<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q/AA
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACTS OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1998
COMMISSION FILE NUMBERS:
ACME Intermediate Holdings, LLC 333-40277
ACME Television, LLC 333-40281
-----------------
ACME TELEVISION, LLC
and
ACME INTERMEDIATE HOLDINGS, LLC
(Exact name of registrants as specified in their charter)
-----------------
<TABLE>
<S> <C> <C>
Delaware ACME Television, LLC 52-2050588
Delaware ACME Intermediate Holdings, LLC 52-2050589
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
----------------
2101 E. Fourth Street, Suite 202
Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: 714-245-9499
----------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED:
------------------- ---------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrants (1) have 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, and (2) have been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
100% of the membership units of ACME TELEVISION, LLC are owned directly
or indirectly by ACME INTERMEDIATE HOLDINGS, LLC. 92% of the membership units of
ACME INTERMEDIATE HOLDINGS, LLC are owned by ACME Television Holdings, LLC. Such
membership units are not publicly traded and have no quantifiable market value.
Indicate the number of membership units outstanding of each of ACME
Television, LLC's classes of equity as of the latest practicable date: At
August 13, 1998, there were outstanding 200 membership units, without par
value.
Indicate the number of membership units outstanding of each of ACME
Intermediate Holdings, LLC's classes of equity, as of the latest practicable
date: At August 13, 1998, there were 895,425 membership units without par value.
================================================================================
<PAGE> 2
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
FORM 10-Q/AA
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM
NUMBER PAGE
------ ----
<S> <C> <C>
PART I - FINANCIAL STATEMENTS
Item 1. FINANCIAL STATEMENTS
Introductory Comments............................................. 3
ACME INTERMEDIATE HOLDINGS, LLC and ACME
TELEVISION, LLC and Subsidiaries
Consolidated Balance Sheets as of
December 31, 1997 and June 30, 1998........................ 4
Consolidated Statements of Operations and
Members' Capital for the Three Months
Ended June 30, 1998 and June 30, 1997...................... 5
Consolidated Statements of Operations and
Members' Capital for the Six Months
Ended June 30, 1998 and June 30, 1997...................... 6
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1998 and
June 30, 1997.............................................. 7
Notes to Consolidated Financial Statements................... 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................... 9
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK....................................................... 10
PART II - OTHER INFORMATION
SIGNATURES .................................................................. 11
</TABLE>
2
<PAGE> 3
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
This document contains forward-looking statements. In addition, when used in
this document, the words "intends to", "believes", "anticipates", "expects" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to a number of risks and uncertainties. Actual results in
the future could differ materially and adversely from those described in the
forward-looking statements. Differences could come about as a result of various
important factors including but not limited to: the impact of changes in
national and regional economies, successful integration of acquired television
stations, completion of pending acquisitions, pricing fluctuations in local and
national advertising and volatility in programming costs. The Company undertakes
no obligation to publicly release the result of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.
Certain Definitions and Market and Industry Data
Unless otherwise indicated, information set forth herein as to designated
market area, rank demographic statistics, station audience and revenue share
and number of commercial broadcasters is as currently reported by BIA
Publications, Inc. or by A.C. Nielsen Company. Set forth below are certain
terms commonly used in the broadcast television industry that are used
throughout this report. Unless the context otherwise requires, such terms shall
have the respective meanings set forth below.
DMA ...........................Designated Market Area. There are 211 DMAs in the
United States with each county in the
continental United States assigned uniquely to
one DMA. Ranking of DMAs is based upon Nielsen
Media Research estimates of the number of
television households.
LMA ...........................Local marketing agreement, time brokerage
agreement or licensee pursuant to which the
broadcaster provides similar arrangement between
a broadcaster and a station programming to,
sells advertising time for and funds operating
expenses for the applicable station, manages
certain station activities, and retains the
advertising revenues of such station, in
exchange for fees paid to the licensee.
Syndicated Programming.........Programming purchased from production studios to
be broadcast during non-network time periods.
Syndicated programming includes both original
programming and previously broadcast programming.
