0000950144-95-002277.txt : 19950815 0000950144-95-002277.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950144-95-002277 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME SHOPPING NETWORK INC CENTRAL INDEX KEY: 0000791024 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 592649518 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09118 FILM NUMBER: 95562246 BUSINESS ADDRESS: STREET 1: 2501 118TH AVE NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 8135728585 10-Q 1 HOME SHOPPING NETWORK, 10-Q, 06/30/95 1 LOGO HOME SHOPPING NETWORK FORM 10-Q For the Quarter Ended June 30, 1995 2 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 COMMISSION FILE NUMBER 1-9118 --------------------- HOME SHOPPING NETWORK, INC. (Exact name of registrant as specified in its charter) DELAWARE 59-2649518 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
2501 118TH AVENUE NORTH, ST. PETERSBURG, FLORIDA 33716 (Address of principal executive offices) (Zip Code) (813) 572-8585 (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 ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Total number of shares of outstanding stock (net of 6,986,000 shares of common stock held in treasury) as of August 1, 1995: Common stock......................... 70,633,629 Class B common stock................. 20,000,000
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 3 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
---------------------------------------------------------------------------------------- THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------- --------------------- 1995 1994 1995 1994 ---------------------------------------------------------------------------------------- (In thousands, except per share data) NET SALES............................ $246,659 $274,005 $490,269 $548,220 Cost of sales........................ 166,156 178,803 328,091 354,418 -------- -------- -------- -------- Gross profit.............. 80,503 95,202 162,178 193,802 -------- -------- -------- -------- Operating expenses: Selling and marketing.............. 41,433 39,078 83,580 77,246 Engineering and programming........ 24,082 24,809 49,439 49,033 General and administrative......... 21,089 20,134 40,383 40,388 Depreciation and amortization...... 8,956 6,932 17,900 13,027 Restructuring charge............... -- -- 2,041 -- -------- -------- -------- -------- 95,560 90,953 193,343 179,694 -------- -------- -------- -------- Operating profit (loss)... (15,057) 4,249 (31,165) 14,108 Other income (expense): Interest income.................... 466 3,628 1,021 7,077 Interest expense................... (2,058) (2,089) (3,277) (4,176) Miscellaneous...................... 1,178 (2,498) 3,525 (2,252) -------- -------- -------- -------- (414) (959) 1,269 649 -------- -------- -------- -------- Earnings (loss) before income taxes.............................. (15,471) 3,290 (29,896) 14,757 Income tax expense (benefit)......... (5,735) 1,382 (11,361) 6,198 -------- -------- -------- -------- NET EARNINGS (LOSS).................. $ (9,736) $ 1,908 $(18,535) $ 8,559 ========= ========= ========= ========= Net earnings (loss) per common share.............................. $ (.11) $ .02 $ (.21) $ .09 ========= ========= ========= ========= Weighted average shares outstanding........................ 90,606 94,949 90,897 95,008 ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 1 4 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
----------------------------------------------------------------------------------------- JUNE 30, --------------------- DECEMBER 31, ASSETS 1995 1994 1994 ----------------------------------------------------------------------------------------- (In thousands) CURRENT ASSETS Cash and cash equivalents........................ $ 15,684 $ 28,852 $ 33,648 Accounts and notes receivable, net............... 27,817 29,271 40,841 Income taxes receivable.......................... 8,607 -- 2,816 Note and interest receivable from related party.......................................... -- 130,007 -- Inventories, net................................. 107,598 102,421 118,801 Deferred income taxes............................ 16,115 24,693 22,108 Other current assets, net........................ 11,824 10,523 10,632 -------- -------- ------------ Total current assets.................. 187,645 325,767 228,846 PROPERTY, PLANT AND EQUIPMENT Computer and broadcast equipment................. 107,523 104,089 106,144 Buildings and leasehold improvements............. 75,692 72,810 74,514 Furniture and other equipment.................... 47,427 42,467 46,183 -------- -------- ------------ 230,642 219,366 226,841 Less accumulated depreciation and amortization................................ 124,527 108,264 116,697 -------- -------- ------------ 106,115 111,102 110,144 Land............................................. 17,833 17,695 17,774 Construction in progress......................... 2,925 3,321 3,182 -------- -------- ------------ 126,873 132,118 131,100 OTHER ASSETS Cable distribution fees, net ($34,295, $20,034, and $34,174, respectively, to related parties)....................................... 94,759 32,535 67,978 Long-term investment in related party............ 10,000 10,000 10,000 Other non-current assets......................... 9,873 5,246 8,575 -------- -------- ------------ 114,632 47,781 86,553 -------- -------- ------------ $429,150 $505,666 $446,499 ========= ========= ===========
The accompanying notes are an integral part of these statements. 2 5 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
----------------------------------------------------------------------------------------- JUNE 30, --------------------- DECEMBER 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 1994 ----------------------------------------------------------------------------------------- (In thousands) CURRENT LIABILITIES Current maturities of long-term obligations....... $ 1,540 $ 85,947 $ 1,690 Accounts payable.................................. 91,439 84,992 75,264 Income taxes payable.............................. -- 14,732 -- Accrued liabilities: Programming fees ($16,282, $19,703 and $26,591, respectively, to related parties)............ 36,200 34,612 50,170 Sales returns................................... 8,647 11,638 12,304 Sales taxes..................................... 5,184 5,791 -- Litigation settlements.......................... 4,850 14,450 14,450 Treasury stock.................................. -- -- 13,109 Other........................................... 32,318 31,155 38,786 -------- -------- ------------ Total current liabilities.............. 180,178 283,317 205,773 LONG-TERM OBLIGATIONS (net of current maturities)..................................... 77,365 1,255 27,491 DEFERRED INCOME TAXES............................. 5,348 8,978 6,792 COMMITMENTS AND CONTINGENCIES..................... -- -- -- STOCKHOLDERS' EQUITY Preferred stock -- $.01 par value; authorized 500,000 shares, no shares issued and outstanding..................................... -- -- -- Common stock -- $.01 par value; authorized 150,000,000 shares, issued 77,603,129 and 77,458,979 shares at June 30, 1995 and 1994, respectively, and 77,553,329 shares at December 31, 1994........................................ 776 775 776 Class B -- convertible common stock -- $.01 par value; authorized, issued and outstanding, 20,000,000 shares at June 30, 1995 and 1994 and December 31, 1994, respectively................. 200 200 200 Additional paid-in capital........................ 167,787 166,108 167,463 Retained earnings................................. 51,025 61,342 69,560 Treasury stock -- 6,986,000 and 3,105,700 common shares at June 30, 1995 and 1994, respectively, and 4,440,700 common shares at December 31, 1994, at cost................................... (48,718) (14,027) (27,136) Unearned compensation............................. (4,811) (2,282) (4,420) -------- -------- ------------ 166,259 212,116 206,443 -------- -------- ------------ $429,150 $505,666 $446,499 ========= ========= ===========
The accompanying notes are an integral part of these statements. 3 6 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
------------------------------------------------------------------------------------------------------------------ CLASS B CONVERTIBLE ADDITIONAL COMMON COMMON PAID-IN RETAINED TREASURY UNEARNED STOCK STOCK CAPITAL EARNINGS STOCK COMPENSATION TOTAL ------------------------------------------------------------------------------------------------------------------ (In thousands) BALANCE AT JANUARY 1, 1994...... $762 $ 206 $160,371 $ 52,783 $(14,027) $ (3,541) $196,554 Issuance of common stock upon exercise of stock options..... 7 -- 3,974 -- -- -- 3,981 Income tax benefit related to executive stock award program and stock options exercised... -- -- 1,763 -- -- -- 1,763 Expense related to executive stock award program........... -- -- -- -- -- 1,259 1,259 Conversion of Class B common stock to common stock......... 6 (6) -- -- -- -- -- Net earnings for the six months ended June 30, 1994........... -- -- -- 8,559 -- -- 8,559 ------ ----- ---------- -------- -------- ------------ -------- BALANCE AT JUNE 30, 1994........ $775 $ 200 $166,108 $ 61,342 $(14,027) $ (2,282) $212,116 ======== ========== ========= ========= ========= ============ ========= BALANCE AT JANUARY 1, 1995...... $776 $ 200 $167,463 $ 69,560 $(27,136) $ (4,420) $206,443 Issuance of common stock upon exercise of stock options..... -- -- 274 -- -- -- 274 Income tax benefit related to executive stock award program and stock options exercised... -- -- 50 -- -- -- 50 Expense related to executive stock award program........... -- -- -- -- -- 363 363 Unearned compensation related to employee equity participation plan.......................... -- -- -- -- -- (1,264) (1,264) Expense related to employee equity participation plan..... -- -- -- -- -- 510 510 Purchase of treasury stock, at cost.......................... -- -- -- -- (21,582) -- (21,582) Net loss for the six months ended June 30, 1995........... -- -- -- (18,535) -- -- (18,535) ------ ----- ---------- -------- -------- ------------ -------- BALANCE AT JUNE 30, 1995........ $776 $ 200 $167,787 $ 51,025 $(48,718) $ (4,811) $166,259 ======== ========== ========= ========= ========= ============ =========
The accompanying notes are an integral part of these statements. 4 7 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
---------------------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, --------------------- 1995 1994 ---------------------------------------------------------------------------------------------- (In thousands) Cash flows from operating activities: Net earnings (loss).................................................... $(18,535) $ 8,559 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization..................................... 12,353 12,381 Amortization of cable distribution fees........................... 5,547 646 Deferred income taxes............................................. 4,549 5,250 Loss on disposition of wholly-owned subsidiary.................... -- 2,854 Change in stock appreciation rights and common stock issued for services provided................................................ (414) 682 Inventory carrying value adjustment............................... (2,642) (3,427) Provision for losses on accounts and notes receivable............. (36) 217 (Gain) loss on sale of assets..................................... (19) 144 Equity in (earnings) losses of unconsolidated affiliates.......... 16 (93) Change in current assets and liabilities: (Increase) decrease in accounts receivable...................... 7,835 (1,587) Increase in income taxes receivable............................. (5,791) -- Decrease in inventories......................................... 13,845 11,936 (Increase) decrease in other current assets..................... 105 (2,453) Increase (decrease) in accounts payable......................... 16,175 (3,866) Increase (decrease) in accrued liabilities and income taxes payable........................................................ (27,174) 19,573 Increase in cable distribution fees............................... (32,328) (33,181) Stock purchases for employee benefit plan......................... (1,264) -- -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.......... (27,778) 17,635 -------- -------- Cash flows from investing activities: Capital expenditures................................................. (7,044) (7,404) Proceeds from long-term notes receivable............................. 2,907 2,320 Increase in intangible assets........................................ (1,577) (993) (Increase) decrease in other non-current assets...................... (703) 731 Proceeds from sale of assets......................................... 925 2,086 -------- -------- NET CASH USED IN INVESTING ACTIVITIES........................ (5,492) (3,260) -------- -------- Cash flows from financing activities: Net borrowings from unsecured credit facility........................ 50,000 -- Purchases of treasury stock.......................................... (34,691) -- Principal payments on long-term obligations.......................... (277) (25,070) Proceeds from issuance of common stock............................... 274 3,981 -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.......... 15,306 (21,089) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS.............................. (17,964) (6,714) Cash and cash equivalents at beginning of period....................... 33,648 35,566 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 15,684 $ 28,852 ======== ========
