling and remanded the case for further proceedings. The Company intends to press its claims. United States of America v. Cable News Network, Inc. and Turner Broadcasting System, Inc. As last updated in the Company's Form 10-Q for the quarter ended March 31, 1994, in October and November of 1990, CNN was involved in investigating and reporting a story concerning the potential government audio taping of telephone calls made by General Manuel Noriega from his cell in the Miami Correctional Center, including the taping of conversations with his attorneys and defense team. CNN obtained copies of some of the alleged tapings and telecast segments thereof. Judge William M. Hoeveler, United States District Court for the Southern District of Florida, entered orders on November 8, 1990 and November 9, 1990 which temporarily prohibited the telecast of Noriega's privileged attorney-client conversations. Judge Hoeveler appointed a special prosecutor, Robert F. Dunlap, to investigate whether CNN violated his Orders in a telecast on November 9, 1990, and to prepare an application for an Order to Show Cause "why those entities and individuals responsible for" the telecast should not be held in contempt of the Court's Orders. On January 15, 1993 CNN was advised by Special Prosecutor Dunlap that it was a target of a grand jury investigation into these alleged contempts. CNN responded to grand jury subpoenas issued at that time. On March 30, 1994 CNN was charged with criminal contempt by Special Prosecutor Dunlap and pleaded innocent at an arraignment before Judge Hoeveler. A non-jury trial has been scheduled on the charge for September 12, 1994. Fines and/or penalties of an undetermined amount could be imposed against CNN as a result of these contempt proceedings. CNN denies it telecast any privileged conversations and therefore denies that it violated or intended to violate the Court Orders. CNN intends to vigorously defend the contempt proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At a special shareholders' meeting held June 14, 1994, the holders of each class of the Company's outstanding stock, voting separately, approved an increase in the voting power of the Company's Class A Common Stock from one vote per share to two votes per share. 14 15 ITEM 5. OTHER INFORMATION REGULATION On October 5, 1992, the 1992 Act became law. The Federal Communications Commission (the "FCC" or the "Commission") is charged with implementation of the 1992 Act. RATE REGULATION Section 623 of the Communications Act of 1934, as amended by the 1992 Act, establishes a two-tier rate structure applicable to systems not found to be subject to "effective competition" as defined by the statute. Rates for a required "basic service tier" are subject to regulation by practically every community. Rates for cable programming services other than those carried on the basic tier are subject to regulation if, upon complaint, the FCC finds that such rates are "unreasonable." Programming offered by a cable operator on a per-channel or per-program basis, however, is exempt from rate regulation. On April 1, 1993, the FCC adopted implementing regulations for Section 623. The text of its Report and Order was released on May 3, 1993. The FCC has adopted a benchmark approach to rate regulation. Rates above the benchmark would be presumed to be unreasonable. Once established, cable operators could adjust their rates based on appropriate factors and could pass through certain costs to customers, including increased programming costs. On February 22, 1994, the Commission adopted further regulations. Among other things, the additional regulations will govern the offering of bona fide "a la carte" channels that are exempted from rate regulation. The Commission also adopted a methodology for determining rates when channels are added to or deleted from regulated tiers. These regulations may adversely affect the Company's ability to sell its existing or new networks to cable customers and/or may adversely affect the prices the Company may charge for its services, although at this time the Company cannot predict their full effect on its operations. On March 30, 1994, the Commission adopted further regulations and solicited additional comments with respect to the methodology for determining rates when channels are added to regulated tiers. The Company cannot predict the outcome or effect of these proceedings. On April 5, 1993, the FCC also froze rates for cable services subject to regulation under the 1992 Act for 120 days. On June 11, 1993, the FCC deferred the implementation of rate regulation from June 21, 1993 until October 1, 1993, and extended the freeze on rates for cable services subject to regulation from August 4, 1993 to November 15, 1993. On November 10, 1993, the Commission further extended the freeze until February 15, 1994, and on February 8, 1994, extended