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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SPECIAL FINANCIAL REPORT ON
FORM 10-K/A
(MARK ONE)
[X]* ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
* THIS SPECIAL REPORT CONTAINS ONLY FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1997 IN ACCORDANCE WITH RULE 15d-2.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 333-40277
ACME INTERMEDIATE HOLDINGS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 4833 52-2050589
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
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2101 E. FOURTH ST., SUITE 202
SANTA ANA, CA 92705
(714) 245-9499
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
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]
(Registrant has not been subject to such filing requirements for the past
90 days)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES CONSOLIDATED TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
(1) DESCRIPTION OF BUSINESS AND FORMATION
ACME Intermediate Holdings, LLC (the Company) was formed on August 8, 1997. Upon
formation, the Company 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 net assets. This contribution of $25,455,000
(including cash of $2,380,000), was made in exchange for membership units in the
Company 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 the Company has reflected the result of operations of the
entities contributed for the period presented. In addition, on September 30,
1997, ACME Parent made an additional contribution of $21,746,000 in exchange for
membership units in the Company.
ACME Television, LLC's subsidiaries (hereinafter referred to in this paragraph
collectively as Subsidiary Guarantors) are fully, unconditionally, and jointly
and severally liable for ACME Television's senior discount notes referred to in
note 5. The Subsidiary Guarantors are wholly owned and constitute all of the
ACME Television's direct and indirect subsidiaries. The Company has not included
separate financial statements of the aforementioned subsidiaries because (i) the
Company and ACME Television, LLC are holding companies with no assets or
independent operations other than their investments in their subsidiaries, and
(ii) the separate financial statements and other disclosures concerning such
subsidiaries are not deemed material to investors.
Various agreements to which the Company and/or the Subsidiary Guarantors are
parties restrict the ability of the Subsidiary Guarantors to make distributions
to the Company. The Investment and Loan Agreement (the 'Investment Agreement'),
dated June 17, 1997, as amended, among ACME Parent and the parties thereto and
the Limited Liability Company Agreement (the 'LLC Agreement'), dated June 17,
1997, as amended, among ACME Parent and the parties thereto each contain certain
restrictions on the ability of the Subsidiary Guarantors to declare or pay
dividends to the Company in the absence of the consent of certain parties
thereto. The Indenture governing the Notes prevents the Subsidiary Guarantors
from declaring or paying any dividend or distribution to the Company unless
a default has not occurred and certain financial covenants are satisfied.
The Loan Agreement (as defined) also prohibits distributions from the Subsidiary
Guarantors to the Company except in certain circumstances during which default
has not occurred thereunder.
ACME Parent owns, directly and indirectly, 92% of the outstanding members units
of the Company. The Company owns, directly or indirectly, 100% of the
outstanding members units of ACME Television, LLC.
ACME Oregon was formed on March 5, 1997 to acquire Station KWBP, serving the
Portland, Oregon market from Channel 32, Incorporated. Prior to the acquisition
of Station KWBP (June 17, 1997), ACME Oregon operated the station and financed
its losses, effective January 1, 1997 pursuant to a Local Marketing Agreement
with the Channel 32, Incorporated. The acquisition was completed on June 17,
1997 (see note 3). ACME Tennessee was formed on April 17, 1997 to acquire
Station WINT, serving the Knoxville, Tennessee market. This acquisition was
completed on October 7, 1997 (See Note 4).
On July 25, 1997 the Company formed ACME Television Holdings of Missouri, Inc.
(formerly ACME Television Licenses of Missouri, Inc.; "ACME Missouri") for the
purpose of acquiring Station KPLR and on October 31, 1997 adopted limited
liability company agreements for ACME Television of Utah, LLC (ACME Utah) and
ACME Television of New Mexico, LLC (ACME New Mexico) for the purpose of
acquiring the licensee of Stations KZAR and the assets of Station KAUO,
respectively. On December 15, 1997, ACME Utah completed its acquisition of a 49%
interest in Station KZAR (See Note 3). The acquisition of Station KAUO did not
occur on or prior to December 31, 1997. (See Note 4)
F-6
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ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(3) ACQUISITION--(CONTINUED)
On October 7, 1997, the Company acquired Crossville Limited Partnership, the
owner of Station WINT, in exchange for $13,200,000 in cash. Subsequent to the
acquisition, the Company changed the call letters of the station to WBXX. The
acquisition was accounted for using the purchase method. The excess of the
purchase price over the fair value of net assets acquired of approximately
$13,287,000, has been recorded as broadcast licenses and is being amortized over
a period of 20 years.