The accompanying notes are an integral part of these statements. 5 8 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A -- BASIS OF PRESENTATION The interim Condensed Consolidated Financial Statements of Home Shopping Network, Inc. and Subsidiaries (the "Company") are unaudited and should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto for the years ended December 31, 1994 and 1993, the four months ended December 31, 1992 and the year ended August 31, 1992. Certain amounts in the Condensed Consolidated Financial Statements for the six month period ended June 30, 1994, have been reclassified to conform to the 1995 presentation. In the opinion of the Company, all adjustments necessary for a fair presentation of such Condensed Consolidated Financial Statements have been included. Such adjustments consist of normal recurring items and a nonrecurring item as discussed in Note E. Interim results are not necessarily indicative of results for a full year. The interim Condensed Consolidated Financial Statements and Notes thereto are presented as permitted by the Securities and Exchange Commission and do not contain certain information included in the Company's annual Consolidated Financial Statements and Notes thereto. NOTE B -- COMMITMENTS AND CONTINGENCIES Litigation A consolidated class action initiated in 1990 is pending against the Company in the Court of Common Pleas of Bucks County, Pennsylvania. The complaints allege violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law with respect to the Company's pricing practices for diamond and imitation diamond jewelry. Plaintiffs seek compensatory damages of at least $100 per class member, treble damages, attorneys' fees, costs, interest and other relief on behalf of all Pennsylvania residents who purchased any jewelry containing diamonds or imitation diamonds from the Home Shopping Club between December 27, 1984 and May 20, 1991. Substantial discovery has been taken in the case. Motions for summary judgment filed by Plaintiffs and the Company have been denied. The Company believes that it has meritorious defenses and is vigorously defending this action. The Company is also involved in various other lawsuits either as plaintiff or defendant. In the opinion of management, the ultimate outcome of these other lawsuits should not have a material impact on the Company's liquidity, results of operations or financial condition. NOTE C -- CREDIT FACILITY The Company's $150.0 million revolving credit facility, as amended on June 28, 1995, expires on August 30, 1997. Borrowings under this facility may be used for general corporate purposes. The total amount available to be drawn under this facility is dependent upon, among other things, future operating cash flow performance. The interest rate on borrowings under the credit facility is tied to LIBOR plus a margin based on the Company's total borrowings and operating cash flow results. At June 30, 1995, the Company was in compliance with all covenants contained in the credit facility. At August 14, 1995, $95.0 million was outstanding under this facility. NOTE D -- INCOME TAXES The Company's federal income tax returns have previously been examined by the Internal Revenue Service ("IRS") for all years through August 31, 1989. All assessments relating to these examinations have been paid. The assessments included a disallowance of deductions for royalty payments made to a then related party. On May 12, 1995, the IRS completed its examination of the Company's federal income tax returns for fiscal years 1990 and 1991, proposing adjustments resulting in income tax deficiencies of $3.0 million, 6 9 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) primarily related to the previously discussed royalty payments. The Company also made such royalty payments during fiscal years 1992 through early 1993. It is expected that the deductibility of these payments will also be challenged by the IRS upon audit. The Company has made adequate provision for this issue for all of the above years. The Company continues to maintain that it has meritorious positions regarding the deductibility of these payments and intends to file a refund claim with the IRS for the payment made for years through fiscal 1989 and will contest the assessment for this matter on open tax years. The Company's federal income tax returns for fiscal years ended August 31, 1992, 1993, and 1994 are currently under examination by the IRS. No additional proposed adjustments relating to such years have been brought to management's attention. The Company has incurred pre-tax financial statement and tax losses for the six months ended June 30, 1995, totaling $29.8 million and $40.9 million, respectively. Should such tax losses still exist at December 31, 1995, $8.9 million may be carried back to obtain an income tax refund at the Company's option. Management believes that it is more likely than not that it will generate future taxable income sufficient to realize this tax benefit which expires December 31, 2010. This belief is based upon, among other things, merchandising and programming strategies instituted by new senior management which are aimed at long-term improvements in sales and operating results, reducing merchandise return rates, obtaining additional program carriage and increasing market penetration. Accordingly, the Company has recognized an asset related to these carry-forwards and no valuation allowance has been provided. NOTE E -- RESTRUCTURING CHARGE During the six months ended June 30, 1995, the Company recorded a charge of $2.0 million covering employee and other costs related to the closing of its fulfillment center in Reno, Nevada. The restructuring was completed by June 30, 1995. During the six months ended June 30, 1995, payments totaling $.5 million were made related to this charge. NOTE F -- EARNINGS (LOSS) PER COMMON SHARE Primary earnings (loss) per common share is based on net earnings (loss) divided by the weighted average common shares outstanding giving effect to stock options when dilutive. Fully diluted earnings per share is not materially different from primary earnings per share in any period presented. NOTE G -- STATEMENTS OF CASH FLOWS For purposes of reporting cash flows, cash and cash equivalents include cash and short-term investments. Short-term investments consist primarily of auction preferred shares, money market funds and certificates of deposit with original maturities of less than 91 days. Supplemental disclosures of cash flow information:
-------------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, -------------------- 1995 1994 -------------------------------------------------------------------------------------- (In thousands) CASH PAID FOR: Interest...................................................... $ 2,580 $4,640 Income taxes.................................................. 385 39 CASH RECEIVED FOR: Income tax refund............................................. 10,725 --
7 10 HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) On March 27, 1995, Precision Systems, Inc. ("PSi") repaid $2.7 million, plus accrued interest, of its $5.0 million loan from the Company. Under an agreement between the Company and PSi, the remaining principal balance of the loan has been recorded as a prepayment of future monthly software maintenance payments due PSi by the Company through December 1996. 8 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES GENERAL Home Shopping Network, Inc. (the "Company") is a holding company, the subsidiaries of which conduct the day-to-day operations of the Company's various business activities. The Company's primary business is electronic retailing conducted by Home Shopping Club, Inc. ("HSC"), a wholly-owned subsidiary of the Company. A. CONSOLIDATED RESULTS OF OPERATIONS The following discussion presents the material changes in the consolidated results of operations of the Company which have occurred in the second quarter and first six months of 1995, compared with the same periods in 1994. Reference should also be made to the Condensed Consolidated Financial Statements included herein. All tables and discussion included herein calculate the percentage changes using actual dollar amounts, versus rounded dollar amounts. NET SALES For the quarter and six months ended June 30, 1995, net sales for the Company decreased $27.3 million, or 10.0%, to $246.7 million from $274.0 million and $58.0 million, or 10.6%, to $490.3 million from $548.2 million, respectively, compared to the same periods in 1994. Net sales of HSC decreased $34.7 million, or 14.1%, and $81.0 million, or 16.3%, for the quarter and six months ended June 30, 1995. HSC's sales reflect decreases of 17.9% and 17.2% in the number of packages shipped while the average price per unit sold increased 6.6% and 2.3% for the quarter and six months ended June 30, 1995, respectively, compared to the same periods in 1994. The decreases in HSC sales for the quarter and six months ended June 30, 1995, were somewhat offset by sales of $5.3 million and $17.1 million, respectively, by the Company's infomercial joint venture, HSN Direct Joint Venture ("HSND"), which commenced operations during the third quarter of 1994. The remaining increases in sales are attributable to the Company's other subsidiary operations. Since September 1994, the Company has appointed new senior management personnel with expertise in merchandising and has also instituted procedures intended to improve purchasing and other merchandising practices. Management's strategies include offering a greater variety of products, developing strong private label lines, selling higher margin items and offering name brand and other high quality merchandise. Management attributes HSC's decline in net sales for the quarter and six months ended June 30, 1995, to the initial impact of the Company's new merchandising and programming strategies. Since June 5, 1995, the Company has operated two full-time networks renamed HSN, the primary network, and Spree!. On August 5, 1995, the Company relaunched the HSN network with more scheduled programs and theme related shows, new sets, graphics and music. During the third quarter of 1995, the Company will relaunch the Spree! network with a casual, fun format, including new graphics, music and less scheduled programming. These changes, which are ongoing, are designed to eliminate programming redundancies, distinguish the networks and reach a broader range of potential customers. The Company has made significant progress in executing these strategies, which are aimed at long-term improvements in sales by attracting new customers and increasing the frequency of repeat purchases. However, sales and operating results through the third quarter of 1995, when compared to the prior year, are expected to continue to be negatively affected by these changes. While management believes the Company's new merchandising and programming strategies will improve results, it estimates the earliest that sales and operating results will be positively affected, when compared to the prior year, will be the fourth quarter of 1995. There can be no assurance that these changes will achieve management's intended results. 9 12 For the quarter and six months ended June 30, 1995, HSC's merchandise return percentage increased to 25.1% from 23.4%, and to 24.6% from 24.2%, respectively, compared to the same periods in 1994. Management is evaluating the Company's product mix and taking other steps in the area of merchandising, as discussed above, in an attempt to reduce the merchandise return rate. Promotional price discounts remained constant at 2.9% of HSC sales for the quarter ended June 30, 1995, and increased to 3.2% from 2.6% of HSC sales for the six months ended June 30, 1995, compared to the same periods in 1994. At June 30, 1995, HSC had approximately 4.9 million active members representing a 2.7% increase over June 30, 1994. An active member is defined as a customer that has completed a transaction within the last 18 months or placed an order within the last seven months. In addition, 58.8% of active members have made more than one purchase in the last 18 months, compared to 61.2% at June 30, 1994. Since late 1993, the Company has significantly increased its program carriage and believes that future levels of net sales of HSC will be dependent on the success of the new merchandising and programming strategies in increasing market penetration. Market penetration represents the level of active members within a market. The following table highlights the changes in the estimated unduplicated television household reach of HSC programming by category for the twelve months ended June 30, 1995:
--------------------------------------------------------------------------------------------- CABLE BROADCAST SATELLITE TOTAL --------------------------------------------------------------------------------------------- (In thousands of households) Households -- June 30, 1994......................... 35,571 24,399 3,750 63,720 Net additions....................................... 2,434 164 -- 2,598 Shift in classification............................. 3,585 (3,585) -- -- Change in Nielsen household counts.................. -- 316 -- 316 ------ --------- --------- ------ Households -- June 30, 1995......................... 41,590 21,294 3,750 66,634 ====== ======= ====== ======
