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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
__________________ to ________________
Commission file number 33-98756
PETRACOM HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 59-3324165
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
1527 N DALE MABRY HWY, SUITE 105, LUTZ, FL 33549
- ------------------------------------------ ------------------
(Address of principal executive offices) (Zip code)
(813) 948-2554
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No Not Applicable
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
240,000 shares of Class A Voting Common Stock, par value $.01 per share, and
60,000 shares of Class B Non-Voting Common Stock, par value $.01 per share,
were outstanding at May 3, 1996.
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PETRACOM HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1996
<TABLE>
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Page
Number
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at March 31, 1996
and December 31, 1995 3
Consolidated Statements of Operations for the
three months ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item. 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II. - OTHER INFORMATION
Item 5. Other Information 9
Signatures 10
</TABLE>
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<TABLE>
<CAPTION>
PETRACOM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (in 000's)
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(Unaudited)
DECEMBER 31, MARCH 31
1995 1996
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,180 $ 2,759
Accounts receivable, less allowances of $537 and $598 5,401 4,738
Trade receivables 375 293
Current portion of broadcast program rights 1,907 2,213
Prepaid expenses and other current assets 688 768
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Total current assets 10,551 10,771
Property and equipment, net 13,318 12,997
Broadcast program rights 1,394 1,056
Intangible assets, net 66,833 65,441
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Total assets $ 92,096 $ 90,265
========= ==========
LIABILITIES, MANDATORILY REDEEMABLE SECURITIES
AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 690 $ 696
Accrued expenses 1,144 843
Income taxes payable 105 -
Trade payables 491 564
Accrued interest 735 321
Current portion of broadcast program rights contracts payable 1,970 2,430
Current portion of long-term debt 5,873 7,351
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Total current liabilities 11,008 12,205
Broadcast program rights contracts payable 1,466 989
Long-term debt 88,423 88,791
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Total liabilities 100,897 101,985
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Mandatorily redeemable securities
Class B, non-voting, common stock 1,625 1,705
Warrants 712 712
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Total mandatorily redeemable securities 2,337 2,417
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Stockholders' deficit
Class A, voting, common stock 3 3
Accumulated deficit (11,141) (14,140)
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Total stockholders' deficit (11,138) (14,137)
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Total liabilities, mandatorily redeemable securities and
stockholders' deficit $ 92,096 $ 90,265
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<TABLE>
<CAPTION>
PETRACOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in 000's)
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THREE MONTHS ENDED MARCH 31,
1995 1996
<S> <C> <C>
Revenues $ 1,696 $ 7,334
Less - agency and national representative commissions (179) (1,088)
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1,517 6,246
Barter and trade revenues 320 592
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Total net revenues 1,837 6,838
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Expenses
Operating 82 339
Selling, general and administrative 1,031 2,899
Programming 438 1,636
Depreciation and amortization 150 1,703
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1,701 6,577
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Income from operations 136 261
Other income (expense)
Interest expense (112) (3,186)
Other income - 6
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Income (loss) before income taxes 24 (2,919)
Provision for income taxes 9 -
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Net income (loss) $ 15 $ (2,919)
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<TABLE>
<CAPTION>
PETRACOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in 000's)
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THREE MONTHS ENDED MARCH 31,
1995 1996
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Cash flows from operating activities
Net income (loss) $ 15 $ (2,919)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation 128 431
Amortization of intangible assets 22 1,272
Amortization of deferred financing costs
included in interest 7 185
Amortization of broadcast program rights 98 364
Payments for broadcast program rights (87) (350)
Net trade position (22) 92
Deferred federal income tax 68 -
Changes in assets and liabilities
Accounts receivable 196 663
Prepaid expenses and other current assets (168) (80)
Accounts payable and accrued expenses 130 (294)
Income taxes payable (59) (105)
Accrued interest, including interest
included in long-term debt - 1,467
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Net cash provided by operating activities 328 726
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Cash flows from investing activities
Additions of property and equipment (3) (47)
Additions of intangible assets - (65)
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Net cash used for investing activities (3) (112)
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Cash flows from financing activities
Payments on long-term debt and capital leases (274) (35)
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Net cash used for financing activities (274) (35)
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Increase in cash and cash equivalents 51 579
Cash and cash equivalents, beginning of period 131 2,180
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Cash and cash equivalents, end of period $ 182 $ 2,759
========= ==========
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 105 $ 1,534
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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PETRACOM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods pursuant to the rules and
regulations of the Securities and Exchange Commission. It is suggested that
these financial statements be read in conjunction with the consolidated
financial statements for the year ended December 31, 1995 and the notes
thereto.
The consolidated financial statements include the accounts of the company and
its wholly-owned subsidiaries. Significant intercompany accounts have been
eliminated in consolidation.
The consolidated statements of operations and of cash flows for the three
months ended March 31, 1995 represent the results of Petracom, Inc. Effective
August 1, 1995, the sole common stockholder of Petracom, Inc. exchanged all
outstanding common stock of Petracom, Inc. for 100% of the outstanding Class A
voting common stock of the Company. As a result of the exchange of shares,
Petracom, Inc. became a wholly-owned subsidiary of the Company. The
acquisition of Petracom, Inc. has been accounted for as a recapitalization with
no change in the historical basis of assets and liabilities.
On August 1, 1995, the Company acquired substantially all the assets of Banam
Broadcasting, Inc., consisting of four television stations. The acquisition
was accounted for using the purchase method of accounting and, accordingly, the
results of operations of these television stations have been included in the
consolidated financial statements from the date of the acquisition.
