PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 7, 1995)
$200,000,000
TIME WARNER INC.
8.30% DISCOUNT DEBENTURES DUE 2036
------------------------
THE 8.30% DISCOUNT DEBENTURES DUE 2036 (THE 'DEBENTURES DUE 2036') WILL MATURE
ON JANUARY 15, 2036, AND WILL NOT BE REDEEMABLE PRIOR TO MATURITY. NO INTEREST
WILL ACCRUE ON THE DEBENTURES DUE 2036 THROUGH JANUARY 14, 2016. BEGINNING
JANUARY 15, 2016, INTEREST ON THE $200,000,000 AGGREGATE PRINCIPAL
AMOUNT AT MATURITY OF THE DEBENTURES DUE 2036 WILL ACCRUE AND BE
PAYABLE SEMIANNUALLY ON JANUARY 15 AND JULY 15 OF EACH YEAR,
COMMENCING JULY 15, 2016, AND SUCH PRINCIPAL AMOUNT WILL BE PAYABLE
AT MATURITY. THE DEBENTURES DUE 2036 WILL NOT BE SUBJECT TO ANY
SINKING FUND. THE DEBENTURES DUE 2036 WILL BE REPRESENTED BY
BOOK-ENTRY SECURITIES REGISTERED IN THE NAME OF THE DEPOSITORY
TRUST COMPANY ('DTC') OR ITS NOMINEE. INTERESTS IN SUCH
BOOK-ENTRY SECURITIES WILL BE SHOWN ON, AND TRANSFER THEREOF
WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY DTC AND
ITS PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN, DEBENTURES
DUE 2036 IN DEFINITIVE FORM WILL NOT BE ISSUED.
SETTLEMENT FOR THE DEBENTURES DUE 2036 WILL BE MADE
IN IMMEDIATELY AVAILABLE FUNDS. SO LONG AS THE
DEBENTURES DUE 2036 ARE REGISTERED IN THE NAME OF
DTC OR ITS NOMINEE, THE DEBENTURES DUE 2036
WILL TRADE IN DTC'S SAME-DAY FUNDS SETTLEMENT
SYSTEM AND SECONDARY MARKET TRADING ACTIVITY
IN THE DEBENTURES DUE 2036 WILL THEREFORE
SETTLE IN IMMEDIATELY AVAILABLE FUNDS.
SEE 'DESCRIPTION OF THE DEBENTURES DUE
2036' HEREIN.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE 17.0385%
------------------------
UNDERWRITING
PRINCIPAL PRICE TO DISCOUNTS AND PROCEEDS TO
AMOUNT AT MATURITY PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
------------------- ------------- --------------- -------------
Per Debenture Due 2036................. 100.000% 17.0385% .2555% 16.783%
Total.................................. $200,000,000 $34,077,000 $511,155 $33,565,845
- ------------
(1) Plus accretion of original issue discount, if any, from January 17,
1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting estimated expenses of $40,000 payable by the Company.
------------------------
The Debentures Due 2036 are offered, subject to prior sale, when, as and if
accepted by the several Underwriters and subject to approval of certain legal
matters by Shearman & Sterling, counsel for the Underwriters. It is expected
that delivery of the Debentures Due 2036 will be made on or about January 17,
1996, through the book-entry facilities of The Depository Trust Company, against
payment therefor in immediately available funds.
------------------------
MORGAN STANLEY & CO. SALOMON BROTHERS INC
INCORPORATED
January 11, 1996
IN CONNECTION WITH THIS OFFERING THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES DUE
2036 OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
NO PERSON IS AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS OR ANY DEALER
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN SO AUTHORIZED. NEITHER
THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR ANY
SALE MADE HEREUNDER DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE ON WHICH SUCH
INFORMATION IS GIVEN.
------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
The Company................................................................................................ S-3
Recent Developments........................................................................................ S-4
Use of Proceeds............................................................................................ S-6
Consolidated Capitalization................................................................................ S-7
Selected Historical and Pro Forma Financial Information.................................................... S-9
Description of the Debentures Due 2036..................................................................... S-14
Certain United States Federal Income Tax Considerations.................................................... S-19
Underwriters............................................................................................... S-21
Legal Opinions............................................................................................. S-21
PROSPECTUS
Available Information...................................................................................... 2
Information Incorporated by Reference...................................................................... 2
Time Warner Inc. .......................................................................................... 3
Ratio of Earnings to Fixed Charges......................................................................... 4
Use of Proceeds............................................................................................ 5
Description of the Debt Securities......................................................................... 5
Description of Common Stock Warrants....................................................................... 9
Description of Common Stock................................................................................ 9
Global Securities.......................................................................................... 11
Holding Company Structure.................................................................................. 12
Plan of Distribution....................................................................................... 13
Legal Opinions............................................................................................. 13
Experts.................................................................................................... 13
S-2
THE COMPANY
Time Warner Inc. (the 'Company') is the largest media and entertainment
company in the world. Its businesses are conducted in five principal areas:
Publishing, Music, Filmed Entertainment, Programming-HBO and Cable. Publishing
consists principally of the publication and distribution of magazines and books;
Music consists principally of the production and distribution of recorded music
and the ownership and administration of music copyrights; Filmed Entertainment
consists principally of the production and distribution of motion pictures and
television programming, the distribution of video cassettes and the ownership
and operation of retail stores and theme parks; Programming-HBO consists
principally of the production and distribution of pay television and cable
programming; and Cable consists principally of the operation of cable television
systems.
The Company was incorporated in the State of Delaware in August 1983 and is
the successor to a New York corporation that was originally organized in 1922.
The Company changed its name from Time Incorporated to Time Warner Inc.
following its acquisition of 59.3% of the common stock of Warner Communications
Inc. ('WCI') in July 1989. WCI became a wholly owned subsidiary of the Company
in January 1990 upon the completion of the merger of WCI and a subsidiary of the
Company.
Time Warner Entertainment Company, L.P. ('TWE') was formed as a Delaware
limited partnership in 1992 to own and operate substantially all of the Filmed
Entertainment, Programming-HBO and Cable businesses owned and operated by the
Company prior to such date. The Company and certain of its wholly owned
subsidiaries (the 'Time Warner General Partners') collectively own 74.49% of the
pro rata priority capital and residual equity interests in TWE and a wholly
owned subsidiary of U S WEST Inc. ('U S WEST') owns pro rata priority capital
and residual equity interests in TWE of 25.51%. In addition, the Time Warner
General Partners own priority capital interests senior and junior to the pro
rata priority capital interests. See 'Recent Developments'.
TWE is the principal component of the Company's Entertainment Group, which
is not consolidated with the Company for financial reporting purposes. Certain
cable systems acquired as a result of the Transactions referred to in 'Recent
Developments' are owned by consolidated subsidiaries of the Company. The balance
of the Company's cable systems are owned by TWE or the TWE-A/N Partnership (as
defined herein), in which TWE owns a two-thirds interest. Accordingly, although
TWE manages substantially all the cable systems owned by the Company, TWE and
the TWE-A/N Partnership, the results of operations of the cable systems owned by
the Company's consolidated subsidiaries will be included in the Company's
consolidated results, while the results of operations of the cable systems owned
by TWE and the TWE-A/N Partnership are included in the consolidated results of
the Entertainment Group. See 'Selected Historical and Pro Forma Financial
Information'.
The Company is a holding company and its assets consist primarily of
investments in its consolidated and unconsolidated subsidiaries, including TWE.
The Company's ability to service its indebtedness, including the Debentures, is
dependent primarily upon the earnings of its consolidated and unconsolidated
subsidiaries, including TWE, and the distribution or other payment of such
earnings to the Company. See 'Holding Company Structure' in the accompanying
Prospectus.
As used in this Prospectus Supplement, unless the context otherwise
requires, the term the 'Company' refers to Time Warner Inc. and its consolidated
and unconsolidated subsidiaries and includes TWE.
The Company's principal executive offices are located at 75 Rockefeller
Plaza, New York, NY 10019, and its telephone number is (212) 484-8000.
S-3
RECENT DEVELOPMENTS
As summarized below and more fully described in the Company's Current
Reports on Form 8-K dated November 14, 1995, December 1, 1995 and January 4,
1996, the Company has recently entered into or consummated a number of
transactions. These transactions will, among other things, result in (i) the
acquisition of Turner Broadcasting System, Inc. ('TBS'), (ii) the acquisition of
cable systems serving approximately 2.2 million subscribers and a 50% interest
in Paragon Communications ('Paragon'), which serves 972,000 subscribers (the
other 50% interest in Paragon was already owned by TWE) and (iii) the
restructuring of the ownership of TWE.
On April 1, 1995, TWE and the Advance/Newhouse Partnership
('Advance/Newhouse'), a New York general partnership between Newhouse
Broadcasting Corporation and a wholly-owned subsidiary of Advance Publications,
Inc., formed a New York general partnership known as the Time Warner
Entertainment-Advance/Newhouse Partnership (the 'TWE-A/N Partnership'), in which
TWE owns a two-thirds equity interest and is the managing partner and
Advance/Newhouse owns a one-third equity interest. The TWE-A/N Partnership was
formed to own and operate cable television systems (or interests therein)
serving approximately 4.5 million subscribers and certain foreign cable
investments and programming investments (the 'TWE-A/N Transaction').
The Company (i) closed on May 2, 1995 its acquisition of Summit
Communications Group, Inc. ('Summit') (the 'Summit Acquisition'); (ii) closed on
July 6, 1995 its acquisition of KBLCOM Incorporated ('KBLCOM'), a subsidiary of
Houston Industries Incorporated (which includes the Paragon interest referred to
above) (the 'KBLCOM Acquisition'); and (iii) closed on January 4, 1996 its
acquisition of Cablevision Industries Corporation ('CVI') and certain related
companies (the 'CVI Acquisition' and together with the Summit Acquisition and
the KBLCOM Acquisition, the 'Acquisitions'). To acquire Summit, the Company
issued approximately 1.55 million shares of its common stock, and approximately
3.26 million shares of a new convertible preferred stock ('Series C Preferred
Stock') and assumed or incurred $146 million of indebtedness. To acquire KBLCOM,
the Company issued one million shares of its common stock and 11 million shares
of a new convertible preferred stock ('Series D Preferred Stock') and assumed or
incurred approximately $1.2 billion of indebtedness, including $102 million of
the Company's allocable share of Paragon's indebtedness. To acquire CVI and
certain related companies, the Company issued 2.9 million shares of its common
stock and 6.5 million shares of new convertible preferred stock (3.25 million
shares of Series E Preferred Stock and 3.23 million shares of Series F Preferred
Stock) and assumed or incurred approximately $2 billion of indebtedness.
TWE (i) on June 23, 1995, recapitalized Six Flags Entertainment Corporation
('Six Flags'), sold 51% of its interest therein and granted certain licenses to
Six Flags (the 'Six Flags Transaction') and (ii) on May 18, 1995, announced the
planned sale of 15 of its unclustered cable television systems serving
approximately 144,000 subscribers, certain of which transactions closed during
the second and third quarters of 1995 (the 'Unclustered Cable Disposition', and
together with the Six Flags Transaction, the 'Asset Sale Transactions'). The net
proceeds from the Asset Sale Transactions have been or will be used to reduce
outstanding indebtedness of TWE.
On June 30, 1995, a wholly owned subsidiary of the Company ('TWI Cable'),
TWE and the TWE-A/N Partnership executed a five-year revolving credit facility
(the 'New Credit Agreement'). The New Credit Agreement enables such entities to
refinance certain indebtedness assumed from the companies acquired in the
Acquisitions, to refinance TWE's indebtedness under a pre-existing bank credit
agreement and to finance the ongoing working capital, capital expenditure and
other corporate needs of each borrower (the 'Bank Refinancing').
On August 15, 1995, the Company and a wholly-owned subsidiary, Time Warner
Financing Trust, completed a public offering of 12,057,561 PERCS of Time Warner
Financing Trust (the 'PERCS Offering'). The PERCS are subject to mandatory
redemption on December 23, 1997, for an amount per PERCS equal to the lesser of
$54.41 and the market value of a share of common stock of Hasbro, Inc.
('Hasbro') on December 17, 1997, payable in cash or, at the Company's option,
Hasbro common stock.
On August 15, 1995, the Company redeemed all of its $1.8 billion principal
amount of outstanding Redeemable Reset Notes Due August 15, 2002 (the 'Reset
Notes') in exchange for approximately $454
S-4
million aggregate principal amount of Floating Rate Notes Due August 15, 2000,
approximately $272 million aggregate principal amount of 7.975% Notes Due August
15, 2004, approximately $545 million aggregate principal amount of 8.11%
Debentures Due August 15, 2006, and approximately $545 million aggregate
principal amount of 8.18% Debentures Due August 15, 2007 (collectively, the
'Exchange Securities') (the 'Reset Notes Refinancing'). The Exchange Securities
were issued under the Company's senior indenture dated as of January 15, 1993
and rank pari passu with all other senior indebtedness of the Company.
On September 5, 1995, and October 2, 1995, ITOCHU Corporation ('ITOCHU')
and Toshiba Corporation ('Toshiba'), respectively, each exchanged their 5.61%
pro rata priority capital and residual equity interests in TWE and their 6.25%
residual equity interests in TW Service Holding I, L.P. and TW Service Holding
II, L.P., each of which owns certain assets related to the TWE businesses (the
'Time Warner Service Partnerships'), for, in the case of ITOCHU, 8 million
shares of two series of new convertible preferred stock ('Series G Preferred
Stock' and 'Series H Preferred Stock') of the Company and, in the case of
Toshiba, 7 million shares of a new convertible preferred stock of the Company
('Series I Preferred Stock') and $10 million in cash (the 'ITOCHU/Toshiba
Transaction'). As a result of the ITOCHU/Toshiba Transaction, the Company
directly or indirectly holds 74.49% of the pro rata priority capital and
residual equity interests in TWE. A subsidiary of U S WEST owns the remaining
25.51% of the pro rata priority capital and residual equity interests in TWE.
