-----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, qbLKuwMBkzfmGHgi85q46SeHyadg21MQfkmeRKnC2jVy/RNLRPnFC79DOBH2Lrrj PmlZ8vsbG38pTMwx87lYdA== 0000950144-95-001275.txt : 19950512 0000950144-95-001275.hdr.sgml : 19950512 ACCESSION NUMBER: 0000950144-95-001275 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TURNER BROADCASTING SYSTEM INC CENTRAL INDEX KEY: 0000100240 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 580950695 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08911 FILM NUMBER: 95536634 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 1 TURNER BROADCASTING SYSTEM, INC. 10-Q, 3-31-95 1 FORM 10-Q 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 March 31, 1995 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. 1-8911 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 March 31, 1995 - ---------------------------- ------------------------------- Class A Common Stock, par value $0.0625 68,330,388 Class B Common Stock, par value $0.0625 137,471,706 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TURNER BROADCASTING SYSTEM, INC. CONSOLIDATED CONDENSED BALANCE SHEETS UNAUDITED (IN THOUSANDS)
MARCH 31, DECEMBER 31, 1995 1994 ------------ ------------ ASSETS Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,856 $ 52,895 Accounts receivable, less allowance of $31,959 and $31,862 Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539,919 567,404 Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,631 103,432 Film costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496,022 446,355 Installment contracts receivable, less allowance of $12,362 and $10,661 . . . . . . . . . . . . . . . . . . . 48,676 46,806 Prepaid expense and other current assets . . . . . . . . . . . . . . . . . 79,630 71,510 ---------- ---------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 1,271,734 1,288,402 Film costs, less current portion . . . . . . . . . . . . . . . . . . . . . 1,902,242 1,893,069 Property and equipment, less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312,818 308,960 Installment contracts receivable, less discount of $536 and $347 . . . . . . . . . . . . . . . . . . . . . . 6,625 1,971 Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . 435,025 409,468 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,330 170,675 ---------- ---------- TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,087,774 $4,072,545 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . $ 227,349 $ 298,849 Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,675 108,122 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,092 61,376 Participants' share and royalties payable . . . . . . . . . . . . . . . . . 66,215 58,417 Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,049 37,338 Film contracts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 66,151 40,252 Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 1,477 1,345 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 47,537 40,702 ---------- ---------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . 643,545 646,401 Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . 2,522,139 2,517,748 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 402,989 385,731 Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . 157,642 178,934 ---------- ---------- TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 3,726,315 3,728,814 TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . 361,459 343,731 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . $4,087,774 $4,072,545 ========== ==========
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 ENDED MARCH 31, ----------------------------- 1995 1994 ------------- -------------- Revenue Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $583,851 $469,104 Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,464 98,200 -------- -------- 710,315 567,304 -------- -------- Cost of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403,742 367,113 Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . 196,176 155,631 Depreciation of property and equipment and amortization of goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,377 12,294 Interest expense, net of interest income . . . . . . . . . . . . . . . . . . . 50,708 51,743 Equity in loss of unconsolidated entities . . . . . . . . . . . . . . . . . . . 5,069 2,317 -------- -------- 672,072 589,098 -------- -------- Income (loss) before provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 38,243 (21,794) Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . 16,253 (8,170) -------- -------- Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,990 $(13,624) ======== ======== Earnings (loss) per common share and common stock equivalent Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ 0.08 $ (0.07) ======== ======== Weighted average number of common shares outstanding, including conversion of common stock equivalents in 1995 . . . . . . . . . . . . . . . . . . . . . . . . 282,367 200,028
See accompanying Notes to Consolidated Condensed Financial Statements. 3 4 TURNER BROADCASTING SYSTEM, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS UNAUDITED (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, -------------------------------- 1995 1994 ------------- ------------- Cash provided by operations before changes in film costs and liabilities, net . . . . . . . . . . . . . . . . . . . . . $ 78,122 $ 64,175 Changes in film costs and liabilities, net Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . . . 20,267 18,757 Produced programming . . . . . . . . . . . . . . . . . . . . . . . . . . . (86,649) (27,168) Licensed program and distribution rights . . . . . . . . . . . . . . . . . 2,030 (5,059) -------- --------- Net cash provided by operations . . . . . . . . . . . . . . . . . . . . . . . . . 13,770 50,705 -------- --------- Cash provided by (used for) investing activities Distribution from unconsolidated entities . . . . . . . . . . . . . . . . . . 