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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ____________________ to ____________________
Commission File Number 1-10880
BET HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 52-1742995
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
One BET Plaza
1900 W Place, N.E., Washington, D.C. 20018-1211
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(Address of principal executive offices)
(202) 608-2000
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(Registrant's phone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Class A Common Stock, $.02 Par Value New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to the Form 10-K.
As of October 11, 1996, there were 10,106,205 shares of the Registrant's Class A
Common Stock, $.02 par value per share, outstanding and the aggregate market
value of such shares held by non-affiliates of the registrants (based on the
closing price of such shares on the New York Stock Exchange composite tape on
October 11, 1996) was approximately $178,751,554. As of October 11, 1996,
there were 1,831,600 shares and 4,820,000 shares of the registrant's Class B
Common Stock and Class C Common Stock, respectively, outstanding, none of which
were held by non-affiliates of the registrant.
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BET HOLDINGS, INC.
FISCAL YEAR 1996 10-K ANNUAL REPORT
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's 1996 Annual Report to Shareholders are
incorporated by reference in Part I, Item 1 and Part II, Items 5-8 of this
report (to the extent described herein).
(2) Portions of the registrant's definitive Proxy Statement to be used in
connection with its 1996 Annual Meeting of Shareholders are incorporated by
reference in Part III, Items 10-13, of this report (to the extent described
herein).
BET HOLDINGS, INC.
FISCAL YEAR 1996 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
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PART I
Item 1. Business........................................... 1
Item 2. Properties......................................... 10
Item 3. Legal Proceedings.................................. 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters........................ 13
Item 6. Selected Consolidated Financial Data............... 13
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition...... 13
Item 8. Consolidated Financial Statements and
Supplementary Data................................. 13
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............. 13
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation............................. 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management..................................... 14
Item 13. Certain Relationships and Related Transactions..... 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................ 15
PART I
ITEM 1. BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
In connection with the initial public offering of its Class A common stock,
BET Holdings, Inc. ("BET Holdings") was incorporated in Delaware in July 1991.
As a result of a series of related transactions completed in September 1991,
Black Entertainment Television, Inc. ("BET"), a District of Columbia corporation
formed in 1979, became a wholly owned subsidiary of BET Holdings. In November
1991, BET Holdings completed its initial public stock offering and became the
first black majority-controlled company listed on the New York Stock Exchange.
Unless the context otherwise requires, as used in this report, the terms
"Registrant" and "Company" means BET Holdings and its consolidated subsidiaries,
including BET. Substantially all of the Company's operations are conducted by
BET through its operation of the Black Entertainment Television cable network
("BET Cable Network"), an advertiser supported basic cable network.
BET Cable Network commenced operations in 1980 by providing two hours of
programming per week targeted to the interests and concerns of African-American
viewers to affiliated cable system operators serving approximately 3.8 million
cable subscribers. In 1984, BET Cable Network began cablecasting 24 hours per
day. As of July 31, 1996, BET Cable Network reached over 45.2 million
households, as estimated by Nielsen Media Research ("Nielsen"), providing a
broad mix of music videos, off-network situation comedies and original
programming.
In August 1991, the Company entered the publishing industry when its newly
formed wholly owned subsidiary, Paige Publications, Inc., began publishing Young
Sisters and Brothers (YSB) magazine , a national lifestyle magazine targeted to
black American teenagers and young adults.
In December 1991, the Company acquired a 44% interest in Emerge
Communications, Inc. ("ECI"), the publisher of Emerge magazine, an issue-
oriented publication providing news, commentary and analysis from the black
American perspective. During its 1995 fiscal year, the Company increased its
ownership interest in ECI to 100%.
In July 1993, the Company acquired 81% of the common stock of Avalon
Pictures, Inc. ("Avalon"), which operates BET Action Pay-Per-View ("Action"), a
cable television network providing programming on a pay-per-view basis. During
its 1994 fiscal year, the Company completed its acquisition of Avalon by
increasing its ownership interest to approximately 100%.
In January 1996, the Company launched BET on Jazz: The Cable Jazz Channel
("BET on Jazz"), its third cable network. BET on Jazz features a broad range
of jazz-oriented musical programming.
In February 1996, the Company, in a joint venture with the New York Daily
News, began publication of BET Weekend, a Sunday newspaper supplement.
In May 1996, the Company's wholly owned subsidiary, BET Direct, Inc. ("BET
Direct"), launched the Color Code line of skin-care products, which are offered
for sale in drug stores and other retail outlets in the United States.
In September 1996, the Company announced that it would discontinue
publishing YSB magazine.
1
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The contribution to revenues and earnings from operations of each industry
segment and the identifiable assets of each industry segment for each of the
last three fiscal years are set forth in Note 11 ("Segment Information") to the
Consolidated Financial Statements of the Company, which are incorporated herein
by reference to the Company's 1996 Annual Report to Shareholders.
C. DESCRIPTION OF BUSINESS
The Company operates in two principal business segments: cable television
programming and magazine publishing. The Company's cable television programming
operations are conducted by its Entertainment Group, which includes BET Cable
Network, BET on Jazz and Action. Ancillary Entertainment Group businesses
established to leverage and expand the BET brand name include BET Direct, which
sells the Color Code line of skin care products on a retail basis and musical
recordings on compact discs and cassettes primarily through short-form direct
advertising. The Company's publishing operations are conducted through its
Publishing Group, which publishes Emerge magazine and published YSB magazine
until its discontinuance in September 1996. The Company has equity ownership
interests in certain unconsolidated affiliated companies, including BET Film
Productions and BET Pictures, which produce low-budget feature length motion
pictures, and a joint venture with the New York Daily News which publishes BET
Weekend, a Sunday newspaper supplement. A description of each of the Company's
business segments follows.
ENTERTAINMENT GROUP
BET Cable Network
The BET Cable Network provides a broad mix of programming targeted to the
interests and concerns of African-American viewers. Programming is produced in-
house or acquired from a variety of sources. BET Cable Network's in-house
productions include hosted music video programs, talk shows, sports, news and
public affairs, children's programs and comedy shows, and are produced in the
Company's studios in Washington, D.C., and Burbank, California. Acquired
programs include situation comedies, gospel music programs and sports and
entertainment specials. For the fiscal year ended July 31, 1996, revenues from
the BET Cable Network represented 88% of the Company's consolidated revenues.