On September 18, 1995, the Company redeemed approximately $1 billion
principal amount of its 8 3/4% Convertible Subordinated Debentures due January
10, 2015 (the '8 3/4% Convertible Debentures') for an aggregate redemption price
of approximately $1.06 billion, including redemption premiums and accrued
interest thereon. The redemption was financed with approximately $500 million of
proceeds raised from the issuance of 7.75% ten-year notes (the '7.75% Notes') in
June 1995, $363 million of net proceeds raised from the issuance of the PERCS
and available cash and equivalents (the 'Market Refinancings').
The Market Refinancings, the Reset Notes Refinancing and the Bank
Refinancing are referred to herein as the '1995 Debt Refinancings'.
The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of September 22, 1995 (as so amended and restated, the 'Merger
Agreement'), to provide for the merger of each of the Company and TBS with
separate subsidiaries of a holding company to be named Time Warner Inc. (the
'Holding Company Transaction' and the acquisition of TBS is herein called the
'TBS Transaction'). Pursuant to the Holding Company Transaction, the issued and
outstanding shares of each class of the capital stock of the Company are to be
converted into the shares of an identical class of capital stock of the holding
company. In connection with any such transaction, the Company expects that it
would cause the holding company to provide guarantees of the Company's
obligations under its outstanding public debt, including the Debentures Due
2036.
In connection with the TBS Transaction, the Company has agreed to enter
into certain agreements and related transactions with certain shareholders of
TBS, including R.E. Turner and Liberty Media Corporation ('LMC'). The Merger
Agreement and certain related agreements provide for the issuance by the holding
company of approximately 171.3 million shares of common stock ('Common Stock'),
the issuance of approximately 13 million stock options to replace all
outstanding TBS options and the assumption of TBS's indebtedness (which
approximated $2.3 billion at September 30, 1995). As part of the TBS
Transaction, LMC will exchange the 50.8 million shares of Common Stock to be
received by LMC in the TBS Transaction for shares of a new series of voting
common stock issued by the holding company ('LMC Voting Common Stock') and will
receive five million additional shares of LMC Voting Common Stock pursuant to a
separate option agreement, all of which will be placed in a voting trust or, in
certain circumstances, exchanged for non-voting stock.
The TBS Transaction and the related transactions are subject to customary
closing conditions, including the approval of the shareholders of TBS and the
Company and certain regulatory approvals. There can be no assurance that the TBS
Transaction will be consummated. For further discussion of the TBS Transaction
and the related transactions, and certain litigation relating thereto, reference
is made to the Company's Current Reports on Form 8-K dated November 14, 1995,
and December 1, 1995, which are incorporated herein by reference.
S-5
The TBS Transaction, the Acquisitions, the TWE-A/N Transaction, the Asset
Sale Transactions, the 1995 Debt Refinancings and the ITOCHU/Toshiba
Transactions are collectively referred to herein as the 'Transactions'. For a
further discussion of the Transactions, reference is made to the Company's
Current Reports on Form 8-K dated November 14, 1995, December 1, 1995, and
January 4, 1996, which are incorporated herein by reference.
On December 5, 1995, the Company and a wholly-owned subsidiary, Time Warner
Capital I, completed a public offering of $575 million of 8 7/8% Preferred Trust
Securities (the 'Preferred Trust Securities'). The Preferred Trust Securities
are subject to optional redemption, at the election of the Company, on or after
December 31, 2000 at their aggregate liquidation amount, and are subject to
mandatory redemption on December 31, 2025 at such price. As discussed below, the
proceeds from the offering of the Preferred Trust Securities, together with the
proceeds from the Debentures Due 2036 offered hereby and the Related Debentures
(as defined below), will be used to fund the redemption of the Company's
outstanding 8 3/4% Convertible Debentures. The offerings of the Preferred Trust
Securities, the Debentures Due 2036 offered hereby and the Related Debentures
and such redemption are not included in the Transactions described above.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Debentures Due 2036
offered hereby will be used, together with the net proceeds to the Company from
the concurrent sale of the approximately $166 million aggregate principal amount
of 7.48% Debentures Due 2008, the $150 million aggregate principal amount of
8.05% Debentures Due 2016 and the $400 million aggregate principal amount of
6.85% Debentures Due 2026 (collectively, the 'Related Debentures') and other
available funds (including primarily the net proceeds of the offering of $575
million of Preferred Trust Securities), to redeem all of the Company's
outstanding 8 3/4% Convertible Debentures for an aggregate redemption price of
approximately $1.269 billion plus accrued interest thereon.
S-6
CONSOLIDATED CAPITALIZATION
The consolidated historical and pro forma capitalization of the Company and
the Company's Entertainment Group, consisting principally of TWE, at September
30, 1995, is set forth below. The Entertainment Group is not consolidated with
Time Warner for financial reporting purposes. The consolidated pro forma
capitalization of the Entertainment Group gives effect to the Unclustered Cable
Disposition as if such transaction occurred at such date. The consolidated pro
forma capitalization of the Company gives effect in column (1) to the
Unclustered Cable Disposition and the CVI Acquisition, and in column (3) to each
of such transactions and the TBS Transaction, in each case as if such
transactions occurred at such date. The consolidated pro forma as adjusted
capitalization of the Company set forth in columns (2) and (4) gives effect to
(i) in the case of column (2), the Transactions reflected in column (1) and, in
the case of column (4), the Transactions reflected in column (3), (ii) in each
case, the issuance of the Debentures Due 2036 offered hereby, approximately $716
million aggregate principal amount of Related Debentures and $575 million of
Preferred Trust Securities and (iii) in each case, the use of the proceeds
therefrom to redeem all outstanding 8 3/4% Convertible Debentures at a
redemption price of approximately $1.269 billion plus accrued interest thereon,
as if such transactions occurred at such date. The pro forma capitalization is
presented for informational purposes only and is not necessarily indicative of
the future capitalization of the Company, any new holding company and the
Entertainment Group.
TIME WARNER INC. ENTERTAINMENT GROUP
-------------------------------------------------------------------------- ---------------------
(1) (2) (3) (4)
PRE-TBS POST-TBS
PRE-TBS PRO FORMA POST-TBS PRO FORMA PRO
HISTORICAL PRO FORMA(a) AS ADJUSTED(a) PRO FORMA(b) AS ADJUSTED(b) HISTORICAL FORMA
---------- ------------ -------------- ------------ -------------- ---------- -------
(MILLIONS)
Long-term debt:
Time Warner Debt:
7.45% and 7.95% notes.... $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 -- --
Exchange Securities...... 1,816 1,816 1,816 1,816 1,816 -- --
Zero coupon convertible
notes due 2012 (6.25%
yield)(c).............. 573 573 573 573 573 -- --
Zero coupon convertible
notes due 2013 (5%
yield)(c).............. 1,006 1,006 1,006 1,006 1,006 -- --
8.75%, 9.125% and 9.15%
Debentures............. 2,248 2,248 2,248 2,248 2,248 -- --
8 3/4% Convertible
Debentures............. 1,226 1,226 -- 1,226 -- -- --
7.75% Notes.............. 497 497 497 497 497 -- --
Debt due to TWE (7.13%
interest rate)(d)...... 400 400 400 400 400 -- --
Debentures Due 2036
offered hereby(c)...... -- -- 34 -- 34 -- --
Related Debentures....... -- -- 716 -- 716 -- --
Time Warner Cable
Subsidiaries Debt:
CVI 10 3/4% senior
notes.................. -- 300 300 300 300 -- --
CVI 9 1/4% senior
debentures............. -- 200 200 200 200 -- --
Summit 10 1/2% senior
subordinated
debentures............. 140 140 140 140 140 -- --
New Credit Agreement
(weighted average
interest rate of 6.8%
with respect to TWI
Cable and 6.4% with
respect to TWE and the
TWE-A/N
Partnership)(e)........ 1,250 2,731 2,731 2,731 2,731 $ 1,805 $ 1,680
TBS Debt:
TBS credit agreement
(weighted average
interest rate of
7.5%).................. -- -- -- 1,295 1,295 -- --
TBS 8 3/8% and 7.4%
senior notes........... -- -- -- 547 547 -- --
TBS 8.4% senior
debentures............. -- -- -- 200 200 -- --
TBS zero coupon
convertible notes due
2007 (7.25%
yield)(c).............. -- -- -- 259 259 -- --
TBS other indebtedness... -- -- -- 35 35 -- --
TWE Debt:
TWE commercial paper
(weighted average
interest rate of
6.2%)(f)............... -- -- -- -- -- 583 583
TWE 8 7/8%, 9 5/8% and
10.15% notes(f)........ -- -- -- -- -- 1,197 1,197
TWE 7 1/4%, 8 3/8% and
8 3/8% debentures(f)... -- -- -- -- -- 2,584 2,584
Other...................... 175 175 175 275 275 12 12
---------- ------------ ------- ------------ ------- ---------- -------
Subtotal................... 10,331 12,312 11,836 14,748 14,272 6,181 6,056
Reclassification of debt
due to TWE to investments
in and amounts due to the
Entertainment Group(d)... (400) (400) (400) (400) (400) -- --
---------- ------------ ------- ------------ ------- ---------- -------
Total long-term debt....... 9,931 11,912 11,436 14,348 13,872 6,181 6,056
Company-obligated mandatorily
redeemable preferred
securities of subsidiaries
holding solely subordinated
notes and debentures of the
Company...................... 374 374 949 374 949 -- --
Shareholders' equity:
Preferred stock
liquidation
preference............. 2,994 3,644 3,644 3,644 3,644 -- --
Equity applicable to
common stock........... 698 864 839 8,574 8,549 -- --
---------- ------------ ------- ------------ ------- ---------- -------
Total shareholders' equity.... 3,692 4,508 4,483 12,218 12,193 -- --
Time Warner General Partners'
senior capital............... -- -- -- -- -- 1,398 1,398
Partners' capital............. -- -- -- -- -- 6,440 6,500
---------- ------------ ------- ------------ ------- ---------- -------
Total capitalization.......... $ 13,997 $ 16,794 $ 16,868 $ 26,940 $ 27,014 $ 14,019 $13,954
---------- ------------ ------- ------------ ------- ---------- -------
---------- ------------ ------- ------------ ------- ---------- -------
(footnotes on following page)
S-7
(a) Also reflects, on a pro forma basis, the capitalization of the Company as
a separate subsidiary of the new holding company after consummation of the
Holding Company Transaction. See 'Recent Developments'.
(b) Reflects, on a pro forma basis, the capitalization of the new holding
company after consummation of the Holding Company Transaction (in which
case the Company expects that the new holding company would provide
guarantees of the Company's outstanding public debt). See 'Recent
Developments'.
(c) The zero coupon convertible notes due 2012 and 2013 are reflected net of
unamortized original issue discount of $1.078 billion and $1.409 billion,
respectively. The Debentures Due 2036 offered hereby are reflected net of
unamortized original issue discount of $166 million. The TBS zero coupon
notes due 2007 are reflected net of unamortized original issue discount of
$323 million.
(d) The Company and TWE entered into a credit agreement in 1994 that allows
the Company to borrow up to $400 million from TWE through September 15,
2000. Outstanding borrowings from TWE bear interest at LIBOR plus 1% per
annum. For financial reporting purposes, the $400 million of currently
outstanding loans from TWE to the Company have been reclassified and shown
as a reduction in the Company's investments in and amounts due to the
Entertainment Group.
(e) The New Credit Agreement permits borrowings in an aggregate amount of up
to $8.3 billion. Borrowings are limited to $4 billion in the case of TWI
Cable, $5 billion in the case of the TWE-A/N Partnership and $8.3 billion
in the case of TWE, subject in each case to certain limitations and
adjustments. Such borrowings bear interest at different rates for each of
the three borrowers, generally equal to LIBOR plus a margin ranging from
50 to 87.5 basis points based on the credit rating or financial leverage
of the applicable borrower. The New Credit Agreement contains certain
covenants for each borrower relating to, among other things, additional
indebtedness; liens on assets; cash flow coverage and leverage ratios; and
loans, advances, distributions and other cash payments or transfers of
assets from the borrowers to their respective partners or affiliates. See
'Recent Developments' and the Company's Current Report on Form 8-K dated
November 14, 1995, incorporated by reference herein, for a description of
the New Credit Agreement.
(f) Guaranteed by certain subsidiaries of the Company which are the general
partners of TWE.
S-8
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
COMPANY SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information of the Company set forth
below has been derived from and should be read in conjunction with the
consolidated financial statements and other financial information of the Company
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, as amended, and with the unaudited consolidated condensed
financial statements contained in the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995, which are incorporated herein by
reference. The selected historical financial information for all periods after
1992 reflect the deconsolidation of the Entertainment Group, principally TWE,
effective January 1, 1993. Capitalized terms are as defined and described in
such historical financial statements, or elsewhere herein.
