<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 MARCH 31, 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
---------------------------------------
(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
COMMON STOCK 155,250,000 SHARES OF CLASS A COMMON STOCK AND 700,000,000 SHARES
OF CLASS B COMMON STOCK OUTSTANDING AT APRIL 30, 1999
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<PAGE> 2
The Company hereby amends the following items of its Quarterly Report on Form
10-Q for the three months ended March 31, 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
MARCH 31,
--------------------------------------------
1999 1998
====================================================================================================================
<S> <C> <C>
Total revenues $ 538,627 $ 375,117
Less agency commissions (64,892) (45,509)
- --------------------------------------------------------------------------------------------------------------------
Net revenues 473,735 329,608
- --------------------------------------------------------------------------------------------------------------------
Operating expenses excluding depreciation and amortization 298,574 212,267
Depreciation and amortization 72,610 49,013
Corporate expenses 5,005 4,449
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 376,189 265,729
- --------------------------------------------------------------------------------------------------------------------
Operating earnings 97,546 63,879
Interest expense, net (2,202) --
Other expense, net (92) (24)
- --------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and minority interest 95,252 63,855
Income taxes (47,627) (32,535)
Minority interest in loss of consolidated subsidiaries 35 122
- --------------------------------------------------------------------------------------------------------------------
Net earnings $ 47,660 $ 31,442
====================================================================================================================
Basic and diluted earnings per common share $ 0.06 $ 0.04
====================================================================================================================
</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)
MARCH 31, DECEMBER 31,
1999 1998
==========================================================================================================================
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 626,675 $ 497,701
Receivable (net of allowance for doubtful accounts of $31,838
and $27,463, respectively) 401,942 460,966
Prepaid and other current assets 53,290 39,206
Deferred tax assets 29,527 19,641
- --------------------------------------------------------------------------------------------------------------------------
Total current assets 1,111,434 1,017,514
Property and equipment, net 249,735 236,584
Goodwill, net 5,401,513 5,426,627
FCC licenses, net 3,600,392 3,683,988
Transit franchise agreements, net 245,030 248,555
Other assets 205,028 184,975
- --------------------------------------------------------------------------------------------------------------------------
Total assets $10,813,132 $10,798,243
==========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses $ 216,444 $ 176,430
Accrued compensation 44,424 39,750
Accrued interest 7,559 12,113
Accrued income taxes 49,673 3,000
Other current liabilities 634 647
- --------------------------------------------------------------------------------------------------------------------------
Total current liabilities 318,734 231,940
Long-term debt 398,281 523,960
Deferred taxes 1,147,309 1,156,244
Other noncurrent liabilities 43,121 28,072
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,907,445 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
Accumulated earnings 91,686 44,026
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 8,905,687 8,858,027
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $10,813,132 $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>
THREE MONTHS ENDED MARCH 31, 1999 1998
=======================================================================================================================
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 47,660 $ 31,442
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 72,610 49,013
Deferred taxes 954 1,630
Other noncash items (1,786) --
Changes in assets and liabilities, net of acquisitions and dispositions
(Increase) decrease in accounts receivable 59,024 64,104
(Increase) decrease in other assets (13,548) (6,523)
Increase (decrease) in accounts payable and accrued expenses 40,014 (4,647)
Increase (decrease) in accrued interest (4,554) (6)
Increase (decrease) in accrued income taxes 46,673 --
Increase (decrease) in other liabilities (6,065) (7,792)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 240,982 127,221
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from dispositions 58,750 11,831
Business acquisitions and investments (16,326) --
Deposits in acquisition trust (20,588) --
Capital expenditures (10,299) (4,370)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 11,537 7,461
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Receipts from (payments to) CBS, net -- (133,399)
Repayment of debt (123,545) --
- ----------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (123,545) (133,399)
- ----------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 128,974 1,283
Cash and cash equivalents at beginning of period 497,701 22,522
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 626,675 $ 23,805
======================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 14,277 $ --
Income taxes -- 32,535
======================================================================================================================
</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. Certain previously reported
amounts have been reclassified to conform to the 1999 presentation.
Infinity 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.
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 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) on June 4, 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
On June 4, 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. Based on preliminary estimates, 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
MARCH 31,
--------------------------------
1999 1998
===================================================================================================================
<S> <C> <C>
Net revenues $ 473,735 $ 418,308
Net earnings 47,660 24,762
Net earnings per common share - basic and diluted 0.06 0.04
===================================================================================================================
</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)
MARCH 31, DECEMBER 31,
1999 1998
===================================================================================================================
<S> <C> <C>
Accounts payable $ 54,624 $ 41,685
Accrued transit franchise payments 31,870 25,562
Other 129,950 109,183
- -------------------------------------------------------------------------------------------------------------------
Total accounts payable and accrued expenses 216,444 176,430
===================================================================================================================
</TABLE>
4. LEGAL MATTERS
The Company is party to various legal proceedings arising in the ordinary course
of business. In the opinion of management of the Company, however, there are no
legal proceedings pending against the Company likely to have a material adverse
effect on the Company.