As of June 30, 1995, there were 94.8 million homes in the United States with a television set, 60.0 million basic cable television subscribers and 3.8 million homes with satellite dish receivers. The cable television household growth was achieved through increased cable system carriage of HSC's broadcast signal due to the implementation of "must carry" beginning in September 1993, and the Company's aggressive campaign to obtain contracts for cable carriage of HSC programming. Because HSC programming is now on a cable channel line-up, former broadcast households can more easily access HSC programming. The decrease in broadcast television households was primarily attributable to the shift in classification from broadcast to cable. This decrease was offset, in part, by the addition of broadcast television households due to changes in the composition of the broadcast television station group with which HSC has affiliation agreements. In addition to the households in the above table, approximately 4.0 million unduplicated cable television households are reached by the Spree! network. During the remainder of 1995, cable system contracts covering 3.5 million cable subscribers are subject to termination or renewal. This represents 8.4% of the total number of unduplicated cable households receiving HSC programming, exclusive of "must carry" subscribers. The Company is pursuing both renewals and additional cable television system contracts, but channel availability, competition, cost of carriage and cable re-regulation are some of the factors affecting the negotiations for cable television system contracts. Although management cannot determine the percentage of expiring contracts that will be renewed or the number of households that will be added through new contracts, management believes that a majority of these contracts will be renewed. HSC's market penetration lags behind increases in carriage. As a result of the increase in carriage since late 1993, the Company has initially experienced a decrease in its market penetration. As the new households mature, the Company expects market penetration to improve, but there can be no assurance that this will occur. Beginning in the third quarter of 1995, in connection with the relaunch of its programming networks, the Company is embarking on a national advertising campaign including television and print media. These efforts are aimed at increasing consumer awareness of HSC programming to improve market penetration. 10 13 The Company has postponed further development of its planned shopping service, Television Shopping Mall ("TSM"). Costs related to TSM did not have a material negative impact on the Company's results of operations during the quarter and six months ended June 30, 1995. COST OF SALES For the quarter and six months ended June 30, 1995, cost of sales decreased $12.6 million, or 7.1%, to $166.2 million from $178.8 million and $26.3 million, or 7.4%, to $328.1 million from $354.4 million, respectively, compared to the same periods in 1994. As a percentage of net sales, cost of sales increased to 67.4% from 65.3% and to 66.9% from 64.6% for the quarter and six months ended June 30, 1995, respectively, compared to the same periods in 1994. Cost of sales of HSC decreased $18.0 million and $39.8 million, respectively, for the quarter and six months ended June 30, 1995, which was somewhat offset by increases in cost of sales for HSND of $2.4 million and $7.1 million, respectively. The remaining increase in cost of sales is attributable to the Company's other subsidiary operations. As a percentage of HSC's net sales, cost of sales increased to 69.7% from 67.1% and to 69.7% from 66.4%, for the quarter and six months ended June 30, 1995, compared to the same periods in 1994. The dollar decreases in consolidated and HSC's cost of sales relate to the lower sales volumes. The increases in cost of sales percentage compared to the second quarter and first six months of 1994 relate to warehouse sales and other promotional events. These events offered price discounts and were held in connection with, among other things, the Company's distribution center restructuring. OPERATING EXPENSES The following table highlights the operating expense section from the Company's Condensed Consolidated Statements of Operations, including the dollar and percentage changes for the quarter and six months ended June 30, 1995, compared to the same periods in 1994:
--------------------------------------------------------------------------------------------- THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1995 JUNE 30, 1995 -------------------------- -------------------------- $ $ % $ $ % AMOUNT CHANGE CHANGE AMOUNT CHANGE CHANGE --------------------------------------------------------------------------------------------- (In millions, except %) Selling and marketing............ $41.4 $2.4 6.0% $ 83.6 $ 6.3 8.2 % Engineering and programming...... 24.1 (.7) (2.9) 49.4 .4 .8 General and administrative....... 21.1 .9 4.7 40.4 -- -- Depreciation and amortization.... 9.0 2.0 29.2 17.9 4.9 37.4 Restructuring charge............. -- -- -- 2.0 2.0 100.0 ------ ------ ------ ------ $95.6 $4.6 $193.3 $13.6 ====== ===== ====== =====
As a percentage of net sales, these expenses increased to 38.7% from 33.2%, and to 39.4% from 32.8%, respectively, for the quarter and six months ended June 30, 1995, compared to the same periods in 1994. In August of 1995, management instituted measures aimed at streamlining operations primarily by reducing its work force and other operating expenses. Although these changes will result in future reductions to operating expenses, the Company will incur costs related to severance in the third quarter of 1995. SELLING AND MARKETING For the quarter and six months ended June 30, 1995, selling and marketing expenses, as a percentage of net sales, increased to 16.8% from 14.3%, and to 17.0% from 14.1%, respectively, compared to the same periods in 1994. 11 14 The major components of selling and marketing expenses are detailed below, including the dollar and percentage changes for the quarter and six months ended June 30, 1995, compared to the same periods in 1994:
--------------------------------------------------------------------------------------------- THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1995 JUNE 30, 1995 -------------------------- -------------------------- $ $ % $ $ % AMOUNT CHANGE CHANGE AMOUNT CHANGE CHANGE --------------------------------------------------------------------------------------------- (In millions, except %) Telephone, operator and customer service........................ $13.3 $ (.4 ) (2.9 )% $26.0 $ (.7 ) (2.6 )% Fees to cable systems operators: Commissions.................... 7.5 (2.2 ) (22.8 ) 14.8 (4.7 ) (24.2 ) Marketing payments for cable advertising................. 4.8 (3.2 ) (38.0 ) 9.1 (6.5 ) (41.8 ) Performance bonus commissions................. 3.4 2.0 149.3 6.8 4.7 230.3 HSND selling expenses............ 2.7 2.7 100.0 9.0 9.0 100.0
Telephone, operator and customer service expenses are typically related to sales, call volume and the number of packages shipped. Although telephone expenses decreased 11.4% and 17.0%, respectively, for the quarter and six months ended June 30, 1995, compared to the same periods in 1994, operator and customer service payroll expenses remained relatively constant in total dollars, while increasing as a percent of sales, compared to the quarter and six months ended June 30, 1994. This was due to the expansion of customer service operating hours, in March 1995, to seven days a week, twenty-four hours a day. Management is reviewing these expenses, and operator and customer service expenses are expected to fluctuate more in relation to call and package volume for the remainder of 1995. For the quarter and six months ended June 30, 1995, commissions to cable system operators decreased as a result of the decrease in sales. Marketing payments for cable advertising, which relate primarily to previous contractual commitments, decreased for the quarter and six months ended June 30, 1995, compared to the same periods in 1994. As older agreements expire or are renegotiated and new cable carriage agreements are executed, marketing payments for cable advertising are being replaced by other forms of incentive compensation to cable operators. These include payment of cable distribution fees, as discussed in "Depreciation and Amortization," and performance bonus commissions which require payments based upon HSC attaining certain sales levels in the cable operator's franchise area. Accordingly, marketing payments for cable advertising are expected to continue to decrease, and depreciation and amortization and performance bonus commissions will increase for the remainder of 1995. In addition, cable operators which have executed affiliation agreements to carry the Company's programming are compensated for all sales within their franchise areas, regardless of whether a customer's order results from watching the program via cable, satellite dish, or on a broadcast television station. Thus, with the advent of "must carry," HSC is paying commissions to cable operators in addition to the hourly affiliation payments made to broadcast television stations. As a result of the above factors, subject to sales volume, fees paid to cable system operators are expected to remain at higher levels in future periods. Selling and marketing expenses related to HSND, which primarily consist of media and telephone, operator and customer service expenses, are expected to fluctuate in relation to HSND sales levels for the remainder of 1995. The remaining net increase in selling and marketing expenses is attributable to advertising and promotional expenses of the Company's other subsidiary operations. Management believes that total selling and marketing expenses in future periods will be at higher levels as the Company maintains its efforts to increase the number of cable systems carrying the Company's programming and increase market penetration through expanded direct mailings and other advertising, as discussed in "Net Sales". 12 15 ENGINEERING AND PROGRAMMING For the quarter and six months ended June 30, 1995, engineering and programming expenses, as a percentage of net sales, increased to 9.8% from 9.1%, and to 10.1% from 8.9%, respectively, compared to the same periods in 1994. The decrease in engineering and programming expenses for the quarter ended June 30, 1995, and increase for the six months then ended, compared to the same periods in 1994, was due to lower broadcast costs of $1.0 million and $1.2 million, respectively, offset by HSND programming costs of $.2 million and $1.5 million, respectively. Engineering and programming expenses are expected to remain relatively constant for the remainder of 1995. GENERAL AND ADMINISTRATIVE For the quarter and six months ended June 30, 1995, general and administrative expenses, as a percentage of net sales, increased to 8.5% from 7.3%, and to 8.2% from 7.4%, respectively, compared to the same periods in 1994. Payroll expense, consulting and other administrative expenses increased by $2.3 million and $4.1 million for the quarter and six months ended June 30, 1995, respectively. These increases were partially offset by decreases in legal expense and expenses in connection with the Company's executive stock award program and stock appreciation rights granted in 1993 totaling $1.4 million and $4.1 million, respectively, for the quarter and six months ended June 30, 1995, compared to the same periods in 1994. Based on present circumstances, management expects general and administrative expenses to remain at current levels for the remainder of 1995. DEPRECIATION AND AMORTIZATION Depreciation and amortization increased primarily due to the amortization of cable distribution fees, which increased $2.4 million and $4.9 million, respectively, for the quarter and six months ended June 30, 1995. Amortization of these fees is expected to total $11.8 million in 1995 based on existing agreements. This amortization could increase if additional cable contracts are entered into during the remainder of 1995 in connection with renewing or adding long-term cable subscribers, as discussed in "Net Sales." Accordingly, depreciation and amortization will be higher for the remainder of 1995. RESTRUCTURING CHARGE The restructuring charge for the six months ended June 30, 1995, of $2.0 million, represents management's estimate of costs to be incurred in connection with the closing of the Company's Reno, Nevada, distribution center, which was accomplished in June 1995. The decision to close the Reno distribution center was based on an evaluation of the Company's overall distribution strategy. Management believes that consolidation of the Company's distribution facilities will result in better operating efficiencies and improved service to customers. OTHER INCOME (EXPENSE) For the quarter and six months ended June 30, 1995, the Company had net other expense of $.4 million and net other income of $1.3 million, respectively, compared to net other expense of $1.0 million and net other income of $.6 million, respectively, for the same periods in 1994. Interest income decreased $3.2 million and $6.1 million, respectively, for the quarter and six months ended June 30, 1995, compared to the same periods in 1994, primarily due to the repayment by Silver King Communications, Inc. ("SKC"), in August 1994, of its indebtedness to the Company. Interest income is expected to further decrease for the remainder of 1995, compared to 1994. Interest expense decreased $.9 million for the six months ended June 30, 1995, primarily as a result of the repayment by the Company, in August 1994, of its Senior Term Loans. For the quarter ended June 30, 1995, 13 16 interest expense remained constant with the same period in 1994 due to borrowings by the Company under its amended bank facility in late 1994 and the first half of 1995. The Company intends to borrow additional amounts during the remainder of 1995. Interest expense for the last six months of 1995 will show an increase compared to 1994 as a result of these borrowings and higher interest rates. For the quarter and six months ended June 30, 1995, the Company had net miscellaneous income of $1.2 million and $3.5 million, respectively, which primarily include the receipt of proceeds from lawsuit settlements of $.4 million and $1.0 million, respectively, royalty income related to HSND of $.2 million and $.7 million, respectively, and a gain of $.6 million on the sale of other assets in the first quarter of 1995. For