The selected historical financial information for 1995 reflects the
issuance of 29.3 million shares of convertible preferred stock having an
aggregate liquidation preference of $2.926 billion in connection with (i) the
acquisitions of KBLCOM and Summit and (ii) the exchange by Toshiba and ITOCHU of
their direct and indirect interests in TWE. The selected historical financial
information for 1993 reflects the issuance of $6.1 billion of long-term debt and
the use of $500 million of cash and equivalents for the exchange or redemption
of preferred stock having an aggregate liquidation preference of $6.4 billion.
The selected historical financial information for 1992 reflects the
capitalization of TWE on June 30, 1992 and associated refinancings, and the
acquisition of the 18.7% minority interest in American Television and
Communications Corporation ('ATC') as of June 30, 1992, using the purchase
method of accounting for business combinations. Per common share amounts and
average common shares have been restated to give effect to the four-for-one
common stock split that occurred on September 10, 1992.
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------- ------- -------
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
OPERATING STATEMENT INFORMATION
Revenues................................. $5,705 $5,109 $7,396 $6,581 $13,070 $12,021 $11,517
Depreciation and amortization............ 398 319 437 424 1,172 1,109 1,138
Business segment operating income(a)..... 343 423 713 591 1,343 1,154 1,114
Equity in pretax income of Entertainment
Group.................................. 235 177 176 281 -- -- --
Interest and other, net.................. 615 514 724 718 882 966 1,133
Net income (loss)(b)(c).................. (199) (103) (91) (221) 86 (99) (227)
Net loss applicable to common shares
(after preferred dividends)............ (223) (112) (104) (339) (542) (692) (786)
Per share of common stock:
Net loss(b)(c)................... $ (.58) $ (.30) $ (.27) $ (.90) $ (1.46) $ (2.40) $ (3.42)
Dividends........................ $ .27 $ .26 $ .35 $ .31 $ .265 $ .25 $ .25
Average common shares(c)................. 382.5 378.8 378.9 374.7 371.0 288.2 229.9
Ratio of earnings to fixed charges
(deficiency in the coverage of fixed
charges by earnings before fixed
charges)(d)............................ $ (46) 1.1x 1.1x 1.1x 1.4x 1.1x $ (101)
(footnotes on following page)
S-9
DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------
1995 1994 1993 1992 1991 1990
------------- ------- ------- ------- ------- -------
(MILLIONS)
BALANCE SHEET INFORMATION
Investments in and amounts due to and from
Entertainment Group......................... $ 6,022 $ 5,350 $ 5,627 $ -- $ -- $ --
Total assets.................................. 21,422 16,716 16,892 27,366 24,889 25,337
Long-term debt................................ 9,931 8,839 9,291 10,068 8,716 11,184
Company-obligated mandatorily redeemable
preferred securities of subsidiary holding
solely Company subordinated notes........... 374 -- -- -- -- --
Shareholders' equity:
Preferred stock liquidation preference...... 2,994 140 140 6,532 6,256 5,954
Equity applicable to common stock........... 698 1,008 1,230 1,635 2,242 360
Total shareholders' equity.................. 3,692 1,148 1,370 8,167 8,498 6,314
- ------------
(a) Business segment operating income for the nine months ended September 30,
1995 includes $85 million in losses relating to certain businesses and
joint ventures owned by the Music division which are being restructured or
closed. Operating income for the year ended December 31, 1991 includes a
$60 million charge relating to the restructuring of the Publishing
division.
(b) The net loss for the nine months ended September 30, 1995 includes an
extraordinary loss on the retirement of debt of $42 million ($.11 per
common share). The net loss for the year ended December 31, 1993 includes
an extraordinary loss on the retirement of debt of $57 million ($.15 per
common share) and an unusual charge of $70 million ($.19 per common share)
from the effect of the new income tax law on the Company's deferred income
tax liability.
(c) In August 1991, the Company completed the sale of 137.9 million shares of
common stock pursuant to a rights offering. Net proceeds of $2.558 billion
from the rights offering were used to reduce indebtedness under the
Company's bank credit agreement. If the rights offering had been completed
at the beginning of 1991, net loss for the year would have been reduced to
$33 million, or $1.70 per common share, and there would have been 369.3
million shares of common stock outstanding during the year.
(d) For purposes of the ratio of earnings to fixed charges, earnings were
calculated by adding pretax income, interest expense, previously
capitalized interest amortized to expense, the portion of rents
representative of an interest factor, preferred stock dividend requirements
of majority-owned subsidiaries, the Company's proportionate share of such
items for its majority-owned subsidiaries and 50%-owned companies, and
undistributed losses of less-than-50%-owned companies. Fixed charges
consist of interest expense, interest capitalized, the portion of rents
representative of an interest factor, preferred stock dividend requirements
of majority-owned subsidiaries and the Company's proportionate share of
such items for majority-owned subsidiaries and 50%-owned companies. For
periods in which earnings before fixed charges were insufficient to cover
fixed charges, the dollar amount of coverage deficiency, instead of the
ratio, is disclosed. Earnings as defined include significant noncash
charges for depreciation and amortization. In addition fixed charges for
the nine months ended September 30, 1995 and 1994 and the year ended
December 31, 1994 include noncash interest expense of $156 million, $162
million and $219 million, respectively, relating to the Reset Notes and the
Company's zero coupon convertible notes due 2012 and 2013.
ENTERTAINMENT GROUP SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information of the Entertainment Group
set forth below has been derived from and should be read in conjunction with the
consolidated financial statements and other financial information of the Company
and TWE contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, as amended, and with the unaudited consolidated condensed
financial statements and other financial information of the Company and TWE
contained in the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, which are incorporated herein by reference. For periods
prior to January 1, 1993, the Entertainment Group is
S-10
consolidated with the Company for financial reporting purposes and, accordingly,
is also reflected in the Company's summary historical financial information.
The selected historical financial information for 1995 reflects the
consolidation by TWE of the TWE-A/N Partnership resulting from the formation of
such partnership, effective as of April 1, 1995, and the consolidation of
Paragon effective as of July 6, 1995. The selected historical financial
information gives effect to the consolidation of Six Flags Entertainment
Corporation ('Six Flags') effective as of January 1, 1993 as a result of an
increase in TWE's ownership of Six Flags from 50% to 100% in September 1993, and
the subsequent deconsolidation of Six Flags resulting from the disposition by
TWE of a 51% interest in Six Flags effective as of June 23, 1995. The selected
historical financial information for 1993 also gives effect to the admission of
U S WEST as an additional limited partner of TWE as of September 15, 1993 and
the issuance of $2.6 billion of TWE debentures during the year to reduce
indebtedness under the TWE credit agreement, and for 1992 gives effect to the
initial capitalization of TWE and associated refinancings as of the dates such
transactions were consummated and the Company's acquisition of the ATC minority
interest as of June 30, 1992, using the purchase method of accounting. The
Company's cost to acquire the ATC minority interest is reflected in the
consolidated financial statements of TWE under the pushdown method of
accounting.
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- --------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
(MILLIONS, EXCEPT RATIOS)
OPERATING STATEMENT INFORMATION
Revenues.......................................... $6,871 $6,205 $8,509 $7,963 $6,761 $6,068 $5,671
Depreciation and amortization..................... 780 719 959 909 788 733 775
Business segment operating income................. 749 673 852 905 814 724 549
Interest and other, net........................... 467 451 616 564 531 526 648
Net income (loss)(a).............................. 149 137 136 207 173 103 (180)
TWE ratio of earnings to fixed charges (deficiency
in the coverage of fixed charges by earnings
before fixed charges)(b)........................ 1.5x 1.5x 1.4x 1.4x 1.4x 1.4x $ (138)
DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------
1995 1994 1993 1992 1991 1990
------------- ------- ------- ------- ------- -------
(MILLIONS)
BALANCE SHEET INFORMATION
Total assets..................................... $18,541 $18,992 $18,202 $15,886 $14,230 $14,415
Long-term debt................................... 6,181 7,160 7,125 7,171 4,571 6,516
Time Warner General Partners' senior capital..... 1,398 1,663 1,536 -- -- --
Partners' capital................................ 6,440 6,491 6,228 6,483 6,717 5,809
- ------------
(a) Net income for the nine months ended September 30, 1995, and the year ended
December 31, 1993 includes an extraordinary loss on the retirement of debt
of $24 million and $10 million, respectively.
(b) For purposes of the ratio of earnings to fixed charges, earnings were
calculated by adding pretax income, interest expense, previously
capitalized interest amortized to expense, the portion of rents
representative of an interest factor, TWE's proportionate share of such
items for its majority-owned subsidiaries and 50%-owned companies, and
undistributed losses of less-than-50%-owned companies. Fixed charges
consist of interest expense, interest capitalized, the portion of rents
representative of an interest factor and TWE's proportionate share of such
items for majority-owned subsidiaries and 50%-owned companies. For periods
in which earnings before fixed charges were insufficient to cover fixed
charges, the dollar amount of coverage deficiency, instead of the ratio, is
disclosed. Earnings as defined include significant noncash charges for
depreciation and amortization.
COMPANY AND ENTERTAINMENT GROUP SELECTED PRO FORMA FINANCIAL INFORMATION
The unaudited selected pro forma balance sheet information of the
Entertainment Group at September 30, 1995 set forth below gives effect to the
Unclustered Cable Disposition, as if such transaction had occurred as of such
date. The unaudited selected pro forma balance sheet information of the Company
at September 30, 1995 set forth below gives effect in column (1) to the
Unclustered
S-11
Cable Disposition and the CVI Acquisition and in column (2) to each of such
transactions and the TBS Transaction, in each case as if such transactions
occurred at such date. The Summit Acquisition, the KBLCOM Acquisition, the 1995
Debt Refinancings, the ITOCHU/Toshiba Transaction, the TWE-A/N Transaction and
the Six Flags Transaction are already reflected in the historical balance sheets
of the Company and the Entertainment Group as of September 30, 1995. The
unaudited selected pro forma operating statement information of the
Entertainment Group for the nine months ended September 30, 1995 and the year
ended December 31, 1994 set forth below gives effect to the Asset Sale
Transactions, the TWE-A/N Transaction and the 1995 Debt Refinancings, as if such
transactions occurred at the beginning of such periods. The unaudited selected
pro forma operating statement information of the Company for the nine months
ended September 30, 1995 and the year ended December 31, 1994 set forth below
gives effect in column (1) to the Asset Sale Transactions, the TWE-A/N
Transaction, the 1995 Debt Refinancings, the Acquisitions and the ITOCHU/Toshiba
Transaction, and in column (2) to each of such transactions and the TBS
Transaction, in each case as if the transactions occurred at the beginning of
such periods. No pro forma effect has been given in the information set forth
below for the issuance of the Debentures Due 2036 offered hereby, the Related
Debentures and the Preferred Trust Securities, and the redemption of the 8 3/4%
Convertible Debentures because such transactions will not have a material effect
on the Company or the new holding company (see 'Consolidated Capitalization').
The selected pro forma financial information should be read in conjunction with
the 'Time Warner Inc. and the Entertainment Group Pro Forma Consolidated
Condensed Financial Statements' included in the Company's Current Report on Form
8-K dated November 14, 1995, which is incorporated herein by reference.
The selected pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the financial position or
operating results that would have occurred if the transactions given retroactive
effect therein had been consummated as of the dates indicated, nor is it
necessarily indicative of future financial conditions or operating results.
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, 1995 DECEMBER 31, 1994
----------------------------------------- -----------------------------------------
(1) (2) (1) (2)
COMPANY COMPANY COMPANY COMPANY
PRE-TBS POST-TBS ENTERTAINMENT PRE-TBS POST-TBS ENTERTAINMENT
PRO FORMA(a) PRO FORMA(b) GROUP PRO FORMA(a) PRO FORMA(b) GROUP
------------ ------------ ------------- ------------ ------------ -------------
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
PRO FORMA OPERATING STATEMENT
INFORMATION
Revenues.......................... $6,249 $8,764 $ 6,945 $8,217 $ 11,026 $ 8,790
Depreciation and amortization..... 699 998 808 912 1,263 1,040
Business segment operating
income.......................... 339 435 761 652 704 928
Equity in pretax income of
Entertainment Group............. 259 259 -- 208 208 --
Interest and other, net........... 770 921 455 940 1,143 660
Income (loss) before extraordinary
item............................ (254) (347) 200 (266) (437) 174
Loss before extraordinary item
applicable to common shares
(after preferred dividends)..... (363) (456) -- (412) (583) --
Per share of common stock:
Loss before extraordinary
item........................ (.94) (.81) -- (1.07) (1.04) --
Dividends..................... .27 .27 -- .35 .35 --
Average common shares............. 386.4 562.7 -- 384.0 560.3 --
Company and TWE ratio of earnings
to fixed charges (deficiency in
the coverage of fixed charges by
earnings before fixed
charges)(c)..................... $ (181) $ (233) 1.7x $ (77) $ (273) 1.6x
(footnotes on following page)
S-12
SEPTEMBER 30, 1995
---------------------------------------------
(1) (2)
COMPANY COMPANY
PRE-TBS POST-TBS ENTERTAINMENT
PRO FORMA(a) PRO FORMA(b) GROUP
------------ ------------ -------------
(MILLIONS)
PRO FORMA BALANCE SHEET INFORMATION
Investments in and amounts due to and from Entertainment Group..... $ 6,082 $ 6,082 $ --
Total assets....................................................... 25,265 36,792 18,476
Long-term debt..................................................... 11,912 14,348 6,056
Company-obligated mandatorily redeemable preferred securities of
subsidiary holding solely Company subordinated notes............. 374 374 --
Shareholders' equity:
Preferred stock liquidation preference........................ 3,644 3,644 --
Equity applicable to common stock............................. 864 8,574 --
Total shareholders' equity.................................... 4,508 12,218 --
Time Warner General Partners' senior capital....................... -- -- 1,398
Partners' capital.................................................. -- -- 6,500
- ------------
(a) Also reflects, on a pro forma basis, the Company as a separate subsidiary
of the new holding company after consummation of the Holding Company
Transaction. See 'Recent Developments'.
