<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
----------------
FORM 10-Q/A
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
-------------
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 1-14599
----------------
INFINITY BROADCASTING CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-4030071
------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
40 WEST 57TH STREET, NEW YORK, NY 10019
--------------------------------------------------
(Address of principal executive offices, zip code)
(212) 314-9200
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(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
AT JULY 31, 1999, 149,983,000 SHARES OF CLASS A COMMON STOCK AND 700,000,000
SHARES OF CLASS B COMMON STOCK WERE OUTSTANDING.
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<PAGE> 2
The Company hereby amends the following items of its Quarterly Report on Form
10-Q for the six months ended June 30, 1999 (the Original Filing). Each of the
below referenced Items in Part I are hereby amended by deleting the Items in
their entirety and replacing them with the Items set forth herein. Any Items or
Exhibits in the Original Filing not expressly changed hereby shall be as set
forth in the Original Filing.
PART I
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INFINITY BROADCASTING CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(unaudited, in thousands except per-share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------------------------
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $681,957 $521,928 $1,220,584 $ 897,045
Less agency commissions (84,684) (66,164) (149,576) (111,673)
- --------------------------------------------------------------------------------------------------------------------------
Net revenues 597,273 455,764 1,071,008 785,372
- --------------------------------------------------------------------------------------------------------------------------
Operating expenses excluding depreciation and amortization 327,575 253,509 626,149 465,776
Depreciation and amortization 73,928 56,926 146,538 105,939
Corporate expenses 4,615 4,421 9,620 8,870
- --------------------------------------------------------------------------------------------------------------------------
Total operating expenses 406,118 314,856 782,307 580,585
- --------------------------------------------------------------------------------------------------------------------------
Operating earnings 191,155 140,908 288,701 204,787
Interest expense, net 79 (4,760) (2,123) (4,760)
Other income (expense), net (41) 637 (133) 613
- --------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and minority interest 191,193 136,785 286,445 200,640
Income taxes (91,586) (69,694) (139,213) (102,229)
Minority interest in (income) loss of consolidated subsidiaries 21 (214) 56 (92)
- --------------------------------------------------------------------------------------------------------------------------
Net earnings $ 99,628 $ 66,877 $ 147,288 $ 98,319
- --------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per common share $ 0.12 $ 0.10 $ 0.17 $ 0.14
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to the Condensed Consolidated Financial Statements.
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<PAGE> 4
INFINITY BROADCASTING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands except share and per-share amounts)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 535,211 $ 497,701
Receivables (net of allowance for doubtful accounts of
$34,645 and $27,463, respectively) 469,230 460,966
Prepaid and other current assets 56,559 39,206
Deferred tax assets 29,527 19,641
- -------------------------------------------------------------------------------------------------
Total current assets 1,090,527 1,017,514
Property and equipment, net 249,929 236,584
Goodwill, net 5,365,519 5,426,627
FCC licenses, net 3,694,669 3,683,988
Transit franchise agreements, net 241,505 248,555
Other assets 149,933 184,975
- -------------------------------------------------------------------------------------------------
Total assets $ 10,792,082 $ 10,798,243
- -------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current maturities of long-term debt $ 74,445 $ 647
Accounts payable and accrued expenses 221,071 176,430
Accrued compensation 44,705 39,750
Accrued interest 7,433 12,113
Accrued income taxes 36,583 3,000
- -------------------------------------------------------------------------------------------------
Total current liabilities 384,237 231,940
Long-term debt 262,897 523,960
Deferred taxes 1,148,962 1,156,244
Other noncurrent liabilities 39,430 28,072
- -------------------------------------------------------------------------------------------------
Total liabilities 1,835,526 1,940,216
- -------------------------------------------------------------------------------------------------
Contingent liabilities and commitments
- -------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, par value $0.01 (50,000,000 shares
authorized, none issued) -- --
Class A common stock, par value $0.01 (2,000,000,000 shares
authorized, 155,250,000 shares issued) 1,553 1,553
Class B common stock, par value $0.01 (2,000,000,000 shares
authorized, 700,000,000 shares issued) 7,000 7,000
Capital in excess of par value 8,805,448 8,805,448
Common stock held in treasury, at cost (48,759) --
Accumulated earnings 191,314 44,026
- -------------------------------------------------------------------------------------------------
Total stockholders' equity 8,956,556 8,858,027
- -------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 10,792,082 $ 10,798,243
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to the Condensed Consolidated Financial Statements.
