FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 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: 333-06437
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PARK BROADCASTING, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0700598
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 Vine Center Office Tower
333 West Vine Street
Lexington, Kentucky 40507
----------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (606) 252-7275
---------------
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 No X
-------- --------
On November 14, 1996, the registrant had outstanding 25,974.37 shares of
Common Stock, no par value.<PAGE>
<PAGE>
PARK BROADCASTING, INC.
INDEX
___________________________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1996
(Unaudited) and December 31, 1995. . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Income and Retained Earnings for
the three months and nine months ended September 30, 1996, the three
months ended September 30, 1995, the period from January 1, 1995 to May
10, 1995 and the period from May 11, 1995 to September 30, 1995
(Unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 4
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996, the period from January 1, 1995 to May 10,
1995 and the period from May 11, 1995 to September 30, 1995 (Unaudited)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Unaudited Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . 8 - 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. . . 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 12 - 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PARK BROADCASTING, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
<CAPTION>
New Park
-----------------------------
September 30 December 31
1996 1995
----------- -----------
<S> <C> <C>
Assets: (Unaudited)
Current Assets:
Cash and cash equivalents............................. $ 36,644 $ 1,305
Accounts receivable, less allowance for doubtful
accounts of $433 in 1996 and $544 in 1995............ 12,158 18,844
Film contracts........................................ 2,198 2,717
Other................................................. 1,803 1,190
---------- ----------
Total current assets................................ 52,803 24,056
---------- ----------
Property, plant & equipment:
Property, plant and equipment......................... 47,019 62,314
Less accumulated depreciation and amortization........ (7,973) (4,358)
---------- ----------
39,046 57,956
Intangible assets, net................................. 338,469 465,672
Film contracts......................................... 2,887 2,787
Other assets........................................... 13,366 419
---------- ----------
$446,571 $550,890
========== ==========
Liabilities and Stockholder's Equity
Current Liabilities:
Current maturities of long-term debt.................. $ 339 $ 339
Current maturities of film contracts.................. 2,929 2,619
Accounts payable...................................... 2,007 1,129
Consulting/non-compete contracts...................... 12 62
Interest.............................................. 10,852 18,750
Income taxes.......................................... 17,012 377
Accrued liabilities................................... 2,144 1,959
---------- ----------
Total current liabilities........................... 35,295 25,235
Long-term debt......................................... 235,607 413,299
Long-term film contracts............................... 3,255 2,481
Deferred income........................................ 7,960 4,549
Consulting/non-compete contracts....................... 15 74
Deferred income taxes.................................. 88,704 124,605
---------- ----------
Total liabilities.................................... 370,836 570,243
Commitments
Stockholder's Equity:
Common Stock-no par value:
Authorized 25,974 shares issued and outstanding
25,974 shares in 1996 and 1995...................... 2,598 2,598
Paid in capital....................................... 56,828 (2,598)
Intercompany receivables from Parent.................. --- (5,412)
Retained earnings (deficit)........................... 16,309 (13,941)
---------- ----------
Total stockholder's equity (deficit)................... 75,735 (19,353)
---------- ----------
$446,571 $550,890
========== ============
<FN>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PARK BROADCASTING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Retained Earnings
(Dollars and Shares in Thousands Except Earnings Per Share)
<CAPTION>
New Park
---------------------
Nine Months Ended Period
---------------------- ---------------------
Pro forma New Park Old Park
---------- ---------- ----------
Sept. 30 Sept. 30 5/11/95- 1/01/95-
1996 1995 9/30/95 5/10/95
----------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Broadcasting revenue........................... $ 57,377 $ 56,072 $ 29,336 $ 26,736
Less: agency and national representative
Commissions................................... 8,408 8,333 4,332 4,001
--------- --------- --------- ---------
Net revenue................................... 48,969 47,739 25,004 22,735
Operating expenses:
Cost of sales (exclusive of depreciation and
amortization)................................. 17,688 15,156 7,868 7,288
Selling, general and administrative............ 13,414 10,701 5,955 4,746
Depreciation................................... 4,535 4,171 2,163 1,655
Amortization................................... 5,425 5,782 2,998 245
Amortization of excess of cost over net
assets acquired............................... 1,993 2,135 1,107 68
--------- --------- --------- ---------
43,055 37,945 20,091 14,002
--------- --------- --------- ---------
Operating income............................ 5,914 9,794 4,913 8,733
Interest expense................................ (25,734) (30,642) (16,652) (34)
Interest income................................. 613 245 8 ---
Other income.(expense).......................... (79) (256) (149) (1,117)
--------- --------- --------- ---------
(Loss) income from continuing operations
before income taxes........................ (19,286) (20,859) (11,880) 7,581
Provision (benefit) for income taxes............ (6,561) (7,405) (4,257) 3,176
--------- --------- --------- ---------
(Loss) income from continuing operations.... (12,725) $(13,454) (7,623) 4,405
(Loss) income from discontinued operations, =========
net of income taxes (benefit) of $(4,661)
in 1996 and $(3,056) in 1995................... (6,379) (2,507) 125
Gain on sale of discontinued operations,
net of income taxes of $48,459................. 49,354 --- ---
--------- --------- ---------
Net income (loss)............................... 30,250 (10,130) 4,530
Retained earnings (deficit),
beginning of period............................ (13,941) --- 140,630
--------- --------- ---------