(b) Reflects, on a pro forma basis, the new holding company after consummation
of the Holding Company Transaction (in which case the Company expects that
the new holding company would provide guarantees of the Company's
outstanding public debt). See 'Recent Developments'.
(c) For purposes of the ratio of earnings to fixed charges, earnings were
calculated by adding pretax income, interest expense, previously
capitalized interest and amortized to expense, the portion of rents
representative of an interest factor, preferred stock dividend requirements
of majority-owned subsidiaries, the proportionate share for each of the
Company and TWE, respectively, of such items for its majority-owned
subsidiaries and 50%-owned companies, and undistributed losses of less-
than-50%-owned companies. Fixed charges consist of interest expense,
interest capitalized, the portion of rents representative of an interest
factor, preferred stock dividend requirements of majority-owned
subsidiaries and the proportionate share for each of the Company and TWE,
respectively, of such items for majority-owned subsidiaries and 50%-owned
companies. For periods in which earnings before fixed charges were
insufficient to cover fixed charges, the dollar amount of coverage
deficiency, instead of the ratio, is disclosed. Earnings as defined include
significant noncash charges for depreciation and amortization. Fixed
charges for the Company for the nine months ended September 30, 1995 and
the year ended December 31, 1994 in column (1) and column (2) included
noncash interest expense of $63 million and $79 million, respectively,
relating to the Company's zero coupon convertible notes due 2012 and 2013
and, in column (2) only, an additional $14 million and $17 million,
respectively, relating to TBS's zero coupon convertible notes due 2007.
S-13
DESCRIPTION OF THE DEBENTURES DUE 2036
The Debentures Due 2036 is a separate series of Debt Securities described
in the accompanying Prospectus that will be issued under an indenture dated as
of January 15, 1993 (the 'Indenture'), between the Company and Chemical Bank, as
trustee (the 'Trustee'). The following description of the particular terms of
the Debentures offered hereby supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
Debt Securities set forth in the accompanying Prospectus, to which description
reference is hereby made. Capitalized terms used but not defined herein or in
the accompanying Prospectus have the meanings given to them in the Indenture.
Section references are to the Indenture unless otherwise indicated.
GENERAL
The Debentures Due 2036 will be limited to $200,000,000 aggregate principal
amount at maturity. The Debentures Due 2036 will mature on January 15, 2036 and
will not be redeemable prior to maturity or entitled to any sinking fund.
The $200,000,000 aggregate principal amount at maturity of Debentures Due
2036 will be issued at a discount to their aggregate principal amount. Although
for federal income tax purposes significant amounts of original issue discount,
taxable as ordinary income, will be recognized by a holder of the Debentures Due
2036 from the date of issuance through maturity, no interest will accrue or be
paid on the Debentures Due 2036 prior to January 15, 2016 (except after
acceleration as provided below). Beginning January 15, 2016, the Debentures Due
2036 will bear interest on their $200,000,000 aggregate principal amount at
maturity at the annual rate set forth on the cover page of this Prospectus
Supplement, payable semiannually on January 15 and July 15 of each year,
commencing July 15, 2016 (each an 'Interest Payment Date'), to holders of record
at the close of business on the January 1 or July 1 next preceding each such
Interest Payment Date. In addition, if the principal of the Debentures Due 2036
is accelerated upon the occurrence of an Event of Default, the Company will pay
interest on the Accreted Value (as defined below) as of the date of acceleration
at a rate equal to the yield to maturity of the Debentures Due 2036 as of the
date of issuance, compounded semiannually (in lieu of (i) any further accretion
of the Accreted Value and (ii), in the case of any period after January 14,
2016, the accrual of any interest at the rate set forth on the cover page of
this Prospectus Supplement). The Debentures Due 2036 will be issued only in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. The principal of and interest on the Debentures Due 2036 will
be payable and the transfer of the Debentures Due 2036 will be registrable
through the Depositary as described under ' -- Book Entry System' below.
(Sections 305 and 202 and Form of Debentures) The Company will not charge a
service charge for any registration of transfer or exchange of Debentures Due
2036; however, the Company may require payment by a Holder of a sum sufficient
to cover any tax, assessment or other governmental charge payable in connection
therewith. (Section 305) The Trustee shall authenticate and deliver Debentures
Due 2036 in accordance with the Indenture and the procedures for dating, due
execution by the Company and book-entry transfer set forth therein. (Section
303)
The Events of Default specified in the accompanying Prospectus will apply
to the Debentures Due 2036. The amount of the principal of the Debentures Due
2036 that will be subject to acceleration upon the occurrence of an Event of
Default will be the Accreted Value thereof as of the date of such acceleration.
'Accreted Value', as of any date of determination and in respect of each
$1,000 principal amount of Debentures Due 2036, shall be determined in the
following manner:
(i) the Accreted Value as of the next preceding January 15 or July 15
(or, if such date of determination is on or before July 15, 1996, the
original issue price of $170.385); plus
(ii) accretion on the amount and from the date determined in (i) above
at a rate equal to the yield to maturity on the Debentures Due 2036
calculated based on a 360 day year composed of twelve 30-day months (which
rate is approximately 8.80% per annum); and less
(iii) the amount of interest, if any, payable on such date of
determination.
S-14
Pursuant to the foregoing, the Accreted Value of each $1,000 principal amount of
Debentures Due 2036 will be $953.33 on January 15, 2016 and will further accrete
to $1,000 at January 15, 2036. The exact Accreted Value of each $1,000 principal
amount of Debentures Due 2036 as of each January 15 and July 15 will be set
forth in the form of Debentures Due 2036.
RANKING AND HOLDING COMPANY STRUCTURE
The Debentures Due 2036 will be senior indebtedness of the Company and will
rank pari passu with all other unsecured and unsubordinated debt of the Company.
See 'Consolidated Capitalization'. The Debentures Due 2036 will be effectively
subordinated to all existing and future liabilities, including indebtedness, of
subsidiaries of the Company. As of September 30, 1995, the Company's
consolidated and unconsolidated subsidiaries had approximately $15.2 billion of
total liabilities, including approximately $7.6 billion of indebtedness.
Indebtedness of the Company's consolidated and unconsolidated subsidiaries
increased by approximately $2 billion as a result of the consummation of the CVI
Acquisition on January 4, 1996. The consolidated indebtedness of the new holding
company will increase by an additional $2.3 billion after consummation of the
TBS Transaction. The Company's rights and the rights of its creditors, including
holders of Debentures Due 2036, to participate in the distribution of assets of
any subsidiary upon such subsidiary's liquidation or reorganization will be
subject to prior claims of such subsidiary's creditors, including trade
creditors, except to the extent the Company may itself be a creditor with
recognized claims against such subsidiary. See 'Holding Company Structure' in
the accompanying Prospectus.
COVENANTS OF THE COMPANY
LIMITATION ON LIENS. The Indenture provides that neither the Company nor
any Material Subsidiary of the Company shall incur, create, issue, assume,
guarantee or otherwise become liable for any indebtedness for money borrowed
that is secured by a lien on any asset now owned or hereafter acquired by it
unless the Company makes or causes to be made effective provision whereby the
Debentures Due 2036 will be secured by such lien equally and ratably with (or
prior to) all other indebtedness thereby secured so long as any such
indebtedness shall be secured. The foregoing restriction does not apply to the
following:
(i) liens existing as of the date of the Indenture;
(ii) liens created by Subsidiaries of the Company to secure
indebtedness of such Subsidiaries to the Company or to one or more other
Subsidiaries of the Company;
(iii) liens affecting property of a person existing at the time it
becomes a Subsidiary of the Company or at the time it merges into or
consolidates with the Company or a Subsidiary of the Company or at the time
of a sale, lease or other disposition of all or substantially all of the
properties of such person to the Company or its Subsidiaries;
(iv) liens on property exiting at the time of the acquisition thereof
or incurred to secure payment of all or a part of the purchase price
thereof or to secure Indebtedness incurred prior to, at the time of, or
within one year after the acquisition thereof for the purpose of financing
all or part of the purchase price thereof;
(v) liens on any property to secure all or part of the cost of
improvements or construction thereon or indebtedness incurred to provide
funds for such purpose in a principal amount not exceeding the cost of such
improvements or construction;
(vi) liens consisting of or relating to the sale, transfer or
financing of motion pictures, video and television programs, sound
recordings, books or rights with respect thereto to or with so-called tax
shelter groups or other third-party investors in connection with the
financing of such motion pictures, video and television programming, sound
recordings or books in the ordinary course of business and the granting to
the Company or any of its Subsidiaries of rights to distribute such motion
pictures, video and television programming, sound recordings or books;
provided, however, that no such lien shall attach to any asset or right of
the Company or its Subsidiaries (other than the motion pictures, video and
television programming, sound recordings, books or rights which
S-15
were sold, transferred to or financed by the tax shelter group or
third-party investors in question or the proceeds arising therefrom);
(vii) liens on shares of stock, indebtedness or other securities of a
Person that is not a Subsidiary;
(viii) other liens arising in connection with indebtedness of the
Company and its Subsidiaries in an aggregate principal amount for the
Company and its Subsidiaries not exceeding at the time such lien is issued,
created or assumed the greater of (A) 10% of the Consolidated Net Worth of
the Company and (B) $500 million; and
(ix) any extensions, renewal or replacement of any lien referred to in
the foregoing clauses (i) through (viii) inclusive, or of any indebtedness
secured thereby; provided that the principal amount of indebtedness secured
thereby shall not exceed the principal amount of indebtedness so secured at
the time of such extension, renewal or replacement, or at the time the lien
was issued, created or assumed or otherwise permitted, and that such
extension, renewal or replacement lien shall be limited to all or part of
substantially the same property which secured the lien extended, renewed or
replaced (plus improvements on such property). (Section 1006)
LIMITATION ON SENIOR DEBT. The Indenture provides that the Company will
not, and will not permit any of its Subsidiaries to, incur, create, issue,
assume, guarantee or otherwise become directly or indirectly liable for
(collectively, 'incur') any Senior Debt, if after giving effect to such
incurrence of Senior Debt, determined on a pro forma basis as if such incurrence
had occurred on the first day of the Test Period, the Consolidated Cash Flow
Coverage Ratio for the Company and its Subsidiaries for the Test Period would be
less than 1.5 to 1; provided, however, that the foregoing restrictions will not
apply to TWE or any of its Subsidiaries to the extent that the application of
such restrictions would be prohibited under, or cause a violation of, TWE's bank
credit agreement as in effect from time to time or any successor or replacement
credit agreement. (Section 1007)
Other than the restrictions in the Indenture on liens and incurrence of
Senior Debt described above, the Indenture and the Debentures Due 2036 do not
contain any covenants or other provisions designed to afford holders of the
Debentures Due 2036 protection in the event of a recapitalization or highly
leveraged transaction involving the Company.
LIMITATION ON MERGER, CONSOLIDATION AND CERTAIN SALES OF ASSETS. The
Indenture provides that the Company will not merge or consolidate with or into,
or convey or transfer its property substantially as an entirety to, any Person
unless (a) the successor is organized and existing under the laws of the United
States or any State or the District of Columbia, (b) the successor assumes the
Company's obligations under the Indenture and the Debentures Due 2036 on the
same terms and conditions and (c) immediately after giving effect to such
transaction, there is no default under the Indenture. (Section 801)
CERTAIN DEFINITIONS
The following are certain of the terms defined in the Indenture:
'Consolidated Cash Flow' means, for any period, the net income of the
Company and its Subsidiaries as determined on a consolidated basis in
accordance with GAAP consistently applied, plus the sum of depreciation,
amortization, other noncash charges which reduce net income, income tax
expense and interest expense, in each case to the extent deducted in
determining such net income, and excluding extraordinary gains or losses.
Notwithstanding the foregoing, for purposes of determining the Consolidated
Cash Flow of the Company, there shall be included, in respect of each other
Person that is accounted for by the Company on the equity method (as
determined in accordance with GAAP), the Company's proportionate amount of
such other Person's and its Subsidiaries' consolidated net income,
depreciation, amortization, other noncash charges which reduce net income,
income tax expense and interest expense, in each case to the extent
deducted in determining such other Person's net income, excluding
extraordinary gains and losses.
S-16
'Consolidated Cash Flow Coverage Ratio' means, for any period, the
ratio for such period of Consolidated Cash Flow to Consolidated Interest
Expense. In determining the Consolidated Cash Flow Coverage Ratio, effect
shall be given to the application of the proceeds of Senior Debt whose
incurrence is being tested to the extent such proceeds are used to repay or
refinance other Senior Debt.
'Consolidated Interest Expense' means, for any period, cash interest
expense of the Company and its Subsidiaries on Senior Debt for such period
other than the amount amortized during such period in respect of all fees
paid in connection with the incurrence of such Senior Debt, such expense to
be determined on a consolidated basis in accordance with GAAP consistently
applied. Notwithstanding the foregoing, for purposes of determining the
Consolidated Interest Expense of the Company, there shall be included, in
respect of each other Person that is accounted for by the Company on the
equity method (as determined in accordance with GAAP), the Company's
proportionate amount of the cash interest expense of such other Person and
its Subsidiaries on Senior Debt for the relevant period other than the
amount amortized during such period in respect of all fees paid in
connection with the incurrence of such Senior Debt, such expense to be
determined on a consolidated basis in accordance with GAAP consistently
applied.