5,720 - Acquisitions and advances to unconsolidated entities. . . . . . . . . . . . . (2,522) (142,260) Additions to property and equipment . . . . . . . . . . . . . . . . . . . . (26,452) (32,849) -------- --------- Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . (23,254) (175,109) -------- --------- Cash provided by (used for) financing activities Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 574,610 Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (129) (475,271) Payments of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . (4,902) - Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . 476 477 -------- --------- Net cash provided by (used for) financing activities . . . . . . . . . . . . . . (4,555) 99,816 -------- --------- Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . (14,039) (24,588) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 52,895 162,858 -------- --------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 38,856 $ 138,270 ======== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES: Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,162 $ 6,317 Net interest paid, including interest capitalized of $4,419 and $3,552 . . . . . . . . . . . . . . . . . . . . . . 58,596 33,205 Dividends declared but unpaid . . . . . . . . . . . . . . . . . . . . . . . . . . - 4,901 On January 28, 1994, the Company completed the merger with New Line Cinema Corporation as follows (in thousands): Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 695,400 Less: common stock issued or issuable . . . . . . . . . . . . . . . . . . . . . . 406,700 cash paid for debt and other acquisition costs . . . . . . . . . . . . . . 139,600 --------- Liabilities assumed, including Convertible Debentures . . . . . . . . . . . . . . $ 149,100 =========
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") 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 incorporated by reference in the Company's Form 10-K for the year ended December 31, 1994. 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):
March 31, December 31, 1995 1994 ----------------- ----------------- Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . $1,079,776 $1,102,563 Produced programming Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311,599 302,559 Completed and not released . . . . . . . . . . . . . . . . . . . . . 44,816 40,021 In process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459,835 405,255 Episodic television . . . . . . . . . . . . . . . . . . . . . . . . 111,277 107,543 Licensed program and distribution rights . . . . . . . . . . . . . . . 277,492 257,796 Prepaid licensed program rights . . . . . . . . . . . . . . . . . . . 113,469 123,687 ---------- ---------- 2,398,264 2,339,424 Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . 496,022 446,355 ---------- ---------- $1,902,242 $1,893,069 ========== ==========
Episodic television includes serial television program costs. Prepaid licensed program rights represent licensed program rights for which payments have been made but the programming is 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 86% of released and episodic television produced programming costs at March 31, 1995 will be amortized within the three-year period ending March 31, 1998. Amortization of film costs included in Cost of Operations is composed of the following (in thousands):
Three months ended March 31, ------------------------------ 1995 1994 ------------- ------------- Purchased program rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,363 $ 22,377 Produced programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,385 165,811 Licensed program and distribution rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,080 19,711 Participants' share and royalties . . . . . . . . . . . . . . . . . . . . . . . . 18,110 15,339 Non-cash amortization of certain acquisition purchase adjustments . . . . . . . . . . . . . . . . . . . . . . 2,793 964 -------- -------- $231,731 $224,202 ======== ========
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 1995 and 1994. The 1995 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. In 1994, no common stock equivalents are included in the calculation of primary earnings per share, due to their anti-dilutive effect on net loss for the period. The Company's zero coupon subordinated convertible notes 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 periods ended March 31, 1995 and 1994 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):
MARCH 31, DECEMBER 31, 1995 1994 ----------- ------------ Bank credit facilities . . . . . . . . . . . . . . . . . . . . . $1,490,000 $1,490,000 8 3/8% Senior Notes . . . . . . . . . . . . . . . . . . . . . . 297,396 297,381 7.4% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . 249,645 249,637 8.4% Senior Debentures . . . . . . . . . . . . . . . . . . . . . 199,845 199,845 Zero coupon subordinated convertible notes . . . . . . . . . . . 249,982 245,569 Convertible subordinated debentures of a wholly-owned subsidiary . . . . . . . . . . . . . . . . . . . 29,075 29,075 Obligations under capital leases . . . . . . . . . . . . . . . . 6,297 6,200 Other long-term debt . . . . . . . . . . . . . . . . . . . . . . 1,376 1,386 ---------- ---------- 2,523,616 2,519,093 Less current portion . . . . . . . . . . . . . . . . . . . . . . 1,477 1,345 ---------- ---------- $2,522,139 $2,517,748 ========== ==========
6 7 NOTE 5. STOCKHOLDERS' EQUITY Stockholders' equity consists of the following components (in thousands, except share data):
MARCH 31, DECEMBER 31, 1995 1994 -------------- --------------- 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 137,471,706 and 137,424,549 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,592 8,589 Capital in excess of par value . . . . . . . . . . . . . . . . 1,073,952 1,073,317 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (985,794) (1,002,884) ---------- ----------- Total stockholders' equity . . . . . . . . . . . . . . . . $ 361,459 $ 343,731 ========== ===========