Retained earnings(deficit), end of period....... $ 16,309 $(10,130) $145,160
========= ========= =========
Earnings (loss) per share:
Continuing operations.......................... $ (481.91) $(517.98)
Discontinued operations........................ 1,654.54 ---
---------- ---------
Net loss....................................... $1,164.63 $(517.98)
========== =========
Average shares.................................. 25,974 25,974
<FN>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PARK BROADCASTING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Retained Earnings
(Dollars and Shares in Thousands Except Earnings Per Share)
<CAPTION>
New Park
------------------------
Three Months Ended
------------------------
Sept. 30 Sept. 30
1996 1995
---------- -----------
(Unaudited)
<S> <C> <C>
Revenue:
Broadcasting revenue...........................$ 19,303 $ 18,026
Less: agency and national representative
Commissions................................... 2,817 2,625
---------- -----------
Net revenue................................... 16,486 15,401
Operating expenses:
Cost of sales (exclusive of depreciation and
amortization)................................. 6,635 4,870
Selling, general and administrative............ 4,443 4,000
Depreciation................................... 1,565 1,384
Amortization................................... 1,848 1,933
Amortization of excess of cost over net
assets acquired............................... 679 783
---------- -----------
15,170 12,970
---------- -----------
Operating income............................ 1,316 2,431
Interest expense................................ (7,316) (10,592)
Interest income................................. 540 11
Other income.(expense).......................... (62) (42)
---------- -----------
(Loss) income from continuing operations
before income taxes........................ (5,522) (8,192)
Provision (benefit) for income taxes............ (1,615) (2,886)
---------- -----------
(Loss) income from continuing operations.... (3,907) (5,306)
(Loss) income from discontinued operations,
net of income taxes (benefit) of $(1,114)
in 1996 and $(1,145) in 1995................... 343 (1,725)
(Loss) on sale of discontinued operations,
net of income taxes of $2,720.................. (4,319) ---
---------- -----------
Net income (loss)............................... (7,883) (7,031)
Retained earnings (deficit),
beginning of period............................ 24,192 (3,099)
---------- -----------
Retained earnings(deficit), end of period.......$ 17,979 $(10,130)
========== ===========
Earnings (loss) per share:
Continuing operations..........................$(150.42) $(204.28)
Discontinued operations........................ (153.08) (66.41)
---------- -----------
Net loss.......................................$(303.50) $(270.69)
========== ===========
Average shares.................................. 25,974 25,974
<FN>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PARK BROADCASTING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
<CAPTION>
Nine Months Ended Period
----------- ----------------------
New Park New Park Old Park
----------- ---------- ----------
Sept. 30 5/11/95- 1/01/95-
1996 9/30/95 5/10/95
----------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Operating Activities:
Net income ............................................... $ 30,250 $(10,032) $ 4,530
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Gain on sale of discontinued operations,
exclusive of income tax.................................. (97,813) ---
Corporate allocation of overhead.......................... 1,711 ---
Depreciation and amortization............................. 14,102 8,340 3,454
Amortization of film contract rights and
consulting/non-compete contracts included in
operating expenses....................................... 2,846 1,195 2,062
Payments on film contract liabilities..................... (2,290) (1,246) (2,117)
Payments on consulting/non-compete contracts.............. (109) (15) (31)
Provision for losses on accounts receivable............... 348 451 (153)
Provision for deferred income taxes....................... (35,901) (66) (339)
Loss on sale of property, plant, & equipment.............. 211 --- 648
Amortization of debt issue costs and debt discount........ 2,626 --- ---
Changes in operating assets and liabilities net
of effects from the purchase and disposal of companies:
Accounts receivable..................................... 6,338 1,926 (1,450)
Other current assets.................................... (1,098) 210 429
Accounts payable and accrued liabilities................ 18,130 14,734 1,589
Deferred income......................................... 3,411 --- ---
----------- ---------- ---------
Net cash (used in ) provided by operating activities.... (57,238) 15,497 8,622
Investing Activities:
Purchases of property, plant and equipment................ (8,385) (1,659) (1,566)
Proceeds from sale of property, plant and equipment....... 19 --- ---
Proceeds from sale of discontinued operations,
net of selling expenses.................................. 228,510 --- ---
Increase in other long term assets........................ (4,946) --- ---
----------- --------- --------
Net cash (used in) provided by investing
activities......................................... 215,198 (1,659) (1,566)
Financing Activities:
Proceeds from new debt.................................... 292,951 ---
Debt issue costs.......................................... (9,972) ---
Principal payments on long-term debt...................... (470,828) (94) (146)
Net intercompany transfers from Parent.................... 63,127 (11,880) (9,283)
----------- --------- ---------
Net cash used in financing activities............... (124,722) (11,974) (9,429)
Increase (decrease) in cash............................. 35,339 1,864 (2,373)
Cash beginning of period................................... 1,305 --- 2,373
----------- --------- ---------
Cash end of period......................................... 36,644 $ 1,864 $ ---
=========== ========= ==========
Non-Cash Financing Activities:
Capitalization of intercompany receivable from Parent..... $(57,715)
============
<FN>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
</TABLE>
<PAGE>
<PAGE>
PARK BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed interim financial statements are unaudited; however,
in the opinion of the Company's management, all adjustments (which comprise
only normal and recurring accruals) necessary for a fair presentation of the
interim financial results have been included. The results for the interim
periods are not necessarily indicative of results to be expected for the entire
year. These financial statements and notes should be read in conjunction with
the Company's audited annual consolidated financial statements for the year
ended December 31, 1995.