'Consolidated Net Worth' means, at the date of any determination, the
consolidated stockholders' equity of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP consistently
applied; provided that the Company's 8 3/4% Convertible Debentures that are
then outstanding shall be considered equity for the purposes of the
computation of the Company's Consolidated Net Worth.
'GAAP' means generally accepted accounting principles as such
principles are in effect as of the date of the Indenture.
'Material Subsidiary' means any Person that is a Subsidiary if at the
end of the most recent fiscal quarter of the Company, the aggregate amount,
determined in accordance with GAAP consistently applied, of securities of,
loans and advances to, and other investments in, such Person held by the
Company and its other Subsidiaries exceeded 10% of the Company's
Consolidated Net Worth.
'Person' means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
'Senior Debt' means, with respect to any Person, all indebtedness of
such Person, in respect of money borrowed, determined in accordance with
GAAP consistently applied, other than indebtedness as to which the
instrument governing such indebtedness provides that such indebtedness is,
or which is in effect, subordinated or junior in right of payment to any
other indebtedness of such Person.
'Subsidiary' means, with respect to any Person, any corporation more
than 50% of the voting stock of which is owned directly or indirectly by
such Person, and any partnership, association, joint venture or other
entity in which such Person owns more than 50% of the equity interests or
has the power to elect a majority of the board of directors or other
governing body.
'Test Period' means, with respect to any date, the period consisting
of the most recent four full fiscal quarters for which financial
information is generally available.
LIMITATION ON CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of the Company, the
claim of the holder of a Debenture Due 2036, under Title 11 of the United States
Code, may be limited to the original issue price of the Debenture Due 2036 plus
that portion of the Accreted Value that has accrued from the date of issue to
the commencement of the proceeding.
S-17
BOOK-ENTRY SYSTEM
The Debentures Due 2036 initially will be represented by one or more global
securities (the 'Global Securities') deposited with DTC and registered in the
name of a nominee of DTC. Except as set forth below, the Debentures Due 2036
will be available for purchase in denominations of $1,000, and integral
multiples thereof, in book-entry form only.
Unless and until certificated Debentures Due 2036 are issued under the
limited circumstances described below, no beneficial owner of a Debenture Due
2036 shall be entitled to receive a definitive certificate representing a
Debenture Due 2036. So long as DTC or any successor depositary (the
'Depositary') or its nominee is the registered owner of all the Global
Securities, the Depositary or such nominee, as the case may be, will be
considered to be the sole owner or holder of the Debentures Due 2036 for all
purposes of the Indenture. Unless and until exchanged in whole or in part for
the Debentures Due 2036 represented thereby, the Global Securities may not be
transferred except in their entirety by the Depositary to a nominee of the
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
depositary or any nominee of such successor.
So long as the Global Securities represent the Debentures Due 2036,
payments of interest and principal will be made to the Depositary or its
nominee, as the registered owner of the Global Securities. Payments to
beneficial owners of the Debentures Due 2036 are expected to be made through the
Depositary or its nominee, as described in the Prospectus. None of the Company,
the Trustee, any Paying Agent or the Registrar will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the Global Securities for the Debentures
Due 2036 or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
If the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days, the Company will issue individual Debentures Due 2036 in
definitive form in exchange for the Global Securities representing the
Debentures Due 2036. In addition, the Company may at any time and in its sole
discretion determine not to have the Debentures Due 2036 represented by Global
Securities, and, in such event, will issue individual Debentures Due 2036 in
definitive form in exchange for the Global Securities. In either instance, the
Company will issue Debentures Due 2036 in definitive form equal in aggregate
principal amount to the Global Securities, in such names and in such principal
amounts as the Depositary shall request. Debentures Due 2036 so issued in
definitive form will be issued in denominations of $1,000 and integral multiples
thereof and will be issued in registered form only, without coupons.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a 'clearing corporation' within the
meaning of the New York Uniform Commercial Code and a 'clearing agency'
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities of its participants
and to facilitate the clearance and settlement of securities transactions among
its participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations, some of which (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
A further description of the Depositary's procedures with respect to Global
Securities is set forth in the accompanying Prospectus under 'Description of the
Debt Securities -- Global Securities'. The Depositary has confirmed to the
Company, the Underwriters and the Trustee that it intends to follow such
procedures.
S-18
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general description of the principal United States
Federal income tax consequences of ownership and disposition of the Debentures
Due 2036 to initial holders purchasing the Debentures Due 2036 at the 'issue
price' (as defined below). This summary is based on United States Federal income
tax laws existing as of the date hereof, changes to which subsequent to the date
of this Prospectus Supplement may affect the tax consequences described herein.
This summary discusses only Debentures Due 2036 held as capital assets within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the 'Code'). It does not discuss all of the tax consequences that may be
relevant to a holder in light of his particular circumstances or to holders
subject to special rules, such as certain financial institutions, insurance
companies, dealers in options or securities or persons holding the Debentures
Due 2036 as part of a hedging transaction or straddle.
PURCHASERS OF THE DEBENTURES DUE 2036 SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
U.S. HOLDERS
As used herein, the term 'U.S. Holder' means a holder of the Debentures Due
2036 that is, for United States Federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a corporation, or other entity taxable as a
corporation, created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate or trust, the income of which
is subject to United States Federal income taxation regardless of its source, or
(iv) a person otherwise subject to United States Federal income taxation on a
net income basis in respect of such holder's ownership of the Debentures Due
2036.
ORIGINAL ISSUE DISCOUNT
The Debentures Due 2036 will be treated as issued with original issue
discount ('OID') for United States Federal income tax purposes equal to the
difference between their issue price and their 'stated redemption at maturity'.
The 'issue price' of a Debenture Due 2036 will equal the first price at which a
substantial amount of the Debentures Due 2036 are sold to the public (not
including bond houses, brokers or similar persons or organizations acting in the
capacity of underwriters, placement agents or as wholesalers) for money. The
'stated redemption price at maturity' of a Debenture Due 2036, as such term is
defined for tax purposes, will equal the sum of all scheduled payments other
than 'qualified stated interest.' The effect of this definition of 'stated
redemption price at maturity' is to cause scheduled interest payments on a debt
instrument to be treated as OID includible on the economic accrual basis
described below. The term 'qualified stated interest' generally refers to stated
interest unconditionally payable at least annually over the entire term of a
note. Because there will be no interest payable on the Debentures Due 2036 prior
to 2016, none of the scheduled payments on the Debentures Due 2036 will
constitute 'qualified stated interest'. Accordingly, the 'stated redemption
price at maturity' of a Debenture Due 2036 will equal the sum of all scheduled
payments thereon (including all stated interest on the Debentures Due 2036).
A U.S. Holder must, regardless of such holder's method of tax accounting,
include OID in income on an economic accrual basis (using the
constant-yield-to-maturity method of accrual described in Section 1272(a) of the
Code and the Treasury Regulations promulgated thereunder), in advance of the
receipt of the cash to which such OID is attributable. A U.S. Holder will not be
required to include in income any scheduled cash payments received. Under such
constant-yield-to-maturity method, a U.S. Holder generally will have to include
in income increasingly greater amounts of OID in successive accrual periods.
Based on the issue price of the Debentures Due 2036 of $34,077,000, the yield to
maturity is 8.80% determined by semiannual compounding of interest. A U.S.
Holder's basis in a Debenture Due 2036 will be increased by the amount of OID
included with respect to the Debenture Due 2036 and decreased by any payments
made under the Debenture Due 2036.
S-19
A U.S. Holder that purchases the Debentures Due 2036 at a price that
differs from the issue price of the Debentures Due 2036 may be subject to the
'acquisition premium' or 'market discount' rules of Sections 1272(a)(7) and
1278, respectively, of the Code. Such U.S. Holders should consult their own tax
advisors.
SALE, EXCHANGE OR RETIREMENT OF THE DEBENTURES DUE 2036
Upon the sale, exchange or retirement of a Debenture Due 2036, a U.S.
Holder will recognize taxable gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement and such U.S. Holder's
adjusted tax basis in the Debenture Due 2036.
Gain or loss recognized on the sale, exchange or retirement of a Debenture
Due 2036 will be capital gain or loss. Such gain or loss will be a long-term
capital gain or loss if at the time of sale or exchange the Debenture Due 2036
has been held for more than one year.
NON-U.S. HOLDERS
The following is a summary of certain United States Federal income tax
consequences that may be relevant to a beneficial owner of the Debentures Due
2036 that is not a U.S. Holder (a 'Non-U.S. Holder'). This summary deals only
with Non-U.S. Holders that are initial holders of the Debentures Due 2036. It
does not address the tax considerations applicable to Non-U.S. Holders if income
or gain in respect of the Debentures is effectively connected with the conduct
of a trade or business in the United States.
Generally, payments of interest or OID made with respect to the Debentures
Due 2036 to a Non-U.S. Holder will not be subject to United States Federal
income or withholding tax, provided that (i) the Non-U.S. Holder does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote, (ii) the Non-U.S. Holder
is not a controlled foreign corporation for United States tax purposes that is
directly or indirectly related to the Company through stock ownership and (iii)
the Non-U.S. Holder complies with applicable certification requirements.
Any capital gain realized on the sale, exchange, retirement or other
disposition of a Debenture Due 2036 by a Non-U.S. Holder will not be subject to
United States Federal income or withholding taxes unless such Non-U.S. Holder is
an individual who is present in the United States for 183 days or more in the
taxable year of such sale, exchange, retirement or other disposition and meets
certain additional requirements.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain noncorporate U.S. Holders may be subject to backup withholding at a
rate of 31 percent on certain amounts paid to the holder unless such holder
provides proof of an applicable exemption (including a general exemption for
Non-U.S. Holders) or correct taxpayer identification number, and otherwise
complies with applicable requirements of the backup withholding rules. Any
amount withheld under the backup withholding rules will be creditable against
the holder's United States Federal income tax liability.
S-20
UNDERWRITERS
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally and not jointly agreed to
purchase, the respective amounts of the Debentures Due 2036 set forth opposite
its name below:
PRINCIPAL AMOUNT
OF DEBENTURES
NAME DUE 2036
- ------------------------------------------------------------------------------------- ----------------
Morgan Stanley & Co. Incorporated.................................................... $100,000,000
Salomon Brothers Inc................................................................. 100,000,000
----------------
Total........................................................................... $200,000,000
----------------
----------------
The activities of the Underwriters in connection with this transaction are
jointly led by Morgan Stanley & Co. Incorporated and Salomon Brothers Inc. The
Underwriting Agreement provides that the obligation of the Underwriters to pay
for and accept delivery of the Debentures Due 2036 is subject to the approval of
certain legal matters by their counsel and to certain other conditions. Under
the terms and conditions of the Underwriting Agreement, the Underwriters are
committed to take and pay for all of the Debentures Due 2036 if any are taken.
The Company has been advised by the Underwriters that they initially
propose to offer the Debentures Due 2036 in part directly to purchasers at the
initial public offering price set forth on the cover page of this Prospectus
Supplement and in part to certain securities dealers at such price less a
concession of .17% of the principal amount of the Debentures Due 2036. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
.085% of the principal amount of the Debentures Due 2036 to certain brokers and
dealers. After the initial offering of the Debentures Due 2036, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
Subject to certain exceptions, the Company has agreed with the Underwriters
that, without the prior written consent of the Underwriters, until January 17,
1996, the closing date for the sale of the Debentures Due 2036 offered hereby,
it will not, and will not permit TWE to, directly or indirectly offer, sell or
contract to sell, or announce the offering of, any debt securities designed to
be traded or distributed in the public or private securities markets.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended, and will be required to contribute to
payments which the Underwriters may be required to make in respect thereof.
From time to time certain Underwriters have provided, and continue to
provide, investment banking services to the Company for which customary
compensation has been and will be received.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company by Cravath,
Swaine & Moore, New York, New York, and for the Underwriters by Shearman &
Sterling, New York, New York.
S-21
PROSPECTUS
TIME WARNER INC.
Debt Securities
Convertible Debt Securities
Debt Securities with Common Stock Warrants
Time Warner Inc. (the 'Company') may offer from time to time its (i) notes,
debentures or other evidences of indebtedness ('Debt Securities'), which may be
(ii) convertible into shares of the Company's Common Stock, par value $1.00 per
share (the 'Common Stock'), or other securities or other property ('Convertible
Debt Securities') or (iii) may be accompanied by warrants ('Common Stock
Warrants') to purchase Common Stock ('Debt Securities with Common Stock
Warrants'), having an aggregate initial public offering price of $1,800,581,550
(including the U.S. dollar equivalent of securities for which the initial public
offering price is denominated in one or more foreign currencies or composite
currencies). The Debt Securities (including any Convertible Debt Securities),
Common Stock Warrants, and the Common Stock underlying any such Convertible Debt
Securities or Debt Securities with Common Stock Warrants (collectively, the
'Offered Securities') may be offered in one or more series in amounts, at prices
and on terms determined at the time of sale and set forth in a supplement to
this Prospectus (a 'Prospectus Supplement').
Unless otherwise specified in an accompanying Prospectus Supplement, the
Debt Securities will be senior securities of the Company, ranking equally with
all other unsubordinated and unsecured indebtedness of the Company.
The net proceeds from the sale of Offered Securities will be used to
repurchase, redeem or otherwise repay indebtedness of the Company, unless
otherwise set forth in the Prospectus Supplement. See 'Use of Proceeds'.