PART I
ITEM 1. FINANCIAL STATEMENTS
Important Explanatory Note
This integrated Form 10-Q is filed pursuant to the Securities Exchange Act of
1934, as amended, for each of ACME Intermediate Holdings, LLC ("ACME
Intermediate") and its subsidiary, ACME Television, LLC ("ACME Television").
Separate financial information has been provided for each entity and, where
appropriate, separate disclosure. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations. It is suggested that these Consolidated Financial Statements be
read in conjunction with the financial information set forth in the Annual
Reports on Form 10-K of each of ACME Intermediate Holdings, LLC and ACME
Television, LLC for the fiscal year ended December 31, 1997.
Unless the context requires otherwise, references to the "Company" refers to
both ACME Intermediate and ACME Television.
3
<PAGE> 4
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 JUNE 30, 1998
--------------------------- -------------------------
ACME ACME
ACME INTERMEDIATE ACME INTERMEDIATE
TELEVISION HOLDINGS TELEVISION HOLDINGS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 8,820 $ 8,820 $ 1,886 $ 1,886
Accounts receivable, net 699 677 9,269 9,269
Due from affiliates 162 54 139 40
Current portion of program
broadcast rights 614 614 4,340 4,340
Prepaid expenses and other assets 3,032 3,060 1,246 1,246
Deferred income taxes -- -- 342 342
-------- -------- -------- --------
Total current assets 13,327 13,225 17,222 17,123
Property and Equipment, net 7,346 7,346 12,631 12,631
Program broadcast rights,
less current portion 587 587 5,961 5,961
Intangible assets, net 36,004 36,004 233,180 233,180
Investment in affiliates -- -- 5,766 5,766
Deposits 143,000 143,000 220 220
Other assets 17,418 19,010 12,707 14,311
-------- -------- -------- --------
Total assets $217,682 $219,172 $287,687 $289,192
======== ======== ======== ========
LIABILITIES AND MEMBERS' CAPITAL
Current Liabilities
Accounts payable $ 3,361 $ 3,363 $ 4,468 $ 4,468
Accrued expenses 651 651 5,987 5,987
Notes payable to banks -- -- 12,000 12,000
Current portion of program
rights payable 653 653 6,078 6,078
Current portion of obligations
under lease 292 292 637 637
Other current liabilities -- -- -- 22
-------- -------- -------- --------
Total current liabilities 4,957 4,959 29,170 29,192
Program broadcast rights
payable, net of current portion 1,351 1,351 4,634 4,634
Obligations under lease, net of
current portion 443 443 2,033 2,033
Deferred taxes -- -- 33,297 33,297
Other liabilities -- -- 1,801 1,801
Senior discount notes 130,833 130,833 137,947 137,947
Senior secured notes -- 36,863 -- 39,371
-------- -------- -------- --------
Total liabilities 137,584 174,449 208,882 248,275
-------- -------- -------- --------
Members' capital 85,516 51,357 92,561 58,400
Accumulated deficit (5,418) (6,634) (13,756) (17,483)
-------- -------- -------- --------
Total members' capital 80,098 44,723 78,805 40,917
-------- -------- -------- --------
Total liabilities and
members' capital $217,682 $219,172 $287,687 $289,192
======== ======== ======== ========
</TABLE>
See accompanying notes
4
<PAGE> 5
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND MEMBERS' CAPITAL
(Unaudited - in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------
1997 1998
------------------------- -------------------------
ACME ACME
ACME INTERMEDIATE ACME INTERMEDIATE
TELEVISION HOLDINGS TELEVISION HOLDINGS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Broadcast revenues $ 751 $ 751 $ 11,570 $ 11,570
Operating expenses:
Programming 370 370 4,133 4,133
Selling, general and
administrative 960 960 5,458 5,458
LMA fees -- -- 228 228
Depreciation and
amortization 105 105 3,332 3,332
-------- -------- -------- --------
Operating expenses 1,435 1,435 13,151 13,151
Operating loss (684) (684) (1,581) (1,581)
Interest income 3 3 115 115
Interest expense (194) (194) (4,004) (5,303)
-------- -------- -------- --------
Loss before taxes (875) (875) (5,470) (6,769)
Income tax benefit -- -- 385 385
-------- -------- -------- --------
Net loss $ (875) $ (875) $ (5,085) $ (6,384)
Parent's
contribution 25,214 25,214 1,050 1,050
Members' capital (deficit)
at beginning of period (442) (442) 82,840 46,251
-------- -------- -------- --------
Members' capital at end
of period $ 23,897 $ 23,897 $ 78,805 $ 40,917