the expiration date of the freeze until May 15, 1994. On July 27, 1993, the FCC moved the effective date of rate regulation back to September 1, 1993. Additionally, among other things, the FCC permitted cable operators to structure rates and service offerings up until September 1, 1993, without prior notice to subscribers. On July 16, 1993, the FCC issued a Notice of Proposed Rulemaking to add the regulatory requirements to govern cost-of-service showings that cable operators may submit under this provision to justify rates above the benchmarks. On February 22, 1994, the Commission adopted interim rules to govern the cost of service proceedings. On March 30, 1994, the Commission released a Further Notice of Proposed Rulemaking in connection with its cost of service regulations. In that Notice, the Commission proposed to limit the price a cable operator may recover in transactions with its affiliates. The proposal, if adopted, could adversely affect the Company's transactions with certain cable operators, including Tele-Communications, Inc. and Time Warner, Inc., which are affiliates of the Company. 15 16 On July 1, 1994, the Company filed comments opposing this proposal. The Company cannot predict the ultimate outcome of the proceeding. The constitutionality of these provisions has been challenged in litigation filed in the United States District Court for the District of Columbia. On September 27, 1993, the district court upheld the constitutionality of these provisions. An appeal of that decision is pending in the U.S. Court of Appeals for the District of Columbia. Appeals of the Commission's implementing regulations have also been taken to the United States Court of Appeals for the District of Columbia Circuit. The Company cannot predict the ultimate outcome of the litigation. MUST CARRY AND RETRANSMISSION CONSENT The 1992 Act contains provisions that would require cable television operators to devote up to one-third of their channel capacity to the carriage of local broadcast stations and provide certain channel position rights to local broadcast stations. The 1992 Act also includes provisions governing retransmission of broadcast signals by cable systems, whereby retransmission of broadcast signals would require the broadcaster's consent and provides each local broadcaster the right to make an election between must carry or retransmission consent. The retransmission consent provisions of the 1992 Act became effective on October 5, 1993. On March 11, 1993, the FCC adopted a Report and Order implementing these provisions. The provisions could affect the ability and willingness of cable systems to carry cable programming services. The Company has filed litigation challenging the provision as unconstitutional (see "Legal Proceedings - Turner Broadcasting System, Inc. v. Federal Communications Commission and The United States of America"). The case was remanded by the United States Supreme Court for further proceedings. The Company cannot predict the ultimate outcome of the litigation. PROGRAM ACCESS On April 1, 1993, the Commission issued regulations implementing a provision that, among other things, makes it unlawful for a cable network, in which a cable operator has an attributable interest, to engage in certain unfair methods of competition or unfair or deceptive acts or practices, the purpose and effect of which is to hinder significantly or prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to cable subscribers or consumers. The provisions contain an exemption for any contract that grants exclusive distribution rights to a person with respect to satellite cable programming or that was entered into on or before June 1, 1990. While the Company cannot predict the regulations' full effect on its operations, they may affect the rates charged by the Company's cable programming services to its customers and could affect the terms and conditions of contracts between the Company and its customers. The constitutionality of this provision has been challenged in litigation filed in the United States District Court for the District of Columbia. On September 27, 1993, the district court upheld this provision. An appeal of that decision is pending in the United States Court of Appeals for the District of Columbia Circuit. Appeals of the Commission's implementing regulations have also been taken to the United States Court of Appeals for the District of Columbia Circuit. The Company cannot predict the ultimate outcome of the litigation. REGULATION OF CARRIAGE AGREEMENTS The 1992 Act contains a provision that requires the FCC to establish regulations governing program carriage agreements and related practices between cable operators and video programming vendors, including provisions to prevent the cable operator from requiring a financial interest in a program service as a condition of carriage and provisions designed to prohibit a cable operator from coercing a video programming vendor to provide exclusive rights as a condition of carriage. On October 22, 1993, the Commission issued regulations implementing this provision. The Company cannot at this time predict the effect of this provision on its operations. 