As discussed in the December 31, 1995 consolidated financial statements, the
Company was acquired by Park Acquisitions, Inc. on May 11, 1995 in a
transaction accounted for as a purchase. The purchase price and an allocable
portion of debt have been "pushed down" to the financial statements of the
Company and, as a result, the post-acquisition (New Park) consolidated
financial statements are not comparable to the pre-acquisition (Old Park)
consolidated financial statements.
2. Discontinued Operations
As of September 30, 1996, the Company has sold all of its radio stations. The
results of the radio division are included in the single line of the income
statement labeled "(Loss) income from discontinued operations." The gain on
the sale is included in the single line on the income statement labeled "Gain
on sale of discontinued operations." The corporate operating expenses
allocated to radio are $463,000 for the nine-month period ended September 30,
1996, $183,000 for the period of 1/1/95 - 5/10/95, and $200,000 for the period
of 5/11/95 - 9/30/95. The corporate overhead allocated to radio for the
quarter ended September 30 was $35,000 in 1996 and $128,000 in 1995. The
following is a summary of revenue and income (loss) of the radio broadcasting
properties for the nine months and three months ended September 30 (dollars in
thousands):
Nine Months Ended Three Months Ended
-------------------- ------------------
1996 1995 1996 1995
--------- --------- -------- -------
Revenue................................. $14,023 $23,974 $ 713 $11,570
========= ========== ========= ========
Operating (loss) income................. (465) $ 2,391 $ 379 $ 1,263
========= ========== ========= ========
3. Refinancing
On May 13, 1996, Park Communications, Inc. ("PCI") refinanced its existing debt
through the issuance of three separate debt offerings and a short term Senior
Credit Facility. PCI issued $80.0 million in principal amount of 13 3/4% Senior
Pay-in-Kind Notes due 2004 (the "Offering"). Interest on such notes (the "PCI
Notes") will be payable semi-annually in arrears on May 15 and November 15 of
each year, commencing November 15, 1996. Through May 15, 1999, interest is
payable at the option of PCI by the issuance of additional notes in lieu of
cash. After May 15, 1999, interest is payable in cash. The PCI Notes were
issued with warrants entitling the holder to purchase one share of Common
Stock, par value $0.0001 per share, of PCI at an exercise price of $0.01 per
share. The warrants will be exercisable at any time on or after the date of
the occurrence of the earliest of: (i) immediately prior to the occurrence of a
Change of Control, (ii) the 180th day (or such fewer number of days as
determined by PCI in its sole discretion) after the consummation of a Public
Equity Offering, (iii) the 90th day after the Registration Election Date (which
is on or within a date 60 days after May 15, 2001), (iv) the approval by the
holders of the capital stock of PCI of any Plan of Liquidation of PCI and (v)
the 180th day prior to May 15, 2004. The number of shares of Common Stock of
PCI for which, and the price per share at which, a warrant is exercisable are
subject to adjustment upon the occurrence of certain events as provided in the
warrant Agreement. Upon exercise, the holders of warrants would be entitled in
the aggregate to purchase 7% of the Common Stock of PCI on a fully diluted
basis. In addition, in the event PCI does not consummate a Public Equity
Offering or one or any series of substantially concurrent Strategic Equity
Investments<PAGE>
<PAGE>
on or prior to December 31, 1997, resulting in net proceeds to PCI of $40.0
million, PCI will be obligated to issue warrants (contingent warrants) to the
holders of the PCI Notes exercisable for 3% of the Common Stock of PCI on a
fully diluted basis as of the date of such issuance. The proceeds of the
Offering were allocated to the PCI Notes and warrants based on their relative
fair values in the amounts of $77.2 and $2.8 million, respectively. The $2.8
million allocated to the warrants were recorded as additional paid in capital
on PCI's financial statements. Concurrently with the Offering, Park
Newspapers, Inc. issued $155.0 million in principal amount of 11 7/8% Senior
Notes due 2004 ("Newspapers Notes") at an offering price of 100%, and the
Company issued $241.0 million in principal amount of 11 3/4% Senior Notes due
2004 ("Broadcasting Notes") at an offering price of 97.49% or $235.0 million.