the quarter and six months ended June 30, 1994, the Company had net miscellaneous expense of $2.5 million and $2.3 million, respectively, due to a $2.9 million loss on the sale of the common stock of the Company's former wholly-owned subsidiary, HSN Mistix Corporation. INCOME TAXES The Company's effective tax rates were benefits of (37.1)% and (38.0)% for the quarter and six months ended June 30, 1995, respectively, and an expense of 42.0% for the quarter and six months ended June 30, 1994. The Company's effective tax rate for these periods differed from the statutory rate due primarily to the amortization of goodwill and other acquired intangible assets relating to acquisitions from prior years, state income taxes and the provision for interest on adjustments proposed by the Internal Revenue Service ("IRS"), as discussed in Note D to the Condensed Consolidated Financial Statements included herein. The Company's effective tax rate is expected to vary from the statutory rate for the remainder of 1995. NET EARNINGS (LOSS) The Company had a net loss of $(9.7) million, or $(.11) per share, for the quarter ended June 30, 1995, compared to net earnings of $1.9 million, or $.02 per share, for the quarter ended June 30, 1994. For the six months ended June 30, 1995, the Company had a net loss of $(18.5) million, or $(.21) per share, compared to net earnings of $8.6 million, or $.09 per share in the same period of 1994. The decreases in net income for the quarter and six months ended June 30, 1995, were primarily attributable to decreases in net sales of $27.3 million and $58.0 million and decreases in gross profit of $14.7 million and $31.6 million, respectively, compared to the quarter and six months ended June 30, 1994. As discussed in "Restructuring Charge," the results for the six months ended June 30, 1995, include $2.0 million of costs expected to be incurred in connection with the closing of the Company's Reno, Nevada, distribution center. SEASONALITY The Company believes that seasonality does impact its business but not to the same extent it impacts the retail industry in general. 14 17 B. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES The following table highlights various balances and ratios from the Condensed Consolidated Financial Statements included herein:
------------------------------------------------------------------------------------------ JUNE 30, ------------------ DECEMBER 31, 1995 1994 1994 ------------------------------------------------------------------------------------------ Cash and cash equivalents (millions)................. $ 15.7 $ 28.9 $ 33.6 Working capital (millions)........................... $ 7.5 $ 42.5 $ 23.1 Current ratio........................................ 1.04:1 1.15:1 1.11:1 Accounts and notes receivable, net (millions)........ $ 27.8 $ 29.3 $ 40.8 Inventories, net (millions).......................... $ 107.6 $102.4 $118.8 Inventory turnover for the quarter (annualized for June periods only)................................. 6.07 6.95 6.36 Inventory turnover for six months (annualized for June periods only)................................. 5.80 6.64 6.36
Cash and cash equivalents totaled $15.7 million at June 30, 1995, compared to $28.9 million at June 30, 1994, and $33.6 million at December 31, 1994. The principal sources of cash for the twelve months ended June 30, 1995, were the repayment by SKC of its obligation to the Company in the amount of $130.0 million and borrowings by the Company under its revolving credit facility. These funds, along with operating funds, were used principally to repay the $85.0 million balance of the Company's Senior Term Loans, pay cable distribution fees of $65.3 million, purchase treasury stock, pay settlements to the IRS in the amount of $19.6 million, pay litigation settlements and pay for $18.2 million of capital expenditures. The principal source of cash for the six months ended June 30, 1995, was borrowings by the Company under its revolving credit facility. These funds, along with operating funds, were used principally to pay cable distribution fees of $42.8 million, purchase treasury stock, pay litigation settlements and pay for capital expenditures. Net earnings adjusted for non-cash items totaled $24.6 million and $.8 million for the twelve months and six months ended June 30, 1995, respectively. Accounts and notes receivable, net, decreased to $27.8 million at June 30, 1995, from $29.3 million at June 30, 1994, and from $40.8 million at December 31, 1994. The primary reason for the decreases is "FlexPay" accounts receivable which totaled $16.8 million at June 30, 1995, compared to $17.9 million at June 30, 1994, and $23.6 million at December 31, 1994. The Company's financing of "FlexPay" accounts receivable has not had a significant impact on its liquidity position. In addition, on March 27, 1995, Precision Systems, Inc. ("PSi") repaid $2.7 million, plus accrued interest, of its $5.0 million loan from the Company. Under an agreement between the Company and PSi, the remaining principal balance of the loan has been recorded as a prepayment of future monthly software maintenance payments due PSi from the Company through December 1996. Inventories, net, increased to $107.6 million at June 30, 1995, from $102.4 million at June 30, 1994, and decreased from $118.8 million at December 31, 1994. The inventory balance is net of a carrying value adjustment of $16.1 million at June 30, 1995, which represents a decrease from $21.8 million at June 30, 1994, and from $18.8 million at December 31, 1994. Capital expenditures for the six months ended June 30, 1995, were $7.0 million. The Company estimates capital expenditures will range between $9.0 million and $10.0 million for the remainder of 1995. On June 28, 1995, the Company entered into an amendment to its $150.0 million revolving credit facility. The amendment provides the Company with more flexibility with respect to certain of its financial covenants and the amount of borrowings available, through June 30, 1996. However, there remain restrictions on borrowings and repurchases of the Company's common stock based upon future cash flow levels. As of August 14, 1995, $95.0 million was outstanding under this facility. 15 18 In February 1995, the Company paid $9.6 million, plus interest, in connection with litigation settlements, using borrowings under its bank facility. During the remainder of 1995, management expects to pay cable distribution fees, totaling $24.0 million, relating to current contracts with cable system operators to carry HSC programming. Of this amount, $15.8 million is payable to a related party over the next four months along with interest at 1% over one-month LIBOR. In July 1995, the Company paid $4.0 million for a 20.0% interest in Body By Jake Enterprises, L.L.C. This investment will be accounted for under the cost method. Because of a decision made by major league baseball regarding investments of HSN's major shareholder in other professional sports ventures, the Company will not participate in the major league baseball franchise for the Tampa Bay area. In management's opinion, available cash, internally generated funds, the credit facility, and other sources of financing which management believes are readily available, will provide sufficient capital resources to meet the Company's foreseeable needs. As of July 31, 1995, the Company has $58.0 million of bank credit lines available to back letters of credit which are used exclusively to facilitate inventory imports. Presentation of letters of credit by vendors results in an immediate charge to the Company's account with no interest charges incurred. Outstanding letters of credit amounted to $22.5 million at July 31, 1995, leaving $35.5 million available. For the quarter ended June 30, 1995, the Company did not pay any cash dividends and does not anticipate paying cash dividends in the immediate future. At July 31, 1995, .8 million options to purchase the Company's common stock were outstanding and exercisable at prices ranging between $3.25 and $14.75. The exercise of such stock options would result in a cash inflow of $2.4 million to the Company. In 1994, the Company's Board of Directors authorized the repurchase of up to an additional $75.0 million of the Company's common stock. In 1994, the Company repurchased 1.3 million shares at a total cost of $13.1 million and in the quarter ended March 31, 1995, the Company repurchased an additional 2.6 million shares at a total additional cost of $21.6 million. The Company may, subject to cash availability, debt covenants and market conditions, continue to repurchase its common stock within the limits set by the Board of Directors. Under the terms of its credit facility, the Company may repurchase its common stock only if it meets certain cash flow ratios. 16 19 PART II -- OTHER INFORMATION ITEM 1 -- LEGAL PROCEEDINGS On April 26, 1993, four stockholders of the Company filed with the Delaware Chancery Court a purported class action complaint, styled as 7547 Corp. v. Liberty Media Corp., C.A. No. 12956, on behalf of an unspecified class of stockholders of the Company (the "Section 203 Action"). The defendants in the original complaint were Liberty, Liberty Program Investments, Inc. ("LPI"), the Company, and certain current and former directors of the Company (Messrs. Speer, Forstmann, McNamara, Wandler, Chu, James, Ramsey and Roberts). On June 24, 1994, plaintiffs filed an amended complaint which names additional defendants who are past or present directors of the Company (Messrs. Barton, Bennett, Draper, Hogan, Malone, Hindery and McNamee). The gravamen of the amended complaint in the Section 203 action was that, prior to the time when Liberty reached an agreement, arrangement or understanding with RMS Limited Partnership, a Nevada Limited Partnership ("RMS"), to allow Liberty to purchase a controlling equity interest in the Company, the Company's Board and Executive Committee failed to take effective action to approve the proposed transaction and, thereby, failed under Section 203(a)(1) to exempt Liberty from the restrictions under Section 203 on any "business combination" between Liberty and the Company prior to December 4, 1995. As a result, plaintiffs alleged that any business combination involving Liberty, its affiliates or associates, and the Company would require the affirmative vote of 66 2/3% of the outstanding voting stock of the Company which is not owned by Liberty. Plaintiffs also alleged that Liberty's disclosures regarding the effectiveness of the Section 203 exemption by the HSN Executive Committee on December 4, 1992, were false and misleading. Plaintiffs asserted that Liberty disregarded the conflicts of interest held by the members of the HSN Executive Committee on the Section 203 exemption, and that Liberty knew that no valid action had been taken by the Company's Board to exempt Liberty from the restrictions under Section 203. The amended complaint alleged that, by asserting that Liberty was exempt from Section 203, Liberty and the other defendants misrepresented a material fact to all sellers of the Company's stock and holders of the Company's stock after the public announcement of the Liberty/RMS Agreement in Principle on December 7, 1992. Plaintiffs also alleged that the Liberty Tender Offer constituted a prohibited "business combination" under Section 203. Plaintiffs also alleged that the members of the Company's Executive Committee (Messrs. Speer, Wandler and Ramsey) had disabling conflicts of interest which prevented the Company's Executive Committee from taking effective action on December 4, 1992, to exempt Liberty from the restrictions of Section 203. The Company and the individual defendants allegedly aided and abetted Liberty in its asserted scheme to misrepresent its status under Section 203. The individual defendants also allegedly breached their fiduciary duties by failing to correct Liberty's asserted misrepresentation of its exemption from Section 203. Plaintiffs sought a declaratory judgment that Liberty is subject to Section 203, an award of damages to the plaintiff class members who sold the Company's common stock, and equitable relief. On November 16, 1994, the parties reached an agreement to settle the Section 203 Action subject to several conditions. Under the settlement, all claims which were, could have been or in the future might be asserted by any member of the Section 203 Class against any of the defendants or their affiliates, which relate to or arise out of, directly or indirectly, the allegations contained in any complaint filed in the Section 203 Action (the "Section 203 Claims"), would be dismissed with prejudice. In exchange for the foregoing release of the Section 203 Claims, Liberty and the Company have agreed, among other things, that the consummation of any "business combination," as defined in Section 203, prior to December 4, 1995, between the Company, on the one hand, and Liberty or any of its "affiliates" or "associates," on the other hand (a "Qualifying Business Combination"), shall be subject to the prior approval of the Company's board of directors, and the authorization at an annual or special meeting of the Company's stockholders, and not by written consent, by the affirmative vote of the holders of at least a majority of the outstanding voting stock which is not "owned" by Liberty (the "Section 203 Undertaking"). 