BET Cable Network Affiliated Cable Systems and Subscribers
BET Cable Network contracts with cable system operators to receive a monthly
per subscriber fee under long-term affiliation agreements, which are subject to
renewal from time to time. BET Cable Network's current affiliation agreement
provides for a monthly per subscriber rate of $.11, $.12 and $.13 in calendar
years 1996, 1997 and 1998, respectively, with the monthly per subscriber rate
increasing $.005 per year through calendar year 2003, at which time the monthly
per subscriber rate will be $.155. BET Cable Network's affiliation agreements
are subject to cancellation by either BET Cable Network or cable system
operators under certain circumstances. Additionally, substantially all of BET
Cable Network's affiliation agreements include a "most favored nations"
provision under which BET Cable Network is obligated to extend the terms and
provisions of its most favorable contractual rate to covered affiliates.
Accordingly, in the event BET Cable Network enters into a new or renewed
affiliation agreement with terms more favorable than those included in its
current standard affiliation agreement, it would be obligated to extend the more
favorable terms to substantially all other affiliates. The BET Cable Network
currently generates approximately 43% of its revenues from subscriber fees paid
by cable systems affiliates.
BET Cable Network affords cable system operators the opportunity both to
attract subscribers from a significant market segment not specifically targeted
by other programming services, and, by diversifying the mix of programming
offered on their systems, to satisfy certain social objectives mandated by many
franchising authorities. The BET Cable Network is also attractive to cable
operators seeking to respond to cable subscribers' demands for black-oriented
entertainment, sports and public affairs programming.
2
At July 31, 1996, BET Cable Network had over 41.4 million subscribers, based
on reports to the Company from cable system affiliates, an increase of 11% as
compared to July 31, 1995. This growth is attributable both to incremental
growth in household penetration by cable systems nationwide and to the Company's
success in obtaining affiliation agreements with cable systems not previously
carrying the BET Cable Network. The Company believes that while it will
continue to experience subscribership growth, growth rates experienced in
previous years may not be attainable in the future. Continued subscribership
growth will be encouraged by new cable system construction in the central cities
of a number of metropolitan areas as well as by upgrades of existing cable
systems and, eventually, from the expected significant expansion of channel
capacity of cable television systems, which is expected to occur over the next
several years. Increased rate regulation and structural changes in the cable
industry generally, however, could place downward pressure on rates charged by
cable programming services and could cause cable system operators not to expand
channel capacity as rapidly as expected. The rate of subscribership growth also
may be restricted, in management's view, as a result of re-regulation of the
cable industry and competition for limited channel capacity, both of which may
make it more difficult to increase the BET Cable Network's distribution in those
markets with less than 5% black populations.
Advertising
BET Cable Network's advertising revenues are derived primarily from sales of
national spot advertising, infomercial advertising and direct response
advertising. Advertisers on the BET Cable Network include nationally known
companies in the entertainment, beverage, packaged goods, fast food, automotive,
retail, insurance and travel industries. BET Cable Network currently earns
approximately 55% of its revenues from advertising.
The Company believes that advertising on BET Cable Network is attractive to
advertisers because it allows them to execute a general market strategy of
reaching more cable television viewers and to target a specific population that
frequently uses their product or service. Over the past 10 years, cable
television has captured a greater share of advertising budgets. During this
period, the overall ratings for the major networks (ABC, CBS and NBC), and for
local broadcast stations, have declined, while over the same period the overall
ratings for basic cable television programming services have increased. Because
ratings are a significant factor in determining both advertisers' placement
strategy and the pricing of advertising time, during this period cable
advertising revenues have grown significantly faster than those of broadcast
networks. The Federal Communications Commission has predicted that this trend
will continue throughout the 1990's. The Company believes that the BET Cable
Network has benefited, and will continue to benefit, from this trend.
In addition, the Company believes that the BET Cable Network will benefit
from the trend in advertising strategies toward greater market segmentation and
that a significant number of major national advertisers are dedicating a larger
share of their advertising budgets to target the black consumer in an effort to
increase their share of this large and rapidly growing market. These
advertisers, as well as manufacturers of black consumer products, purchase
advertising on the BET Cable Network because it provides them with a cost
effective means to reach a significant number of black consumers. In addition to
the other factors that normally motivate advertisers to purchase advertising
time on the BET Cable Network, certain advertisers may believe that they derive
indirect corporate benefits from supporting culturally diverse programming
services such as the BET Cable Network.
Advertising time on the BET Cable Network is marketed and sold by the
Company's advertising sales force located in New York, Chicago, Los Angeles and
Detroit.
3
National Spot Advertising
National spot advertising primarily consists of 30 second advertisements for
products and services. BET Cable Network sells national spot advertising time
to agencies representing national advertisers and directly to advertisers. The
Company believes that its advertising rates are among the most cost effective of
the cable networks. In fiscal 1996, national spot advertising accounted for 67%
of BET Cable Network advertising revenues.
Infomercial Advertising
Infomercial advertising, such as instructional, ministry, health, beauty and
other programming, ranges in length from 30 to 60 minutes. These programs
frequently take the form of talk shows or game shows. Infomercial advertising
is generally aired during less desirable programming hours. Infomercial
advertising revenue accounted for 27% of BET Cable Network advertising revenue
in fiscal 1996.
During fiscal 1996, Robert Rosenheim Associates ("Rosenheim") purchased
$15.3 million of infomercial advertising from BET, representing 12% of the
Company's total consolidated revenues. The Company's long-term contract with
Rosenheim extends through its 1999 fiscal year and provides for annual rate
increases of 22%, 10%, and 10% in fiscal years 1997, 1998 and 1999,
respectively.
