<PAGE> 1
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
JUNE 30, 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.
-----------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 59-3324165
- -------- ----------
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.)
1527 N DALE MABRY HWY, SUITE 105, LUTZ, FL 33549
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip code)
</TABLE>
(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
---- ----
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
--- ---
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 August 12, 1996.
<PAGE> 2
PETRACOM HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1996
Page
Number
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at June 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations for the
six months ended June 30, 1996 and 1995 4
Consolidated Statements of Operations for the
three months ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item. 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. - OTHER INFORMATION
Item 5. Other Information 10
Signatures 11
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PETRACOM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (in 000's)
<TABLE>
<CAPTION>
(Unaudited)
DECEMBER 31, JUNE 30,
1995 1996
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,180 $ 550
Accounts receivable, less allowances of $537 and $464 5,401 5,554
Trade receivables 375 536
Current portion of broadcast program rights 1,907 2,019
Prepaid expenses and other current assets 688 695
-------- --------
Total current assets 10,551 9,354
Property and equipment, net 13,318 12,736
Broadcast program rights 1,394 929
Intangible assets, net 66,833 64,001
-------- --------
Total assets $ 92,096 $ 87,020
LIABILITIES, MANDATORILY REDEEMABLE SECURITIES
AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 690 $ 1,107
Accrued expenses 1,144 816
Income taxes payable 105 -
Trade payables 491 836
Accrued interest 735 296
Current portion of broadcast program rights contracts payable 1,970 2,237
Current portion of long-term debt 5,873 7,197
-------- --------
Total current liabilities 11,008 12,489
Broadcast program rights contracts payable 1,466 863
Long-term debt 88,423 87,594
-------- --------
Total liabilities 100,897 100,946
Mandatorily redeemable securities
Class B, non-voting, common stock 1,625 1,788
Warrants 712 712
-------- --------
Total mandatorily redeemable securities 2,337 2,500
-------- --------
Stockholders' deficit
Class A, voting, common stock 3 3
Accumulated deficit (11,141) (16,429)
-------- --------
Total stockholders' deficit (11,138) (16,426)
-------- -------
Total liabilities, mandatorily redeemable securities and
stockholders' deficit $ 92,096 $ 87,020
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
PETRACOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in 000's)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1995 1996
<S> <C> <C>
Revenues $3,679 $15,426
Less - agency and national representative commissions (399) (2,303)
------ -------
3,280 13,123
Barter and trade revenues 624 1,308
------ -------
Total net revenues 3,904 14,431
------ -------
Expenses
Operating 163 678
Selling, general and administrative 2,037 5,793
Programming 919 3,281
Depreciation and amortization 300 3,427
------ -------
3,419 13,179
------ -------
Income from operations 485 1,252
Other income (expense)
Interest expense (225) (6,382)
Other income - 5
------ -------
Income (loss) before income taxes 260 (5,125)
Provision for income taxes 96 -
------ -------
Net income (loss) $ 164 $(5,125)
====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
PETRACOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in 000's)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1995 1996
<S> <C> <C>
Revenues $1,983 $ 8,092
Less - agency and national representative commissions (220) (1,215)
------ -------
1,763 6,877
Barter and trade revenues 304 716
------ -------
Total net revenues 2,067 7,593
------ -------
Expenses
Operating 81 339
Selling, general and administrative 1,006 2,894
Programming 481 1,645
Depreciation and amortization 150 1,724
------ -------
1,718 6,602
------ -------
Income from operations 349 991
Other income (expense)
Interest expense (113) (3,196)
Other income - (1)
------ -------
Income (loss) before income taxes 236 (2,206)
Provision for income taxes 87 -
------ -------
Net income (loss) $ 149 $(2,206)
====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
PETRACOM HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in 000's)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1995 1996
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 164 $(5,125)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation 249 877
Amortization of intangible assets 49 2,550
Amortization of deferred financing costs
included in interest 14 369
Amortization of broadcast program rights 196 733
Payments for broadcast program rights (151) (716)
Net trade position (69) 15
Deferred federal income tax 164 -
Changes in assets and liabilities
Accounts receivable 48 (153)
Prepaid expenses and other current assets (92) (7)
Accounts payable and accrued expenses 21 89
Income taxes payable (68) (105)
Accrued interest, including interest
included in long-term debt 29 3,371
----- -------
Net cash provided by operating activities 554 1,898
----- -------
Cash flows from investing activities
Additions of property and equipment (3) (126)
Additions of intangible assets - (87)
----- -------
Net cash used for investing activities (3) (213)
----- -------
Cash flows from financing activities
Payments on long-term debt and capital leases (483) (3,315)
----- -------
Net cash used for financing activities (483) (3,315)
----- -------
Increase (decrease) in cash and cash equivalents 68 (1,630)
Cash and cash equivalents, beginning of period 131 2,180
----- -------
Cash and cash equivalents, end of period $ 199 $ 550
===== =======
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 180 $ 2,638
===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
PETRACOM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 six months
ended June 30, 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 six months and three months ended June 30,
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 six and three months ended June 30, 1995
and 1996 is not meaningful and therefore has not been presented.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Comparison of Six Months Ended June 30, 1996 to Six Months Ended June 30, 1995
Net revenues, including trade and barter revenues, increased to $14,431,000 for
the six months ended June 30, 1996 from $3,904,000 for the six months ended
June 30, 1995. Total operating expenses, including expenses related to
engineering, news, production, programming, selling, general and administrative
expenses, amortization of programming rights, trade and barter expenses and
depreciation and amortization of intangibles, increased to $13,179,000 for the
six months ended June 30, 1996 from $3,419,000 for the six months ended June
30, 1995. 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 $9,703,000 in net revenues and $9,558,000 in operating
expenses for the six months ended June 30, 1996. Interest expense increased to
$6,382,000 for the six months ended June 30, 1996 from $225,000 for the six
months ended June 30, 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 $5,125,000 for the six
months ended June 30, 1996 compared to net income of $164,000 for the six
months ended June 30, 1995. The decrease resulted primarily from the reasons
discussed above.