The unaudited pro forma financial information set forth below reflects the net
revenue and net loss assuming the KWBP and WBXX transactions had occurred on
January 1, 1997. No pro forma adjustment has been made for the WBXX transaction
because WBXX did not begin broadcasting or significant operations until
subsequent to the acquisition date. This unaudited pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the acquisition occurred on January 1, 1997.
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YEAR ENDED
DECEMBER 31, 1997
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Net Revenues................................................... $11,347,000
Net Loss....................................................... $(7,150,000)
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During 1997, ACME Parent entered into and contributed to the Company the right
to: (i) acquire 49% of the licensee of Station KZAR in exchange for member units
in ACME Parent valued at $6 million, (ii) pay $3 million for an option to
acquire the remaining 51% interest in the licensee of Station KZAR for $5
million, exercisable immediately after the station commences on-air operations,
which is expected to occur in the second quarter of 1998.
On December 15, 1997, the Company acquired the 49% interest in the licensee of
Station KZAR, paid $3 million to acquire the option and loaned the sellers $4
million. This 49% interest is accounted for using the equity method. In the
event the Company exercises the option to acquire the remaining 51%, the $4
million loan will be applied against the remaining purchase price. In addition,
the Company considers the $3 million paid to acquire the option as part of the
purchase price. Accordingly, at December 31, 1997, the amount paid to acquire
the option and the loan have been included in other non-current assets.
On January 22, 1998, ACME Parent issued $6 million of its member units to the
sellers of the 49% interests in the license of Station KZAR in connection with
the above transaction. The amount of the issuance was based upon a fixed dollar
amount of consideration. ACME Parent contributed this investment to the Company
in exchange for membership units in the Company. The Company did not record the
$6 million investment or increase in capital until the consideration was issued
in January of 1998.
(4) SUBSEQUENT AND PENDING ACQUISITIONS
On July 29, 1997, ACME Parent entered into and subsequently contributed to ACME
Missouri a stock purchase agreement to acquire Koplar Communications, Inc.
(KCI). On September 30, 1997, ACME Missouri placed $143 million into an escrow
account, classified as a deposit on the accompanying Consolidated Balance Sheet,
in connection with this acquisition, entered into a long-term LMA with Station
KPLR and filed requisite applications with the FCC for the transfer of the
Station's license to ACME Missouri.
Pursuant to the LMA entered into on September 30, 1997 relating to Station KPLR,
the Company retained all revenues generated by the station, bore substantially
all operating expenses of the stations and was obligated to pay an LMA fee.
These revenues and expenses for the period October 1 through December 31, 1997
are included in the Company's operating results. However, since the Company did
not acquire KCI until after December 31, 1997, the assets and liabilities of KCI
are included in the Company's consolidated balance sheet at December 31, 1997.
On March 13, 1998, the acquisition of KCI was consummated and the LMA was
terminated.
In connection with the acquisition of KCI, ACME Missouri entered into a
management agreement with Edward J. Koplar (the 'Management Agreement'),
providing for an annual fee of $1 million over an initial term of three years
(which is deemed to have commenced on October 1, 1997). Mr. Koplar has the right
to voluntarily terminate his services thereunder at any time and be paid any
remaining consulting fees that would be payable for the remaining term of the
agreement at the effective date of such termination. The Company does not intend
to renew the Management Agreement and has no right to require Mr. Koplar to
provide services pursuant thereto in exchange for the compensation payable
thereunder. Accordingly, the Company intends to treat the $3 million payable
pursuant to the Management Agreement as additional purchase price in connection
with the acquisition, allocate such amount to broadcast licenses, and amortize
such amount over a 20-year period.
On August 22, 1997, ACME New Mexico entered into an agreement with affiliates
of the sellers of station KZAR to acquire 100% of the interests in the
construction permit for Station KAUO for a consideration of $10,000. This
agreement was consummated on January 22, 1998.