Such discount on the Broadcasting Notes will be amortized over the life of the
Broadcasting Notes using the effective yield method. Interest on the
Broadcasting Notes and the Newspapers Notes will be payable in cash
semi-annually on May 15 and November 15 of each year, commencing November 15,
1996.
Upon a Change of Control Triggering Event, each holder of the Broadcasting
Notes will have the right to require the Company to offer to purchase such
holder's Broadcasting Notes at a price equal to 101% of the principal amount
plus accrued and unpaid interest, if any , to the date of purchase. In
addition, the Company will be obligated to offer to purchase the Broadcasting
Notes at 100% of their principal amount plus accrued and unpaid interest, if
any, to the date of repurchase in the event of certain asset sales.
The Broadcasting Notes were issued under an indenture containing covenants
which, among other things, limit or restrict the Company's ability to incur
additional indebtedness, pay cash dividends or make other payments affecting
restricted subsidiaries, sell assets, incur liens, make capital contributions,
change lines of business and enter into transactions with affiliates.
In addition to the above offerings, PCI entered into a short term $58.0 million
Senior Credit Facility with a consortium of lenders. Interest was payable at a
variable rate and the debt was due on November 13, 1996. Such amount borrowed
under the Senior Credit Facility was repaid entirely in May and June of 1996
with the proceeds of the sale of certain Radio Station Assets. Interest
expense under the Senior Credit Facility of $2,657,000 has been included in
discontinued operations.
4. Corporate Overhead Allocated
Corporate overhead was allocated to PCI's broadcasting division for September
year-to-date as follows: $1,315,000 for the period 1/1/96 - 9/30/96, $312,000
for the period 1/1/95 - 5/10/95, and $617,000 for the period of 5/11/95 -
9/30/95. Corporate overhead was allocated to PCI's broadcasting division for
the third quarter as follows: $389,000 for the period 7/1/96 - 9/30/96, and
$341,000 for the period 7/1/95 - 9/30/95.
5. Sale of Company
On July 19, 1996, the stockholders of Park Acquisitions, Inc., the sole
stockholder of PCI which is the sole stockholder of the Company, agreed to sell
100% of their stock in a cash merger to Media General, Inc. for total
consideration of approximately $710.0 million. Consummation of the merger is
subject to certain conditions, including receipt of the consent of the Federal
Communications Commission to the transfer of control.
6. Other Information.
On October 10, 1996, the Company exchanged $236,000,000 in principal amount of
its Series B 11 3/4% Senior Notes due 2004 (the "Series B Notes") for a like
amount of its 11 3/4% Senior Notes due 2004 (the "Initial Notes"). The
exchange was made in connection with the Company's exchange offer (the
"Exchange Offer") made pursuant to its Prospectus dated September 6, 1996. The
form and terms of the Series B Notes are the same as the form and terms of the
Initial Notes (which they replace) except that the Series B Notes bear a
"Series B" designation and have been registered under the Securities Act of
1933, as amended, and, therefore, do not bear legends restricting their
transfer. $5,000,000 in principal amount of the Initial Notes were not tendered
by holders of Initial Notes in the Exchange Offer and, therefore, remain
outstanding.<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview of Operations
The Company through its subsidiaries owns and operates nine network
affiliated television stations: five CBS affiliates, two NBC affiliates and two
ABC affiliates. The Company has entered into a definitive purchase agreement to
acquire an additional ABC affiliate in Montgomery, Alabama for $6.0 million;
$4.9 million of such amount has been paid. As of September 30, 1996, the
Company divested all of its 22 radio stations.
The net revenue of the Company is derived primarily from local and
national advertising revenue, and to a much lesser extent, from compensation
paid by the networks to the stations for broadcasting network programs. The
primary operating expenses involved in owning and operating television stations
are employee compensation, programming, news gathering, production, promotion
and the solicitation of advertising.
The Company's advertising revenue is generally the highest in the second
and fourth quarters of each year. The increase is due to increased advertising
in the spring and in the periods leading up to and including the Christmas
holiday season. In addition, political advertising increases the Company's
revenue during election years and is typically heaviest during the fourth
quarters of those years. However, management believes that fluctuations in its
political advertising revenue are tempered by the levels of political activity
in the areas in which it operates.