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement, including, where applicable, (i) in the case of Debt Securities, the
specific designation, aggregate principal amount, currency, denomination,
maturity (which may be fixed or extendible), priority, interest rate or rates
(or manner of calculation thereof), if any, time of payment of interest, if any,
terms for any redemption or repayment at the option of the Company or the holder
or for any sinking fund payments, terms for any conversion or exchange
(including the terms relating to the adjustment thereof), the initial public
offering price and any other specific terms of such Debt Securities, and (ii) in
the case of Common Stock Warrants included in any Debt Securities with Common
Stock Warrants, the duration, offering price, exercise price, detachability and
any other specific terms thereof.
The Prospectus Supplement will also contain information, where applicable,
about certain United States Federal income tax considerations relating to, and
any listing on a securities exchange of, the Offered Securities covered by the
Prospectus Supplement.
The Debt Securities and Common Stock Warrants may be issued only in
registered form, including in the form of one or more global securities ('Global
Securities'), unless otherwise set forth in the Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Offered Securities may be offered directly, through agents designated
from time to time or through dealers or underwriters. If any agents of the
Company or any dealers or underwriters are involved in the offering of the
Offered Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable commissions or
discounts will be set forth in the Prospectus Supplement. The net proceeds to
the Company from such sale will also be set forth in the Prospectus Supplement.
------------------------
THE DATE OF THIS PROSPECTUS IS JUNE 7, 1995.
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE OFFERED SECURITIES OFFERED HEREBY OR OTHER SECURITIES OF THE COMPANY AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the 'Commission'). Reports, proxy statements
and other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048; and Northwestern Atrium Center, 500 West Madison Street (Suite
1400), Chicago, Illinois 60661; and copies of such material may be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549, at
prescribed rates. Such reports, proxy statements and other information may also
be inspected at the offices of the New York Stock Exchange, Inc. ('NYSE'), 20
Broad Street, New York, New York, and the Pacific Stock Exchange ('PSE'), 301
Pine Street, San Francisco, California, on which one or more of the Company's
securities are listed.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
'Securities Act'). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Offered
Securities. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The Company incorporates herein by reference the following documents filed
with the Commission (File No. 1-8637) pursuant to the Exchange Act:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
(c) The Company's Current Reports on Form 8-K dated January 26, 1995,
February 6, 1995, April 1, 1995 and May 30, 1995.
(d) The description of the Company's Common Stock contained in Item 4
of the Company's Registration Statement on Form 8B filed with the
Commission on December 8, 1983, pursuant to Section 12(b) of the Exchange
Act, as amended from time to time.
(e) The description of the rights issued to stockholders of the
Company pursuant to the Rights Agreement, dated as of January 20, 1994,
between the Company and Chemical Bank, as Rights Agent, contained in Item 1
of the Company's Registration Statement on Form 8-A filed with the
Commission on January 24, 1994.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Offered
Securities shall be deemed to be incorporated herein by reference and to be a
part hereof from the date of filing of such documents.
2
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus or any Prospectus Supplement to the extent that
a statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any Prospectus Supplement.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus and the accompanying Prospectus
Supplement are delivered, upon the written or oral request of such person, a
copy of any or all the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference in such documents, and any other documents specifically identified
herein as incorporated by reference into the Registration Statement to which
this Prospectus relates or into such other documents. Requests should be
addressed to: Shareholder Relations, Time Warner Inc., 75 Rockefeller Plaza, New
York, New York 10019; telephone: (212) 484-6971.
TIME WARNER INC.
The Company was incorporated in the State of Delaware in August 1983 and is
the successor to a New York corporation that was originally organized in 1922.
The Company changed its name from Time Incorporated following its acquisition of
59.3% of the common stock of Warner Communications Inc. ('WCI') in July 1989.
WCI became a wholly owned subsidiary of the Company in January 1990 upon the
completion of the merger of WCI and a subsidiary of the Company. As used in this
Prospectus, the term the 'Company' refers to Time Warner Inc. and its
subsidiaries and divisions, and includes, unless the context otherwise
indicates, Time Warner Entertainment Company, L.P. ('TWE').
The Company is the largest media and entertainment company in the world.
Its businesses are carried on in three principal groups: Publishing, Music and
Entertainment. The Publishing group consists principally of the publication and
distribution of magazines and books; the Music group consists principally of the
production and distribution of recorded music and the ownership and
administration of music copyrights; and the Entertainment group consists
principally of the production and distribution of motion pictures and television
programming, the distribution of videocassettes, the ownership and operation of
retail stores and theme parks, the production and distribution of pay television
and cable programming, and the operation of cable television systems. These
businesses are conducted throughout the world through numerous wholly owned, and
in certain cases less than wholly owned, subsidiaries and affiliates.
TWE was formed as a Delaware limited partnership in 1992 and owns and
operates substantially all of the Entertainment group businesses, and certain
other businesses, previously owned and operated by the Company. Certain wholly
owned subsidiaries of the Company (the 'Time Warner General Partners')
collectively own 63.27% pro rata priority capital and residual equity interests
in TWE and wholly owned subsidiaries of ITOCHU Corporation, Toshiba Corporation
and U S West, Inc. own pro rata priority capital and residual equity interests
in TWE of 5.61%, 5.61% and 25.51%, respectively. In addition, the Time Warner
General Partners own priority capital interests senior and junior to the pro
rata priority capital interests.
The Company is a holding company and its assets consist primarily of
investments in its subsidiaries and TWE. The Company's ability to service its
indebtedness, including the Debt Securities, is dependent primarily upon the
earnings of its subsidiaries and TWE and the distribution or other payment of
such earnings to the Company. See 'Holding Company Structure'.
The Company's principal executive offices are located at 75 Rockefeller
Plaza, New York, New York 10019, and its telephone number is (212) 484-8000.
RECENT DEVELOPMENTS
As summarized below and more fully described in the Company's Current
Report on Form 8-K dated May 30, 1995, the Company has recently entered into or
consummated a number of transactions to acquire, operate or dispose of cable
television systems and certain other assets. These transactions
3
will, among other things, result in the acquisition of cable systems by
subsidiaries of the Company serving approximately 2.2 million subscribers and a
50% interest in Paragon Communications ('Paragon'), which serves 967,000
subscribers (the other 50% interest in Paragon is already owned by TWE).
The Company (i) closed on May 2, 1995 its acquisition of Summit
Communications Group, Inc. ('Summit'); (ii) agreed on January 26, 1995 to
acquire KBLCOM Incorporated ('KBLCOM'), a subsidiary of Houston Industries
Incorporated; and (iii) agreed on February 6, 1995 to acquire Cablevision
Industries Corporation ('CVI') and related companies (collectively, the
'Acquisitions'). To acquire Summit, the Company issued approximately 1.55
million shares of Common Stock, and approximately 3.26 million shares of a new
convertible preferred stock ('Series C Preferred Stock') and assumed or incurred
$146 million of indebtedness. To acquire KBLCOM, the Company will issue one
million shares of Common Stock and 11 million shares of a new convertible
preferred stock ('Series D Preferred Stock') and assume or incur approximately
$1.3 billion of indebtedness, including $111 million of the Company's allocable
share of Paragon's indebtedness. To acquire CVI and its related companies, the
Company will issue 2.5 million shares of Common Stock and 6.5 million shares of
new convertible preferred stock (3.25 million shares of Series E Preferred Stock
and 3.25 million shares of Series F Preferred Stock) and assume or incur
approximately $2 billion of debt of CVI and its related companies.
On April 1, 1995 TWE and Advance/Newhouse Partnership ('Advance/Newhouse'),
a New York general partnership between Newhouse Broadcasting Corporation and a
wholly owned subsidiary of Advance Publications, Inc., formed a New York general
partnership known as Time Warner Entertainment-Advance/Newhouse Partnership (the
'TWE-A/N Partnership'), in which TWE owns a two-thirds equity interest and is
the managing partner. The TWE-A/N Partnership was formed to own and operate
cable television systems (or interests therein) serving approximately 4.5
million subscribers and certain foreign cable investments and programming
investments (the 'TWE-A/N Transaction').
TWE (i) agreed on April 17, 1995, subject to certain conditions, to
recapitalize Six Flags Entertainment Corporation ('Six Flags'), sell 51% of its
interest therein and grant certain licenses to Six Flags and (ii) announced on
May 18, 1995 the sale of 15 of its unclustered cable television systems serving
approximately 144,000 subscribers (the 'Asset Sale Transactions').
The Company and TWE are currently in negotiations with an administrative
agent for a bank syndicate regarding a five-year revolving credit facility (the
'New Credit Agreement') expected to be executed in July 1995, pursuant to which
TWE, the TWE-A/N Partnership and a wholly owned subsidiary of the Company will
be borrowers. The New Credit Agreement will enable such entities to refinance
certain indebtedness assumed from the companies acquired or to be acquired in
the Acquisitions, to refinance existing indebtedness of TWE and to finance the
ongoing working capital, capital expenditure and other corporate needs of each
borrower (the '1995 Debt Refinancing').
For a discussion of the Acquisitions, the TWE-A/N Transaction, the Asset
Sale Transactions and the 1995 Debt Refinancing reference is made to the
Company's Current Report on Form 8-K dated May 30, 1995.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Company is set forth below
for the periods indicated. For periods in which earnings before fixed charges
were insufficient to cover fixed charges, the amount of coverage deficiency (in
millions), instead of the ratio, is disclosed. The historical ratios of earnings
to fixed charges for all periods after 1992 reflect the deconsolidation of the
Entertainment Group, principally TWE, effective January 1, 1993. The historical
ratios of earnings to fixed charges for 1992 and periods prior to such date have
not been changed; however, a ratio of earnings to fixed charges for 1992
retroactively reflecting the deconsolidation is presented as supplementary
information under the column heading 'restated' to facilitate comparative
analysis.
The historical ratio of earnings to fixed charges for 1993 reflects the
issuance of $6.1 billion of long-term debt and the use of $500 million of cash
and equivalents in 1993 for the exchange or redemption of preferred stock having
an aggregate liquidation preference of $6.4 billion. The historical ratio of
4
earnings to fixed charges for 1992 reflects the capitalization of TWE on June
30, 1992 and associated refinancings, and the acquisition of the 18.7% minority
interest in American Television and Communications Corporation as of June 30,
1992, using the purchase method of accounting for business combinations.
The pro forma coverage deficiencies for the three months ended March 31,
1995 and the year ended December 31, 1994 give effect to the Acquisitions,
TWE-A/N Transaction, 1995 Debt Refinancing and Asset Sale Transactions as if
such transactions had occurred at the beginning of such periods. Such pro forma
information should be read in conjunction with the pro forma consolidated
condensed financial statements contained in the Company's Current Report on Form
8-K dated May 30, 1995 and incorporated herein by reference. Such pro forma
amounts are presented for informational purposes only and are not necessarily
indicative of the actual ratio or coverage deficiency that would have occurred
if such transactions had been consummated as of the dates indicated, nor are
they necessarily indicative of future results.
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
- ------------------------ -------------------------------------------------------------------------------------------------
PRO FORMA HISTORICAL PRO FORMA HISTORICAL HISTORICAL RESTATED HISTORICAL HISTORICAL HISTORICAL
- --------- ---------- --------- ---------- ---------- -------- ---------- ---------- ----------
1995 1995 1994 1994 1993 1992 1992 1991 1990
- --------- ---------- --------- ---------- ---------- -------- ---------- ---------- ----------
$ (18) 1.0x $(73) 1.1x 1.1x 1.4x 1.4x 1.1x $(101)
For purposes of computing the ratio of earnings to fixed charges, earnings
were calculated by adding pretax income, interest expense, previously
capitalized interest amortized to expense, the portion of rents representative
of an interest factor, the Company's proportionate share of such items for its
partially-owned subsidiaries and 50%-owned companies, and undistributed losses
of less-than-50%-owned companies. Fixed charges consist of interest expense,
interest capitalized, the portion of rents representative of an interest factor
and the Company's proportionate share of such items for its partially-owned
subsidiaries and 50%-owned companies. Pro forma and historical fixed charges for
the three months ended March 31, 1995 and the year ended December 31, 1994
include noncash interest expense of $57 million and $219 million, respectively,
relating to the Company's Redeemable Reset Notes due 2002 and its Liquid Yield
Option Notes due 2012 and 2013.
USE OF PROCEEDS
Except as otherwise set forth in the Prospectus Supplement, the net
proceeds to the Company from the sale of Offered Securities will be used to
repurchase, redeem or otherwise repay indebtedness of the Company. Additional
information on the use of net proceeds from the sale of any particular Offered
Securities will be set forth in the Prospectus Supplement relating to such
Offered Securities.
DESCRIPTION OF THE DEBT SECURITIES
GENERAL
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of any Debt Securities
and the extent, if any, to which such general provisions will not apply to such
Debt Securities will be described in the Prospectus Supplement relating to such
Debt Securities.
The Debt Securities will be issued from time to time in series under an
Indenture dated as of January 15, 1993 (the 'Indenture'), between the Company
and Chemical Bank (the 'Trustee'), as Trustee. The statements set forth below
are brief summaries of certain provisions contained in the Indenture, which
summaries do not purport to be complete and are qualified in their entirety by
reference to the Indenture, a copy of which is an exhibit to the Registration
Statement of which this Prospectus is a part. Numerical references in
parentheses below are to articles or sections of the Indenture. Wherever defined
terms are used but not defined herein, such terms shall have the meanings
assigned to them in the Indenture, it being intended that such referenced
articles and sections of the Indenture and such defined terms shall be
incorporated herein by reference.