======== ======== ======== ========
</TABLE>
See accompanying notes
5
<PAGE> 6
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND MEMBERS' CAPITAL
(Unaudited - in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------
1997 1998
-------------------------- -------------------------
ACME ACME
ACME INTERMEDIATE ACME INTERMEDIATE
TELEVISION HOLDINGS TELEVISION HOLDINGS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Broadcast revenues $ 1,396 $ 1,396 $ 19,327 $ 19,327
Operating expenses:
Programming 657 657 6,463 6,463
Selling, general and
administrative 1,882 1,882 9,668 9,668
LMA fees -- -- 228 228
Depreciation and amortization 166 166 4,181 4,181
-------- -------- -------- --------
Operating expenses 2,705 2,705 20,540 20,540
Operating loss (1,309) (1,309) (1,213) (1,213)
Interest income 3 3 188 188
Interest expense (461) (461) (7,683) (10,194)
-------- -------- -------- --------
Loss before taxes (1,767) (1,767) (8,708) (11,219)
Income tax benefit -- -- 365 365
-------- -------- -------- --------
Net loss $ (1,767) $ (1,767) $ (8,343) $(10,854)
Parent's contribution 25,664 25,664 7,050 7,050
Members' capital at
beginning of period -- -- 80,098 44,721
-------- -------- -------- --------
Members' capital
at end of period $ 23,897 $ 23,897 $ 78,805 $ 40,917
======== ======== ======== ========
</TABLE>
See accompanying notes
6
<PAGE> 7
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------
1997 1998
---------------------------- --------------------------
ACME ACME
ACME INTERMEDIATE ACME INTERMEDIATE
TELEVISION HOLDINGS TELEVISION HOLDINGS
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,767) $ (1,767) $ (8,343) $(10,854)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 166 166 4,181 4,181
Amortization of discount on
Senior Notes and debt issuance costs -- -- 7,114 9,622
Changes in assets and liabilities:
Increase in accounts receivables, net (689) (689) (4,013) (4,013)
Increase in programming rights (9) (9) (1,108) (1,108)
Increase in prepaid expenses
and other current assets (39) (39) (691) (691)
Decrease in deferred income taxes -- -- (345) (345)
Increase in accounts payable 892 892 102 102
Increase in accrued expenses 722 722 4,304 4,304
Increase in programming rights payable -- -- 450 450
Decrease in other liabilities -- -- (1,730) (1,727)
-------- -------- -------- --------
Net cash provided by (used in)
operating activities (724) (724) (79) (79)
-------- -------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment (112) (112) (3,934) (3,934)
Cash acquired in acquisition -- -- 779 779
Purchase of Ft. Myers / Naples Station -- -- (14,445) (14,445)
Increase in investment in affiliates
and other broadcast assets (650) (650) (2,975) (2,975)
Other -- -- (215) (215)
-------- -------- -------- --------
Net cash used in investing activities (762) (762) (20,790) (20,790)
-------- -------- -------- --------
Cash flows from financing activities:
Contribution from parent 2,589 2,589 -- --
Increase in notes payable to banks -- -- 12,000 12,000
Additional capital leases, net of
repayments -- -- 1,935 1,935
-------- -------- -------- --------
Net cash provided by
financing activities 2,589 2,589 13,935 13,935
-------- -------- -------- --------
Net increase (decrease) in cash 1,103 1,103 (6,934) (6,934)
Cash at beginning of period -- -- 8,820 8,820
-------- -------- -------- --------
Cash at end of period $ 1,103 $ 1,103 $ 1,886 $ 1,886
======== ======== ======== ========
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 405 $ 405 $ 121 $ 121
Income taxes -- -- -- --
======== ======== ======== ========
Non cash transactions:
Contribution of station assets
from Parent in exchange for
membership units $ 23,075 $ 23,075 $ 7,050 $ 7,050
======== ======== ======== ========
</TABLE>
See accompanying notes
7
<PAGE> 8
ACME TELEVISION, LLC AND
ACME INTERMEDIATE HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
ACME INTERMEDIATE HOLDINGS, LLC ("ACME Intermediate") is a holding
company with no assets or independent operations other than its investment in
ACME TELEVISION, LLC ("ACME Television"). ACME Television, through its
subsidiaries, owns, operates and / or holds licenses or options to acquire six
commercially licensed broadcast television stations (the "Stations") located
throughout the United States.