Results of Operations
- ---------------------
Quarter ended September 30, 1996 (unaudited) Compared with Quarter Ended
September 30, 1995 (unaudited)
Revenue. Gross revenue for the quarter ended September 30, 1996 was $19.3
million compared to $18.0 million for the quarter ended September 30, 1995, an
increase of $1.3 million, or 7.2%. The revenue increase in the third quarter
of 1996 was due to increased political and local advertising revenue, partially
offset by a decline in national advertising revenue.
Operating Expenses. Operating expenses (excluding depreciation and
amortization) for the quarter ended September 30, 1996 were $11.1 million
compared to $8.9 million for the quarter ended September 30, 1995, an increase
of $2.2 million, or 24.7%. This expense increase resulted from a number of
factors that were a result of the implementation of the Company's business and
operating strategy, including approximately $0.8 million from the cost of
upgrading the news staff and operations of WBMG-TV in Birmingham, Alabama and
approximately $0.7 million in increased television station promotion and
programming costs, resulting from approximately $0.5 million from the markdown
of certain syndicated programs at several of the Company's television stations.
Depreciation and amortization was $4.1 million for the quarter ended
September 30, 1996 and for the quarter ended September 30, 1995. As a
percentage of gross broadcast revenue, depreciation and amortization was 21.2%
for the quarter ended September 30, 1996 compared to 22.8% for the quarter
ended September 30, 1995.
Operating Income. Operating income for the quarter ended September 30,
1996 was $1.3 million compared to $2.4 million for the quarter ended September
30, 1995, a decrease of $1.1 million, or 45.8%. The decrease was a <PAGE>
<PAGE>
result of the increase in expenses discussed above more than offsetting the
increase in revenue. Operating income includes $0.4 million and $0.3 million
of allocated Central Corporate Overhead for the quarters ended September 30,
1996 and September 30, 1995, respectively. Operating income for the quarters
ended September 30, 1996 and September 30, 1995 does not include $1.1 million
of cash network compensation received pursuant to the Company's affiliation
agreements, but not recognized as revenue.
Interest Expense. Interest expense for the quarter ended September 30,
1996 was $7.3 million compared to $10.6 million for the quarter ended September
30, 1995. The decrease in interest expense was due to the decrease in total
debt and interest rates as a result of the recently completed refinancing.
Income Taxes. Income taxes (benefit) for the quarter ended September 30,
1996 were ($1.6) million compared to ($2.9) million for the quarter ended
September 30, 1995, a decrease in the benefit of $1.3 million, or 44.8%. The
decrease in the benefit is due to the decrease in the taxable loss which is the
result of the decrease in interest expense, partially offset by the decrease in
operating income. The effective tax benefit rate for the three month period
ended September 30, 1996 was 29%, compared to an effective benefit rate of 35%
for the same period in 1995. The change in the effective tax rate is partially
due to amortization of nondeductible goodwill being a large component of the
loss before income taxes in the three month period ended September 30, 1996
than in the same period in 1995 (see "Income Taxes" below).
(Loss) Income from Continuing Operations. (Loss) income from continuing
operations for the quarter ended September 30, 1996 was ($3.9) million compared
to ($5.3) million for the quarter ended September 30, 1995, a decrease in the
loss of $1.4 million.
Discontinued Operations. The discontinued operations consist of the
Company's radio station operations. Net (loss) income for the radio station
operations for the quarter ended September 30, 1996 was $0.3 million compared
to ($1.7) million for the quarter ended September 30, 1995. On December 26,
1995, the Company announced its intention to divest all of its radio station
operations on an individual basis. The segment has produced operating profits
before interest expense, depreciation and amortization. The results of
operations of the radio station operations are included in the single line of
the income statement labeled "(loss) income from discontinued operations." In
the third quarter of 1996, the Company sold the last four of its radio stations
resulting in a loss, net of taxes, of $4.3 million. This amount is included in
the single line of the income statement labeled "gain on sale of discontinued
operations."
Nine Months ended September 30, 1996 (unaudited) Compared with Nine Months
Ended September 30, 1995 (pro forma unaudited)
Revenue. Gross revenue for the nine months ended September 30, 1996 was
$57.4 million compared to $56.1 million for the nine months ended September 30,
1995, an increase of $1.3 million, or 2.3%. The revenue increase for the first
nine months was due primarily to increased political and local advertising
revenue, partially offset by a decline in national advertising revenue and was
dampened by the adverse effect in the first quarter of severe winter weather in
many of the markets the Company serves. Major snow and ice storms in January
and February caused many advertisers to close their businesses and cancel
scheduled advertising.
Operating Expenses. Operating expenses (excluding depreciation and
amortization) for the nine months ended September 30, 1996 were $31.1 million
compared to $25.9 million for the nine months ended September 30, 1995, an
increase of $5.2 million, or 20.1%. This expense increase resulted from a
number of factors that were a result of the<PAGE>
<PAGE>
implementation of the Company's business and operating strategy, including
approximately $1.7 million from the cost of upgrading the news staff and
operations of WBMG-TV in Birmingham, Alabama and approximately $1.7 million in
increased television station promotion and programming costs, resulting from
approximately $0.5 million from the markdown of certain syndicated programs at
several of the Company's television stations.