Direct Response Advertising
Direct response advertising consists of 30 and 60 second commercials for
various consumer products, such as musical recordings and kitchenware, which
direct consumers to dial an 800 or 900 telephone number in order to purchase the
particular product. In most cases, these products are not available on a retail
basis. In fiscal 1996, direct response advertising accounted for 6% of BET
Cable Network advertising revenues.
Market Demographics
The majority of the BET Cable Network's audience is comprised of black
viewers and at July 31, 1996, BET Cable Network reached over 97% of the 6.8
million U.S. black cable households, based on reports from Nielsen. The Company
believes that certain demographic characteristics of the BET Cable Network's
viewing audience favorably influence advertisers' decisions to purchase time on
the BET Cable Network. Generally, homes served by cable television watch more
television, have a higher per capita income and have more people per household
than the general population. Additionally, research indicates that black
households watch more television and are more brand conscious than the general
population.
The black population as a group is growing at a faster rate than the total
population of the United States. The United States Department of Commerce,
Bureau of the Census (the "Census Bureau") reported that the black population
grew by 15.6% to approximately 30.6 million between April 1, 1980 and April 1,
1990, a growth rate 1.5 times that of the total population. Another report by
the Census Bureau projected that this growth will continue, predicting that the
total black population of the United States will increase by approximately 15.8%
between 1990 and 2000. Because of the unique niche occupied by the BET Cable
Network, the Company believes that growth in the black population will generally
lead to increased viewership of the BET Cable Network and to increased
advertising revenues. The Census Bureau has projected that the black population
in the age group of 35-44 years old, which is particularly attractive to
advertisers, will grow by 30.8% between 1990 and 2000.
According to Census Bureau reports, approximately 57% of the black
population in the United States is concentrated in the central cities of
metropolitan areas, compared to 31% of the total population. BET Cable Network
has affiliation agreements with cable operators in each of the top 50
metropolitan areas and distributes its programming to cable systems in each of
the 10 media markets in the United States with the largest black populations.
4
Ratings
Since 1987, Nielsen has provided the Company with metered audience
measurements. Nielsen's metered estimates are widely accepted by advertisers as
a basis for determining placement strategy. The Company also uses these
subscriber estimates for the purpose of determining the rates that the BET Cable
Network will charge advertisers for commercial air time within its programs.
According to Nielsen's most recent prime time audience measurements (July 1,
1996 to September 29, 1996), BET Cable Network's ratings averaged approximately
.6. This signifies that during that period (based on Nielsen estimates), on
average, approximately 284,000 homes were tuned in to the BET Cable Network
during prime time. In addition, Nielsen reports the BET Cable Network's prime
time rating for black cable households reached by the BET Cable Network. For the
most recent period (July 1, 1996 to September 29, 1996), the BET Cable Network's
prime time black household ratings averaged approximately 3.4 indicating that
approximately 233,000 black households were tuned in to the BET Cable Network
during prime time. The Company believes the BET Cable Network's average prime
time ratings are competitive with the average prime time ratings of other basic
cable programming services with a targeted viewing audience, which ranged from
.3 to 1.5 according to the most recent Nielsen report (July 1, 1996 to September
29, 1996).
Programming
The BET Cable Network provides a full range of black-oriented programming.
Most of BET Cable Network's programs feature black actors and performers in
leading or dominant roles or reflect the black cultural experience. BET Cable
Network independently produces the majority of its programming and acquires the
remainder from various external sources. Program offerings include hosted music
video programs, off-network sitcoms, stand-up comedy, news and public affairs
programming, entertainment specials and concert performances. The programs are
transmitted via satellite from the Company's facilities in Washington, D.C. to
BET Cable Network's cable system affiliates.
Originally Produced Programming
In fiscal 1996, most of the BET Cable Network's programmed hours (excluding
infomercial advertising) were produced by the Company. The majority of the
programming produced by the Company consists of hosted music video programs,
such as Video Soul and its successor UnReal, featuring urban contemporary music,
and Rap City, featuring rap music. The programs also feature live entertainment
and in-depth interviews with guest artists. Record companies provide the Company
with music videos in exchange for the promotional benefits gained by their
artists through exposure on BET Cable Network.
Regularly produced programs also include entertainment related shows, such
as Comic View, a stand-up comedy show, Teen Summit, a daily program which
addresses issues affecting black youth, and Screen Scene, an entertainment
oriented magazine style show. The Company also produces a variety of news and
public affairs programming such as BET News, a weekly, half-hour news program
dealing with issues of primary concern to black Americans, BET Talk, an issues
oriented talk show featuring viewer participation, Lead Story, a news digest
examining national issues of particular concern to black Americans, and Our
Voices, a half-hour live call-in talk show designed to permit viewers to express
their opinions on various issues of interest to black Americans.
Programming is produced in two state-of-the-art production facilities owned
by the Company and located in Washington, D.C. Another studio is leased and is
located in Burbank, California. The production facilities in Washington, D.C.,
include four major production studios and six edit suites, while the facility in
Burbank has one production studio and two edit suites.
5
Acquired Programming
To complement its originally produced programming, the Company acquires
programs from various sources, including the broadcast networks, film companies
and program syndicators. The Company exhibits acquired programming pursuant to
licensing agreements with suppliers who generally own the copyrights to such
programming. Licenses to air acquired programming generally run for two years
and entitle the Company to show each episode several times. During fiscal 1997,
acquired programming will include situation comedies, such as Sanford, Thea and
Benson and specialty shows, such as The Bobby Jones Gospel Show and concerts
featuring various music talent.
Most of these acquired programs consist of off-network productions obtained
from the major syndicators. Management believes that acquiring the rights to air
high quality, off-network programming, such as situation comedies and
entertainment specials (rather than attempting to produce them independently) is
the most cost-effective way to provide its viewers with this kind of
programming. Although many of these programs are very popular with black
viewers, they may not have achieved ratings sufficient to justify their
continuation on a major broadcast network or as a first-run syndicated program.
Historically, BET Cable Network has often been the only national television
medium for many of these types of programs and, therefore, exhibition rights
have been relatively inexpensive. However, with the recent proliferation of
cable television programmers, obtaining rights to such programming has become
increasingly competitive and expensive.