The results of operations for the three months ended March 31, 1995 and 1996
are not necessarily indicative of the results to be expected for the full year.
2. EARNINGS PER SHARE
As a result of the recapitalization of the Company on August 1, 1995,
historical earnings per share for the three months ended March 31, 1995 and
1996 is not meaningful and therefore has not been presented.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net revenues, including trade and barter revenues, increased to $6,838,000 for
the three months ended March 31, 1996 from $1,837,000 for the three months
ended March 31, 1995, an increase of 272%. Total operating expenses, including
expenses related to engineering, news, production, programming and operations,
selling, general and administrative expenses, amortization of programming
rights, trade and barter expenses and depreciation and amortization of
intangibles, increased to $6,577,000 for the three months ended March 31, 1996
from $1,708,000 for the three months ended March 31, 1995, an increase of 285%.
The increases in net revenues and operating expenses resulted primarily from
the operations of WTVW-TV, KDEB-TV, KLBK-TV and KARD-TV which were acquired by
the Company on August 1, 1995. The acquired television stations generated
$4,572,000 in net revenues and $4,766,000 in operating expenses for the three
months ended March 31, 1996. Interest expense increased to $3,186,000 for the
three months ended March 31, 1996 from $105,000 for the three months ended
March 31, 1995. This increase resulted primarily from interest expense on the
debt incurred on August 1, 1995 to acquire the four television stations, repay
existing debt, repurchase outstanding preferred stock interests, provide
additional working capital and to pay all fees and expenses related to the
transaction. There was a net loss of $2,919,000 for the three months ended
March 31, 1996 compared to net income of $15,000 for the three months ended
March 31, 1995. The decrease resulted primarily from the reasons discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of capital have been cash flow from operations
and the proceeds of borrowings on August 1, 1995 incurred in connection with
acquisitions described above. Operating cash flow increased to $2,070,000 for
the three months ended March 31, 1996 from $275,000 for the three months ended
March 31, 1995. The increase resulted primarily from the operations of the
acquired television stations. Operating cash flow for this purpose is defined
as operating income, excluding trade and barter, plus depreciation and
amortization of intangibles and programming rights less payments for
programming rights. The Company believes that operating cash flow is useful to
investors to measure the Company's ability to service debt and as a measure of
the Company's performance under the various covenants of its borrowings.
As of March 31, 1996, the Company had $53,000,000 in outstanding indebtedness
under a $55,000,000 term and revolving bank credit facility ("Bank Credit
Facility"), $27,986,000 of indebtedness under its 17.5% Senior Discount Notes
with warrants and $15,345,000 of indebtedness under a Junior Subordinated Note.
The amounts due under Senior Discount Notes and the Junior Subordinated Note
include $2,985,000 and $1,845,000 of accrued interest at March 31, 1996. No
interest or principal payments were required under the Senior Discount Notes or
the Junior Subordinated Note for the three months ended March 31, 1995. Cash
interest payments on the Senior Discount Notes may begin August 1998 and must
begin August 2000, but the Company expects to issue promissory notes in lieu of
cash interest payments during the
7
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period from August 1998 through August 2000. The Senior Discount Notes mature
on February 1, 2003. Interest on the Junior Subordinated Note will accrue and
be added to the unpaid balance until maturity on August 1, 2003. During the
three months ended March 31, 1996, the Company made interest payments of
$1,520,000 under its Bank Credit Facility. No principal payments were required
under the Bank Credit Facility for the three months ended March 31, 1996.
Scheduled quarterly principal repayments begin June 30, 1996 with final payment
due June 30, 2002.
On March 31, 1996 the Company completed an exchange of its outstanding 17.5%
Senior Discount Notes for an identical amount of publicly-tradeable 17.5%
Senior Discount Notes which had been registered with the Securities and
Exchange Commission pursuant to a registered Exchange Offer which became
effective January 30, 1996.
During the three months ended March 31, 1996 the Company purchased $47,000 of
capital equipment and made program payments of $350,000.
8
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PART II - OTHER INFORMATION
Item 5. Other Information
The Company has engaged an investment banking firm to explore the feasibility
of selling the Company's radio stations.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PETRACOM HOLDINGS, INC.
By /s/ HENRY A. ASH
----------------------
Henry A. Ash
President
Date: May 14, 1996
By /s/ HENRY A. ASH President and Director (principal executive
---------------------- officer and sole director)
Henry A. Ash
Date: May 14, 1996
By /s/ JOSEPH M. FRY Vice President, Chief Financial Officer,
---------------------- Treasurer and Assistant Secretary
Joseph M. Fry (principal financial officer and principal
Date: May 14, 1996 accounting officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PETRACOM HOLDINGS, INC. FOR THE YEAR ENDED DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,759
<SECURITIES> 0
<RECEIVABLES> 5,336
<ALLOWANCES> 598
<INVENTORY> 0
<CURRENT-ASSETS> 10,771
<PP&E> 16,624
<DEPRECIATION> 3,627
<TOTAL-ASSETS> 90,265
<CURRENT-LIABILITIES> 12,205
<BONDS> 88,791
1,705
0
<COMMON> 3
<OTHER-SE> (14,140)
<TOTAL-LIABILITY-AND-EQUITY> 90,265
<SALES> 0
<TOTAL-REVENUES> 6,838
<CGS> 0
<TOTAL-COSTS> 6,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 79
<INTEREST-EXPENSE> 3,186
<INCOME-PRETAX> (2,919)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,919)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,919)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