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<PAGE> 5
INFINITY BROADCASTING CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 147,288 $ 98,319
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 146,538 105,939
Deferred taxes 2,607 (3,812)
Other noncash items (3,296) --
Changes in assets and liabilities, net of acquisitions and dispositions
(Increase) decrease in accounts receivable (8,264) 5,937
(Increase) decrease in other assets (19,714) (10,203)
Increase (decrease) in accounts payable and accrued expenses 29,246 13,897
Increase (decrease) in accrued interest (4,680) 1,045
Increase (decrease) in accrued income taxes 33,583 --
Increase (decrease) in other liabilities (4,468) (8,410)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 318,840 202,712
- ---------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from dispositions 58,750 11,831
Business acquisitions (101,422) (1,393,326)
Capital expenditures (19,561) (10,987)
- ---------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (62,233) (1,392,482)
- ---------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Receipts from CBS, net -- 1,777,215
Purchase of treasury stock (34,366) --
Repayment of debt (184,731) (566,576)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (219,097) 1,210,639
- ---------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 37,510 20,869
Cash and cash equivalents at beginning of period 497,701 22,522
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 535,211 $ 43,391
- ---------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 20,744 $ 3,715
Income taxes $ 103,114 $ 106,041
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to the Condensed Consolidated Financial Statements.
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<PAGE> 6
INFINITY BROADCASTING CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The condensed consolidated financial statements include the accounts of Infinity
Broadcasting Corporation and its subsidiary companies (together, the Company or
Infinity) after elimination of intercompany accounts and transactions. When
reading the financial information contained in this Quarterly Report, reference
should be made to the consolidated financial statements, schedule, and notes
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as amended by Form 10-K/A, and the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999, as amended by Form 10-Q/A.
Certain previously reported amounts have been reclassified to conform to the
1999 presentation.
The Company was incorporated in September 1998 to own and operate the radio and
outdoor advertising business of CBS Corporation (CBS). In December 1998, CBS
contributed to the Company, at book value, its radio and outdoor advertising
properties.
On May 27, 1999, the Company entered into an agreement to acquire Outdoor
Systems, Inc. (Outdoor Systems) for approximately $8.7 billion which includes
the assumption of $1.8 billion of Outdoor Systems debt. The terms of the
agreement call for each Outdoor Systems common share to be exchanged for 1.25
shares of Infinity Class A common stock. Outdoor Systems is the largest outdoor
advertising company in North America, operating bulletin, poster, mall and
transit advertising display faces in the United States, Canada, and Mexico. The
consummation of the merger is subject to certain conditions, including approval
by Outdoor Systems and Infinity shareholders and review of certain regulatory
bodies. In connection with the Hart-Scott-Rodino Antitrust Improvements Act of
1976 filing, the Company has received a second request for information from the
Department of Justice, to which it is responding. The Company believes that the
transaction will close in the fourth quarter of 1999.
The condensed consolidated financial statements have been prepared assuming that
the Company existed as a stand-alone entity during all periods presented. Any
acquisitions by CBS during these periods have been presented as the Company's
transactions, and any consideration to effect these acquisitions has been
treated as a capital contribution by CBS to the Company. These acquisitions
include (a) the radio operations of CBS Inc. in November 1995, (b) Infinity
Media Corporation (formerly Infinity Broadcasting Corporation) and subsidiaries,
which includes TDI Worldwide, Inc. (TDI), (collectively, Old Infinity), on
December 31, 1996, and (c) the radio operations of CBS Radio, Inc. and
subsidiaries (formerly American Radio Systems Corporation) (American Radio) in
June 1998. The operating results for the acquired entities have been included in
the Company's Condensed Consolidated Statement of Earnings from their respective
dates of acquisition. See note 2 to the condensed consolidated financial
statements.
Certain prior period financial information included herein may not necessarily
reflect what the consolidated results of operations, financial position, changes
in stockholders' equity and cash flows of the Company would have been had the
Company been a separate, stand-alone entity during those prior periods
presented.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. On an ongoing basis,
management reviews its estimates, including those related to intangible assets,
program rights, contracts, allowance for doubtful accounts, income taxes and
litigation, based on currently available information. Changes in facts and
circumstances may result in revised estimates. In the opinion of management, the
condensed consolidated financial statements include all material adjustments
necessary to present fairly the Company's financial position, results of
operations, and cash flows. Such adjustments are of a normal recurring nature.
The results for this interim period are not necessarily indicative of results
for the entire year or any other interim period.
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<PAGE> 7
2. ACQUISITIONS
In June 1998, the Company acquired the radio broadcasting operations of American
Radio for $1.4 billion in cash plus the assumption of debt with a fair value of
approximately $1.3 billion. The acquisition was accounted for under the purchase
method. The excess consideration paid over the estimated fair value of net
assets acquired totaling approximately $0.8 billion was recorded as goodwill and
is being amortized on a straight-line basis over 40 years.