On March 1, 1995, 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 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 issued upon conversion of each share of Class C Preferred Stock. Cash dividends of $4,902,000 were paid on March 30, 1995 to shareholders of record at the close of business on March 15, 1995. 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 Preferred Stock is subject to certain covenants in the Company's outstanding debt instruments. Currently the most restrictive of such covenants 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 and distribution 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 shares, valued at approximately $442,000,000. Cash will be distributed in lieu of any fractional shares. At March 31, 1995 approximately 16,300,000 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 $149,100,000 and paid debt and certain other acquisition costs of approximately $140,000,000 in connection with the Merger. 7 8 Among the liabilities assumed in the Merger were $29,125,000 of New Line 6 1/2% convertible subordinated debentures (the "Convertible Debentures"). The Convertible Debentures are convertible at the option of the holders into an aggregate of approximately 1,700,000 shares of Class B Common Stock. The Merger was accounted for by the purchase method of accounting. Goodwill and other intangible assets in the amount of approximately $330,000,000 were recognized in the transaction, and are being amortized using a straight-line basis over periods not to exceed 40 years. The pro forma effect of the Merger for the three months ended March 31, 1994 is not considered significant. NOTE 7. SUBSEQUENT EVENT On May 9, 1995, the Company signed an agreement with a financial institution whereby the Company and certain of its subsidiaries will sell on an ongoing basis and without recourse up to $300,000,000 of an undivided percentage ownership interest in a designated pool of domestic cable and advertising accounts receivable. The initial sale is expected to close during the second quarter of 1995. The estimated cost of the program for the initial sale of the accounts receivable will not have a material effect on the consolidated statement of operations. 8 9 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 after changes in film costs and associated liabilities for the three months ended March 31, 1995 aggregated $14 million. Included in cash provided by operations were $187 million utilized by the Company for original entertainment and sports programming (including $101 million for theatrical film productions, excluding promotional and advertising costs) and cash interest payments, net of cash interest received, of $59 million. Other primary uses of cash during the period included additions to property and equipment of $26 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 $2.5 billion of outstanding indebtedness at March 31, 1995, of which $1.5 billion was outstanding under unsecured revolving credit facilities with banks. On May 9, 1995, the Company signed an agreement with a financial institution whereby the Company and certain of its subsidiaries will sell on an ongoing basis and without recourse up to $300 million of an undivided percentage ownership interest in a designated pool of domestic cable and advertising accounts receivable. The initial sale is expected to close during the second quarter of 1995. The estimated cost of the program for the initial sale of the accounts receivable will not have a material effect on the consolidated statement of operations. CAPITAL RESOURCES AND COMMITMENTS During the next 12 months, the Company anticipates making cash expenditures of approximately $280 million for sports programming, primarily rights fees, approximately $840 million for original entertainment programming (excluding promotional and advertising costs) and approximately $130 million for licensed programming. Also, during the next 12 months, the Company expects to make total expenditures of approximately $107 million for additional or replacement property and equipment. Of the anticipated programming and capital expenditures described above, firm commitments exist for approximately $570 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 and film suppliers and additional borrowings. 9 10 RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1995 VS. THREE MONTHS ENDED MARCH 31, 1994
UNAUDITED UNAUDITED THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, 1995 MARCH 31, 1994 -------------- -------------- (IN THOUSANDS) Revenue Entertainment Networks $242,796 $197,437 Production & Distribution 286,646 210,850 Intrasegment revenue elimination (31,823) (14,868) -------- -------- Total Entertainment 497,619 393,419 News 183,078 150,788 Other 33,763 25,992 Intersegment revenue elimination (4,145) (2,895) -------- -------- $710,315 $567,304 ======== ======== Operating profit (loss) Entertainment Networks $ 43,152 $ (1,094) Production & Distribution 12,789 (3,166) Intrasegment elimination (8,582) 4,070 -------- -------- Total Entertainment 47,359 (190) News 67,423 49,197 Other (20,762) (16,741) Equity in loss of unconsolidated entities (5,069) (2,317) -------- -------- $ 88,951 $ 29,949 ======== ========