16 17 The constitutionality of this provision has been challenged in litigation filed in the United States District Court for the District of Columbia. On September 27, 1993, the district court upheld the constitutionality of this provision. An appeal of that decision is pending in the United States Court of Appeals for the District of Columbia Circuit. The Company cannot predict the outcome of the litigation. OWNERSHIP LIMITATIONS Section 11 of the 1992 Act directed the Commission to prescribe rules and regulations establishing limits on the number of cable subscribers a person is authorized to reach through cable systems owned by such person and the number of channels that can be occupied by video programmers in which a cable operator has an attributable interest. The Commission must also consider the necessity of imposing limitations on the degree to which multichannel video programming distributors may engage in the creation or production of video programming. On December 28, 1992, the FCC issued a Notice of Proposed Rulemaking and Notice of Inquiry with respect to these provisions. On October 22, 1993, the FCC adopted a Second Report and Order that established a 40% limit on the number of channels that may be occupied by programming services in which the particular cable operator has an attributable interest. The Company is subject to this provision. The FCC also established a national limit of 30% on the number of homes passed that any one person can reach through cable systems owned by such person, but stayed implementation of that provision pending judicial review of its constitutionality. Petitions for reconsideration are pending. The Company cannot at this time predict the effect of this provision or of these proposals on its operations. The constitutionality of these provisions has been challenged in litigation filed in the United States District Court for the District of Columbia. On September 27, 1993, the district court found the national limit on homes passed unconstitutional, but upheld the constitutionality of the channel capacity limits. An appeal of that decision is currently pending in the United States Court of Appeals for the District of Columbia Circuit. Appeals of the Commission's implementing regulations have also been taken to the United States Court of Appeals for the District of Columbia Circuit. The Company cannot predict the ultimate outcome of the litigation. SPORTS MIGRATION The 1992 Act directs the FCC to submit an interim report by July 1, 1993, and a final report by July 1, 1994, to Congress on the migration of sports programming from broadcast networks to cable networks and cable pay-per-view. The interim report was submitted on June 24, 1993. On June 30, 1994, the FCC issued its final report in which it recommended that no action by Congress was necessary. 17 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Restated Articles of Incorporation of the Company+ 10.38 Turner Broadcasting System, Inc. 1993 Stock Option and Equity-Based Award Plan (replacing the 1993 Stock Option Plan filed as Exhibit 10.38 to the Company's Form 10-K for the fiscal year ended December 31, 1993)+ 10.42 Amendment No. 1 to Turner Broadcasting System, Inc. 1988 Stock Option Plan*+ 10.43 Amendment No. 2 to Turner Broadcasting System, Inc. 1988 Stock Option Plan*+ 10.44 Turner Broadcasting System, Inc. Long-Term Incentive Plan*+ 11 Computation of Earnings per Common and Common Equivalent Share+ *Management contract or compensatory plan or arrangement. +Previously Filed (b) Reports on Form 8-K No reports have been filed on Form 8-K during the quarter for which this report is filed. 18 19 SIGNATURES Pursuant to the requirements 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. TURNER BROADCASTING SYSTEM, INC. By: /s/ William S. Ghegan ------------------------------------- William S. Ghegan Vice President, Controller and Chief Accounting Officer Date: August 12, 1994 19 20 INDEX TO EXHIBITS 3.1 Restated Articles of Incorporation of the Company+ 10.38 Turner Broadcasting System, Inc. 1993 Stock Option and Equity-Based Award Plan (replacing the 1993 Stock Option Plan filed as Exhibit 10.38 to the Company's Form 10-K for the fiscal year ended December 31, 1993)+ 10.42 Amendment No. 1 to Turner Broadcasting System, Inc. 1988 Stock Option Plan.+ 10.43 Amendment No. 2 to Turner Broadcasting System, Inc. 1988 Stock Option Plan.+ 10.44 Turner Broadcasting System, Inc. Long-Term Incentive Plan.+ 11 Computation of Earnings per Common and Common Equivalent Share+ +Previously Filed -----END PRIVACY-ENHANCED MESSAGE-----