ACME Intermediate was formed on August 8, 1997. Upon formation, ACME
Intermediate received a contribution from ACME Television Holdings, LLC (ACME
Parent) of ACME Parent's wholly-owned subsidiaries - ACME Television of Oregon,
LLC ("ACME Oregon") and ACME Television of Tennessee, LLC ("ACME Tennessee") and
certain other assets. This contribution was made in exchange for membership
units in ACME Intermediate and was treated as a transaction between entities
under common control, similar to a pooling of interests. Accordingly, the
transaction was recorded at historical cost and ACME Intermediate has reflected
the results of operations of the entities contributed for all of the periods
presented.
ACME Television was formed on August 15, 1997. Upon formation, ACME
Parent contributed to ACME Television, through ACME Intermediate, the net assets
of ACME Oregon, ACME Tennessee and other net assets in exchange for membership
units.
The accompanying unaudited consolidated financial statements of ACME
Intermediate include the accounts of ACME Intermediate and ACME Television. The
accompanying unaudited consolidated financial statements of ACME Television
include the accounts of ACME Television and its subsidiaries. All significant
intercompany items and transactions have been eliminated in each of the sets of
consolidated financial statements.
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for the fair presentation of
the financial position as of June 30, 1998 and the results of operations for the
three months ended June 30, 1998 have been included. Operating results for the
three months ended June 30, 1998 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Annual Reports on Form 10-K of each of ACME Television
and ACME Intermediate for the year ended December 31, 1997.
Note 2 - Acquisitions
ACME Parent was formed in 1997 and operated only one station (under a
Local Marketing Agreement, an "LMA") - KWBP Channel 32, serving Portland, Oregon
- - during the second quarter of 1997. In June 1997, ACME Parent completed its
acquisition of KWBP. During the fourth quarter of 1997, ACME Television
completed its acquisition of WBXX Channel 20, serving Knoxville, Tennessee and
launched the station, which was previously off the air.
In September 1997, ACME Parent entered into, and subsequently assigned
to ACME Television Holdings of Missouri, Inc. ("ACME Missouri"), a purchase
agreement to acquire station KPLR Channel 11, serving St. Louis, Missouri, and
effective October 1, 1997, began operating the station pursuant to an LMA. The
acquisition was completed in March 1998, at which time the LMA was terminated.
The total purchase price was $145 million. The acquisition was accounted for
under the purchase method. The excess of the purchase price over the fair value
of net assets acquired (including $83 million allocated to the FCC license) of
approximately $62 million was recorded as goodwill and is being amortized on a
straight line basis over 20 years.
In early March 1998, ACME Television entered into an agreement to
purchase station WTVK Channel 46, serving the Ft. Myers / Naples, Florida
marketplace and began operating the station pursuant to an LMA. ACME Television
received regulatory approvals and completed its acquisition of WTVK on June 30,
1998. In connection with this transaction, $1.045 million in membership units
were issued to the sellers by ACME Parent, which was treated as a capital
contribution to ACME Television through ACME Intermediate.