The following unaudited pro forma information combines the consolidated results
of operations of the Company with those of American Radio as if the American
Radio acquisition occurred on January 1, 1998. The pro forma results give effect
to certain purchase accounting adjustments, including additional depreciation
expense resulting from a step-up in the basis of fixed assets, additional
amortization expense from goodwill and other identifiable intangible assets,
increased interest expense from acquisition debt and related income tax effects.
PRO FORMA RESULTS
(unaudited, in thousands except per-share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------------------------
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 597,273 $ 534,439 $1,071,008 $ 952,747
Net earnings 99,628 66,941 147,288 91,703
Net earnings per common share - basic and diluted $ 0.12 $ 0.10 $ 0.17 $ 0.13
- --------------------------------------------------------------------------------------------------------------
</TABLE>
This pro forma financial information is presented for comparative purposes only
and is not necessarily indicative of the operating results that actually would
have occurred had the American Radio acquisition been consummated on January 1,
1998. In addition, these results are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
(in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable $ 52,916 $ 41,685
Accrued transit franchise payments 28,151 25,562
Other 140,004 109,183
- ---------------------------------------------------------------------------------
Total accounts payable and accrued expenses $ 221,071 $ 176,430
- ---------------------------------------------------------------------------------
</TABLE>
4. RELATED PARTY TRANSACTIONS
In connection with the formation and capitalization of the Company discussed in
note 1, the Company entered into an intercompany agreement with CBS. The Company
utilizes certain executive and other services provided by CBS or its
subsidiaries. Certain officers of CBS serve as officers of the Company.
Additional services provided by CBS include, among others, certain financial and
administrative services. For the three months and six months ended June 30,
1999, allocated expenses in the approximate amounts of $1.8 million and $3.5
million, respectively, were included in the Condensed Consolidated Statement of
Earnings of the Company. During the same periods in 1998, allocated expenses
totaled $1.1 million and $3.0 million, respectively.
The Company owns a minority equity interest in Westwood One, Inc. (Westwood
One). Most of the Company's stations are affiliated with Westwood One, and
Westwood One distributes nationally certain of the Company's network
programming. In connection with these arrangements, the Company receives
affiliation fees as well as programming cost reimbursements and in certain
instances shares in revenue from the sale of the Company's programming. In
addition, certain officers of the Company serve as officers of Westwood One for
which the Company receives a management fee. For the three months and six months
ended June 30, 1999, revenue and expense reimbursements from these arrangements
recorded by the Company totaled approximately $16 million and $32 million,
respectively. During the same periods in 1998, these amounts were $13 million
and $31 million, respectively.
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<PAGE> 8
5. EARNINGS PER COMMON SHARE
The Company adopted SFAS No. 128 "Earnings per Share" which requires the
disclosure of basic and diluted earnings per share and related computations as
follows:
COMPUTATION OF EARNINGS PER COMMON SHARE
(unaudited, in thousands except per-share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings applicable to common stock $ 99,628 $ 66,877 $147,288 $ 98,319
- ------------------------------------------------------------------------------------------------
Average shares outstanding - basic 854,794 700,000 854,990 700,000
Diluted effect of stock option plans 144 -- 72 --
- ------------------------------------------------------------------------------------------------
Average shares outstanding - diluted 854,938 700,000 855,062 700,000
- ------------------------------------------------------------------------------------------------
Basic and diluted earnings per common share $ 0.12 $ 0.10 $ 0.17 $ 0.14
- ------------------------------------------------------------------------------------------------
</TABLE>
6. SEGMENT INFORMATION
The Company's operations are aligned into two business segments, Radio and
Outdoor, which are consistent with the mediums through which the Company sells
its advertising and the Company's financial reporting structure.