Depreciation and amortization for the nine months ended September 30, 1996
was $12.0 million compared to $12.1 million for the nine months ended September
30, 1995, a decrease of $0.1 million, or 0.8%. As a percentage of gross
broadcast revenue, depreciation and amortization was 20.9% for the nine months
ended September 30, 1996 compared to 21.6% for the nine months ended September
30, 1995.
Operating Income. Operating income for the nine months ended September
30, 1996 was $5.9 million compared to $9.8 million for the nine months ended
September 30, 1995, a decrease of $3.9 million, or 39.8%. The decrease was a
result of the increase in expenses discussed above more than offsetting the
increase in revenue. Operating income includes $1.3 million and $0.9 million
of allocated Central Corporate Overhead for the nine months ended September 30,
1996 and September 30, 1995, respectively. Operating income for the nine
months ended September 30, 1996 and September 30, 1995 does not include $3.4
million of cash network compensation received pursuant to the Company's
affiliation agreements, but not recognized as revenue.
Interest Expense. Interest expense for the nine months ended September
30, 1996 was $25.7 million compared to $30.6 million for the nine months ended
September 30, 1995. The decrease was due to the decrease in total debt and
interest rates as a result of the recently completed refinancing.
Income Taxes. Income taxes (benefit) for the nine months ended September
30, 1996 were ($6.6) million compared to ($7.4) million for the nine months
ended September 30, 1995, a decrease in the benefit of $0.8 million, or 10.8%.
The decrease in the benefit is due to the decrease in the taxable loss which is
the result of the decrease in interest expense, partially offset by the
decrease in operating income. The effective tax benefit rate for the nine
months ended September 30, 1996 was 34%, compared to an effective tax benefit
rate of 36% for the nine months ended September 30, 1995. The change in the
effective rate is due to amortization of nondeductible goodwill being a larger
component of the loss before income taxes in the nine month period ended
September 30, 1996 than in the same period in 1995 (see "Income Taxes" below).
(Loss) Income from Continuing Operations. (Loss) income from continuing
operations for the nine months ended September 30, 1996 was ($12.7) million
compared to ($13.5) million for the nine months ended September 30, 1995, a
decrease in the loss of $0.8 million.
Discontinued Operations. The discontinued operations consist of the
Company's radio station operations. Net (loss) income for the radio station
operations for the nine months ended September 30, 1996 was ($6.4) million
compared to ($2.4) million for the nine months ended September 30, 1995. On
December 26, 1995, the Company announced its intention to divest all of its
radio station operations on an individual basis. The segment has produced
operating profits before interest expense, depreciation and amortization. The
results of operations of the radio station operations are included in the
single line of the income statement labeled "(loss) income from discontinued
operations." During the first nine months of 1996, the Company sold all of its
22 radio stations resulting in a gain, net of taxes, of $49.4 million. This
amount is included in the single line of the income statement labeled "gain on
sale of discontinued operations."
<PAGE>
<PAGE>
Liquidity and Capital Resources
The Company derives substantially all of its cash flow from its
subsidiaries. The Company's primary sources of liquidity in the future will be
dividends from its subsidiaries and tax sharing payments pursuant to a tax
sharing agreement among the Company and its subsidiaries. The Company's
subsidiaries' principal source of liquidity is net cash provided by operating
activities. Net cash provided by operating activities was ($55.1) million for
the nine month period ended September 30, 1996 compared to $24.1 million for
the nine month period ended June 30, 1995. The variance was primarily due to
increased income tax and interest payments made in 1996, compared to 1995, of
approximately $36.8 million and $38.5 million, respectively. The increased tax
payments resulted from the 1996 sale of the Company's radio stations. The
increased interest payments were due to an absence of long-term debt until May
11, 1995, when the Company was acquired by Park Acquisitions, Inc. The Company
believes that it will have sufficient liquidity to meet its future capital
expenditure and working capital requirements, debt service and other
obligations.
Capital expenditures for the nine months ended September 30, 1996 were
$8.4 million compared to $3.2 million for the nine months ended September 30,
1995. Historically, the Company has financed capital expenditures through
internally generated cash flow. The Company expects to finance capital
expenditures in the future primarily through cash flow from operations.
On May 13, 1996, the Company sold 11 % Senior Notes due 2004 in the
principal amount of $241.0 million as part of a series of refinancing
transactions (including a $58.0 million Senior Credit Facility) with its parent
company, Park Communications, Inc., and Park Newspapers, Inc. (a wholly owned
subsidiary of Park Communications, Inc.). On June 20, 1996, the $58.0 million
Senior Credit Facility was prepaid due to the timely sale of the Company's
radio stations.