Patents, Trademarks, Licenses
BET Cable Network neither holds nor depends upon any material patent,
trademark, license, franchise or concession except its registered trademark for
the letters "BET".
Competition
There is intense competition for viewers among companies providing
programming services via cable television and through other video delivery
systems. Accordingly, BET Cable Network also competes for available channel
space on cable television systems and for subscriber fees from cable operators
with other cable programming services and nationally distributed and local
television stations. BET Cable Network also competes for advertising revenues
with other national cable programming services, including superstations,
broadcast networks, local over-the-air television stations, broadcast radio and
the print media. In addition, BET Cable Network competes for advertising revenue
with other black targeted media, including black-oriented radio stations,
magazines, such as Ebony, Black Enterprise, Jet and Essence, and black-oriented
television programs, such as Soul Train. More generally, BET Cable Network
competes with various other leisure-time activities such as home videos, movie
theaters, and other alternative forms of information and entertainment.
Currently, music videos are included in approximately 60% of the Company's
programming. As is customary in the record industry, record companies provide
the Company with music videos in exchange for promotional considerations. If
the record industry were to change its current practice and begin to charge for
music videos, the Company's programming costs and operating margins may be
materially adversely affected if the Company was unable to receive adequate
compensation for the promotional value of its related airtime. The Company is
aware of one programming service, MTV, that has entered into exclusive
arrangements with record companies covering a limited number of artists.
Cable system channel capacity and competition in the cable industry may be
affected by technological advances, such as digital compression, which allows
cable systems to expand channel capacity, and "multiplexing", which allows
programming services to offer more than one feed of their programming. As a
result of the increased segmentation made possible by these advances, another
programming service might be able to provide programming that targets the
Company's viewing audience. MTV has announced plans to produce three separate
channels of programming, one of which might feature black urban contemporary
music. To the Company's knowledge, MTV does not have any present plan to offer
such a channel in the near future. The Company is
6
aware, however, of several cable programmers that have announced plans to offer
programming targeted to the BET Cable Network's audience. Although there can be
no assurance, the Company believes that it will be able to compete effectively
against other programming services distributing music video programming targeted
to black Americans because of its extensive experience, capitalization,
established relationships within the cable industry, its reputation for
providing a broad mix of quality black-oriented programming and its identity as
a black owned and operated enterprise.
Other Entertainment Group Ventures
BET on Jazz: The Cable Jazz Channel
The Company launched BET on Jazz: The Cable Jazz Network ("BET on Jazz") in
January 1996. BET on Jazz is an advertiser-supported basic cable network
featuring jazz concerts, music videos and interviews with jazz artists. In
June 1996, BET on Jazz expanded overseas when it began providing programming to
cable systems located in the United Kingdom and South Africa. At July 31, 1996,
BET on Jazz reached over one million domestic and international households.
While BET on Jazz's domestic rate card provides for a monthly per subscriber fee
of $.05, its affiliation agreements provide for up to a two year free carriage
period. While current marketing efforts indicate that it may be able to
negotiate more favorable affiliation fees and launch support terms with
international cable system operators, such terms are not assured until
significant international subscriber penetration is achieved. Accordingly, BET
on Jazz is not expected to earn a significant level of revenue in the near
future.
Action Pay-Per-View
The Company's pay-per-view operations are conducted by Action Pay-Per-View
("Action") and represented approximately 7% of the Company's revenues in fiscal
1996. Action is a satellite-delivered television network which offers
programming on a pay-per-view basis to cable systems operators and, to a lesser
extent, home satellite dish owners.
Action has entered into affiliation agreements with cable system operators
which provide for the offering of Action's programming to affiliated cable
system subscribers on a pay-per-view basis. Cable system subscribers purchase
Action's programming from their cable system operator on a one-time viewing for
a fixed charge basis of approximately $5. Affiliated cable systems remit to
Action a contractually specified portion of such revenues. At July 31, 1996,
Action's programming was available to approximately 8.2 million addressable
homes.
Action acquires all of its programming from third parties including major
film studios such as Warner Bros., Paramount, Universal, Twentieth Century Fox,
Columbia/Tri Star, Disney, MGM and others. Typical pay-per-view licenses entitle
film studios to the greater of a minimum rental amount or a share of the gross
revenue generated at the consumer level from the purchase of the pay-per-view
film.
Action competes with several other companies which offer feature film
programming on a pay-per-view basis, some of which may have substantially
greater resources than Action and the Company. More generally, Action competes
with other segments of the entertainment industry, including network and cable
television, theater showing of films and video tape sales and rentals.
Direct Marketing
In May 1996, the Company's merchandising subsidiary, BET Direct, Inc.,
launched the Color Code line of skin care products for women of color. Initial
distribution has been limited with national distribution scheduled for February
1997.
7
PUBLISHING GROUP
Advertising and subscriber revenues earned by the Publishing Group
represented 4% of the Company's total operating revenues in fiscal 1996.
Emerge Communications, Inc.
On December 31, 1991, the Company acquired control of ECI, the publisher of
Emerge, a general interest magazine aimed at a predominantly black audience that
is published ten times a year. Since December 31, 1991, the Company has
consolidated the entire results of operations for ECI into the Company's
financial statements. During the year ended July 31, 1995, the Company
increased its ownership interest in ECI to 100%.
For the fiscal year ended July 31, 1996, Emerge's paid circulation
(including subscriptions and newsstand sales) approximated 160,000.
Paige Publications, Inc.
The Company's wholly owned subsidiary, Paige Publications, Inc., publishes
YSB, a general lifestyle magazine aimed at black teenagers and young adults, ten
times a year. In September 1996, the Company announced that it would
discontinue publishing YSB, which incurred operating losses of approximately $2
million during each of fiscal years 1996 and 1995.
EQUITY INVESTEES
Film Production
BET Film Productions
In fiscal 1994, the Company, in a joint venture with Encore Media Corp. and
LIVE Entertainment, Inc., established BET Film Productions, which was formed to
produce and distribute black, action-oriented independent feature films. BET
Film Productions has produced two films: Out of Sync and Spirit Lost, which is
scheduled for release in February 1997.