ACME Television also owns a 49% interest in KUPX - Channel 16 (formerly
KZAR) serving the Salt Lake City, Utah marketplace and has exercised its option
to acquire the remaining interests in the station which was granted its license
from the FCC in May 1998. ACME Television and the majority owners of KUPX have
entered into an agreement with another broadcaster in the Salt Lake City market
to swap KUPX for KUWB Channel 30, which ACME Television has operated since April
1998 under an interim LMA. The swap of channels is subject to regulatory
approvals.
In January 1998 ACME Television acquired the interest to the
construction permit for station KWBQ Channel 19 (formerly KAUO) serving the
Albuquerque, New Mexico marketplace. The Company expects the station to be built
and operational by January 1, 1999.
The following table summarizes the operational status of each of the
stations as of June 30, 1998:
<TABLE>
<CAPTION>
Stations in Operation Date of LMA Date acquired
- ---------------------- ----------- -------------
<S> <C> <C>
Portland, Oregon January 1997 June 1997
St. Louis, Missouri October 1997 March 1998
Knoxville, Tennessee (1) October 1997
Ft. Myers / Naples, Florida March 1998 June 1998
Salt Lake City, Utah April 1998(2) January 1998(3)
</TABLE>
- --------------
(1) Commenced operations in October 1997
(2) As to Station KUWB
(3) As to minority interest in KUPX
<TABLE>
<CAPTION>
Station not in Operation Date acquired
- ------------------------ -------------
<S> <C>
Albuquerque, New Mexico January 1998
</TABLE>
Note 3 - Recent pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting
Comprehensive Income" which is effective for fiscal periods beginning after
December 15, 1997. SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components. ACME Intermediate and ACME
Television believe SFAS No. 130 will not have an effect on the manner in which
they currently report.
8
<PAGE> 9
In June 1997, the FASB issued SFAS No. 131 "Disclosures About Segments
of an Enterprise and Related Information" which is effective for fiscal periods
beginning after December 15, 1997. SFAS No. 131 establishes standards for
reporting information about operating segments and for related disclosures about
products, services, geographic areas and major customers. The Company does not
divide its business into segments and, accordingly, does not believe SFAS No.
131 will have any applicability to the Company's financial reporting.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The operating revenues of the Stations are derived primarily from the
sale of advertising time. The stations sell commercial time during the programs
to national, regional and local advertisers. Credit arrangements are determined
on an individual customer basis. The Company generally pays commissions to
advertising agencies on local, regional and national advertising and to national
sales representatives on national advertising. All such commission is reflected
as deductions from gross revenues in the accompanying consolidated financial
statements.
The primary operating expenses of the Company consist of employee
salaries, programming, advertising and promotional expenses and depreciation and
amortization.
The following table sets forth certain operating data for ACME
Television and ACME Intermediate for the three months and six months ended June
30, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1997 1998 1997 1998
-------- -------- ------- -------
AMOUNTS IN THOUSANDS
<S> <C> <C> <C> <C>
Operating income (loss) $ (684) $(1,581) $(1,309) $(1,213)
Add:
Time brokerage agreement fees -- 171 -- 228
Program amortization -- 1,186 -- 2,195
Depreciation and amortization 105 3,332 166 4,181
Corporate expense 157 689 419 1,362
Less:
Program payments -- 1,002 -- 2,153
------- ------- ------- -------
Broadcast cash flow $ (422) $ 2,795 $ (724) $ 4,601
======= ======= ======= =======
</TABLE>
(1) Broadcast cash flow is defined as operating income, plus depreciation and
amortization, program amortization and corporate overhead, less program payments
- - the latter as adjusted to reflect reductions for impaired or expired rights in
connection with acquisitions. The Company has included broadcast cash flow data
because the Company believes such data is a useful measure for evaluating the
operating performance of the Company's stations. Broadcast cash flow eliminates
the effect of depreciation and amortization which relate to acquisitions under
the purchase method of accounting, the impact of accelerated program
amortization and the impact of corporate expenses, and allows for an evaluation
of the operating performance of the Company's stations relative to that of the
Company's competitors which may not have similar depreciation, amortization or
corporate structures. The Company's definition of broadcast cash flow may not be
comparable to similarly titled measures presented by other companies. Broadcast
cash flow is not, and should not be used as an indicator or alternative to
operating income, net loss or cash flow as reflected in the consolidated
financial statements, is not a measure of financial performance under generally
accepted accounting principles and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
9
<PAGE> 10
accounting principles and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net broadcast revenues for the three months ended June 30, 1998
increased $10.8 million to $11.6 million compared to $751,000 for the three
months ended June 30, 1997. This increase is due to the expansion in the number
of the Company's operating stations as described in "Note 2 - Acquisitions"
above. Net revenues increased $3.8 million for the three months ended June 30,
1998 compared to the three months ended March 31, 1998 as a result of increased
sports revenues, increased market shares, new station start-ups and seasonally
higher advertising rates.