ENTERTAINMENT SEGMENT Entertainment Segment revenue increased $104 million, or 26%, from $394 million to $498 million. In the networks, subscription revenue increased $20 million, or 32%, due to higher rates and an increase in subscribers, while advertising revenue increased $19 million, or 16%, due to an increase in the amount charged per thousand homes and higher viewership. The Company's production and distribution companies contributed the remaining revenue increase primarily through strong home video distribution, which increased $43 million, or 60%, due to recent releases of theatrical film product as well as international sales of existing library product. The remaining increase is due to favorable box office results for new theatrical film releases, which increased $18 million, or 51%. Operating profit for the Entertainment Segment increased $48 million. An increase in the operating profits of the Company's core networks (which consist of TBS SuperStation, TNT and TNT Latin America) of $38 million was primarily due to reduced sports programming costs as compared to the first quarter of last year when the 1994 Winter Olympics were telecast, as well as the subscription and advertising revenue advances mentioned above. Combined operating losses for new networks decreased $2 million to $5 million, as improved results from Cartoon Network and Cartoon Latin America were offset by increased losses from the new operations of TNT & Cartoon Network Asia which was launched in October 1994. Operations outside the networks accounted for the remaining increase, primarily due to favorable results from theatrical film and home video releases. 10 11 NEWS SEGMENT News Segment revenue rose $32 million, or 21%, to $183 million. The increase was due primarily to an $18 million, or 28%, increase in domestic advertising revenue associated with higher viewership levels, and a $5 million, or 10%, increase in domestic subscription revenue primarily due to increased sales in the home satellite dish market. The remaining increase in overall revenue was generated by CNN International, where first quarter revenue rose $7 million, or 31%, to $30 million. As a result of the revenue advances, which outpaced cost increases, operating profit for the News Segment increased $18 million, or 37%. OTHER SEGMENT Revenue for the segment increased $8 million, or 30%, to $34 million. Increased revenues at World Championship Wrestling ("WCW") of $6 million associated primarily with pay-per-view events accounted for the majority of the increase. Overall, operating losses for the Segment rose $4 million, due primarily to higher spending on information technology and other infrastructure to support the growth of the Company and increased operating costs at WCW, offsetting revenue gains. On March 31, 1995, the Major League Baseball Players' Association ended its strike and Major League Baseball scheduled a 144 game season. The strike and abbreviated season are not expected to have a significant impact on the Company's operating results in 1995. EQUITY IN LOSS OF UNCONSOLIDATED ENTITIES/OTHER CONSOLIDATED INFORMATION Operating losses increased $3 million due primarily to reduced Atlanta Hawks ticket revenue associated with attendance levels in comparison to the prior year. Consolidated depreciation and amortization increased approximately $4 million due to purchases of property and equipment. As a result of the information discussed above, the Company reported net income of $22 million in the first quarter of 1995 ($0.08 net income per common share and common share equivalent). This compares to a net loss of $14 million in the first quarter of 1994 ($0.07 net loss per common share). 11 12 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-K for the year ended December 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 June 27, 1994, the United States Supreme Court vacated the District Court's ruling and remanded the case for further proceedings. The Company is pursuing its claims. 12 13 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 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 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. 13 14 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. On July 1, 1994, the Company filed comments opposing this proposal. The Company cannot predict the ultimate outcome of the proceeding. The FCC on November 10, 1994 reversed its policy regarding rate regulation of packages of "a la carte" services. "A la carte" services that are offered in a package will now be subject to rate regulation by the FCC. In light of the uncertainty created by the various criteria that the FCC previously applied to "a la carte" packages, the FCC, in those cases in which it was not clear how the FCC's previous criteria should have been applied to the package at issue, and where only a "small number" of channels were moved from a previously regulated tier to the package, will allow cable operators to treat existing packages as New Product Tiers ("NPTs") as discussed below. The FCC, in addition to revising its rules governing "a la carte" channels, also on November 10, 1994 revised its regulations governing the manner in which cable operators may charge subscribers for new cable programming services. The FCC instituted a three-year flat fee mark-up plan for charges relating to new channels of cable programming services in addition to the present formula for calculating the permissible rate for new services. Commencing on January 1, 1995, operators may charge for new channels of cable programming services added after May 14, 1994 at a mark-up of 20 cents per channel over actual programming costs, but may not make adjustments to monthly rates for these new services totaling more than $1.20, plus an additional 30 cents solely for programming license fees, per subscriber over the first two years of the three-year period. Cable operators may charge an additional 20 cents in the third year only for channels added in that year. Cable operators electing to use the 20 cents per channel adjustment may not take a 7.5% mark-up on programming cost increases, which is permitted under the FCC's current rate regulations. The FCC requested further comment on whether cable operators should continue to receive the 7.5% mark-up on increases in license fees on existing programming services. Additionally, the FCC will permit cable operators to offer NPTs at rates which they elect so long as, among other conditions, other service tiers that are subject to rate regulation are priced in conformity with applicable FCC regulations and cable operators do not remove programming services from such existing tiers and offer them on the NPT. 