BET Pictures
In fiscal 1994, the Company, in a joint venture with Blockbuster
Entertainment Corp., formed BET Pictures to produce and distribute black,
family-oriented films. BET Pictures has produced one film, Once Upon a
Time...When We Were Colored.
United Image Entertainment
United Image Entertainment ("UIE"), a joint venture with actor and producer
Tim Reid and his production company and Butch Lewis Productions, Inc., produces
black-oriented films, mini-series and situation comedies for cable television,
pay television and the broadcast networks by developing concepts for such
vehicles and then seeking the financial support of programmers to produce
particular projects. Certain projects co-produced by UIE, such as Race to
Freedom: The Underground Railroad, are aired on the BET Cable Network.
Additionally, UIE has co-produced all of the films produced by BET Film
Productions and BET Pictures.
8
Publishing
BET Weekend
In fiscal year 1996, in a joint venture with the New York Daily News, the
Company began publication of BET Weekend, a Sunday newspaper supplement. BET
Weekend is currently published quarterly and distributed by seven metropolitan
newspapers to over one million subscribers. As reader and advertiser interest
increases, the joint venture expects to move to monthly and ultimately to weekly
publication.
SATELLITE DISTRIBUTION
The Company transmits all BET Cable Network programming from its production
facility located in Washington, D.C., by means of an earth station transmitting
antenna (called an "uplink") which the Company owns. The Company operates the
uplink facility, which transmits the BET Cable Network's programming signal over
Galaxy V, an orbiting communications satellite on which the Company owns a
transponder, to cable system headend receiving antennae throughout the United
States, its territories and possessions.
The Company contracts with IDB Communications Group, Inc. ("IDB") to
transmit BET Action Pay-Per-View programming by means of an uplink. IDB
transmits Action's programming signal over Galaxy VII, an orbiting
communications satellite on which the Company owns a transponder, to cable
system headend receiving antennae throughout the United States. The Company
leases an additional transponder on Galaxy VII which it uses to distribute BET
on Jazz.
REGULATION
Although the vast majority of the Company's operations are not subject to
federal regulation, the operations of cable television systems, satellite
distribution systems and broadcast television program distribution companies are
subject to the Communications Act of 1934, as amended, and to regulatory
supervision thereunder by the Federal Communications Commission (the "FCC").
The Company's uplink and microwave facilities are licensed by the FCC and must
be operated in conformance with the terms and conditions of those licenses.
Cable systems are also subjected to local franchise authority regulation.
Local Cable Regulation
The cable television industry is regulated by municipalities or other local
government authorities which have the jurisdiction to grant and to assign
franchises and to negotiate generally the terms and conditions of such
franchises, including rates charged to subscribers, except to the extent that
such jurisdiction is pre-empted by federal law. Any such rate regulation may
place downward pressure on the subscriber fees earned by the Company.
Federal Cable Re-regulation
The Company is regulated under the Communications Act of 1934 (the
"Communications Act"), as it was most recently amended by the Telecommunications
Act of 1996. The Telecommunications Act of 1996 (the "1996 Act" or sometimes
the "Act") is responsible for the most significant changes in communications law
and regulation since enactment of the Communications Act. The 1996 Act amends
the provisions of the Communications Act concerning cable television systems and
other multichannel video programming services. For example, the Act provides
guidelines for the entry of telephone companies into the provision of video
services within their telephone service areas and alters existing rate
regulation. More specifically, rate regulation for cable programming service
("CPS") or "expanded basic" tiers will end immediately for certain small cable
operators, and will end for all cable systems in 1999. Rate regulation will
also end for particular cable operators if a local exchange carrier, or any
other multichannel distributor using the telephone company's facilities, offers
comparable programming services in
9
such cable operators' franchise areas by any means other than direct broadcast
satellite ("DBS"). These changes in federal regulation are expected to have a
beneficial impact, to some degree, on the future growth of BET and BET on Jazz,
although the extent of such impact cannot yet be determined.
EMPLOYEES
As of July 31, 1996, the Company employed 436 people. Although none of the
Company's employees are subject to collective bargaining agreements, as of July
31, 1996, the BET Cable Network was in negotiations with a local labor
bargaining agent with respect to a group of approximately 40 of the BET Cable
Network's labor force. The Company does not believe any collective bargaining
agreement resulting from such negotiations will have a material effect on the
Company as its scope would affect personnel whose skills are readily available
in the local labor market. The Company has never experienced a strike or work
stoppage.
ITEM 2. PROPERTIES
The company owns its corporate office facility, which is located at One BET
Plaza, 1900 W Place, N.E. in Washington, D.C. The Company's corporate office
facility houses its executive staff, administrative staff, BET Cable Network's
and BET on Jazz's principal affiliate sales offices and the principal offices of
Emerge and BET Direct. The Company also owns its production facility located at
1899 9th Street, N.E. in Washington, D.C., which is adjacent to the Company's
corporate office facility. The corporate office and production facilities are
constructed on property that the Company leases from the District of Columbia
pursuant to a long-term lease. The initial expiration date of the lease is
October 1, 2013. At the Company's option, the Company may extend the term for
three successive 15 year periods. The lease also contains an option to purchase
the land.
Additionally, the Company currently leases a production studio and office
space at 2801 West Olive Avenue in Burbank, California. The lease for this
commercial space has been extended to January 1997. The lease is not renewable
by its terms but the Company has not experienced difficulties in negotiating
extensions to the lease in the past.
BET Cable Network's principal advertising sales offices are located at 380
Madison Avenue in New York City, where the Company leases space under a long-
term lease expiring in December 2002. The Company also leases office space at
2425 West Olympic Boulevard in Santa Monica, California under a lease expiring
in December 1997. The space is used to house substantially all of Action's
staff as well as certain members of BET Cable Network's advertising sales and
affiliate sales staffs. Additional advertising sales offices are located in
Chicago and the Detroit area.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time engaged in legal proceedings incidental to
its business. The Company does not believe that any legal proceedings that it
is currently engaged in, either individually or in the aggregate, will have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1996.