Operating expenses increased $11.7 million to $13.2 million compared to
the prior year quarter's operating expense of $1.4 million. This increase was
also due to the additional stations added since the second quarter of 1997.
Operating expenses increased $5.8 million for the quarter ended June 30, 1998
compared to the three months ended March 31, 1998. This increase is due
primarily to increased amortization of goodwill related to the acquisition of
KPLR, seasonally higher program costs relating to sports rights fees and the
start-up of new stations.
Interest expense for the current year quarter was $4.0 million for ACME
TV and $5.3 million for ACME Intermediate, primarily representing the
amortization of original issuance discount of the September 1997 issued senior
discount notes (ACME Television) and senior secured notes (ACME Intermediate)
along with related amortization of prepaid financing costs. The interest expense
of $194,000 during the second quarter of 1997 represents primarily the interest
expense assumed by the Company, on behalf of the seller of KWBP (Portland),
during the interim LMA period.
Apart from the Company's Missouri operations (which pertain solely to
the Company's investment in KPLR), which are organized as traditional "C"
corporations, ACME Intermediate and ACME Television and its operating
subsidiaries are organized as limited liability companies. Accordingly, although
the Company is subject to various minimum state taxes, all federal tax
attributes are passed through to the members of the Company. The Company's
Missouri operations, after deduction of allocable interest charges, generated a
net taxable loss. The Company has not recognized the benefit of such a loss. The
Company has recorded a tax benefit for the decrease on the deferred tax
liability relating to the amortization of other intangibles, primarily for the
FCC licenses, relating to the KPLR acquisition which are not deductible for tax
purposes.
The net loss for ACME Television and for ACME Intermediate for the
three months ended June 30, 1998 was $5.1 million and $6.4 million,
respectively, compared to a net loss of $875,000 for the comparable quarter of
the prior year. These increased net losses are due primarily to the amortization
of broadcast licenses relating to the Companies' newly acquired and operating
stations and the substantially increased interest expense incurred in connection
with the September 1997 issuance of long-term debt to finance these
acquisitions.
Broadcast cash flow for the three months ended June 30, 1998 was $2.8
million, compared to a ($422,000) broadcast cash flow for the corresponding
quarter in 1997. This increase is attributable to the Company's profitable
operations of KPLR, which was operated under an LMA from October 1, 1997 and
acquired on March 13, 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net broadcast revenues for the six months ended June 30, 1998 increased
$17.9 million to $19.3 million compared to $1.4 million for the six months
ended June 30, 1997. This increase is due to the expansion in the number of
Company's operating stations as described in "Note 2 - Acquisitions" above.
Operating expenses increased to $20.5 million compared to the prior
year's six months operating expenses of $2.7 million. This increase was also
due to the additional stations added since the second quarter of 1997.
Interest expense for the current year was $7.7 million for ACME
Television and $10.2 million for ACME Intermediate, primarily representing the
amortization of original issuance discount of the September 1997 issued senior
discount notes (ACME Television) and senior secured notes (ACME Intermediate)
along with related amortization of prepaid financing costs. The interest expense
of $461,000 during the first six months of 1997 represents primarily the
interest expense assumed by the Company, on behalf of the seller of KWBP
(Portland), during the interim LMA period.