17 20 The parties to the Section 203 Action also agreed, among other things, that upon the approval by the Delaware Chancery Court of the settlement of the Section 203 Action, (i) the Section 203 Undertaking shall be binding as against any member of the Section 203 Class, which shall include any holder, purchaser or seller of the Company's stock from and after October 12, 1994, through and including December 4, 1995 (a "Subsequent Company Stockholder"); and (ii) so long as Liberty and the Company comply with the Section 203 Undertaking, no member of the Section 203 Class (including any Subsequent Company Stockholder) shall be entitled to assert that any Qualifying Business Combination (a) is required to be separately approved by the Company's stockholders under any provision of Section 203, or (b) is otherwise subject to, conditioned upon, restricted by or prohibited under any provision of Section 203. Liberty also has agreed that, in the event it consummates a "business combination" (as defined in Section 203) with the Company prior to the hearing on the proposed settlement of the Section 203 Action, Liberty will comply with the Section 203 Undertaking. Plaintiffs' counsel in the Section 203 Action petitioned the Court for an award of attorneys' fees and expenses not to exceed $2.6 million. Liberty agreed to pay plaintiffs' counsel such fees and disbursements as may be awarded by the Delaware Chancery Court in the Section 203 Action, and the Company is not responsible for any of the fees or expenses of plaintiffs' counsel in the Section 203 Action. On January 25, 1995, the Delaware Chancery Court approved the settlement of the Section 203 Action. This disclosure is included in this Form 10-Q pursuant to the terms of the above settlement. ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K Exhibit 10.37 First Amendment, dated as of March 29, 1995, to the Second Amended and Restated Credit Agreement. Exhibit 10.38 Second Amendment, dated as of June 28, 1995, to the Second Amended and Restated Credit Agreement. Exhibit 27 Financial Data Schedule (SEC use only). 18 21 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. HOME SHOPPING NETWORK, INC. ------------------------------------ (Registrant) Dated August 14, 1995 /s/ GERALD F. HOGAN ------------------------ ----------------------------------------------- Gerald F. Hogan President and Chief Executive Officer Dated August 14, 1995 /s/ KEVIN J. MCKEON ------------------------ ----------------------------------------------- Kevin J. McKeon Senior Vice President, Accounting & Finance and Treasurer (Principal Financial Officer) Dated August 14, 1995 /s/ BRIAN J. FELDMAN ------------------------ ----------------------------------------------- Brian J. Feldman Controller (Chief Accounting Officer)
19 22 LOGO HOME SHOPPING NETWORK EX-10.37 2 FIRST AMENDMENT TO RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.37 EXECUTION COPY FIRST AMENDMENT, dated as of March 29, 1995, to the SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 30, 1994 (the "Credit Agreement"), among HOME SHOPPING NETWORK, INC., a Delaware corporation, as borrower (the "Company"), HOME SHOPPING CLUB, INC., a Delaware corporation, as guarantor (the "Guarantor"), the banks signatory thereto (individually, a "Bank" and collectively, the "Banks"), LTCB TRUST COMPANY, as Agent, BANK OF MONTREAL and THE BANK OF NEW YORK COMPANY, INC., each as a Co-Agent (each in such capacity, a "Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent for the Banks (in such capacity, the "Administrative Agent"). WHEREAS, the Company and the Guarantor have requested, and the Banks and the Administrative Agent are willing, to amend certain provisions of the Credit Agreement to provide for increases in the Commitments and for other matters provided herein; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereby agree as follows: SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in this First Amendment, terms defined in the Credit Agreement and used herein shall have their respective defined meanings when used herein. SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT. Subject to the fulfillment of the conditions precedent set forth in Section 4 hereof, the Credit Agreement is hereby amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Applicable Margin" set forth in such Section in its entirety and replacing it with the following: "Applicable Margin" shall mean, at any time: (a) with respect to LIBOR Loans, 1.625% minus the Margin Adjustment (if any) in effect at such time; and (b) with respect to Prime Rate Loans, 0.625% minus the Margin Adjustment (if any) in effect at such time; provided, that in no event shall the Applicable Margin be less than 0%. (b) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Commitment" set forth in such Section in its entirety and replacing it with the following: 2 "Commitment" shall mean, with respect to any Bank, at any time prior to the First Amendment Commitment Effective Date, the amount set forth opposite such Bank's name on the signature pages of this Agreement under the caption "Commitment", and at any time on or after the First Amendment Commitment Effective Date, the amount set forth opposite such Bank's name on the signature pages of the First Amendment under the caption "Commitment" (in either case as reduced from time to time pursuant to Section 2.3 hereof or otherwise). (c) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Facility Fee Rate" set forth in such Section in its entirety and replacing it with the following: "Facility Fee Rate" shall mean, at any time of determination thereof, when the Total Debt Ratio, as set forth in the Total Debt Ratio Notice most recently delivered to the Administrative Agent pursuant to Section 9.1(g) hereof (which Notice shall be effective on the date of the Administrative Agent's receipt thereof in accordance with Section 12.2 hereof), is at each of the following levels, the rate per annum set forth opposite such level below:
Effective Total Debt Ratio Facility Fee Rate ------------------ ----------------- Greater than or equal to 4.00 to 1 0.375% Less than 4.00 to 1, but greater than or equal to 3.50 to 1 0.375% Less than 3.50 to 1 but greater than or equal to 3.00 to 1 0.375% Less than 3.00 to 1 but greater than or equal to 2.50 to 1 0.375% Less than 2.50 to 1 but greater than or equal to 2.00 to 1 0.375% Less than 2.00 to 1 but greater than or equal to 1.00 to 1 0.250% Less than 1.00 to 1 0.250%;
-2- 3 provided, that the Facility Fee Rate for the period commencing on April 1, 1995 until the next date on which the Administrative Agent receives the Total Debt Ratio Notice pursuant to Section 9.1(g) hereof shall be 0.375%. (d) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Margin Adjustment" set forth in such Section in its entirety and replacing it with the following: "Margin Adjustment" shall mean, at any time of determination thereof, when the Total Debt Ratio, as set forth in the Total Debt Ratio Notice most recently delivered to the Administrative Agent pursuant to Section 9.1(g) hereof (which Notice shall be effective on the date of the Administrative Agent's receipt thereof in accordance with Section 12.2 hereof), is at each of the following levels, the percentage set forth opposite such level:
Effective Total Debt Ratio Margin Adjustment ------------------ ----------------- Greater than or equal to 4.00 to 1 0 Less than 4.00 to 1, but greater than or equal to 3.50 to 1 0.125% Less than 3.50 to 1 but greater than or equal to 3.00 to 1 0.375% Less than 3.00 to 1 but greater than or equal to 2.50 to 1 0.375% Less than 2.50 to 1 but greater than or equal to 2.00 to 1 0.625% Less than 2.00 to 1 but greater than or equal to 1.00 to 1 0.875% Less than 1.00 to 1 1.125%;
-3- 4 provided, that in no event shall the Margin Adjustment cause the Applicable Margin to be less than 0%; and provided, further, that the Margin Adjustment for the period commencing on April 1, 1995 until the next date on which the Administrative Agent receives the Total Debt Ratio Notice pursuant to Section 9.1(g) hereof shall be 0.625%. (e) Section 1.1 is hereby amended by adding the following new definitions thereto in the appropriate alphabetical position as follows: "Current Total Debt Ratio" shall mean, on any day on which the Company repurchases or proposes to repurchase any of its shares of common stock, the ratio of (a) the Total Debt of the Company and its consolidated Subsidiaries on such day after giving effect to the incurrence of any Indebtedness on such day, to (b) the Operating Cash Flow for the Company and its Subsidiaries on a consolidated basis for the four-Fiscal Quarter period then most recently ended as shown in the Total Debt Ratio Notice for such period; provided that if such day falls in any Fiscal Quarter at any time prior to the date on which the Total Debt Ratio Notice required to be delivered pursuant to Section 9.1(g) for the most recently ended four-Fiscal Quarter period has been delivered to the Agent, the Company shall calculate the Current Total Debt Ratio utilizing the Operating Cash Flow for the four-Fiscal Quarter period ending with the next preceding Fiscal Quarter as reported in the Total Debt Ratio Notice for such next preceding Fiscal Quarter. "Current Total Debt Ratio Notice" shall mean each notice provided for in Section 9.18 hereof setting forth the Current Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis. "First Amendment" shall mean the First Amendment to this Agreement dated as of March 29, 1995. "First Amendment Commitment Effective Date" shall mean the date on which the First Amendment shall have been duly executed by all parties provision for whose signature is made on the signature pages thereof, and on which all conditions precedent set forth in Section 4 thereof shall have been fulfilled to the reasonable satisfaction of the Administrative Agent. -4- 5 (f) Section 3.2(b) of the Credit Agreement is hereby amended by adding the following text to the end of said Section immediately prior to the semicolon: "(at any time when the Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis is less than 3.0:1) or 2.250% per annum (at any time when such Total Debt Ratio is greater than or equal to 3.0:1)". (g) The first sentence of Section 8.2 of the Credit Agreement is hereby amended by deleting the reference therein to "December 31, 1993" and replacing it with "December 31, 1994", by deleting the reference therein to "June 30, 1994" and replacing it with "September 30, 1994", and by deleting the words "two-Fiscal Quarter" and replacing them with "three-Fiscal Quarter". (h) Section 9.12 of the Credit Agreement is hereby deleted and replaced in its entirety as follows: 9.12. Total Debt Ratio. The Company will maintain the Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis at all times during the periods set forth below to be less than the ratio set forth below for such period:
Period Ratio ------ ----- At any time at or prior to March 31, 1995 3.0:1 After March 31, 1995 and at or prior to June 30, 1995 4.25:1 After June 30, 1995 and at or prior to September 30, 1995 4.25:1 After September 30, 1995 and at or prior to December 31, 1995 3.5:1 After December 31, 1995 and at or prior to March 31, 1996 3.25:1 At all times after March 31, 1996 3.0:1;
provided that if the Company repurchases any shares of its common stock in any Fiscal Quarter, the Company shall -5- 6 maintain the Total Debt Ratio for the four-Fiscal Quarter period ending with (and including)such Fiscal Quarter in any event at less than 2.5:1, irrespective of the Current Total Debt Ratio that was calculated at the time of such repurchase; and provided, further, that, without limiting the requirements of the preceding proviso, if the date of such repurchase occurs prior to the delivery of the Total Debt Ratio Notice for the four-Fiscal Quarter period most recently ended as of such date, it shall be deemed to be a default under this Section 9.12 if the Total Debt Ratio for such period, as shown in the Total Debt Ratio Notice for such period when delivered to the Agent pursuant to Section 9.1(g), shall turn out to have been greater than or equal to 2.5:1, irrespective of the Current Total Debt Ratio that was calculated at the time of such repurchase. Notwithstanding the foregoing, the denominator of the Total Debt Ratio shall be deemed to be $34,989,000 for the period from April 1, 1995 to and including May 30, 1995 or, if earlier, the date on which the Company delivers to the Administrative Agent and the Banks, pursuant to Section 9.1 hereof, the financial statements of the Company and its consolidated Subsidiaries for the Fiscal Quarter ending March 31, 1995 and the Total Debt Ratio Notice for the four-Fiscal Quarter period ended on March 31, 1995, at which time said denominator shall be Operating Cash Flow of the Company and its Subsidiaries on a consolidated basis as shown in such Total Debt Ratio Notice. (i) Section 9.18 of the Credit Agreement is hereby amended by inserting the following proviso immediately before the period at the end of that Section: ; provided, that no repurchase of common stock shall be made (1) on any day prior to July 1, 1995, or (2) thereafter, on any day if, after giving effect to the incurrence of any Indebtedness on such date of repurchase, the Current Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis would be greater than or equal to 2.5:1 as shown in the Current Total Debt Ratio Notice for such date of repurchase, which shall have been delivered by the Company to the Agent and the Banks prior to such repurchase. (j) Section 9 is hereby amended by adding at the end thereof the following new Section 9.19: 9.19. Minimum Operating Cash Flow. At any time when the Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis is greater than 3.0:1, -6- 7 the Company shall not permit the Operating Cash Flow of the Company and its Subsidiaries on a consolidated basis to be less than the following amounts during each of the following periods:
Period Amount ------ ------ At any time at or prior to March 31, 1995 $30,000,000 After March 31, 1995 and at or prior to June 30, 1995 $30,000,000 After June 30, 1995 and at or prior to September 30, 1995 $30,000,000 After September 30, 1995 and at or prior to December 31, 1995 $40,000,000 After December 31, 1995 and at or prior to March 31, 1996 $50,000,000.