SEGMENT RESULTS OF OPERATIONS
(unaudited, in thousands)
<TABLE>
<CAPTION>
REVENUE OPERATING EARNINGS EBITDA
----------------------- --------------------- ---------------------
THREE MONTHS ENDED JUNE 30, 1999 1998 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Radio $ 463,154 $347,822 $167,484 $121,442 $234,382 $172,956
Outdoor 134,119 107,942 23,671 19,466 30,660 25,515
- ----------------------------------------------------------------------------------------------------------
Total Out-of-Home $ 597,273 $455,764 $191,155 $140,908 $265,042 $198,471
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
REVENUE OPERATING EARNINGS EBITDA
----------------------- --------------------- ---------------------
SIX MONTHS ENDED JUNE 30, 1999 1998 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Radio $ 827,583 $586,780 $252,533 $175,548 $385,400 $270,580
Outdoor 243,425 198,592 36,168 29,239 49,706 40,759
- ----------------------------------------------------------------------------------------------------------
Total Out-of-Home $1,071,008 $785,372 $288,701 $204,787 $435,106 $311,339
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Management believes that earnings before interest, taxes, minority interest,
depreciation and amortization (EBITDA) is an appropriate measure for evaluating
the operating performance of the Company's business. EBITDA eliminates the
effect of depreciation and amortization of tangible and intangible assets, most
of which were acquired in acquisitions accounted for under the purchase method
of accounting, including CBS Inc.'s radio operations, Old Infinity and American
Radio. The exclusion of amortization expense eliminates variations in results
among stations or other entities caused by the timing of acquisitions. More
recent acquisitions reflect higher amortization expense due to increasing prices
associated with out-of-home properties. However, EBITDA should be considered in
addition to, not as a substitute for, operating earnings, net earnings, cash
flows and other measures of financial performance reported in accordance with
generally accepted accounting principles. As EBITDA is not a measure of
performance calculated in accordance with generally accepted accounting
principles, this measure may not be comparable to similarly titled measures
employed by other companies.
Net revenues of $52 million and $91 million for the three months and six months
ended June 30, 1999, respectively, were derived from the Company's foreign
operations, compared to $41 million and $74 million for the corresponding
periods of 1998.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Infinity Broadcasting Corporation (Infinity or the Company) was formed in
September 1998 as a wholly owned subsidiary of CBS Corporation (CBS) to own and
operate its radio and outdoor advertising segment. The radio broadcasting
properties and TDI Worldwide, Inc. (TDI), one of the largest outdoor advertising
companies in the United States, comprise the Company's out-of-home media
business focusing on providing advertising to targeted demographic audiences
outside the consumer's home.
In December 1998, the Company completed an initial public offering of
155,250,000 shares of its Class A common stock, generating net proceeds of $3.0
billion. Following the stock offering, CBS owned 81.8% of the Company's equity
and 95.8% of the voting power.
On May 27, 1999, the Company entered into an agreement to acquire Outdoor
Systems, Inc. (Outdoor Systems) for approximately $8.7 billion which includes
the assumption of $1.8 billion of Outdoor Systems debt. The terms of the
agreement call for each Outdoor Systems common share to be exchanged for 1.25
shares of Infinity Class A common stock. Outdoor Systems is the largest outdoor
advertising company in North America, operating bulletin, poster, mall and
transit advertising display faces in the United States, Canada, and Mexico. The
consummation of the merger is subject to certain conditions, including approval
by Outdoor Systems and Infinity shareholders and review of certain regulatory
bodies. In connection with the Hart-Scott-Rodino Antitrust Improvements Act of
1976 filing, the Company has received a second request for information from the
Department of Justice, to which it is responding. The Company believes that the
transaction will close in the fourth quarter of 1999.
The condensed consolidated financial statements have been prepared assuming that
the Company existed as a stand-alone entity during all periods presented. Any
acquisitions of radio or outdoor advertising properties by CBS during these
periods have been presented as the Company's transactions, and any consideration
to effect these acquisitions has been treated as a capital contribution by CBS
to the Company. These acquisitions include (a) the November 1995 acquisition of
the radio operations of CBS Inc. for $1.2 billion of cash, (b) the December 31,
1996 acquisition of Infinity Media Corporation (formerly known as Infinity
Broadcasting Corporation) and subsidiaries, which includes TDI (collectively,
Old Infinity), for $4.7 billion, consisting of $3.8 billion of CBS's common
stock and $0.9 billion of debt that was repaid immediately prior to the
acquisition, and (c) the June 1998 acquisition of the radio operations of CBS
Radio, Inc. and subsidiaries (formerly American Radio Systems Corporation)
(American Radio) for $1.4 billion of cash plus the assumption of debt with a
fair value of approximately $1.3 billion. See note 2 to the condensed
consolidated financial statements.
The Condensed Consolidated Statement of Earnings and Condensed Consolidated
Statement of Cash Flows for the three and six months ended June 30, 1998 are not
necessarily indicative of the results of operations and cash flows that would
have resulted had the Company actually operated as a separate, stand-alone
entity.
RESULTS OF OPERATIONS
The Company's operations are aligned into two business segments, Radio and
Outdoor, which are consistent with the mediums through which the Company sells
its advertising and the Company's financial reporting structure.