Income Taxes
The Company is part of a consolidated group (which includes Park
Acquisitions, Inc., Park Communications, Inc. and Park Newspapers, Inc.) which
files a consolidated federal income tax return and separate state or local tax
returns as required.<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
By unanimous written consent dated August 22, 1996, the stockholder
of the Company re-elected, effective as of May 23, 1996, Gary B. Knapp and
Donald R. Tomlin, Jr. as the directors of the Company.
Item 5. Other Information.
On October 10, 1996, the Company exchanged $236,000,000 in principal
amount of its Series B 11 3/4% Senior Notes due 2004 (the "Series B
Notes") for a like amount of its 11 3/4% Senior Notes due 2004 (the "Initial
Notes"). The exchange was made in connection with the Company's exchange offer
(the "Exchange Offer") made pursuant to its Prospectus dated September 6, 1996.
The form and terms of the Series B Notes are the same as the form and terms of
the Initial Notes (which they replace) except that the Series B Notes bear a
"Series B" designation and have been registered under the Securities Act of
1933, as amended, and, therefore, do not bear legends restricting their
transfer. $5,000,000 in principal amount of the Initial Notes were not tendered
by holders of Initial Notes in the Exchange Offer and, therefore, remain
outstanding.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit Number Description of Exhibit
2.1 Asset Purchase Agreement dated as of February 29, 1996 among
Montgomery Alabama Channel 32 Operating Limited Partnership, WHOA-TV, Inc. and
Park of Montgomery I, Inc. regarding acquisition of WHOA-TV (Incorporated by
reference to Exhibit 2.5 filed with Park Communications, Inc.'s Form S-4
Registration Statement No. 333-06427, filed June 20, 1996)
3(i)(a) Certificate of Incorporation of the Company (Incorporated by
reference to Exhibit 3(i)(a) filed with Park Broadcasting, Inc.'s Form S-4
Registration Statement No. 333-06437, filed June 20, 1996)
3(i)(b) Certificate of Amendment of Certificate of Incorporation of the
Company filed August 23, 1983 (Incorporated by reference to Exhibit 3(i)(b)
filed with Park Broadcasting, Inc.'s Form S-4 Registration Statement No.
333-06437, filed June 20, 1996)
3(i)(c) Certificate of Amendment of Certificate of Incorporation of
the Company filed November 14, 1983 (Incorporated by reference to Exhibit
3(i)(c) filed with Park Broadcasting, Inc.'s Form S-4 Registration Statement
No. 333-06437, filed June 20, 1996)
3(ii) Amended and Restated Bylaws of the Company (Incorporated by reference
to Exhibit 3(ii) filed with Park Broadcasting, Inc.'s Form S-4 Registration
Statement No. 333-06437, filed June 20, 1996)
4.1 Indenture dated as of May 13, 1996 between the Company and IBJ Schroder
Bank & Trust Company, as Trustee, with the forms of Series A Note and Series B
Note attached thereto (Incorporated by reference to Exhibit 10.3 filed with
Park Communications, Inc.'s Form S-4 Registration Statement No. 333-06427,
filed June 20, 1996)<PAGE>
<PAGE>
Exhibit
Number Description of Exhibit
10.1 Registration Rights Agreement dated as of May 13, 1996 among the
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs
& Co (Incorporated by reference to Exhibit 10.1 filed with Park Broadcasting,
Inc.'s Form S-4 Registration Statement No. 333-06437, filed on June 20, 1996)
10.2 Tax Sharing Agreement executed as of May 13, 1996 among Park
Acquisitions, Inc., Park Communications, Inc., the Company, Park Newspapers,
Inc. and certain of the other subsidiaries of Park Communications, Inc.
(Incorporated by reference to Exhibit 10.6 filed with Park Communications,
Inc.'s Form S-4 Registration Statement No. 333-06427, filed on June 20, 1996)
10.3 Management Services Agreement dated as of May 13, 1996 among Park
Acquisitions, Inc., Park Communications, Inc., the Company and Park Newspapers,
Inc. (Incorporated by reference to Exhibit 10.7 filed with Park
Communications, Inc.'s Form S-4 Registration Statement No. 333-06427, filed on
June 20, 1996)
10.4 Affiliation Agreement dated as of October 1, 1995 between Roy H. Park
Broadcasting, Inc. and CBS Television Network, a division of CBS Inc. ("CBS")
(Incorporated by reference to Exhibit 10.8 filed with Park Communications,
Inc.'s Form S-4 Registration Statement No. 333-06427, filed on June 20, 1996)
10.5 Affiliation Agreement dated as of October 1, 1995 between Roy H. Park
Broadcasting of Tri-Cities, Inc. (as successor by merger with Roy H. Park
Broadcasting of Tennessee, Inc.) and CBS (Incorporated by reference to Exhibit
10.9 filed with Park Communications, Inc.'s Form S-4 Registration Statement No.