(k) References in the Credit Agreement to "this Agreement" and the words "hereof", "herein", "hereto" and the like, shall refer to the Credit Agreement, the First Amendment, and the Credit Agreement as amended by the First Amendment; provided, that the words "the date of this Agreement" and "the date hereof" shall continue to refer to the date of the Credit Agreement. (l) Each reference in the Credit Agreement to the "Notes" or to a "Note" shall be deemed to include the New Notes issued pursuant to Section 4.C(1) of this First Amendment. Section 3. REPRESENTATIONS AND WARRANTIES. To induce the Administrative Agent and each Bank to enter into this First Amendment, each of the Company and the Guarantor hereby represents and warrants that each of the representations and warranties set forth in Section 8 of the Credit Agreement is true, correct and complete on and as of the date of this First Amendment (whether or not the First Amendment Covenant Effective Date or the First Amendment Commitment Effective Date, each as defined in Section 4 hereof, occurs), and on and as of the First Amendment Covenant Effective Date and on and as of the First Amendment Commitment Effective Date, both before and after giving -7- 8 effect to the amendments set forth in Section 2 of this First Amendment on any such date, as if each reference therein to "this Agreement" were a reference to "this Agreement as amended by the First Amendment". Each of the Company and the Guarantor further represents and warrants that, as of the date of this First Amendment, as of the First Amendment Covenant Effective Date and as of the First Amendment Commitment Effective Date, no Default or Event of Default has occurred and is continuing. SECTION 4. CONDITIONS TO EFFECTIVENESS. A. The amendments set forth in Section 2 of this First Amendment (other than in Sections 2(b) and 2(l) hereof) shall become effective as of the date (the "First Amendment Covenant Effective Date"), as specified by the Administrative Agent, when counterparts hereof shall have been duly executed and delivered by the Majority Banks, the Administrative Agent, the Company and the Guarantor, and when each of the conditions precedent set forth in Sections 4.C(2), (8) and (9) and 4.D hereof shall have been fulfilled to the satisfaction of the Administrative Agent. The Administrative Agent will promptly notify the other parties of the occurrence of the First Amendment Covenant Effective Date. B. The amendments set forth in Section 2(b) and 2(l) of this First Amendment shall become effective as of the date (the "First Amendment Commitment Effective Date"), as specified by the Administrative Agent, when counterparts hereof shall have been duly executed and delivered by all of the Banks, the Administrative Agent, the Company and the Guarantor, and each of the conditions precedent set forth in Sections 4.C and 4.D hereof shall have been fulfilled to the satisfaction of the Administrative Agent on or prior to April 5, 1995. The Administrative Agent will promptly notify the other parties of the occurrence of the First Amendment Commitment Effective Date. C. The effectiveness of all or part of the amendments set forth in Section 2 hereof shall, as provided in Sections 4.A hereof and 4.B hereof, be subject to the condition precedent that the Administrative Agent shall have received each of the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance: (1) New Notes, substantially in the form of Exhibit A to the Credit Agreement, duly executed and delivered by the Company to the order of each Increasing Bank (as defined in Section 4.C(11) below) and otherwise appropriately completed, bearing the executed guarantee of the Guarantor, and dated the First Amendment Commitment Effective Date (the "New Notes"). -8- 9 (2) Certified copies of the certificate of incorporation and bylaws of the Company and the Guarantor and all corporate action and (if necessary) stockholder action taken by the Company and the Guarantor approving this First Amendment, the Credit Agreement as amended hereby and the New Notes and borrowings by the Company under the Credit Agreement as amended hereby and the guarantee by the Guarantor hereunder and thereunder (including, without limitation, a certificate setting forth the resolutions of the Boards of Directors of the Company and the Guarantor adopted in respect of the transactions contemplated hereby and thereby). (3) A certificate of each of the Company and the Guarantor in respect of each of the officers (i) who is authorized to sign this First Amendment or the New Notes on its behalf and (ii) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with the Credit Agreement as amended by this First Amendment and the transactions contemplated thereby and hereby. The Administrative Agent, the Agent, the Co-Agents and the Banks may conclusively rely on such certificate until the Administrative Agent receives notice in writing from the Company or the Guarantor, respectively, to the contrary. (4) Certificates, as of a recent date, from the appropriate authorities for each jurisdiction in which the Company and the Guarantor are incorporated or qualified to do business, as to the good standing of the Company and the Guarantor, respectively, in each such jurisdiction. (5) A certificate of a senior officer of each of the Company and the Guarantor to the effect set forth in Section 4.D of this First Amendment. (6) An opinion of Counsel to the Company and the Guarantor, substantially in the form of Exhibit A hereto. (7) A compliance certificate in the form of Exhibit C to the Credit Agreement and a Total Debt Ratio Notice for Fiscal 1994. (8) Evidence of the payment of all fees and expenses then payable pursuant to Section 12.3 of the Credit Agreement, and all other fees heretofore agreed between the Company and the Administrative Agent. -9- 10 (9) Evidence of payment (to the extent then payable) of (a) all interest on the Loans outstanding under the Credit Agreement and (b) all facility fees accrued through the First Amendment Covenant Effective Date or the First Amendment Commitment Effective Date, as the case may be. (10) Such other documents as the Administrative Agent or any Bank may reasonably request including, without limitation, all requisite governmental approvals and filings. (11) Each Bank with a Commitment which, expressed as a percentage of the aggregate Commitments of all Banks, is increasing on the First Amendment Commitment Effective Date (an "Increasing Bank") shall have paid to the Agent, for distribution to the Banks whose Commitments, expressed as a percentage as aforesaid, are decreasing on such date (the "Decreasing Banks") such amount as shall be necessary (such Increasing Bank's "Settlement Amount") so that the aggregate principal amount of the Loans outstanding upon the occurrence of the First Amendment Commitment Effective Date shall be shared among the Banks pro rata in accordance with their respective Commitments as in effect after the effectiveness of the amendments set forth in Section 2(b) hereof. Assuming that the aggregate principal amount of all Loans outstanding on the First Amendment Commitment Effective Date is $75,000,000, the Settlement Amount that each Bank is required to pay or entitled to receive, as the case may be, shall be the amount set forth for such Bank in Schedule 1 hereto, and if the aggregate principal amount of all Loans is other than $75,000,000, the Settlement Amount of each Bank shall be the amount notified by the Administrative Agent to such Bank within a reasonable time on or prior to the First Amendment Commitment Effective Date. The payment by each Increasing Bank of its Settlement Amount shall constitute the purchase by such Increasing Bank from each Decreasing Bank, and the sale and assignment by each Decreasing Bank to such Increasing Bank, of a ratable portion of such Decreasing Bank's then outstanding Loans. Such purchase, sale and assignment shall be without recourse, representation or warranty of any kind, except that each Decreasing Bank represents and warrants to the Administrative Agent and the other Banks that it owns the interests being so purchased, sold and assigned free and clear of all Liens. The Administrative Agent hereby agrees not to require the payment of the recordation fee required by Section 12.6 of the Credit Agreement in connection with the foregoing assignments. After the First Amendment -10- 11 Commitment Effective Date, when the Administrative Agent receives payment of interest on the Loans that are subject to the purchases, sales and assignments provided for in this clause (11), the Administrative Agent shall distribute such payments to the Banks pro rata in accordance with the principal amounts of such Loans held by each of them from time to time during the period for which interest was paid, and in accordance with the respective periods in which such Loans were held by each of them. (12) To the extent that the Increasing Banks and the Decreasing Banks are unable to settle such amounts among themselves, the Company shall have paid to each Bank (whether an Increasing Bank or a Decreasing Bank) such amounts as may be necessary to compensate such Bank for any loss, cost or expense (of the type described in the first sentence of Section 5.4 of the Credit Agreement) that such Bank may incur in connection with the purchases, sales and assignments contemplated in clause (11) of this Section 4 as a result of (a) the repayment or prepayment of any principal of any Loan prior to the last day of the Interest Period therefor, or (b) the funding of a Loan, or any portion thereof, for the remainder of the Interest Period then in effect therefor. D. The occurrence of each of the First Amendment Covenant Effective Date and the First Amendment Commitment Effective Date shall be subject to the further conditions precedent that, as of each such date: (1) No Default or Event of Default shall have occurred and be continuing; and (2) The representations and warranties made by the Company and the Guarantor in Section 3 hereof and in any other certificate or other document delivered in connection with this First Amendment or the Credit Agreement as amended hereby shall be true, correct and complete on and as of each such date with the same force and effect as if made on and as of such date (including, without limitation, that there shall have occurred no material adverse change since December 31, 1993 in the consolidated financial condition or operations, or the business taken as a whole, of the Company and its consolidated Subsidiaries from that set forth in their financial statements dated as of December 31, 1993). -11- 12 SECTION 5. MISCELLANEOUS. A. This First Amendment may be executed in any number of counterparts, all of which taken together and when delivered to the Administrative Agent shall constitute one and the same instrument, and any of the parties hereto may execute this First Amendment by signing any such counterpart. B. Each of the Company and the Guarantor hereby confirms its obligation, pursuant to Section 12.3(a) of the Credit Agreement, to pay all of the Administrative Agent's costs and expenses (including, without limitation, the reasonable fees and expenses of all special counsels to the Administrative Agent) in connection with this First Amendment, whether or not the First Amendment Covenant Effective Date or the First Amendment Commitment Effective Date occurs. C. THIS FIRST AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. D. Except as expressly set forth in this First Amendment, the Credit Agreement shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed as of the date first above written. HOME SHOPPING NETWORK, INC., as the Company By ------------------------- Title: HOME SHOPPING CLUB, INC., as the Guarantor By ------------------------- Title: -12- 13 Commitment The Banks ---------- --------- $ 30,000,000 LTCB TRUST COMPANY By ---------------------------- Title: $ 25,500,000 BANK OF MONTREAL By ---------------------------- Title: $ 25,500,000 THE BANK OF NEW YORK COMPANY, INC. By ---------------------------- Title: $ 24,500,000 TORONTO DOMINION [TEXAS], INC. By ---------------------------- Title: $ 17,000,000 FIRST UNION NATIONAL BANK OF NORTH CAROLINA By ---------------------------- Title: $ 14,000,000 PNC BANK, KENTUCKY, INC. By ---------------------------- Title: -13- 14 $ 13,500,000 THE DAIWA BANK, LIMITED By ---------------------------- Title: By ---------------------------- Title: The Administrative Agent LTCB TRUST COMPANY, as Administrative Agent By ---------------------------- Title: -14- 15 Schedule 1
Settlement Amount to Bank be Paid (Received) ----- ------------------ LTCB Trust Company $ 0.00 Bank of Montreal $ 0.00 The Bank of New York Company, Inc. $ 0.00 Toronto Dominion [Texas], Inc. $1,750,000 First Union National Bank of North Carolina $1,750,000 PNC Bank, Kentucky, Inc. $(3,500,000) The Daiwa Bank, Limited $ 0.00
-15- 16 EXHIBIT A [Form of Opinion of Counsel to the Company and Guarantor] _______, 1995 To the Banks party to the Credit Agreement referred to below and LTCB Trust Company, as Administrative Agent Ladies and Gentlemen: We are, respectively, the General Counsel and Senior Counsel to Home Shopping Network, Inc., a Delaware corporation (the "Company"), and Home Shopping Club, Inc., a Delaware corporation (the "Guarantor"), and have acted as such in connection with the First Amendment dated as of March 29, 1995 (the "First Amendment") to the Second Amended and Restated Credit Agreement dated as of August 30, 1994 (the "Credit Agreement") among the Company, the Guarantor, the Banks named therein, LTCB Trust Company, as Agent, Bank of Montreal and The Bank of New York Company, Inc., as Co-Agents, and LTCB Trust Company, as Administrative Agent, providing for loans to be made to the Company in the aggregate principal amount of $100,000,000 under the guarantee of the Guarantor, as increased pursuant to the First Amendment. Terms defined in the Credit Agreement are used herein as defined therein. In rendering the opinion expressed below, we have examined and relied upon the originals or conformed copies of such corporate records, agreements and instruments of the Company and the Guarantor, certificates of public officials and of officers of the Company and the Guarantor, and such other documents and records, and such matters of law, as we have deemed appropriate as a basis for the opinions hereinafter expressed. Based upon the foregoing, we are of the opinion that: -16- 17 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and the Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware; each of them is duly qualified to transact business in the State of Florida and has the necessary corporate power to enter into and perform the First Amendment, the Credit Agreement as amended thereby and the new Notes issued under the Credit Agreement as amended by the First Amendment (the "New Notes") and, in the case of the Company, to borrow under the Credit Agreement as amended by the First Amendment. The Guarantor is a Wholly-Owned Subsidiary of the Company. 