USE OF EBITDA
Management believes that earnings before interest, taxes, minority interest,
depreciation and amortization (EBITDA) is an appropriate measure for evaluating
the operating performance of the Company's business. EBITDA eliminates the
effect of depreciation and amortization of tangible and intangible assets, most
of which were acquired in acquisitions accounted for under the purchase method
of accounting, including CBS Inc.'s radio operations, Old Infinity and American
Radio. The exclusion of amortization expense eliminates variations in results
among stations or other entities caused by the timing of acquisitions. More
recent acquisitions reflect higher amortization expense due to increasing prices
associated with out-of-home properties. However, EBITDA should be considered in
addition to, not as a substitute for, operating earnings, net earnings, cash
flows and other measures of financial performance reported in accordance with
generally accepted accounting principles. As EBITDA is not a measure of
performance
-9-
<PAGE> 10
calculated in accordance with generally accepted accounting principles, this
measure may not be comparable to similarly titled measures employed by other
companies.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998
Certain discussions below provide a comparison of actual results with pro forma
results. For the three months ended June 30, 1999 and 1998 comparisons, pro
forma results were determined as if the acquisition of American Radio and
related divestitures and exchanges had occurred on January 1, 1998.
The Company's net revenues for the three months ended June 30, 1999 were $597
million compared to $456 million for the three months ended June 30, 1998, an
increase of approximately 31%. Radio net revenues for the three months ended
June 30, 1999 were $463 million compared to $348 million for the three months
ended June 30, 1998, an increase of approximately 33%. Driving this increase was
the continued strong performance of the stations and the inclusion of the
operations of American Radio in the Company's results subsequent to its June
1998 acquisition. Outdoor net revenues for the three months ended June 30, 1999
were $134 million compared to $108 million for the three months ended June 30,
1998, an increase of approximately 24%. Driving this increase was the strong
performance of the Company's outdoor advertising business and the February 1999
acquisition of Alrecon, the outdoor subsidiary of the Dutch national rail
company. On a pro forma basis, the Company's net revenues for the three months
ended June 30, 1999 compared to the three months ended June 30, 1998 increased
approximately 15%.
The Company's operating expenses excluding depreciation and amortization expense
for the three months ended June 30, 1999 were $328 million compared to $254
million for the three months ended June 30, 1998, an increase of approximately
29%. Radio operating expenses for the three months ended June 30, 1999 were $224
million compared to $171 million for the three months ended June 30, 1998, an
increase of approximately 31%. Outdoor operating expenses for the three months
ended June 30, 1999 were $104 million compared to $83 million for the three
months ended June 30, 1998, an increase of approximately 24%. These increases
were primarily attributable to the higher revenues generated by Radio and
Outdoor, as well as Radio's June 1998 acquisition of American Radio. On a pro
forma basis, the Company's operating expenses for the three months ended June
30, 1999 compared to the three months ended June 30, 1998 increased
approximately 12%. Operating expenses on a pro forma basis did not increase in
the same proportion as the increase in revenues because a substantial portion of
the Company's costs are fixed. The Company's depreciation and amortization
expense for the three months ended June 30, 1999 was $74 million compared to $57
million for the three months ended June 30, 1998, an increase of approximately
30%. Radio depreciation and amortization expense for the three months ended June
30, 1999 was $67 million compared to $51 million for the three months ended
June, 1998, an increase of approximately 31%. The increase primarily represents
additional depreciation and amortization expense resulting from the June 1998
acquisition of American Radio. Outdoor depreciation and amortization expense for
the three months ended June 30, 1999 was $7 million compared to $6 million for
the three months ended June 30, 1998. The increase primarily represents
additional depreciation and amortization expense resulting from the February
1999 acquisition of Alrecon.
The Company's operating earnings for the three months ended June 30, 1999 were
$191 million compared to $141 million for the three months ended June 30, 1998,
an increase of approximately 36%. Radio operating earnings for the three months
ended June 30, 1999 were $167 million compared to $122 million for the three
months ended June 30, 1998, an increase of approximately 38%. Outdoor operating
earnings for the three months ended June 30, 1999 were $24 million compared to
$19 million for the three months ended June 30, 1998, an increase of
approximately 22%. These increases were primarily attributable to the higher
revenues of Radio and Outdoor, as well as Radio's June 1998 acquisition of
American Radio. On a pro forma basis, the Company's operating earnings for the
three months ended June 30, 1999 compared to the three months ended June 30,
1998 increased approximately 29%.
The Company's EBITDA for the three months ended June 30, 1999 was $265 million
compared to $198 million for the three months ended June 30, 1998, an increase
of approximately 34%. Radio EBITDA for the three months ended June 30, 1999 was
$234 million compared to $173 million for the three months ended June 30, 1998,
an increase of approximately 36%. Outdoor EBITDA for the three months ended June
30, 1999 was $31 million compared to $25 million for the three months ended June
30, 1998, an increase of approximately 20%. On a pro forma basis, the Company's
EBITDA for the three months ended June 30, 1999 compared to the three months
ended June 30, 1998 increased approximately 20%.