Apart from the Company's Missouri operations (which pertain solely to
the Company's investment in KPLR), which are organized as traditional "C"
corporations, ACME Intermediate and ACME Television and its operating
subsidiaries are organized as limited liability companies. Accordingly, although
the Company is subject to various minimum state taxes, all federal tax
attributes are passed through to the members of the Company. The Company's
Missouri operations, after deduction of allocable interest charges, generated a
net taxable loss, and a corresponding deferred tax benefit was recorded for the
goodwill amortization.
The net loss for ACME Television and for ACME Intermediate for the six
months ended June 30, 1998 was $8.3 million and $10.9 million, respectively,
compared to a net loss of $1.8 million for the comparable six months of the
prior year. These increased net losses are due primarily to the amortization of
broadcast licenses relating to the Companies' newly acquired and operating
stations and the substantially increased interest expense incurred in connection
with the September 1997 issuance of long-term debt to finance these
acquisitions.
Broadcast cash flow for the six months ended June 30, 1998 was $4.6
million, compared to a ($724,000) broadcast cash flow for the corresponding six
months in 1997. This increase is attributable to the Company's profitable
operations of KPLR, which was operated under an LMA from October 1, 1997 and
acquired on March 13, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used by operating activities were $79,000 during the six
months ended June 30, 1998 compared to cash flows used by operating activities
of $724,000 during the six months ended June 30, 1997, a decrease of $645,000.
This decrease was primarily due to higher broadcast cash flow offset by seasonal
working capital needs.
Cash flows used in investing activities were $20.8 million during the
six months ended June 30, 1998, compared to $762,000 used in investing
activities during the six months ended June 30, 1997. Cash flows used in
investing activities during the six months ended June 30, 1998 related to
capital expenditures principally related to the build-out of KUWB, the Company's
acquisition of WTVK, and the CP acquisition for Channel 31 serving Springfield,
Missouri. The Company anticipates that future requirements for capital
expenditures will include those incurred in the continued build-out of its
station in Albuquerque, New Mexico and the upgrade of its other stations and
will be financed primarily through its $20 million capital equipment facility
(of which approximately $18 million is still available at June 30, 1998)
recently entered into with General Electric Capital Corporation ("GECC").
Cash flows used in financing activities were $13.9 million related to
$12 million in notes payable and additions to capital leases, net of repayments,
during the six months ended June 30, 1998 compared to cash flows provided by
financing activities of $2.6 million related to parent contributions during the
six months ended June 30, 1997. At June 30, 1998 there was an outstanding
balance of $12,000,000 due under the Company's existing credit agreement
facility with Canadian-Imperial Bank Corporation ("CIBC"). This facility allows
for revolving credit borrowings of up to a maximum of $40,000,000, dependent
upon certain financial ratios of ACME Television, can be used to fund future
acquisitions of broadcast stations and for general corporate purposes.
The Company believes that internally generated funds from operations,
financings under the Company's capital equipment facility and additional
borrowings under its credit agreement, if necessary, will be sufficient to
satisfy the Company's cash requirements for its existing operations for the next
twelve months and for the foreseeable future thereafter. The Company expects
that any future acquisitions of television stations would be financed through
funds generated from operations, through additional borrowings under the
existing CIBC credit agreement and through additional debt and equity
financings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ACME Televisions' revolving credit facility has a variable interest
rate. Accordingly, the Company's interest expense can be materially affected by
future fluctuations in the applicable interest rate.
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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.
ACME TELEVISION, LLC
Date: April 22, 1999 By: /s/ Doug Gealy
------------------------------
Doug Gealy, President
Date: April 22, 1999 By: /s/ Thomas D. Allen
------------------------------
Thomas D. Allen
Executive Vice President/CFO
(principal financial officer)
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.
ACME INTERMEDIATE HOLDINGS, LLC
Date: April 22, 1999 By: /s/ Doug Gealy
------------------------------
Doug Gealy, President
Date: April 22, 1999 By: /s/ Thomas D. Allen
------------------------------
Thomas D. Allen
Executive Vice President/CFO
(principal financial officer)
11