10
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of October 11, 1996 and their ages
and positions with the Company are set forth below.
Name Age Position
- --------------------------------------------------------------------------------
Robert L. Johnson 50 Chairman of the Board of Directors, Chief
Executive Officer
Debra L. Lee 42 President and Chief Operating Officer
William T. Gordon, III 43 Executive Vice President, Chief Financial
Officer and Treasurer
James A. Ebron 42 Executive Vice President, Media Sales
Sheila Crump Johnson 47 Executive Vice President, Corporate Affairs
and Director
Jefferi K. Lee 39 Executive Vice President, Network Operations
and Programming
Curtis N. Symonds 41 Executive Vice President, Affiliate Sales and
Marketing
Janis P. Thomas 41 Executive Vice President, Marketing and
Merchandising
The executive officers of the Company serve at the pleasure of the Board of
Directors. The following is a brief description for at least the past five
years of the current executive officers of the Company.
Mr. Johnson founded BET, the Company's primary operating subsidiary, in 1979.
Mr. Johnson has served as President, Chief Executive Officer and a director of
BET since its creation. Since 1991 Mr. Johnson also served as the Chairman of
the Board of Directors. Since 1991, Mr. Johnson also served as Chief Executive
Officer of the Company and has served as its President from 1991 until March
1996. Mr. Johnson is also the Chairman of District Cablevision, Inc., a
Washington, D.C. cable system operating company which he founded in 1980, and
has served as a director of Liberty Media Corporation since December 1991. Since
January 1994, Mr. Johnson has served as a director of Hilton Hotels Corporation.
Ms. Lee has served as President and Chief Operating Officer since March 1996.
Prior to that time Ms. Lee served as an Executive Vice President of the Company
since September 1992. Since September 1991, she has also served as the General
Counsel and Secretary of the Company. From September 1991 to September 1992,
she served as a Vice President of the Company. Ms. Lee has also served as Vice
President and General Counsel of BET since April 1986. In July 1991, she became
the Secretary of BET.
Mr. Gordon has served as Executive Vice President, Chief Financial Officer and
Treasurer since August 1993. From 1987 to 1993, Mr. Gordon was a partner with
the accounting firm of Price Waterhouse LLP. Mr. Gordon was BET's audit partner
on behalf of Price Waterhouse, LLP between 1989 and early 1992. Mr. Gordon
joined Price Waterhouse in 1975.
Mr. Ebron has served as Executive Vice President, Media Sales since September
1992. Prior to that time, Mr. Ebron served as Vice President, Network Sales of
the Company from September 1991 to September 1992. He served as Vice President,
Network Sales of BET from August 1983 until September 1991.
Since September 1992, Mrs. Johnson has served as Executive Vice President,
Corporate Affairs of the Company. From September 1991 to September 1992, she
served as Vice President, Corporate Affairs of the Company. Since 1979 she has
served as a director of BET and, since 1990, as Vice President, Corporate
Affairs of BET. Prior to 1990, Mrs. Johnson was a lecturer and author in the
area of early childhood music education.
Mr. Lee has served as Executive Vice President, Network Operations and
Programming since September 1992. Mr. Lee served as Vice President, Network
Operations of the Company from September 1991 to September 1992 and of BET
since September 1982.
Mr. Symonds has served as Executive Vice President, Affiliate Sales and
Marketing since September 1992. Mr. Symonds served as Vice President, Affiliate
Marketing of the Company from September 1991 to September 1992 and of BET since
July 1988.
11
Ms. Thomas is Executive Vice President, Marketing and Merchandising. She
previously served as Executive Vice President, Direct Marketing and Advertising
Services since September 1992. Ms. Thomas served as Vice President, Advertising
of the Company from September 1991 to September 1992 and of BET since September
1982.
12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding the market for the Company's Class A Common Stock,
number of shareholders and dividends is included under the captions entitled
"Price Range of Common Stock" and "Selected Consolidated Financial Data" and in
the Notes to Consolidated Financial Statements in the Company's 1996 Annual
Report to Shareholders and is incorporated herein by reference.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
A summary of selected consolidated financial data for the Company for the
five years in the period ended July 31, 1996 is included under the caption
entitled "Selected Consolidated Financial Data" on page 24 of the Company's 1996
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Information regarding the Company's results of operations and financial
condition is included under the caption entitled "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 25 through
29 of the Company's 1996 Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The consolidated financial statements, notes thereto and supplementary data
of the Company, which are included on pages 30 through 42 of the 1996 Annual
Report to Shareholders under the following captions listed below, are
incorporated herein by reference.
Consolidated Balance Sheets at July 31, 1996 and 1995.
Consolidated Statements of Income for the three years in the period ended
July 31, 1996.
Consolidated Statements of Cash Flows for the three years in the period
ended July 31, 1996.
Consolidated Statements of Changes in Shareholders' Equity for the three
years in the period ended July 31, 1996.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
Unaudited Quarterly Financial Information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to directors of the Company is set forth under the
caption entitled "Election of Directors" in the Company's 1996 Proxy Statement
and is incorporated herein by reference. Certain information concerning the
executive officers of the Company is set forth in Part I of this report pursuant
to General Instruction G(3) of Form 10-K under the caption entitled "Executive
Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
The information regarding compensation of officers and directors of the
Company is set forth under the caption entitled "Executive Compensation" in the
Company's 1996 Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding ownership of certain of the Company's securities is set
forth under the captions entitled "Security Ownership of Certain Beneficial
Owners" and "Security Ownership of Management" in the Company's 1996 Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions with the
Company is set forth under the caption entitled "Certain Relationships and
Related Transactions" in the Company's 1996 Proxy Statement and is incorporated
herein by reference.
14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements and report of independent accountants
(which are set forth on pages 30 through 41 of the Company's 1996 Annual Report
to Shareholders) are incorporated herein by reference (see Exhibit 13).
Consolidated Balance Sheets at July 31, 1996 and 1995.
Consolidated Statements of Income for the three years in the period ended July
31, 1996.
Consolidated Statements of Cash Flows for the three years in the period ended
July 31, 1996.