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 14 15 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"). 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, such regulations 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. 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 15 16 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. On April 5, 1995, the FCC denied the petitions for reconsideration. 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 directed 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. On June 30, 1994, the FCC issued its final report in which it recommended that no action by Congress was necessary. 16 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 4.6.6 Form of Amendment No. 4, dated as of December 5, 1994, among the Company, the banks listed therein and The Chase Manhattan Bank (National Association), as Agent, to the Credit Agreement dated as of July 1, 1993. 4.7.1 Form of Amendment No. 1, dated as of December 5, 1994, among the Company, the banks listed therein and The Chase Manhattan Bank (National Association), as Agent, to the Credit Agreement dated as of September 7, 1994. 11 Computation of Earnings per Common and Common Equivalent Share 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K No reports have been filed on Form 8-K during the quarter for which this report is filed. 17 18 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: May 11, 1995 18 EX-4.6.6 2 AMD. #4 TO CREDIT AGREEMENT OF 7-1-93 1 EXHIBIT 4.6.6 FORM OF AMENDMENT NO. 4 AMENDMENT NO. 4 dated as of December 5, 1994 between TURNER BROADCASTING SYSTEM, INC., a Georgia corporation (the "Company"), the Banks (as such term is defined below) party hereto and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) ("Chase"), as agent (the "Agent"). The Company, certain lenders (the "Banks") and the Agent are party to a Credit Agreement dated as of July 1, 1993 (as amended, supplemented and otherwise modified and in effect to but excluding the date hereof, the "Credit Agreement"). The Company has requested that the Banks agree, and the Banks party hereto are willing, to amend certain provisions of the Credit Agreement, all on the terms and conditions of this Amendment. Accordingly, in consideration of the premises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Terms used but not defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement. Section 2. Amendments. Subject to the satisfaction of the conditions to effectiveness specified in Section 4 hereof, but with effect on and after the date hereof, the Credit Agreement shall be amended as follows: A. Certain Defined Terms. Section 1.01 of the Credit Agreement shall be amended: (1) by adding a sentence at the end of the definition of "Lien" therein reading as follows: "For purposes of this Agreement, sales of accounts receivable under any Permitted Receivables Facility shall not be deemed to constitute Liens."; and (2) by adding the following new definition and inserting the same in the appropriate alphabetical location: "Permitted Receivables Facility" shall mean a receivables purchase facility entered into after December 5, 1994 pursuant to which the Company and/or one or more of its Subsidiaries may at any time or from time to time sell, on a non-recourse credit basis, accounts receivable arising in the ordinary course of business. Amendment No. 4 2 -2- B. Sale of Assets. Section 8.18 of the Credit Agreement shall be amended: (1) by deleting "and" at the end of paragraph (d) thereof; (2) by replacing the period at the end of paragraph (e) thereof with "; and"; and (3) by adding a new paragraph (f) thereto reading as follows: "(f) so long as no Event of Default shall have occurred and then be continuing, the Company and its Subsidiaries may from time to time sell accounts receivable arising in the ordinary course of business under Permitted Receivables Facilities, provided that the aggregate face amount of all such accounts receivable sold thereunder may not exceed $300,000,000 at any one time outstanding." C. Delivery of Permitted Receivables Facilities Agreements. The Credit Agreement shall be amended by adding a new Section 8.20 thereto reading as follows: "8.20 Delivery of Permitted Receivables Facilities Agreements. On or prior to the date of effectiveness of the first sale of accounts receivable under each Permitted Receivables Facility, the Company shall give the Agent notice thereof (and the Agent shall notify the Banks thereof promptly), and shall deliver to the Agent a certified or conformed copy of each of the principal agreements executed and delivered in connection therewith. Promptly following each amendment, waiver and consent relating to a Permitted Receivables Facility, the Company shall give the Agent notice thereof (and the Agent shall notify the Banks thereof promptly), and shall deliver to the Agent a certified or conformed copy of each such amendment, waiver and consent." Section 3. Representations and Warranties. The Company represents and warrants to the Banks and the Agent that: (a) this Amendment has been duly and validly executed and delivered by the Company and constitutes the Company's legal, valid and binding obligation, enforceable against the Company in accordance with its terms; and (b) after giving effect to this Amendment, (i) no Default shall have occurred and be continuing and (ii) the representations and warranties made by the Company in Section 7 of the Credit Agreement are true and correct on Amendment No. 4 3 -3- and as of the date hereof with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). Section 4. Conditions To Effectiveness. The amendments to the Credit Agreement set forth in Section 2 hereof shall become effective, as of the date hereof, upon the receipt by the Agent of this Amendment, duly executed and delivered by the Company, each of the Banks and the Agent. Section 5. Documents Otherwise Unchanged. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect, and each reference to the Credit Agreement and words of similar import in the Credit Agreement, as amended hereby, and the Notes shall be a reference to the Credit Agreement as amended hereby and as the same may be further amended, supplemented and otherwise modified and in effect from time to time. Section 6. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be identical and all of which, when taken together, shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. Section 7. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written. TURNER BROADCASTING SYSTEM, INC. By ------------------------------ Title: Amendment No. 4 4 -4- THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By -------------------------------- Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By -------------------------------- Title: THE FIRST NATIONAL BANK OF BOSTON By -------------------------------- Title: THE BANK OF CALIFORNIA, N.A. By ------------------------------- Title: BANK OF MONTREAL By ------------------------------ Title: Amendment No. 4 5 -5- THE BANK OF NEW YORK COMPANY, INC. By ----------------------------- Title: THE BANK OF NOVA SCOTIA By ----------------------------- Title: BANK OF SCOTLAND By ----------------------------- Title: BANQUE FRANCAISE DU COMMERCE EXTERIEUR By ----------------------------- Title: By ---------------------------- Title: BARCLAYS BANK PLC By ----------------------------- Title: Amendment No. 4 6 -6- CIBC INC. By ---------------------------- Title: CHEMICAL BANK By ---------------------------- Title: CITIBANK, N.A. By ---------------------------- Title: BANK OF AMERICA ILLINOIS By ---------------------------- Title: CREDIT LYONNAIS CAYMAN ISLAND BRANCH By ---------------------------- Title: CREDIT SUISSE By ---------------------------- Title: By ---------------------------- Title: Amendment No. 4 7 -7- THE FIRST NATIONAL BANK OF CHICAGO By ---------------------------- Title: THE FIRST UNION NATIONAL BANK OF GEORGIA By ---------------------------- Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By ---------------------------- Title: LTCB TRUST COMPANY By ---------------------------- Title: MELLON BANK, N.A. By ---------------------------- Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By ---------------------------- Title: Amendment No. 4 8 -8- NATIONSBANK OF TEXAS, N.A. By ---------------------------- Title: THE NIPPON CREDIT BANK, LTD. By ---------------------------- Title: ROYAL BANK OF CANADA By ---------------------------- Title: THE SAKURA BANK, LIMITED, ATLANTA AGENCY By ---------------------------- Title: SOCIETE GENERALE By ---------------------------- Title: THE TOKAI BANK, LIMITED By ---------------------------- Title: THE TORONTO-DOMINION BANK By ---------------------------- Title: Amendment No. 4 9 -9- UNION BANK By ---------------------------- Title: THE YASUDA TRUST AND BANKING CO., LTD. By ---------------------------- Title: BANKERS TRUST COMPANY By ---------------------------- Title: BANK OF HAWAII By ---------------------------- Title: BANQUE PARIBAS By ---------------------------- Title: CORESTATES BANK, N.A. By ---------------------------- Title: Amendment No. 4 10 -10- CRESTAR BANK By ---------------------------- Title: THE FUJI BANK, LTD. By ---------------------------- Title: THE HOKKAIDO TAKUSHOKU BANK LTD. By ---------------------------- Title: MIDLAND BANK, PLC By ---------------------------- Title: PNC BANK, NATIONAL ASSOCIATION By ---------------------------- Title: SHAWMUT BANK CONNECTICUT, N.A. By ---------------------------- Title: Amendment No. 4 11 -11- SWISS BANK CORPORATION, NEW YORK BRANCH By --------------------------- Title: By --------------------------- Title: THE BANK OF TOKYO TRUST COMPANY By --------------------------- Title: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) as Agent By -------------------------- Title: Amendment No. 4 12 [EXECUTION COPY] February 28, 1995 Turner Broadcasting System, Inc. One CNN Center Atlanta, Georgia 30348 Attn: Christian L. Becken The Chase Manhattan Bank (National Association), as Agent for the Banks party to the Credit Agreement referred to below Re: Amendment No. 4 to the Credit Agreement Ladies and Gentlemen: Reference is made to (1) the Credit Agreement dated as of July 1, 1993 (as amended, supplemented and otherwise modified and in effect from time to time, the "Credit Agreement") between Turner Broadcasting System, Inc. (the "Company"), the Banks party thereto and The Chase Manhattan Bank (National Association), as Agent for said Banks (in such capacity, the "Agent"), and (2) Amendment No. 4 dated as of December 5, 1994 ("Amendment No. 4") to the Credit Agreement, a copy of which is attached hereto as Annex A. This is to advise you that the undersigned, which anticipates becoming a "Bank" party to the Credit Agreement on or prior to March 15, 1995, hereby consents to Amendment No. 4, and to the amendments to the Credit Agreement set forth therein, for all purposes of the Credit Agreement and the Notes. The undersigned hereby ratifies the Agent's execution and delivery of Amendment No. 4. IN WITNESS WHEREOF, the undersigned has caused this instrument to be duly executed as of the day and year first above written. FIRST HAWAIIAN BANK By /s/ Donald C. Young ------------------------- Title: Media Finance Officer 13 [EXECUTION COPY] February 14, 1995 Turner Broadcasting System, Inc. One CNN Center Atlanta, Georgia 30348 Attn: Christian L. Becken The Chase Manhattan Bank (National Association), as Agent for the Banks party to the Credit Agreement referred to below Re: Amendment No. 4 to