-10-
<PAGE> 11
Income taxes for the three months ended June 30, 1999 were $92 million compared
to $70 million for the three months ended June 30, 1998. The effective tax rate
was 48% for the three months ended June 30, 1999 compared to 51% for the three
months ended June 30, 1998. The Company's effective tax rate exceeds the federal
statutory rate primarily because of the non-deductible goodwill amortization
resulting from recent business acquisitions. The decrease in the effective tax
rate is due to the Company's higher operating earnings.
Net earnings for the three months ended June 30, 1999 totaled $100 million
compared to $67 million for the three months ended June 30, 1998, an increase of
49%.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
Certain discussions below provide a comparison of actual results with pro forma
results. For the six months ended June 30, 1999 and 1998 comparisons, pro forma
results were determined as if the acquisition of American Radio and related
divestitures and exchanges had occurred on January 1, 1998.
The Company's net revenues for the six months ended June 30, 1999 were $1,071
million compared to $785 million for the six months ended June 30, 1998, an
increase of approximately 36%. Radio net revenues for the six months ended June
30, 1999 were $828 million compared to $587 million for the six months ended
June 30, 1998, an increase of approximately 41%. Driving this increase was the
continued strong performance of the stations and the inclusion of the operations
of American Radio in the Company's results subsequent to its June 1998
acquisition. Outdoor net revenues for the six months ended June 30, 1999 were
$243 million compared to $198 million for the six months ended June 30, 1998, an
increase of approximately 23%. Driving this increase was the strong performance
of the Company's outdoor advertising business and the February 1999 acquisition
of Alrecon. On a pro forma basis, the Company's net revenues for the six months
ended June 30, 1999 compared to the six months ended June 30, 1998 increased
approximately 15%.
The Company's operating expenses excluding depreciation and amortization expense
for the six months ended June 30, 1999 were $626 million compared to $466
million for the six months ended June 30, 1998, an increase of approximately
34%. Radio operating expenses for the six months ended June 30, 1999 were $432
million compared to $308 million for the six months ended June 30, 1998, an
increase of approximately 41%. Outdoor operating expenses for the six months
ended June 30, 1999 were $194 million compared to $158 million for the six
months ended June 30, 1998, an increase of approximately 22%. These increases
were primarily attributable to the higher revenues generated by Radio and
Outdoor, as well as Radio's June 1998 acquisition of American Radio. On a pro
forma basis, the Company's operating expenses for the six months ended June 30,
1999 compared to the six months ended June 30, 1998 increased approximately 11%.
Operating expenses on a pro forma basis did not increase in the same proportion
as the increase in revenues because a substantial portion of the Company's costs
are fixed. The Company's depreciation and amortization expense for the six
months ended June 30, 1999 was $147 million compared to $106 million for the six
months ended June 30, 1998, an increase of approximately 38%. Radio depreciation
and amortization expense for the six months ended June 30, 1999 was $133 million
compared to $95 million for the six months ended June, 1998, an increase of
approximately 40%. The increase primarily represents additional depreciation and
amortization expense resulting from the June 1998 acquisition of American Radio.
Outdoor depreciation and amortization expense for the six months ended June 30,
1999 was $14 million compared to $11 million for the six months ended June 30,
1998. The increase primarily represents additional depreciation and amortization
expense resulting from the February 1999 acquisition of Alrecon.
The Company's operating earnings for the six months ended June 30, 1999 were
$289 million compared to $205 million for the six months ended June 30, 1998, an
increase of approximately 41%. Radio operating earnings for the six months ended
June 30, 1999 were $253 million compared to $176 million for the six months
ended June 30, 1998, an increase of approximately 44%. Outdoor operating
earnings for the six months ended June 30, 1998 were $36 million compared to $29
million for the six months ended June 30, 1998, an increase of approximately
24%. These increases were primarily attributable to the higher revenues of Radio
and Outdoor, as well as Radio's June 1998 acquisition of American Radio. On a
pro forma basis, the Company's operating earnings for the six months ended June
30, 1999 compared to the six months ended June 30, 1998 increased approximately
37%.