Consolidated Statements of Changes in Shareholders' Equity for the three years
in the period ended July 31, 1996.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
(a)(2) Financial Statement Schedules for the three years in the period ended
July 31, 1996
Schedule Page
Number Description Number
- ------ ----------- ------
II Valuation and Qualifying Accounts and Reserves S-1
The report of the Company's independent accountants with respect to the
above-referenced financial statement schedule appears on page 20 of this report.
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
15
(a)(3) Exhibits
Exhibit
Number Description
_______ ___________
3(i) Restated Certificate of Incorporation of Registrant (incorporated by
reference to Exhibit 3.3 to Amendment No. 4 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on October 30, 1991)
3(ii) Bylaws, as amended, of Registrant (incorporated by reference to
Exhibit 3.4 to Amendment No. 4 to the Company's Registration Statement
on Form S-1, Registration No. 33-42853, filed with the Commission on
October 30, 1991)
4.1 Note Agreement, dated January 30, 1990, between Aetna Life Insurance
Company and Black Entertainment Television, Inc., as amended by the
Guaranty, Consent and Amendment to Note Agreement, dated September 5,
1991 (incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on September 18, 1991)
4.2 Revolving Credit and Guaranty Agreement among Bank of New York, Black
Entertainment Television, Inc. and BET Holdings, Inc. dated December
13, 1995
10.1 Ground Lease, dated as of March 18, 1988, by and between the District
of Columbia and Black Entertainment Television, Inc. (incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on
Form S-1, Registration No. 33-42853, filed with the Commission on
September 18, 1991)
10.2 Ground Lease, dated May 4, 1993 between BET Acquisition, Inc. and the
District of Columbia (incorporated by reference to Exhibit 10.18 to
the Company's Form 10-K for the fiscal period ended July 31, 1992)
10.3 Plan of Recapitalization for BET Holdings, Inc. (incorporated by
reference to Exhibit 3.3 of Amendment No. 4 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on October 30, 1991)
10.4 Trustee's Assignment of Ground Lease, dated March 19, 1992, by and
between Leonard W. Harrington, Jr., Substitute Trustee, appointed by
Deed of Appointment of Substitute Trustee dated August 29, 1990, and
recorded August 31, 1990, as instrument no. 48429, and Black
Entertainment Television, Inc. (incorporated by reference to Exhibit
10.11 to the Company's Form 10-K for the fiscal period ended July 31,
1992)
10.5 Assignment of Purchase Agreement, dated March 17, 1992, between Black
Entertainment Television, Inc. and BET Acquisition Corp. (incorporated
by reference to Exhibit 10.12 to the Company's Form 10-K for the
fiscal period ended July 31, 1992)
10.6 Form of Agreement Among Stockholders among BET Holdings, Inc., Robert
L. Johnson, TW/BET Holdings Co. and LMC BET Inc. dated November 6,
1991 (incorporated by reference to Exhibit 10.6 to the Company's Form
10-K for the fiscal period ended July 31, 1994)
16
(a)(3) Exhibits
Exhibit
Number Description
_______ ___________
10.7 Affiliation Agreement, dated as of January 1, 1989, between Black
Entertainment Television, Inc. and American Television and
Communications Corporation (incorporated by reference to Exhibit 10.4
to the Company's Registration Statement on Form S-1, Registration No.
33-42853, filed with the Commission on September 18, 1991)
10.8 Affiliation Agreement, dated as of January 1, 1989, between Black
Entertainment Television, Inc. and Satellite Services, Inc.
(incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on September 18, 1991)
10.9 Amended Affiliation Agreement dated March 3, 1993 between Black
Entertainment Television, Inc. and Satellite Services, Inc.
(incorporated by reference to Exhibit 10.9 to the Company's Form 10-K
for the fiscal period ended July 31, 1993)
10.10 Letter Agreement, dated January 29, 1991, among Time Warner Inc.,
Butch Lewis Productions, Inc. and Black Entertainment Television,
Inc., together with Agreement, dated as of January 1, 1991, among
Butch Lewis Productions, Inc., Black Entertainment Television, Inc.,
Joe Brown and Adrienne L. Brown (incorporated by reference to Exhibit
10.6 to the Company's Registration Statement on Form S-1, Registration
No. 33-42853, filed with the Commission on September 18, 1991)
10.11 Transponder Lease Agreement, dated January 1, 1993, between Avalon
Pictures, Inc. and IDB Communications Group, Inc. (incorporated by
reference to Exhibit 10.11 to the Company's 10-K for the fiscal period
ended July 31, 1993)
10.12 Black Entertainment Television, Inc. TVRO Affiliation Agreement with
HBO Satellite Services, Inc., dated as of February 9, 1990, together
with Letter Agreement from HBO Satellite Services, Inc. to Black
Entertainment Television, Inc. dated March 24, 1992 (incorporated by
reference to Exhibit 10.18 to the Company's Form 10-K for the fiscal
period ended July 31, 1992)
10.13 Purchase Agreement among Black Entertainment Television, Inc., The
Time Inc. Magazine Company and Emerge Communications, Inc., dated as
of December 31, 1991 (incorporated by reference to Exhibit 10.19 to
the Company's Form 10-K for the fiscal period ended July 31, 1992)
10.14 BET Holdings, Inc. Incentive Plan (incorporated by reference to
Exhibit 10.9 to the Company's Registration Statement on Form S-1,
Registration No. 33-42853, filed with the Commission on September 18,
1991)
10.15 BET Holdings, Inc. 1991 Executive Stock Option Plan as amended and
restated August 1, 1994 (incorporated by reference to Exhibit 10.15 to
the Company's Form 10-K for the fiscal period ended July 31, 1995)
10.16 Black Entertainment Television, Inc. 401(k) Profit Sharing Plan
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1, Registration No. 33-42853, filed
with the Commission on September 18, 1991)
17
(a)(3) Exhibits
Exhibit
Number Description
_______ ___________
10.17 Agreement by and between BET Pictures, Inc., Live Ventures, Inc. and
QE+ Limited dated February 1, 1994 (incorporated by reference to
Exhibit 10.17 to the Company's Form 10-K for the fiscal period ended
July 31, 1994)
10.18 Agreement by and between BET Pictures, Inc., and New River
Entertainment Corp. dated December 21, 1993 (incorporated by reference
to Exhibit 10.18 to the Company's Form 10-K for the fiscal period
ended July 31, 1994)
10.19 Purchase Agreement among Black Entertainment Television, Inc., Syncom
Capital corporation, Towers Ventures, Inc., Future Value Ventures,
Inc., Opportunity Capital Corporation, District Cablevision, Inc., the
Estate of Dean E. Stetz, and Emerge Communications, Inc., dated
September 26, 1994 (incorporated by reference to Exhibit 10.19 to the
Company's Form 10-K for the fiscal period ended July 31, 1994)
10.20 Purchase Agreement among Black Entertainment Television, Inc., Time
Inc. and Emerge Communications, Inc. dated October 7, 1994
(incorporated by reference to Exhibit 10.20 to the Company's Form 10-K
for the fiscal period ended July 31, 1994)
10.21 Transponder Lease Agreement for Galaxy VII between Hughes
Communication Galaxy, Inc., and BET Satellite Services, Inc.,
(incorporated by reference to Exhibit 10.21 to the Company's Form 10-K
for the fiscal period ended July 31, 1994 as amended by Form 10K-A
Amendment No.2 the Form 10K).