Comparison of Three Months Ended June 30, 1996 to Three Months Ended June 30,
1995
Net revenues, including trade and barter revenues, increased to $7,593,000 for
the three months ended June 30, 1996 from $2,067,000 for the three months ended
June 30, 1995. Total operating expenses, including expenses related to
engineering, news, production, programming, selling, general and administrative
expenses, amortization of programming rights, trade and barter expenses and
depreciation and amortization of intangibles, increased to $6,602,000 for the
three months ended June 30, 1996 from $1,718,000 for the three months ended
June 30, 1995. 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 $5,131,000 in net revenues and $4,792,000 in operating
expenses for the three months ended June 30, 1996. Interest expense increased
to $3,196,000 for the three months ended June 30, 1996 from $113,000 for the
three months ended June 30, 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 $2,206,000 for
the three months ended June 30, 1996 compared to net income of $149,000 for the
three months ended June 30, 1995. The decrease resulted primarily from the
reasons discussed above.
8
<PAGE> 9
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 $4,817,000 for
the six months ended June 30, 1996 from $837,000 for the six months ended June
30, 1995 and increased to $2,747,000 for the three months ended June 30, 1996
from $562,000 for the three months ended June 30, 1995. The increases resulted
primarily from the operations of the acquired television stations. Operating
cash flow for this purpose is defined as Income from operations, 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 June 30, 1996, the Company had $49,750,000 in outstanding indebtedness
under a $55,000,000 term and revolving bank credit facility ("Bank Credit
Facility"), $29,175,000 of indebtedness under its 17.5% Senior Discount Notes
with warrants and $16,088,000 of indebtedness under a Junior Subordinated Note.
The amounts due under Senior Discount Notes and the Junior Subordinated Note
include $4,175,000 and $2,588,000 of accrued interest at June 30, 1996. No
interest or principal payments were required under the Senior Discount Notes or
the Junior Subordinated Note for the six months ended June 30, 1996. Cash
interest payments on the Senior Discount Notes may begin after August 1,1998
and must begin after August 1, 2000, but the Company expects to issue
promissory notes in lieu of cash interest payments during the 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 six months and
three months ended June 30, 1996, the Company made interest payments of
$2,615,000 and $1,095,000 under its Bank Credit Facility. Scheduled principal
payments of $1,650,000 were made under the Term Bank Credit Facility for the
six months and three months ended June 30, 1996. Principal payments under the
Bank Credit Facility are scheduled quarterly 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 six months and three months ended June 30, 1996 the Company
purchased $126,000 and $63,000 of capital equipment and made program payments
of $716,000 and $366,000.
9
<PAGE> 10
PART II - OTHER INFORMATION
EXHIBITS
27 - Financial Data Schedule (for SEC use only)
10
<PAGE> 11
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: August 12, 1996
By /s/ HENRY A. ASH President and Director (principal executive
------------------------ officer and sole director)
Henry A. Ash
Date: August 12, 1996
By /s/ JOSEPH M. FRY Vice President, Chief Financial Officer,
------------------------ Treasurer and Assistant Secretary
Joseph M. Fry (principal financial officer and principal
Date: August 12, 1996 accounting officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PETRACOM HOLDINGS, INC. FOR THE SIX MONTHS ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 550
<SECURITIES> 0
<RECEIVABLES> 6,018
<ALLOWANCES> 464
<INVENTORY> 0
<CURRENT-ASSETS> 9,354
<PP&E> 16,834
<DEPRECIATION> 4,098
<TOTAL-ASSETS> 87,020
<CURRENT-LIABILITIES> 12,489
<BONDS> 87,594
1,788
0
<COMMON> 3
<OTHER-SE> (16,429)
<TOTAL-LIABILITY-AND-EQUITY> 87,020
<SALES> 0
<TOTAL-REVENUES> 14,431
<CGS> 0
<TOTAL-COSTS> 13,179
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 176
<INTEREST-EXPENSE> 6,382
<INCOME-PRETAX> (5,125)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,125)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,125)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