333-06427, filed on June 20, 1996)
10.6 Affiliation Agreement dated as of October 1, 1995 between Roy H. Park
Broadcasting of the Tri-Cities, Inc. and CBS (Incorporated by reference to
Exhibit 10.10 filed with Park Communications, Inc.'s Form S-4 Registration
Statement No. 333-06427, filed on June 20, 1996)
10.7 Affiliation Agreement dated as of October 1, 1995 between Roy H. Park
Broadcasting of Roanoke, Inc. (as successor by merger with Roy H. Park
Broadcasting of Virginia, Inc.) and CBS (Incorporated by reference to Exhibit
10.11 filed with Park Communications, Inc.'s Form S-4 Registration Statement
No. 333-06427, filed on June 20, 1996)
10.8 Affiliation Agreement dated as of October 1, 1995 between Birmingham
Television corporation and CBS (Incorporated by reference to Exhibit 10.12
filed with Park Communications, Inc.'s Form S-4 Registration Statement No.
333-06427, filed on June 20, 1996)
10.9 Affiliation Agreement dated January 19, 1996 between Park
Broadcasting of Louisiana, Inc. and National Broadcasting Company, Inc. ("NBC")
(Incorporated by reference to Exhibit 10.13 filed with Park Communications,
Inc.'s Form S-4 Registration Statement No. 333-06427, filed on June 20, 1996)
10.10 Affiliation Agreement dated January 19, 1996 between Roy H. Park
of Roanoke, Inc. and NBC (Incorporated by reference to Exhibit 10.14 filed
with Park Communications, Inc.'s Form S-4 Registration Statement No. 333-06427,
filed on June 20, 1996)
10.11 Affiliation Agreement dated June 3, 1996 between Roy H. Park
Broadcasting of Utica-Rome, Inc. and American Broadcasting Companies, Inc.
("ABC") (Incorporated by reference to Exhibit 10.15 filed with Park
Communications, Inc.'s Amendment No. 1 to Form S-4 Registration Statement
No.333-06427, filed on August 16, 1996)
10.12 Affiliation Agreement dated June 3, 1996 between Park
Broadcasting of Kentucky, Inc. and ABC (Incorporated by reference to Exhibit
10.16 filed with Park Communications, Inc.'s Amendment No. 1 to Form S-4
Registration Statement No. 333-06427, filed on August 16, 1996)
<PAGE>
<PAGE>
Exhibit
Number Description of Exhibit
10.13 Employment Agreement dated July 20, 1994 between Park
Communications, Inc. and Wright M. Thomas (Incorporated by reference to Exhibit
10.17 filed with Park Communications, Inc.'s Form S-4 Registration Statement
No. 333-06427, filed on June 20, 1996)
10.14 Agreement dated May 1, 1986 between Park Communications, Inc.
and Wright M. Thomas regarding deferred compensation arrangement (Incorporated
by reference to Exhibit 10.18 filed with Park Communications, Inc.'s Form S-4
Registration Statement No. 333-06427, filed on June 20, 1996)
10.15 Letter Agreement dated February 16, 1979 between Park
Communications, Inc. and Wright M. Thomas regarding contingent retirement
benefits (Incorporated by reference to Exhibit 10.19 filed with Park
Communications, Inc.'s Form S-4 Registration Statement No. 333-06427, filed on
June 20, 1996)
10.16 Park Communications, Inc. Retention Incentive Plan (Incorporated
by reference to Exhibit 10.20 filed with Park Communications, Inc's Form S-4
Registration Statement No. 333-06427, filed on June 20, 1996)
10.17 Park Communications, Inc. Defined Benefit Plan (Incorporated by
reference to Exhibit 10.21 filed with Park Communications, Inc.'s Form, S-4
Registration Statement No. 333-06427, filed on June 20, 1996)
10.18 Description of Supplemental Retirement Benefit to W. Randall
Odil (Incorporated by reference to Exhibit 10.22 filed with Park
Communications, Inc.'s Form S-4 Registration Statement No. 333-06427, filed on
June 20, 1996, filed on June 20, 1996)
10.19 Letter dated December 21, 1995 from Park Communications, Inc. to
Rick Prusator regarding compensation matters (Incorporated by reference to
Exhibit 10.23 filed with Park Communications, Inc.'s Form S-4 Registration
Statement No. 333-06427, filed on June 20, 1996)
27.1 Financial Data Schedule for nine months ended September 30, 1995 and
1996
(b) Reports on Form 8-K.
No report on Form 8-K was filed by the Company during the
quarter ended September 30, 1996.
<PAGE>
<PAGE>
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.
PARK BROADCASTING, INC.
November 14, 1996 By: /s/ Wright M. Thomas
-------------------------------------
Wright M. Thomas
President and Assistant Secretary
(Duly Authorized Officer)
November 14, 1996 By: /s/ Randel N. Stair
--------------------------------------
Randel N. Stair
Treasurer and Secretary
(Principal Financial Officer)
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