10.22 Transponder Lease Agreement for Galaxy VII between Hughes
Communications Galaxy, Inc., and BET Satellite Services, Inc.,
(incorporated by reference to Exhibit 10.22 to the Company's Form 10-K
for the fiscal period ended July 31, 1994 as amended by Form 10K-A
Amendment No.2 the Form 10K).
10.23 BET Holdings, Inc. Incentive Plan for the President, effective August
1, 1994 (incorporated by reference to Exhibit 10.23 to the Company's
Form 10-K for the fiscal period ended July 31, 1995)
10.24 Amendment No. 1 to the BET Holdings, Inc. Incentive Plan (incorporated
by reference to Exhibit 10.24 to the Company's Form 10-K for the
fiscal period ended July 31, 1995)
10.25 Addendum to Transponder Lease Agreement for Galaxy VII between Hughes
Communications Galaxy, Inc. and BET Satellite Services, Inc.
(incorporated by reference to Exhibit 10.25 to the Company's Form 10-Q
for the fiscal period ended January 31, 1996)
10.26 Stock Purchase Agreement between Time Warner Entertainment Company,
L.P. and BET Holdings, Inc. dated November 1, 1995 (incorporated by
reference to Exhibit 10.1 to the Company's Form 8-K filed November 1,
1995)
10.27 Transponder Lease Agreement between Orion Atlantic, L.P. and BET
Satellite Services, Inc. dated June 1, 1996
10.28 Joint Venture Agreement between Daily News, L.P. and Black
Entertainment Television, Inc. dated July 31, 1996
13 1996 Annual Report to Shareholders (with the exception of the
information expressly incorporated by reference in Items 1,5,6,7 and 8
of this report, the 1996 Annual Report to Shareholders is not to be
deemed "filed" with the Securities and Exchange Commission or
otherwise subject to the liabilities of Section Exchange Act of 1934)
21 Subsidiaries of the Company
23 Consent of Independent Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of fiscal year
1996.
18
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BET HOLDINGS, INC.
By: /s/ Robert L. Johnson
----------------------------------------------
Robert L. Johnson
Chairman of the Board and
Chief Executive Officer
Date: October 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Robert L. Johnson Chief Executive Officer and Director October 29, 1996
- ------------------------------------
Robert L. Johnson
/s/ William T. Gordon, III Chief Financial Officer and Treasurer October 29, 1996
- ------------------------------------ (Principal Financial and Accounting Officer)
William T. Gordon, III
/s/ Peter Barton Director October 29, 1996
- ------------------------------------
Peter Barton
/s/ Sheila Crump Johnson Director October 29, 1996
- ------------------------------------
Sheila Crump Johnson
/s/ Delano E. Lewis Director October 29, 1996
- ------------------------------------
Delano E. Lewis
/s/ John C. Malone Director October 29, 1996
- ------------------------------------
John C. Malone
/s/ Herbert P. Wilkins, Sr. Director October 29, 1996
- ------------------------------------
Herbert P. Wilkins, Sr.
19
Report of Independent Accountants on Financial Statement Schedule
-----------------------------------------------------------------
To the Board of Directors of BET Holdings, Inc.
Our audits of the consolidated financial statements referred to in our report
dated September 20, 1996 appearing on page 41 of the BET Holdings, Inc. 1996
Annual Report (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-
K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ Price Waterhouse LLP
- ------------------------------
PRICE WATERHOUSE LLP
Washington, D.C.
September 20, 1996
20
SCHEDULE II
BET HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands of dollars)
Additions
------------------------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end
Description of period expenses accounts Deductions of period
----------- --------- ---------- ---------- ---------- ----------
Year ended July 31, 1994
Allowance for doubtful
accounts $ 379 $1,182 $ - $ 588 (1) $ 973
====== ====== ====== ===== ======
Year ended July 31, 1995
Allowance for doubtful
accounts $ 973 $1,266 $ - $876 (1) $1,363
Deferred tax asset
valuation allowance - - 3,893 (2) - 3,893
------ ------ ------ ---- ------
$ 973 $1,266 $3,893 $876 $5,256
Year ended July 31, 1996 ====== ====== ====== ==== ======
Allowance for doubtful
accounts $1,363 $ 599 $ - $419 (1) $1,543
Deferred tax asset
valuation allowance 3,893 - - - 3,893
------ ------ ------- ---- ------
$5,256 $ 599 $ - $419 $5,436
====== ====== ======= ==== ======
- ----------------------------
(1) Write-off of uncollectible amounts, net of recoveries.
(2) Represents valuation allowance related to net operating loss carryforwards
of Emerge Communications, Inc. (ECI) for income tax reporting purposes
established pursuant to the purchase method of accounting in connection
with the Company's increased ownership interest in ECI.
S-1