5
The Indenture does not limit the amount of Debt Securities which may be
issued thereunder and Debt Securities may be issued thereunder up to the
aggregate principal amount which may be authorized from time to time by the
Company. Any such limit applicable to a particular series will be specified in
the Prospectus Supplement relating to that series.
Reference is made to the Prospectus Supplement for the following terms of
each series of Debt Securities in respect to which this Prospectus is being
delivered: (i) the designation, date, aggregate principal amount, currency or
currency unit of payment and authorized denominations of such Debt Securities;
(ii) initial public offering price or prices of the Convertible Debt Securities
or Debt Securities with Common Stock Warrants and any discounts or commissions
paid to underwriters, dealers or agents in connection therewith; (iii) the date
or dates on which such Debt Securities will mature (which may be fixed or
extendible); (iv) the rate or rates (or manner of calculation thereof), if any,
per annum at which such Debt Securities will bear interest; (v) the dates, if
any, on which such interest will be payable; (vi) the terms, if any, on which
such Debt Securities may be converted into or exchanged for Common Stock or
other securities or property, any specific terms relating to the adjustment
thereof and the period during which such Debt Securities may be so converted or
exchanged; (vii) the terms of any mandatory or optional redemption (including
any sinking, purchase or analogous fund) and any purchase at the option of
holders (including whether any such purchase may be paid in cash, Common Stock
or other securities or property); (viii) whether such Debt Securities are to be
issued in the form of Global Securities and, if so, the identity of the
Depository with respect to such Global Securities; and (ix) any other specific
terms.
Unless otherwise set forth in the Prospectus Supplement, interest on
outstanding Debt Securities will be paid to holders of record on the date which
is 15 days prior to the date such interest is to be paid. Unless otherwise
specified in the Prospectus Supplement, Debt Securities will be issued in fully
registered form only and in denominations of $1,000 and integral multiples
thereof. Unless otherwise specified in the Prospectus Supplement, the principal
amount of the Debt Securities will be payable at the corporate trust office of
the Trustee in New York, New York. The Debt Securities may be presented for
transfer or exchange at such office unless otherwise specified in the Prospectus
Supplement, subject to the limitations provided in the Indenture, without any
service charge, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charges payable in connection therewith. (Section
305)
RANKING
Unless otherwise specified in a Prospectus Supplement for a particular
series of Debt Securities, all series of Debt Securities will be senior
indebtedness of the Company and will be direct, unsecured obligations of the
Company, ranking on a parity with all other unsecured and unsubordinated
indebtedness of the Company. The Company is a holding company and the Debt
Securities will be effectively subordinated to all existing and future
liabilities, including indebtedness, of the Company's subsidiaries. See 'Holding
Company Structure'.
COVENANTS OF THE COMPANY
LIMITATION ON MERGER, CONSOLIDATION AND CERTAIN SALES OF ASSETS. The
Indenture provides that the Company will not merge or consolidate with or into,
or convey or transfer its property substantially as an entirety to, any person
unless (a) the successor is organized and existing under the laws of the United
States or any State or the District of Columbia, (b) the successor assumes the
Company's obligations under the Indenture and the Debt Securities issued under
the Indenture on the same terms and conditions and (c) immediately after giving
effect to such transaction, there is no default under the Indenture. (Section
801)
Any additional covenants pertaining to a series of Debt Securities will be
set forth in a Prospectus Supplement relating to such series of Debt Securities.
Other than as may be specified in a Prospectus Supplement relating to a series
of Debt Securities, the Indenture as it pertains to Convertible Debt Securities
or Debt Securities with Common Stock Warrants does not contain any covenants or
other
6
provisions designed to afford holders of the Debt Securities protection in the
event of a recapitalization or highly leveraged transaction involving the
Company.
DEFEASANCE
The Indenture provides that the Company, at its option, (a) will be
Discharged from any and all obligations in respect of any series of Debt
Securities (except in each case for certain obligations to register the transfer
or exchange of Debt Securities, replace stolen, lost or mutilated Debt
Securities, maintain paying agencies and hold moneys for payment in trust) or
(b) need not comply with the covenant described above under 'Limitation on
Merger, Consolidation and Certain Sales of Assets' and any other restrictive
covenant described in a Prospectus Supplement relating to such series of Debt
Securities, and certain Events of Default (other than those arising out of the
failure to pay interest or principal on the Debt Securities of a particular
series and certain events of bankruptcy, insolvency and reorganization) will no
longer constitute Events of Default with respect to such series of Debt
Securities, in each case if the Company deposits with the applicable Trustee, in
trust, money or the equivalent in securities of the government which issued the
currency in which the Debt Securities are denominated or government agencies
backed by the full faith and credit of such government, or a combination
thereof, which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay
all the principal (including any mandatory sinking fund payments) of, and
interest on, such series on the dates such payments are due in accordance with
the terms of such series. To exercise any such option, the Company is required,
among other things, to deliver to the Trustee an opinion of counsel to the
effect that (i) the deposit and related defeasance would not cause the holders
of such series to recognize income, gain or loss for Federal income tax purposes
and, in the case of a Discharge pursuant to clause (a), accompanied by a ruling
to such effect received from or published by the United States Internal Revenue
Service and (ii) the creation of the defeasance trust will not violate the
Investment Company Act of 1940. In addition, the Company is required to deliver
to the Trustee an Officers' Certificate stating that such deposit was not made
by the Company with the intent of preferring the holders over other creditors of
the Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others. (Article 4)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein with
respect to any series of Debt Securities issued thereunder shall have happened
and be continuing, either the Trustee thereunder or the holders of 25% in
aggregate principal amount of the outstanding Debt Securities of such series (or
25% in aggregate principal amount of all outstanding Debt Securities under the
Indenture, in the case of certain Events of Default affecting all series of Debt
Securities under the Indenture) may declare the principal of all the Debt
Securities of such series to be due and payable. (Section 502)
Events of Default in respect of any series are defined in the Indenture as
being: (i) default for 30 days in payment of any interest installment with
respect to such series; (ii) default in payment of principal of, or premium, if
any, on, or any sinking fund or analogous payment with respect to, Debt
Securities of such series when due at their stated maturity, by declaration or
acceleration, when called for redemption or otherwise; (iii) default for 90 days
after notice to the Company by the Trustee thereunder or by holders of 25% in
aggregate principal amount of the outstanding Debt Securities of such series in
the performance of any covenant in such Indenture with respect to Debt
Securities of such series; (iv) failure to pay when due, upon final maturity or
upon acceleration, the principal amount of any indebtedness for money borrowed
of the Company in excess of $50 million, if such indebtedness is not discharged,
or such acceleration annulled, within 60 days after written notice; and (v)
certain events of bankruptcy, insolvency and reorganization with respect to the
Company or any subsidiary which is organized under the laws of the United States
or any political subdivision thereof in which the Company's loans, advances or
other investments in such subsidiary exceed 10% of the Company's consolidated
net worth. (Section 501 and Form of the Senior Security)
7
Any additions, deletions or other changes to the Events of Default which
will be applicable to a series of Debt Securities will be described in the
Prospectus Supplement relating to such series of Debt Securities.
The Indenture provides that the Trustee thereunder will, within 90 days
after the occurrence of a default with respect to the Debt Securities of any
series, give to the holders of the Debt Securities of such series notice of all
uncured and unwaived defaults known to it; provided that, except in the case of
default in the payment of principal of, premium, if any, or interest, if any, on
any of the Debt Securities of such series, the Trustee thereunder will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interests of the holders of the Debt
Securities of such series. The term 'default' for the purpose of this provision
means the happening of any of the Events of Default specified above, except that
any grace period or notice requirement is eliminated. (Section 602)
The Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default to act with the required standard
of care, to be indemnified by the holders of the Debt Securities before
proceeding to exercise any right or power under the Indenture at the request of
holders of the Debt Securities. (Section 603)
The Indenture provides that the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of any series may direct the
time, method and place of conducting proceedings for remedies available to the
Trustee or exercising any trust or power conferred on the Trustee in respect of
such series. (Section 512)
The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate of no default or specifying any default that exists.
(Section 1004)
In certain cases, the holders of a majority in principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of such series waive any past default or Event of Default with
respect to the Debt Securities of such series or compliance with certain
provisions of the Indenture, except, among other things, a default not
theretofore cured in payment of the principal of, or premium, if any, or
interest, if any, on any of the Debt Securities of such series. (Sections 513
and 1009)
MODIFICATION OF THE INDENTURE
The Company and the Trustee may, without the consent of the holders of the
Debt Securities, enter into indentures supplemental to the Indenture for, among
others, one or more of the following purposes: (i) to evidence the succession of
another Person to the Company, and the assumption by such successor of the
Company's obligations under the Indenture and the Securities of any series; (ii)
to add covenants of the Company, or surrender any rights of the Company, for the
benefit of the holders of Securities of any or all series; (iii) to cure any
ambiguity, or correct any inconsistency in the Indenture; (iv) to evidence and
provide for the acceptance of any successor Trustee with respect to one or more
series of Securities or to facilitate the administration of the trusts
thereunder by one or more trustees in accordance with the Indenture; (v) to
establish the form or terms of any series of securities; and (vi) to provide any
additional Events of Default. (Section 901)
The Indenture contains provisions permitting the Company and the Trustee
thereunder, with the consent of the holders of a majority in principal amount of
the outstanding Debt Securities of each series to be affected, to execute
supplemental indentures adding any provisions to or changing or eliminating any
of the provisions of the Indenture or modifying the rights of the holders of the
Debt Securities of such series to be affected, except that no such supplemental
indenture may, without the consent of the holders of affected Debt Securities,
among other things, change the fixed maturity of any Debt Securities, or reduce
the principal amount thereof, or reduce the rate or extend the time of payment
of interest thereon, or reduce the number of shares of Common Stock to be
delivered by the Company in respect of a conversion of Convertible Debt
Securities or reduce the aforesaid percentage of Debt Securities of any series
the consent of the holders of which is required for any such supplemental
indenture. (Section 902)
8
THE TRUSTEE
Chemical Bank is the Trustee under the Indenture. The Trustee is a
depository for funds and performs other services for, and transacts other
banking business with, the Company and its subsidiaries in the normal course of
business.
GOVERNING LAW
The Indenture will be governed by, and construed in accordance with, the
laws of the State of New York.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants as part of a unit comprising
Debt Securities with Common Stock Warrants that may be detachable or
nondetachable from such Debt Securities. Each series of Common Stock Warrants
will be issued under a separate warrant agreement (a 'Warrant Agreement') to be
entered into between the Company and a bank or trust company, as warrant agent
(the 'Warrant Agent'), all as set forth in the Prospectus Supplement relating to
the particular issue of Common Stock Warrants. The Warrant Agent will act solely
as an agent for the Company in connection with the Warrant Certificates and will
not assume any obligation or relationship of agency or trust for or with any
holders of Warrant Certificates or beneficial owners of Common Stock Warrants. A
copy of the form of Warrant Agreement, including the form of Warrant Certificate
representing the Common Stock Warrants, is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following summary
of certain provisions of the Common Stock Warrants does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Warrant Agreement.
Reference is made to the Prospectus Supplement relating to the particular
issue of Debt Securities with Common Stock Warrants for the terms of such Common
Stock Warrants, including, where applicable: (i) the number of shares of Common
Stock purchasable upon the exercise of such Common Stock Warrants, the price at
which such number of shares of Common Stock may be purchased upon such exercise
(or the method by which it can be determined) and any provisions for the
adjustment of such price and number of shares; (ii) the period or periods during
which or the date or dates on which the Common Stock Warrants shall be
exercisable; (iii) United States Federal income tax consequences applicable to
such Common Stock Warrants; and (iv) any other terms of such Common Stock
Warrants. Common Stock Warrants will be issued in registered form only, unless
otherwise specified in the applicable Prospectus Supplement.
Each Common Stock Warrant will entitle the holder thereof to purchase such
number of shares of Common Stock at such exercise price as shall be set forth
in, or calculable as described in, the applicable Prospectus Supplement, which
exercise price may be subject to adjustment upon the occurrence of certain
events as set forth in such Prospectus Supplement. After the close of business
on the expiration date specified in such Prospectus Supplement, unexercised
Common Stock Warrants will become void. The place or places where, and the
manner in which, Common Stock Warrants may be exercised shall be specified in
the Prospectus Supplement relating to such Common Stock Warrants. Prior to the
exercise of any Common Stock Warrants, holders of such Common Stock Warrants
will not have any of the rights of holders of Common Stock, including the right
to receive payments of dividends, if any, on the Common Stock purchasable upon
such exercise or to exercise any applicable right to vote.
DESCRIPTION OF COMMON STOCK
The following general summary of the Common Stock is qualified in its
entirety by reference to the Company's Restated Certificate of Incorporation, as
amended from time to time (the 'Certificate of Incorporation'), which is an
exhibit to the Registration Statement of which this Prospectus is a part.