2. The execution, delivery and performance by each of the Company and the Guarantor of the First Amendment, the Credit Agreement as amended by the First Amendment and the New Notes and, in the case of the Company, the borrowings thereunder have been duly authorized by all necessary corporate action, and do not and will not violate any provision of law, regulation, order, writ, injunction or decree of any court or governmental authority or agency or any provision of the certificate of incorporation or by-laws of the Company or the Guarantor or result in the breach of, or constitute a default or require any consent under, or result in the creation of any Lien upon any of its respective properties, revenues or assets pursuant to, any indenture or other agreement or instrument to which the Company, the Guarantor or any Subsidiary of either thereof is a party or by which the Company or the Guarantor or any Subsidiary of either thereof or its respective properties may be bound. 3. The First Amendment, the Credit Agreement as amended by the First Amendment and the New Notes have been duly executed and delivered by the Company and the Guarantor and, assuming due execution and delivery thereof by the Administrative Agent and the Banks, constitute the legal, valid and binding obligations of the Company and the Guarantor enforceable in accordance with their respective terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), and except that no opinion is expressed as to the fourth sentence of Section 4.7 of the Credit Agreement. 4. Except as disclosed to the Administrative Agent and the Banks in SEC Reports delivered to the Administrative Agent and the Banks prior to the date hereof, to our knowledge after due inquiry, there are no legal or arbitral proceedings, and no -17- 18 proceedings by or before any governmental or regulatory authority or agency, pending or threatened against or affecting the Company or the Guarantor or any of the Subsidiaries of either thereof, or any properties or rights of the Company or the Guarantor or any of the Subsidiaries of either thereof, which, if adversely determined, would have a material adverse effect on the consolidated financial condition or operations, or the business taken as a whole, of the Company and the Guarantor and the Subsidiaries. 5. No authorizations, consents, approvals, licenses, filings or registrations with any governmental or regulatory authority or agency are required in connection with the execution, delivery or performance by the Company or the Guarantor of the First Amendment, the Credit Agreement as amended by the First Amendment or the New Notes or the borrowings thereunder. 6. Assuming that the Administrative Agent has its principal office in the State of New York, the proceeds of the Loans will be disbursed from the Administrative Agent's office in New York, payments will be made to the Administrative Agent at its office in New York and the Loans will be administered by the Administrative Agent from said office, the provisions of Section 5(c) of the First Amendment and of Section 12.11 of the Credit Agreement as amended by the First Amendment regarding the choice of the laws of the State of New York to govern the Credit Agreement and the New Notes is, under the laws of the State of Florida, a valid choice of law and would be given effect by the courts in Florida. However, courts in Florida are likely to apply Florida procedural law. 7. The provisions of the Credit Agreement as amended by the First Amendment and the New Notes do not violate any Florida law relating to usury or other limitations on the rate of interest that a lender may charge, collect or receive. Barry S. Augenbraun, Esq., General Counsel, is admitted to practice law in the State of New York and the Commonwealth of Pennsylvania, and Elizabeth A. Waters, Esq., Senior Counsel, is admitted to practice law in the State of Florida. The opinions expressed herein relate only to the laws of the States of New York and Florida, the General Corporation Law of the State of Delaware and the federal laws of the United States. Opinions herein based on the laws of the State of New York, the General Corporation Law of the State of Delaware and the federal laws of the United States are rendered by Mr. Augenbraun, and opinions herein based on the laws of the State of Florida are rendered by Ms. Waters. -18- 19 The opinions expressed in this letter are based upon the law in effect on the date hereof, and we assume no obligation to revise or supplement this opinion should such law be changed in any respect by legislative action, judicial decision or otherwise. This opinion is being furnished to you solely for your benefit and only with respect to the transaction referred to herein. Accordingly, it may not be relied upon by any other person or entity without, in each instance, our prior written consent. Very truly yours, -------------------------- Barry S. Augenbraun, Esq., General Counsel -------------------------- Elizabeth A. Waters, Esq., Senior Counsel -19- EX-10.38 3 SECOND AMENDMENT TO RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.38 EXECUTION COPY SECOND AMENDMENT, dated as of June 28, 1995, to the SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 30, 1994 (as amended by the First Amendment thereto, dated as of March 29, 1995, the "Credit Agreement"), among HOME SHOPPING NETWORK, INC., a Delaware corporation, as borrower (the "Company"), HOME SHOPPING CLUB, INC., a Delaware corporation, as guarantor (the "Guarantor"), the banks signatory thereto (individually, a "Bank" and collectively, the "Banks"), LTCB TRUST COMPANY, as Agent, BANK OF MONTREAL and THE BANK OF NEW YORK COMPANY, INC., each as a Co-Agent (each in such capacity, a "Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent for the Banks (in such capacity, the "Administrative Agent"). WHEREAS, the Company and the Guarantor have requested, and the Banks and the Administrative Agent are willing, to amend certain provisions of the Credit Agreement to change the rate of interest and certain fees and to provide for certain other matters as provided herein; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereby agree as follows: SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in this Second Amendment, terms defined in the Credit Agreement and used herein shall have their respective defined meanings when used herein. SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT. Subject to the fulfillment of the conditions precedent set forth in Section 4 hereof, the Credit Agreement is hereby amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Applicable Margin" set forth in such Section in its entirety and replacing it with the following: "Applicable Margin" shall mean: (i) at any time when none of the covenants set forth in Section 9.20 hereof is in effect or, on or after January 1, 1996 (even if said Section 9.20 is in effect), when the Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis (for the four-Fiscal Quarter period most recently ended for which financial statements have been delivered to the 2 Administrative Agent and the Banks in accordance with Section 9.1 hereof) is less than or equal to 4.0:1, (a) with respect to LIBOR Loans, 1.625% minus the Margin Adjustment (if any) in effect at such time, and (b) with respect to Prime Rate Loans, 0.625% minus the Margin Adjustment (if any) in effect at such time; provided, that in no event shall the Applicable Margin be less than 0%; or (ii) at any time when any of the covenants set forth in Section 9.20 hereof are in effect and, on or after January 1, 1996, when the Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis (for the four-Fiscal Quarter period as aforesaid) is greater than 4.0:1, (a) with respect to LIBOR Loans, 2.125%, and (b) with respect to Prime Rate Loans, 1.125%; provided, that if on any day (when such covenants are in effect and such Total Debt Ratio is as stated in this clause (ii)) on or after January 1,1996 the aggregate principal amount of all Loans outstanding under this Agreement shall be less than or equal to $95,000,000, the Applicable Margin for such day shall be (1) with respect to LIBOR Loans, 1.875%, and (2) with respect to Prime Rate Loans, 0.875%. (b) Section 1.1 of the Credit Agreement is hereby amended by adding the following proviso to the end of the definitio of "Facility Fee Rate" set forth in such Section, immediately before the period: ; and provided, further, that at any time when any of the covenants set forth in Section 9.20 hereof is in effect, the Facility Fee Rate shall be 0.375%. (c) Section 1.1 of the Credit Agreement is hereby amended by adding the following proviso to the end of the definition of "Margin Adjustment" set forth in such Section, immediately before the period: ; and provided, further, that no Margin Adjustment shall apply at any time when any of the covenants set forth in Section 9.20 hereof is in effect. (d) Section 1.1 is hereby amended by adding the following new definitions thereto in the appropriate alphabetical position: "Second Amendment" shall mean the Second Amendment to this Agreement dated as of June 28, 1995. -2- 3 "Second Amendment Effective Date" shall have the meaning assigned to that term in Section 4 of the Second Amendment. (e) Section 1.2(a) is hereby amended by deleting the words "Sections 9.11, 9.12 and 9.13" appearing in the second sentence thereof, and replacing them with the words "Sections 9.11, 9.12, 9.13, 9.19, 9.20 and 9.21". (f) Section 3.2(b) of the Credit Agreement is hereby amended by adding the following proviso at the end of said Section, immediately before the semicolon: ; provided, that at any time when any of the covenants set forth in Section 9.20 are in effect, the spread over the applicable Federal Funds Rate shall be 2.625% per annum. (g) In Section 7.2(b) of the Credit Agreement, each of the references to "December 31, 1993" shall be amended to read "December 31, 1994", and the words "date of this Agreement" shall be amended to read "date of the Second Amendment". (h) The first sentence of Section 8.2 of the Credit Agreement is hereby amended by deleting the reference therein to "September 30, 1994" and replacing it with "March 31, 1995", and by deleting the words "three-Fiscal Quarter" and replacing them with "Fiscal Quarter". (i) The last sentence of Section 8.2 of the Credit Agreement shall be amended to read in its entirety as follows: Since December 31, 1994, there has been no material adverse change in the consolidated financial condition or operations, or the business taken as a whole, of the Company and its consolidated Subsidiaries (including, without limitation, the Guarantor) from that set forth in such financial statements as at such date, except as disclosed in writing to the Banks (including, without limitation, in financial data furnished to the Banks) prior to the date of the Second Amendment. (j) Section 8.9(a) of the Credit Agreement is amended to read in its entirety as follows: (a) United States Federal income tax returns of the Company, the Guarantor and the Subsidiaries have been examined and closed through Fiscal 1989, have been -3- 4 examined for Fiscal 1990 and 1991, and are under examination for Fiscal 1992, 1993 and 1994. (k) Section 8.11 of the Credit Agreement is amended by deleting the date "December 31, 1993" and replacing it with the date "December 31, 1994", and by deleting the words "Footnotes D and G" in clause (a) of said Section and replacing them with the words "Footnotes D and H". (l) Section 9.1(b) of the Credit Agreement is hereby amended by deleting the words "9.17 or 9.18 hereof" and replacing them with the words "9.17, 9.18, 9.19, 9.20 or 9.21 hereof". (m) The final paragraph of Section 9.1 of the Credit Agreement is hereby amended by (1) amending the words "Sections 9.11, 9.12 and 9.13 hereof" in clause (ii) thereof to read "Sections 9.11, 9.12, 9.13, 9.19 and 9.21 hereof", and (2) adding the following text to the end of the final paragraph thereof: For each period for which any of the covenants in Section 9.20 is in effect, the Company and the Guarantor shall continue to furnish to the Administrative Agent all financial information, notices and calculations pursuant to this Section 9.1 as if the covenants in Sections 9.11, 9.12 and 9.19 had remained in effect. In addition, the Company and the Guarantor will furnish to the Administrative Agent, with sufficient copies for the Banks, at the time when it furnishes each set of financial statements pursuant to Section 9.1(a) or (b), a certificate of a senior financial officer of the Company and the Guarantor setting forth in reasonable detail the computations necessary to determine whether the Company and the Guarantor are in compliance with Section 9.20 hereof. Said certificate may, at the option of the Company and the Guarantor, form a part of the certificate otherwise accompanying such financial statements in accordance with this final paragraph of Section 9.1. The obligation of the Company and the Guarantor to furnish information with respect to compliance with Section 9.20 shall survive the termination of Section 9.20 for such period as may be necessary to determine such compliance from the financial statements of the Company and its Subsidiaries. (n) Section 9.7 of the Credit Agreement is hereby amended by replacing the words "any Person" in the sixth line of said Section with the words "to any Person"; by deleting the word "and" at the end of clause (ii) thereof; by deleting the period -4- 5 at the end of clause (iii) thereof and replacing it with the word "; and"; and by adding the following new clause (iv): (iv) sales by the Company or any Material Subsidiary of the shares of capital stock of any Non-Material Subsidiary on an arm's length basis for at least fair consideration, so long as such Non-Material Subsidiary, together with all other Non-Material Subsidiaries with respect to which there has been, since the date of this Agreement, such a sale of shares, does not constitute a Material Subsidiary Group. (o) Section 9.11 of the Credit Agreement is hereby amended by adding the following proviso to the end of said Section, immediately before the period: ; provided, that the covenants in this Section are subject to Section 9.20 hereof at such times as said Section 9.20 is in effect. (p) Section 9.12 of the Credit Agreement is hereby amended by adding the following sentence to the end of said Section, as a new indented paragraph: Notwithstanding the foregoing, the covenants in this Section 9.12 are subject to Section 9.20 hereof at such times as said Section 9.20 is in effect. (q) Section 9.19 of the Credit Agreement is hereby amended by adding to the following proviso to the end of said Section, immediately prior to the period: ; provided, that the covenants in this Section are subject to Section 9.20 hereof at such times as said Section 9.20 is in effect. (r) Section 9 is hereby amended by adding at the end thereof the following new Sections 9.20 and 9.21: 9.20. Alternative Financial Covenants. At any time during the period from the Second Amendment Effective Date until this Section 9.20 shall cease to be in effect as provided in clause (g) hereof, the Company's obligation to comply with the covenants in Sections 9.11, 9.12 and 9.19 hereof shall be suspended, and instead the Company and its Subsidiaries will be obligated to comply with all of the following covenants set forth in this Section 9.20: -5- 6 (a) The Company shall not permit the Operating Cash Flow of the Company and its Subsidiaries on a consolidated basis for each of the following Fiscal Quarters to be less than the following amounts:
Fiscal Quarter Ending Amount --------------------- ------ June 30, 1995 ($ 6,500,000) September 30, 1995 $ 5,000,000 December 31, 1995 $14,000,000.