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ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(5) SENIOR DISCOUNT NOTES
On September 30, 1997, ACME Television issued Senior Discount Notes (Television
Notes) with a face value of $175 million and received $127,370,000 in gross
proceeds from such issuance. These Television Notes provide for semi-annual cash
interest payments at an annual rate of 10.875% beginning in the fourth year with
the first interest payment due on March 31, 2001. The Television Notes are
subordinated to the Company's bank revolver (see Note 7) and to the Company's
capital equipment finance facilities. The Television Notes mature on September
30, 2004 and may not be prepaid without penalty.
The Television Notes contain certain covenants and restrictions including
restrictions on future indebtedness and limitations on investments, and
transactions with affiliates. The Company was in compliance with all such
convenants and restrictions at December 31, 1997.
Costs associated with the issuance of these notes, including the underwriters
fees and related professional fees are included in long-term other assets and
will be amortized over the term of the Television Notes.
(6) UNIT OFFERING
On September 30, 1997, the Company issued 71,634 Units (the Unit Offering)
consisting of 71,634 membership units (representing 8% of the Company's
outstanding membership equity) and $71,634,000 (par value at maturity) in 12%
Senior Secured Discount Notes (Intermediate Notes). Cash interest on the
Intermediate Notes is payable semi-annually in arrears, commencing with the
six-month period ending March 31, 2003 and the notes mature on September 30,
2005. The net proceeds from the Unit Offering, after the deduction of
underwriter fees and other related offering costs, were $38.3 million and were
received by the Company on September 30, 1997. The Company has allocated
approximately $3.5 million of such net proceeds to the membership units, $35.6
million to the discounted note payable and $1.5 million to prepaid financing
costs--the latter which is being amortized over the eight year term of the
notes. The Intermediate Notes contain certain convenants and restrictions
including restrictions on future indebtedness and restricted payments, as
defined, and limitations on liens, investments, transactions with affiliates and
certain assets sales. The Company was in compliance with all such convenants and
restrictions at December 31, 1997. The Intermediate Notes are secured by a
first priority lien on all of the capital stock or limited liability company
interests of each subsidiary of ACME Intermediate directly owned by ACME
Intermediate, including all of the outstanding membership units of ACME
Television, LLC.
(7) BANK REVOLVER
On August 15, 1997, the Company entered into a $22.5 million revolving credit
facility (the Loan Agreement) with Canadian Imperial Bank Corporation (CIBC), of
which $3.5 million was drawn and outstanding as of September 30, 1997. Under the
terms of the Loan Agreement, advances bear interest at either the alternative
base rate or the adjusted LIBOR rate, as defined in the Loan Agreement. On
December 2, 1997, the Loan Agreement was amended to provide the Company with an
increased credit line to $40 million, more favorable interest rates and a
lengthened term. There was no outstanding balance due under the Loan Agreement
as of December 31, 1997.
The Loan Agreement contains certain covenants and restrictions including
restrictions on future indebtedness and limitations on investments, and
transactions with affiliates. The Company was in compliance with all such
covenants and restrictions at December 31, 1997.
Costs associated with the procuring of bank credit facilities, including loan
fees and related professional fees, are included in long-term other assets and
will be amortized over the term of the Loan Agreement.
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SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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
By: /s/ THOMAS ALLEN
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Thomas Allen
Executive Vice President, Chief
Financial officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K (containing only financial statements for the period
in question in accordance with Rule 15d-2) has been signed by the following
persons on behalf of the registrant in the capacities and on the dates
indicated.
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SIGNATURE TITLE DATE
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/s/ JAMIE KELLNER Chairman of the Board and Chief April 10, 1998
- ----------------------------------------------------- Executive Officer
Jamie Kellner
/s/ DOUGLAS GEALY President, Chief Operating April 10, 1998
- ----------------------------------------------------- Officer, Secretary and Director
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief April 10, 1998
- ----------------------------------------------------- Financial Officer and Director
Thomas Allen
/s/ THOMAS ALLEN Managing Member April 10, 1998
- -----------------------------------------------------
ACME TELEVISION HOLDINGS, LLC
By: Thomas Allen
Title: Executive Vice President and
Chief Financial Officer
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