The Company is authorized by the Certificate of Incorporation to issue
750,000,000 shares of Common Stock and 250,000,000 shares of Preferred Stock. On
April 30, 1995, 379,863,970 shares of Common Stock (excluding approximately 45.7
million shares of Common Stock held as treasury shares
9
by the Company, as to which approximately 43.7 million were held by wholly owned
subsidiaries of the Company) were issued and outstanding and approximately 148
million shares were reserved for issuance upon exercise of outstanding stock
options and warrants and conversion of outstanding convertible securities. Also,
as of April 30, 1995, 962,068 shares of the Company's Series B Preferred Stock
were issued and outstanding. Upon consummation of the Acquisitions, the Company
will have outstanding approximately 5.1 million additional shares of Common
Stock and approximately 3.3 million shares of Series C Preferred Stock, 11
million shares of Series D Preferred Stock, 3.25 million shares of Series E
Preferred Stock and 3.25 million shares of Series F Preferred Stock. The Series
C, D, E, and F Preferred Stock to be outstanding after consummation of the
Acquisitions will be convertible in the aggregate into approximately 43.2
million shares of Common Stock. Each such series of Preferred Stock has a
liquidation value of $100 per share and will receive, for a period of five years
with respect to the Series C and E Preferred Stock and for a period of four
years with respect to the Series D and F Preferred Stock, an annual dividend per
share equal to the greater of $3.75 and an amount equal to the dividends paid on
the Common Stock into which such share of Preferred Stock may be converted. The
Series C, D, E and F Preferred Stock will be entitled to vote with the Common
Stock on matters submitted to a vote of stockholders and will have two votes per
share in any such matter. For a discussion of the series C, D, E and F Preferred
Stock reference is made to the Company's Current Report on Form 8-K dated May
30, 1995.
The holders of the Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors of the Company out of funds legally
available therefor, subject to the rights of any preferred stock at the time
outstanding.
The holders of the Common Stock are entitled to one vote for each share on
all matters voted on by stockholders, including elections of directors. The
holders of the Common Stock do not have any cumulative voting, conversion,
redemption or preemptive rights. In the event of dissolution, liquidation or
winding up of the Company, holders of the Common Stock will be entitled to share
ratably in any assets remaining after the satisfaction in full of the prior
rights of creditors, including holders of the Company's indebtedness, and the
aggregate liquidation preference of any preferred stock then outstanding.
Pursuant to the Company's Certificate of Incorporation, provided that full
dividends on all outstanding shares of any series of the Company's preferred
stock have been paid, outstanding shares of Common Stock may be redeemed by
action of the Company's Board of Directors to the extent necessary to prevent
the loss of any governmental license or franchise, the holding of which is
conditioned upon stockholders possessing prescribed qualifications.
The Common Stock is listed on the New York Stock Exchange, the Pacific
Stock Exchange and the International Stock Exchange of the United Kingdom and
the Republic of Ireland, Ltd. Chemical Bank is the transfer agent and registrar
for the Common Stock.
Each share of Common Stock of the Company has associated with it one right
(a 'Right') to purchase one one-thousandth of a share of Series A Participating
Cumulative Preferred Stock (or in certain cases other securities) of the
Company. The terms of the Rights are set forth in a Rights Agreement (the
'Rights Agreement') dated as of January 20, 1994, between the Company and
Chemical Bank, as Rights Agent. Prior to the occurrence of certain events,
including a determination by the Board of Directors following the public
disclosure of a tender or exchange offer for shares of Common Stock representing
15% or more of the outstanding shares of the Company's Common Stock, the Rights
will not be represented by separate certificates and will be transferable with
and only with the associated Common Stock.
Pursuant to the Rights Agreement, in the event that, among other things, a
third party acquires beneficial ownership of 15% or more of the outstanding
shares of the Company's Common Stock, each holder of Rights will be entitled to
purchase securities of the Company having a market value equal to twice the
purchase price thereof. In certain circumstances, including an acquisition
involving 50% or more of the assets or earning power of the Company, the Rights
will become exercisable to purchase common shares of the acquiror having a
market value equal to twice the purchase price thereof. In addition, Rights held
by an Acquiring Person (as defined in the Rights Agreement) will become null and
void, nontransferable and nonexercisable.
10
The Rights Agreement provides that the Rights will not become exercisable
in the event of a Qualifying Offer. A 'Qualifying Offer' is defined as an
all-cash tender offer for all outstanding shares of the Company's Common Stock
that meets certain fairness requirements, including the provision of a written
opinion of a nationally recognized investment banking firm stating that the
price to be paid to stockholders pursuant to the offer is fair from a financial
point of view.
Subject to certain limitations, the Company may redeem the Rights in whole,
but not in part, at a price of $.01 per Right. The Rights will expire on January
20, 2004, unless earlier redeemed by the Company.
The foregoing summary of certain terms of the Rights does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Rights Agreement, a copy of which is on file with the Commission.
GLOBAL SECURITIES
The Offered Securities (other than Common Stock) of a series may be issued
in whole or in part in the form of one or more Global Securities that will be
deposited with, or on behalf of, a depository (the 'Depository') identified in
the Prospectus Supplement relating to such series. Global Securities may be
issued only in fully registered form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual Offered
Securities represented thereby, a Global Security may not be transferred except
as a whole by the Depository for such Global Security to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by the Depository or any nominee of such
Depository to a successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Offered Securities will be described in the Prospectus Supplement relating to
such series. Unless otherwise specified in the Prospectus Supplement, the
Company anticipates that the following provisions will apply to depository
arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Offered Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ('Participants'). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Offered
Securities or by the Company if such Offered Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Security
will be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the applicable Depository or its nominee (with respect to
interests of Participants) and records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to own, pledge or transfer beneficial interests in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Offered
Securities represented by such Global Security for all purposes under the
Indenture or applicable Warrant Agreement. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have any of
the individual Offered Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of any such Offered Securities of such series in definitive
form and will not be considered the owners or holders thereof under the
Indenture or applicable Warrant Agreement. Accordingly, each person owning a
beneficial interest in a Global Security must rely on the procedures of the
Depository for such Global Security and, if such person is not a Participant, on
the procedures of the Participant through which such person owns its interest,
to exercise any rights of a holder under the Indenture or applicable Warrant
Agreement. The Company understands that under existing industry practices, if
the Company requests any action of holders or if an owner of a beneficial
interest in a Global Security desires to give or take any action which a holder
is entitled to give or take under the Indenture or applicable Warrant Agreement,
the Depository for such Global Security would authorize
11
the Participants holding the relevant beneficial interests to give or take such
action, and such Participants would authorize beneficial owners owning through
such Participants to give or take such action or would otherwise act upon the
instructions of beneficial owners holding through them.
Payments of principal of and any premium and any interest on individual
Offered Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner of the Global Security representing such
Offered Securities. None of the Company, the Trustee, the Warrant Agent, any
paying agent or the registrar for such Offered Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Security for such Offered Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depository for a series of Offered Securities
or its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Offered
Securities, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security for such Offered Securities as shown on the
records of such Depository or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in such Global
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in 'street name'.
Such payments will be the responsibility of such Participants.
If a Depository for a series of Offered Securities is at any time
unwilling, unable or ineligible to continue as depository and a successor
depository is not appointed by the Company within 90 days, the Company will
issue individual Offered Securities of such series in exchange for the Global
Security representing such series of Offered Securities. In addition, the
Company may, at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to such Offered Securities,
determine not to have any Offered Securities of such series represented by one
or more Global Securities and, in such event, will issue individual Offered
Securities of such series in exchange for the Global Security or Securities
representing such series of Offered Securities. Individual Offered Securities of
such series so issued will be issued in denominations, unless otherwise
specified by the Company, of $1,000 and integral multiples thereof. Any Offered
Securities issued in definitive form in exchange for a Global Security will be
registered in such name or names as the Depository shall instruct the Trustee or
relevant Warrant Agent. It is expected that such instructions will be based upon
directions received by the Depository from Participants with respect to
ownership of beneficial interests in such Global Security.
HOLDING COMPANY STRUCTURE
The Company is a holding company and its assets consist primarily of
investments in its subsidiaries. A substantial portion of the consolidated
liabilities of the Company have been incurred by its subsidiaries. TWE, which is
not consolidated with the Company for financial reporting purposes, also has
substantial indebtedness and other liabilities. The Company's rights and the
rights of its creditors, including holders of Debt Securities, to participate in
the distribution of assets of any person in which the Company owns an equity
interest (including any subsidiary and TWE) upon such person's liquidation or
reorganization will be subject to prior claims of such person's creditors,
including trade creditors, except to the extent that the Company may itself be a
creditor with recognized claims against such person (in which case the claims of
the Company would still be subject to the prior claims of any secured creditor
of such person and of any holder of indebtedness of such person that is senior
to that held by the Company). Accordingly, the holders of Debt Securities may be
deemed to be effectively subordinated to such claims.
The Company's ability to service its indebtedness, including the Debt
Securities, and to pay dividends on its preferred stock and the Common Stock is
dependent primarily upon the earnings of its subsidiaries and TWE and the
distribution or other payment of such earnings to the Company. The TWE Agreement
of Limited Partnership and the bank credit facilities of TWE and certain
subsidiaries of the Company limit distributions and other transfers of funds to
the Company. Generally, distributions by TWE, other than tax distributions, are
subject to restricted payments limitations and availability
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under certain financial ratios applicable to TWE contained in its bank credit
facilities. As a result of the expected acquisition by subsidiaries of the
Company of certain cable systems, certain subsidiaries of the Company expect to
have outstanding indebtedness and bank credit facilities that will contain
limitations on the ability of such subsidiaries to make distributions or other
payments to the Company.
Additional information concerning the indebtedness of the Company and its
subsidiaries will be set forth in the Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters or
dealers for public offering and sale by them or may sell the Offered Securities
to investors directly or through agents. The Prospectus Supplement with respect
to the Offered Securities offered thereby describes the terms of the offering of
such Offered Securities and the method of distribution of the Offered Securities
offered thereby and identifies any firms acting as underwriters, dealers or
agents in connection therewith.
The Offered Securities may be distributed from time to time in one or more
transactions at a fixed price or prices (which may be changed) or at prices
determined as specified in the Prospectus Supplement. In connection with the
sale of the Offered Securities, underwriters, dealers or agents may be deemed to
have received compensation from the Company in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of the
Offered Securities for whom they may act as agent. Underwriters may sell the
Offered Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters or commissions from the purchasers for whom they may act as agent.
Certain of the underwriters, dealers or agents who participate in the
distribution of the Offered Securities may engage in other transactions with,
and perform other services for, the Company in the ordinary course of business.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to dealers, are set forth in
the Prospectus Supplement. Underwriters, dealers and agents participating in the
distribution of the Offered Securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
the resale of the Offered Securities may be deemed to be underwriting discounts
and commissions under the Securities Act. Underwriters and their controlling
persons, dealers and agents may be entitled, under agreements entered into with
the Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
LEGAL OPINIONS
Certain legal matters in connection with the Offered Securities will be
passed upon for the Company by Cravath, Swaine & Moore, Worldwide Plaza, 825
Eighth Avenue, New York, New York and for the Underwriters, if any, named in a
Prospectus Supplement, by Shearman & Sterling, 599 Lexington Avenue, New York,
New York.
EXPERTS
The consolidated financial statements of the Company and TWE appearing in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994,
and the combined financial statements of the Time Warner Service Partnerships
incorporated by reference therein, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon set forth therein
and incorporated herein by reference. Such financial statements have been
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Summit Communications Group, Inc. as of
December 31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as set forth in their report thereon and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report and upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Newhouse Broadcasting Cable Division of
Newhouse Broadcasting Corporation and subsidiaries as of July 31, 1993 and 1994,
and for the three years ended July 31, 1994,
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incorporated by reference in this Prospectus, have been audited by Paul Scherer
& Company LLP, independent auditors, as set forth in their report thereon and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report and upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Vision Cable Division of Vision Cable
Communications, Inc. and subsidiaries as of December 31, 1993 and 1994, and for
the three years ended December 31, 1994, incorporated by reference in this
Prospectus, have been audited by Paul Scherer & Company LLP, independent
auditors, as set forth in their report thereon and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Cablevision Industries Corporation as of
December 31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent auditors, as set forth in their report thereon and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report and upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Cablevision Industries Limited Partnership as
of December 31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent auditors, as set forth in their report thereon and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report and upon the authority of such
firm as experts in accounting and auditing.
The financial statements of KBLCOM Incorporated as of December 31, 1993 and
1994, and for the three years ended December 31, 1994, incorporated by reference
in this Prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as set forth in their report thereon and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Paragon Communications as of December 31, 1993
and 1994, and for the three years ended December 31, 1994, incorporated by
reference in this Prospectus, have been audited by Price Waterhouse LLP,
independent accountants, as set forth in their report thereon and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report and upon the authority of such firm as
experts in accounting and auditing.
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The following information is being disclosed pursuant to Florida law and is
accurate as of the date of this Prospectus: A subsidiary of the Company pays
royalties to Artex, S.A., a corporation organized under the laws of Cuba,
in connection with the distribution in the United States of certain Cuban
musical recordings. Current information concerning this matter may be obtained
from the State of Florida Department of Banking & Finance, The Capital,
Tallahassee, Florida 32399-0350, 904-488-9805.
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No person is authorized to give any information or to make any
representations other than those contained in this Prospectus or any
accompanying Prospectus Supplement in connection with the offer made by this
Prospectus or any Prospectus Supplement, and, if given or made, such other
information or representations must not be relied upon as having been authorized
by the Company or by any underwriter, dealer or agent. This Prospectus and any
Prospectus Supplement do not constitute an offer to sell or a solicitation of an
offer to buy any securities other than those to which they relate. Neither the
delivery of this Prospectus and any accompanying Prospectus Supplement nor any
sale of or offer to sell the Offered Securities offered hereby shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company or that the information herein is correct as of any time
after the date hereof. This Prospectus and any accompanying Prospectus
Supplement do not constitute an offer to sell or a solicitation of an offer to
buy any of the Offered Securities offered hereby in any state to any person to
whom it is unlawful to make such offer or solicitation in such state.
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