(b) The Company shall not permit the Operating Cash Flow of the Company and its Subsidiaries on a consolidated basis for the four-Fiscal Quarter Period ending March 31, 1996 to be less than $25,000,000. (c) The Company shall maintain the Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis at not greater than 4.0:1 at all times from and including March 31, 1996 to but not including June 30, 1996, and not greater than 3.0:1 on June 30, 1996. (d) The Company shall not, and shall not permit any of its Subsidiaries to, incur or assume any Indebtedness whatsoever (other than (i) loans, not under this Agreement, outstanding on March 31, 1995, but not any extension, renewal, refinancing or replacement thereof, and (ii) Loans to the Company under this Agreement in accordance with Section 9.20(e) hereof) unless the financial statements of the Company and its Subsidiaries on a consolidated basis, delivered to the Administrative Agent and the Banks in accordance with Sections 9.1(a) or (b) hereof, show that the Total Debt Ratio of the Company and its Subsidiaries on a consolidated basis, for the four-Fiscal Quarter period most recently ended on the date of the incurrence or assumption of such Indebtedness and covered by such financial statements, was less than or equal to 3.0:1. (e) The Company shall not incur or suffer to remain outstanding any Loans under this Agreement at any time prior to March 31, 1996, except for Loans in such amounts that the aggregate principal amount of all Loans outstanding under this Agreement shall not exceed -6- 7 the following amounts at any time during the following periods:
Maximum Aggregate Period Principal Amount ------ ---------------- At any time on or after the Second Amendment Effective Date and on or prior to June 30, 1995 $ 75,000,000 After June 30, 1995 and on or prior to September 30, 1995 $105,000,000 After September 30, 1995 and prior to December 31, 1995 $115,000,000 On or after December 31, 1995 and prior to January 31, 1996 $105,000,000 On or after January 31, 1996 and prior to March 31, 1996 $100,000,000;
provided, that the foregoing limitations on Indebtedness shall not be deemed to reduce the amount of any Bank's Commitment for any purposes of this Agreement (including, without limitation, Section 2.4 hereof or Section 5 hereof). (f) The Company will not, and will not permit any of its Subsidiaries to, cause any letter of credit to be issued for its account, or otherwise be or become directly or indirectly obligated for the reimbursement of any letter of credit, other than Trade Letters of Credit (as hereinafter defined) in an aggregate stated amount which, when aggregated with the amount of all unreimbursed drawings under all letters of credit of the Company and its Subsidiaries, does not exceed the following amounts during each of the following periods:
Period Maximum Aggregate Amount ------ ------------------------ At June 30, 1995 $ 15,000,000 After June 30, 1995
-7- 8 and prior to September 30, 1995 $ 25,000,000 On or after September 30, 1995 and prior to December 31, 1995 $ 25,000,000 On or after December 31, 1995 and prior to June 30, 1996 $ 20,000,000.
As used in this Section 9.20(e), "Trade Letter of Credit" shall mean a trade letter of credit issued for the account of the Company or any of its Subsidiaries or for the reimbursement of draws under which the Company or any Subsidiary may be directly or indirectly obligated, in either case in the ordinary course of business of the Company or such Subsidiary, as the case may be, in favor of one or more vendors of merchandise sold or to be sold to the Company or such Subsidiary in the ordinary course of the business of the Company or such Subsidiary, providing for or securing the payment by the Company or such Subsidiary for such merchandise, pursuant to the terms of which letter of credit (or any application, reimbursement agreement or similar document in connection therewith) (A) the Company or such Subsidiary, as the case may be, is obligated to reimburse the issuer thereof for any drawing thereunder on the date of such drawing and (B) such issuer extends no other credit thereunder to the Company or any Subsidiary. (g) The covenants set forth in this Section 9.20 shall cease to be in effect on June 30, 1996, unless the financial statements for any Fiscal Quarter ended prior to that date, when delivered to the Administrative Agent and the Banks in accordance with Section 9.1(a) or (b) hereof, show that the Company and its Subsidiaries have complied with all of the covenants in this Agreement other than this Section 9.20 (such compliance to include, without limitation, compliance with Sections 9.11, 9.12 and 9.19 hereof without regard to the final proviso to each thereof), for the four-Fiscal Quarter period then ended, in which case the covenants in this Section 9.20 shall not apply to such four-Fiscal Quarter period or to any subsequent period. Commencing on June 30, 1996 or such earlier date on which this Section 9.20 no longer applies, as aforesaid (and for each period to which this Section 9.20 no longer applies, and for all periods thereafter), the Company and its -8- 9 Subsidiaries shall be obligated to perform and comply with each of Sections 9.11, 9.12 and 9.19 hereof without regard to the final provision to each thereof (as well as all other covenants set forth in this Agreement) as if this Section 9.20 had not existed, and any failure to be in compliance with such covenants on or after such date shall be an Event of Default. 9.21. Current Ratio. The Company will maintain the ratio of current assets to current liabilities (each as defined by GAAP) of the Company and its Subsidiaries on a consolidated basis at not less than 1.01:1 as at the end of each Fiscal Quarter. (s) References in the Credit Agreement to "this Agreement" and the words "hereof", "herein", "hereto" and the like, shall refer to the Credit Agreement, the Second Amendment, and the Credit Agreement as amended by the Second Amendment; provided, that the words "the date of this Agreement" and "the date hereof" shall continue to refer to the date of the Credit Agreement (being August 30, 1994). SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the Administrative Agent and each Bank to enter into this Second Amendment, each of the Company and the Guarantor hereby represents and warrants that each of the representations and warranties set forth in Section 8 of the Credit Agreement is true, correct and complete on and as of the date of this Second Amendment (whether or not the Second Amendment Effective Date, as defined in Section 4 hereof, occurs), and on and as of the Second Amendment Effective Date, both before and after giving effect to the amendments set forth in Section 2 of this Second Amendment on either such date, as if each reference therein to "this Agreement" were a reference to "this Agreement as amended by the Second Amendment", except that the representations and warranties in the last sentence of Section 8.2 and in Section 8.11 of the Credit Agreement shall, each time when they are made under this Section 3, be deemed to have been amended as provided in Sections 2(j) and (k), respectively, of this Second Amendment. Each of the Company and the Guarantor further represents and warrants that, as of the date of this Second Amendment and as of the Second Amendment Effective Date, no Default or Event of Default has occurred and is continuing. SECTION 4. CONDITIONS TO EFFECTIVENESS. The amendments set forth in Section 2 of this Second Amendment shall become effective as of the date (the "Second Amendment Effective Date"), as specified by the Administrative Agent, when counterparts hereof shall have been duly executed and delivered -9- 10 by the Majority Banks, the Administrative Agent, the Company and the Guarantor, and when each of the conditions precedent set forth in this Section 4 shall have been fulfilled to the satisfaction of the Administrative Agent: A. The Administrative Agent shall have received each of the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance: (1) A certificate of a senior officer of each of the Company and the Guarantor to the effect set forth in Section 4.C of this Second Amendment. (2) Evidence of the payment of the fees provided for in Section 4.B of this Second Amendment, and of all other fees and expenses then payable, including, without limitation, pursuant to Section 12.3 of the Credit Agreement. (3) Such other documents as the Administrative Agent or any Bank may reasonably request including, without limitation, all requisite governmental approvals and filings. B. The Company shall have paid to the Administrative Agent, for the account of each Bank, a non-refundable amendment fee in an amount equal to 0.6250% of the amount of such Bank's Commitment (if such Bank has signed this Second Amendment) and 0.3125% (if such Bank has not signed this Second Amendment). C. As of such date: (1) No Default or Event of Default shall have occurred and be continuing; and (2) The representations and warranties made by the Company and the Guarantor in Section 3 hereof and in any other certificate or other document delivered in connection with this Second Amendment or the Credit Agreement as amended hereby shall be true, correct and complete on and as of each such date with the same force and effect as if made on and as of such date. The Administrative Agent will promptly notify the other parties of the occurrence of the Second Amendment Effective Date. -10- 11 SECTION 5. MISCELLANEOUS. A. This Second Amendment may be executed in any number of counterparts, all of which taken together and when delivered to the Administrative Agent shall constitute one and the same instrument, and any of the parties hereto may execute this Second Amendment by signing any such counterpart. B. Each of the Company and the Guarantor hereby confirms its obligation, pursuant to Section 12.3(a) of the Credit Agreement, to pay all of the Administrative Agent's costs and expenses (including, without limitation, the reasonable fees and expenses of all special counsels to the Administrative Agent) in connection with this Second Amendment, whether or not the Second Amendment Effective Date occurs. C. THIS SECOND AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. D. Except as expressly set forth in this Second Amendment, the Credit Agreement shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed as of the date first above written. HOME SHOPPING NETWORK, INC., as the Company By ------------------------------------ Title: HOME SHOPPING CLUB, INC., as the Guarantor By ------------------------------------ Title: The Banks LTCB TRUST COMPANY By ----------------------------------- Title: -11- 12 BANK OF MONTREAL By ----------------------------------- Title: THE BANK OF NEW YORK COMPANY, INC. By ----------------------------------- Title: TORONTO DOMINION [TEXAS], INC. By ----------------------------------- Title: FIRST UNION NATIONAL BANK OF NORTH CAROLINA By ----------------------------------- Title: PNC BANK, KENTUCKY, INC. By ----------------------------------- Title: THE DAIWA BANK, LIMITED By ----------------------------------- Title: By ----------------------------------- Title: -12- 13 The Administrative Agent LTCB TRUST COMPANY, as Administrative Agent By ----------------------------------- Title: -13- EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 15,684 0 27,817 0 107,598 187,645 251,400 124,527 429,150 180,178 77,365 776 0 0 165,483 429,150 490,269 490,269 328,091 328,091 193,343 0 3,277 (29,896) (11,361) (18,535) 0 0 0 (18,535) (.21) (.21)