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The Company's EBITDA for the six months ended June 30, 1999 was $435 million
compared to $311 million for the six months ended June 30, 1998, an increase of
approximately 40%. Radio EBITDA for the six months ended June 30, 1999 was $385
million compared to $270 million for the six months ended June 30, 1998, an
increase of approximately 42%. Outdoor EBITDA for the six months ended June 30,
1999 was $50 million compared to $41 million for the six months ended June 30,
1998, an increase of approximately 22%. On a pro forma basis, the Company's
EBITDA for the six months ended June 30, 1999 compared to the six months ended
June 30, 1998 increased approximately 23%.
Income taxes for the six months ended June 30, 1999 were $139 million compared
to $102 million for the six months ended June 30, 1998. The effective tax rate
was 49% for the six months ended June 30, 1999 compared to 51% for the six
months ended June 30, 1998. The Company's effective tax rate exceeds the federal
statutory rate primarily because of the non-deductible goodwill amortization
resulting from recent business acquisitions. The decrease in the effective tax
rate is due to the Company's higher operating earnings.
Net earnings for the six months ended June 30, 1999 totaled $147 million
compared to $98 million for the six months ended June 30, 1998, an increase of
approximately 50%.
SEASONALITY
Seasonal revenue fluctuations are common in the out-of-home media industry. The
Company's revenue is typically lowest in the first quarter and highest in the
second and fourth quarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations generate cash substantially in excess of that required
for recurring operations and capital expenditures. At June 30, 1999, the
Company's cash and cash equivalents totaling $535 million exceeded its total
debt of $337 million by $198 million. Management expects that because of the
Company's strong cash position, it will have sufficient liquidity to meet its
future business needs. Sources of liquidity generally available to the Company
include cash from operations, cash and cash equivalents, borrowings, and
issuances of equity securities.
Operating Activities
The Company's operating activities provided $319 million of cash during the
first six months of 1999 compared to $203 million during the first six months of
1998. The increase relates primarily to the improved operating results during
the first and second quarters of 1999. Subsequent to the Company's initial
public offering in December 1998, income taxes are paid pursuant to the terms of
the tax sharing agreement between the Company and CBS.
Investing Activities
The Company's investing activities used cash of $62 million during the first six
months of 1999 compared to $1,392 million during the first six months of 1998.
Cash used during the first six months of 1999 related primarily to the net
impact of acquisitions, dispositions, and capital expenditures. In June of 1998,
the Corporation completed the acquisition of the radio broadcasting operations
of American Radio for $1.4 billion in cash plus the assumption of debt with fair
value of approximately $1.3 billion.
During the first quarter of 1999, the Company acquired Alrecon, the outdoor
subsidiary of the Dutch national rail company, for $34 million in cash. On April
30, 1999, the Company acquired two radio stations in Tampa, Florida and one in
Cleveland, Ohio from Clear Channel Communications for $123 million in cash.
These acquisitions were funded by a combination of cash on hand and cash held in
acquisition trust.
The Company's capital expenditures totaled $20 million for the first six months
of 1999 compared to $11 million for the first six months of 1998. The Company's
business does not require substantial investment of capital. The increase in
capital expenditures during the first six months of 1999 was due primarily to
the incremental expenditures incurred on the American Radio stations, which were
acquired in June 1998.
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Financing Activities
Cash used for financing activities totaled $219 million during the first six
months of 1999 compared to $1,211 million provided during the first six months
of 1998. Cash used for financing activities during the first six months of 1999
related to the Company's repayment of outstanding debt and the purchase of
treasury stock. Cash provided by financing activities during the first six
months of 1998 reflects net contributions from CBS for the American Radio
acquisition offset by cash earnings generated by the Company.
On June 17, 1999, the Company announced that its board of directors had
authorized the purchase of up to $500 million of its class A common stock. As of
July 31, 1999, 5.3 million shares were repurchased at a cost of approximately
$148 million.
The Company has the ability to borrow up to $1.0 billion under CBS's revolving
credit agreement, which expires on August 29, 2001. No borrowings were
outstanding under this facility at June 30, 1999.
The Company does not anticipate paying any dividends on its common stock in the
near term.
YEAR 2000
The Year 2000 issue is the result of the development of computer programs and
computer chips using two digits rather than four digits to define the applicable
year. Computer programs and/or equipment with time-sensitive software or
computer chips may recognize the date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations causing
disruptions to business operations.
To address the Year 2000 issue, the Company has undertaken efforts to identify,
modify or replace, and test systems that may not be Year 2000 compliant. The
Company estimates its cost to achieve Year 2000 compliance to be approximately
$5 million, of which $4 million has been incurred to date. CBS has incurred
additional costs of approximately $2 million on behalf of the Company to ensure
compliance of the management information systems infrastructure. Approximately
60% of the total expenditures relate to replacement of existing systems. The
Company is funding these costs through its cash flows from operations. Such
costs are expensed as incurred.