the Credit Agreement Ladies and Gentlemen: Reference is made to (1) the Credit Agreement dated as of July 1, 1993 (as amended, supplemented and otherwise modified and in effect from time to time, the "Credit Agreement") between Turner Broadcasting System, Inc. (the "Company"), the Banks party thereto and The Chase Manhattan Bank (National Association), as Agent for said Banks (in such capacity, the "Agent"), and (2) Amendment No. 4 dated as of December 5, 1994 ("Amendment No. 4") to the Credit Agreement, a copy of which is attached hereto as Annex A. This is to advise you that the undersigned, which became a "Bank" party to the Credit Agreement subsequent to January 1, 1995, hereby consents to Amendment No. 4, and to the amendments to the Credit Agreement set forth therein, for all purposes of the Credit Agreement and the Notes. The undersigned hereby ratifies the Agent's execution and delivery of Amendment No. 4. IN WITNESS WHEREOF, the undersigned has caused this instrument to be duly executed as of the day and year first above written. THE DAI-ICHI KANGYO BANK, LTD. By /s/ ------------------------- Title: Joint General Manager EX-4.7.1 3 AMD. #1 TO CREDIT AGREEMENT OF 9-7-94 1 EXHIBIT 4.7.1 [EXECUTION COUNTERPART] FORM OF AMENDMENT NO. 1 AMENDMENT NO. 1 dated as of December 5, 1994 between TURNER BROADCASTING SYSTEM, INC., a Georgia corporation (the "Company"), the Banks (as such term is defined below) party hereto and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) ("Chase"), as agent (the "Agent"). The Company, certain lenders (the "Banks") and the Agent are party to a Credit Agreement dated as of September 7, 1994 (as amended, supplemented and otherwise modified and in effect to but excluding the date hereof, the "Credit Agreement"). The Company has requested that the Banks agree, and the Banks party hereto are willing, to amend certain provisions of the Credit Agreement, all on the terms and conditions of this Amendment. Accordingly, in consideration of the premises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Terms used but not defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement. Section 2. Amendments. Subject to the satisfaction of the conditions to effectiveness specified in Section 4 hereof, but with effect on and after the date hereof, the Credit Agreement shall be amended as follows: A. Certain Defined Terms. Section 1.01 of the Credit Agreement shall be amended: (1) by adding a sentence at the end of the definition of "Lien" therein reading as follows: "For purposes of this Agreement, sales of accounts receivable under any Permitted Receivables Facility shall not be deemed to constitute Liens."; and (2) by adding the following new definition and inserting the same in the appropriate alphabetical location: "Permitted Receivables Facility" shall mean a receivables purchase facility entered into after December 5, 1994 pursuant to which the Company and/or one or more of its Subsidiaries may at any time or from time to time sell, on a non-recourse credit basis, accounts receivable arising in the ordinary course of business. Amendment No. 1 2 - 2 - B. Sale of Assets. Section 8.18 of the Credit Agreement shall be amended: (1) by deleting "and" at the end of paragraph (d) thereof; (2) by replacing the period at the end of paragraph (e) thereof with "; and"; and (3) by adding a new paragraph (f) thereto reading as follows: "(f) so long as no Event of Default shall have occurred and then be continuing, the Company and its Subsidiaries may from time to time sell accounts receivable arising in the ordinary course of business under Permitted Receivables Facilities, provided that the aggregate face amount of all such accounts receivable sold thereunder may not exceed $300,000,000 at any one time outstanding." C. Delivery of Permitted Receivables Facilities Agreements. The Credit Agreement shall be amended by adding a new Section 8.20 thereto reading as follows: "8.20 Delivery of Permitted Receivables Facilities Agreements. On or prior to the date of effectiveness of the first sale of accounts receivable under each Permitted Receivables Facility, the Company shall give the Agent notice thereof (and the Agent shall notify the Banks thereof promptly), and shall deliver to the Agent a certified or conformed copy of each of the principal agreements executed and delivered in connection therewith. Promptly following each amendment, waiver and consent relating to a Permitted Receivables Facility, the Company shall give the Agent notice thereof (and the Agent shall notify the Banks thereof promptly), and shall deliver to the Agent a certified or conformed copy of each such amendment, waiver and consent." Section 3. Representations and Warranties. The Company represents and warrants to the Banks and the Agent that: (a) this Amendment has been duly and validly executed and delivered by the Company and constitutes the Company's legal, valid and binding obligation, enforceable against the Company in accordance with its terms; and (b) after giving effect to this Amendment, (i) no Default shall have occurred and be continuing and (ii) the representations and warranties made by the Company in Section 7 of the Credit Agreement are true and correct on Amendment No. 1 3 - 3 - and as of the date hereof with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). Section 4. Conditions To Effectiveness. The amendments to the Credit Agreement set forth in Section 2 hereof shall become effective, as of the date hereof, upon the receipt by the Agent of this Amendment, duly executed and delivered by the Company, each of the Banks and the Agent. Section 5. Documents Otherwise Unchanged. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect, and each reference to the Credit Agreement and words of similar import in the Credit Agreement, as amended hereby, and the Notes shall be a reference to the Credit Agreement as amended hereby and as the same may be further amended, supplemented and otherwise modified and in effect from time to time. Section 6. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be identical and all of which, when taken together, shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. Section 7. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written. TURNER BROADCASTING SYSTEM, INC. By ------------------------- Title: Amendment No. 1 4 - 4 - THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By ------------------------------------ Title: CREDIT LYONNAIS CAYMAN ISLAND BRANCH By ------------------------------------ Title: THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By ------------------------------------ Title: THE TORONTO-DOMINION BANK By ------------------------------------ Title: BANK OF AMERICA ILLINOIS By ------------------------------------ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By ------------------------------------ Title: Amendment No. 1 5 - 5 - BANK OF MONTREAL By ---------------------------------- Title: THE BANK OF NEW YORK COMPANY, INC. By ---------------------------------- Title: THE BANK OF NOVA SCOTIA By ---------------------------------- Title: CHEMICAL BANK By ---------------------------------- Title: CREDIT SUISSE By ---------------------------------- Title: By ---------------------------------- Title: THE FIRST NATIONAL BANK OF BOSTON By ---------------------------------- Title: Amendment No. 1 6 - 6 - THE FIRST NATIONAL BANK OF CHICAGO By -------------------------------- Title: FIRST UNION NATIONAL BANK OF GEORGIA By -------------------------------- Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY By -------------------------------- Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By -------------------------------- Title: NATIONSBANK OF TEXAS, N.A. By -------------------------------- Title: ROYAL BANK OF CANADA By -------------------------------- Title: SHAWMUT BANK CONNECTICUT, N.A. By -------------------------------- Title: Amendment No. 1 7 - 7 - SOCIETE GENERALE By ---------------------------------- Title: UNION BANK By ---------------------------------- Title: THE BANK OF CALIFORNIA, N.A. By ---------------------------------- Title: BANK OF HAWAII By ---------------------------------- Title: CIBC INC. By ---------------------------------- Title: THE FUJI BANK, LTD. By ---------------------------------- Title: MIDLAND BANK, PLC By ---------------------------------- Title: Amendment No. 1 8 - 8 - PNC BANK, NATIONAL ASSOCIATION By ---------------------------------- Title: CRESTAR BANK By ---------------------------------- Title: THE NIPPON CREDIT BANK, LTD. By ---------------------------------- Title: SWISS BANK CORPORATION, NEW YORK BRANCH By ---------------------------------- Title: By ---------------------------------- Title: THE TOKAI BANK, LIMITED By ---------------------------------- Title: THE YASUDA TRUST AND BANKING CO., LTD. By ---------------------------------- Title: Amendment No. 1 9 - 9 - THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By -------------------------------- Title: Amendment No. 1 EX-11 4 COMPUTATION OF EARNINGS 1 EXHIBIT 11 TURNER BROADCASTING SYSTEM, INC. COMPUTATION OF PRIMARY EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, 1995 ------------------ Net income applicable to common stock $ 21,990 ======== Weighted average number of shares outstanding during the period 205,777 Add: Common equivalent shares issuable assuming conversion of Class C Convertible Preferred Stock 74,382 Shares issuable upon exercise of stock options 15,935 Subtract: Shares which would have been purchased with proceeds from exercise of such stock options 13,727 -------- Weighted average number of common stock, common stock equivalents and converted shares outstanding 282,367 ======== Weighted average number of Class A common shares and common stock equivalents 68,330 ======== Weighted average number of Class B common shares and common stock equivalents 214,037 ======== Earnings per share and common stock equivalent of Class A and Class B Common Stock $ 0.08 ========
2 EXHIBIT 11 (cont.) TURNER BROADCASTING SYSTEM, INC. COMPUTATION OF FULLY-DILUTED EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, 1995 ------------------ Net income applicable to common stock $ 21,990 ======== Add: Interest expense on zero coupon subordinated convertible notes due 2007 4,432 Interest expense on 6.5% convertible notes 473 Subtract: Additional income taxes (2,060) -------- Adjusted net income applicable to common stock $ 24,835 ======== Primary weighted average number of shares outstanding 282,367 Add: Common equivalent shares issuable assuming conversion of convertible notes due 2007 7,440 Change in shares due to options assumed converted using the end of period market value 77 Shares issuable assuming conversion of 6.5% convertible notes 1,661 -------- Weighted average number of common stock, common stock equivalents and convertible shares, assuming full dilution 291,544 ======== Weighted average number of Class A common shares and common equivalents and convertible shares, assuming full dilution 68,330 ======== Weighted average number of Class B common shares and common equivalents and convertible shares, assuming full dilution 223,214 ======== Earnings per share and common stock equivalent of Class A and Class B Common Stock $ 0.09 ========
This calculation is submitted in accordance with the rules and regulations of the Securities and Exchange Commission. Under generally accepted accounting principles this presentation would not be made because it is anti-dilutive. EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 38,856 0 640,509 31,959 0 1,271,734 543,776 230,958 4,087,774 643,545 2,523,616 12,863 0 260,438 88,158 4,087,774 710,315 710,315 403,742 621,364 0 6,232 50,708 38,243 16,253 21,990 0 0 0 21,990 0.08 0
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