The Company's centrally managed critical systems are currently Year 2000
compliant or will be replaced by Year 2000 compliant applications by the end of
the third quarter of 1999. A significant portion of the Year 2000 work for radio
systems has been performed or is underway. The Company has implemented Year 2000
procedures and guidelines for individual radio stations, and most high-risk
radio assets have been remediated and tested. The Company expects to test all
radio systems and believes it will be Year 2000 compliant by the end of the
third quarter of 1999.
The Year 2000 effort also includes communication with all significant third
party suppliers and customers to determine the extent to which the Company's
systems are vulnerable to those parties' failure to reach Year 2000 compliance.
There can be no guarantee that the Company's third party suppliers or customers
will be Year 2000 compliant on a timely basis and that failure to achieve
compliance would not have a material adverse impact on the Company's business
operations.
Although the Company believes that it will complete its Year 2000 effort and
will be compliant on time, there can be no assurances that this will occur. The
Company has developed initial contingency plans to ensure continued business
operations in case of Year 2000 related disruptions. These plans will be
finalized by the end of the third quarter of 1999.
The Company believes that it is difficult to fully assess the risks of the Year
2000 problem due to numerous uncertainties surrounding the issue. Management
believes that primary risks are external to the Company and relate to the Year
2000 readiness of its suppliers and customers. The inability of the Company or
its suppliers and customers to adequately address the Year 2000 issues on a
timely basis could result in a material financial risk, including loss of
revenue, substantial unanticipated costs and service interruptions. Accordingly,
the Company has been, and will continue to, devote the resources it concludes
are appropriate to address all significant Year 2000 issues in a timely manner.
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REGULATORY MATTERS
CBS has received, in the past, numerous permanent and temporary waivers to
permit ownership of a television station and numerous radio stations in the same
market. The temporary waivers were subject to the outcome of pending rulemaking
proceedings focusing upon the possible relaxation of the Federal Communications
Commission (FCC) rule restricting common ownership in the same market of radio
and television stations (the "one-to-a-market" rule).
Recently, the FCC issued its Report and Order with respect to this pending
rulemaking. The Order would amend the radio/television cross-ownership rule to
allow a single party to own in a market (a) up to two television stations (if
permitted by the FCC's television duopoly rule) and up to six radio stations or
(b) one television station and seven radio stations, in both instances under
certain circumstances.
Under the Report and Order, CBS is to submit within sixty days a showing as to
its compliance or non-compliance with the revised rule in those markets where it
currently has temporary waivers. CBS anticipates being able to demonstrate
compliance in all markets other than Los Angeles, Chicago, Baltimore, and
Dallas-Fort Worth, each of which has eight radio stations. As to those four
markets, the Report and Order provides that the FCC will continue the temporary
waivers until 2004, at which time the FCC will review its radio/television
cross-ownership rule, and CBS will have an opportunity to demonstrate that its
continued ownership of an eighth radio station in these markets would serve the
public interest.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q/A, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contains both
historical and forward-looking statements. All statements other than statements
of historical fact are, or may be deemed to be, forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements are not based on historical facts but rather reflect
the Company's current expectations concerning future results and events. The
words "believes," "expects," "intends," "plans," "anticipates," "likely,"
"will," and similar expressions identify such forward-looking statements. These
forward-looking statements are subject to risks, uncertainties, and other
factors, some of which are beyond the Company's control, that could cause actual
results to differ materially from those forecast or anticipated in such
forward-looking statements.
Such risks, uncertainties, and factors include, but are not limited to the
impact of changes in national, regional and local economics; successful
integration of any acquired properties; the Company's ability to develop and/or
acquire radio on-air talent and programming and to attract and retain
advertisers; the impact of significant competition from other radio stations and
programming alternatives such as broadcast television, newspapers, magazines,
cable television, the Internet, direct mail, and the impact of new technologies;
changes in FCC regulations; increased governmental regulation of the location,
size or content of outdoor advertising; and such other competitive and business
risks as from time to time may be detailed in the Company's Securities and
Exchange Commission reports.
Readers are cautioned not to place undue reliance on these forward-looking
statements which reflect management's view only as of the date of this Report on
Form 10-Q/A. The forward-looking statements included in this document are made
only as of the date of this document and the Company does not have any
obligation under Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, to publicly
update any forward-looking statements to reflect subsequent events or
circumstances.
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SIGNATURE
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, on the 24th day of September 1999.
INFINITY BROADCASTING CORPORATION
By: /s/ FARID SULEMAN
------------------------------
Farid Suleman
Executive Vice President,
Chief Financial Officer
and Treasurer
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