5. CONTINGENT LIABILITIES AND OTHER COMMITMENTS
The Company has commitments under operating leases for certain facilities and
equipment. Additionally, the Company has franchise rights entitling it to
display advertising on such outdoor media as buses, taxis, trains, bus shelters,
terminals, billboards, and phone kiosks. Under most of these franchise
agreements, the franchiser is entitled to receive the greater of a percentage of
the relevant advertising revenues, net of advertising agency fees, or a
specified guaranteed minimum annual payment. In addition, the Company routinely
enters into commitments to purchase broadcast rights. These contracts permit the
broadcast of such properties for various periods.
-7-
<PAGE> 8
6. 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 investor
relations, human resources, legal, investment, finance, real estate, information
management, internal audit, tax and treasury. For the three months ended March
31, 1999 and 1998, allocated expenses in the approximate amounts of $1.7 million
and $1.9 million, respectively, were included in the Condensed Consolidated
Statement of Earnings of the Company. Management of the Company believes these
allocations to be a fair and reasonable share of such costs.
The Company owns a minority equity interest in Westwood One, Inc. (Westwood
One). Most of Infinity'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 Infinity's programming. In addition, certain officers
of the Company serve as officers of Westwood One for which the Company receives
a management fee. Revenue and expense reimbursements from these arrangements
recorded by the Company totaled approximately $16 million and $18 million for
the three months ended March 31, 1999 and 1998, respectively.
7. 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
MARCH 31,
------------------------------------
1999 1998
===================================================================================================================
<S> <C> <C>
Net earnings applicable to common stock $ 47,660 $ 31,442
- -------------------------------------------------------------------------------------------------------------------
Average shares outstanding-basic 855,250 700,000
Diluted effect of stock option plans 1 --
- -------------------------------------------------------------------------------------------------------------------
Average shares outstanding-diluted 855,251 700,000
- -------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per common share $ 0.06 $ 0.04
===================================================================================================================
</TABLE>
8. 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 MARCH 31, 1999 1998 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Radio $ 364,429 $ 238,958 $ 85,049 $ 54,106 $ 151,018 $ 97,624
Outdoor 109,306 90,650 12,497 9,773 19,046 15,244
- ------------------------------------------------------------------------------------------------------------------
Total Out-of-Home $ 473,735 $ 329,608 $ 97,546 $ 63,879 $ 170,064 $112,868
- ------------------------------------------------------------------------------------------------------------------
</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
-8-
<PAGE> 9
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 $39 million for the three months ended March 31, 1999 were
derived from the Company's foreign operations as compared to $33 million for the
three months ended March 31, 1998.
-9-
<PAGE> 10
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, now comprise Infinity's out-of-home media
business focusing on providing advertising to targeted demographic audiences
outside the consumer's home.
In December, 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.
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 24, 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 4, 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 months ended March 31, 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 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 MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1998
Certain discussions below provide a comparison of actual results with pro forma
results. For the three months ended March 31, 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.
-10-
<PAGE> 11
The Company's net revenues for the three months ended March 31, 1999 were $474
million compared to $330 million for the three months ended March 31, 1998, an
increase of 44%. Radio net revenues for the three months ended March 31, 1999
were $365 million compared to $239 million for the three months ended March 31,
1998, an increase of approximately 53%. 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 March 31, 1999 were $109 million
compared to $91 million for the three months ended March 31, 1998, an increase
of approximately 21%. 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 March 31,
1999 compared to the three months ended March 31, 1998 increased approximately
16%.
The Company's operating expenses excluding depreciation and amortization expense
for the three months ended March 31, 1999 were $299 million compared to $212
million for the three months ended March 31, 1998, an increase of 41%. Radio
operating expenses for the three months ended March 31, 1999 were $209 million
compared to $137 million for the three months ended March 31, 1998, an increase
of approximately 52%. Outdoor operating expenses for the three months ended
March 31, 1999 were $90 million compared to $75 million for the three months
ended March 31, 1998, an increase of approximately 20%. These increases are
consistent with the respective increases in net revenues during these periods.
On a pro forma basis, the Company's operating expenses for the three months
ended March 31, 1999 compared to the three months ended March 31, 1998 increased
approximately 11%. The Company's depreciation and amortization expense for the
three months ended March 31, 1999 was $73 million compared to $49 million for
the three months ended March 31, 1998, an increase of approximately 48%. Radio
depreciation and amortization expense for the three months ended March 31, 1999
was $66 million compared to $44 million for the three months ended March 31,
1998, an increase of approximately 52%. 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 March 31, 1999 was $7 million compared to $5 million for
the three months ended March 31, 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 March 31, 1999 were
$98 million compared to $64 million for the three months ended March 31, 1998,
an increase of 53%. Radio operating earnings for the three months ended March
31, 1999 were $85 million compared to $54 million for the three months ended
March 31, 1998, an increase of approximately 57%. Outdoor operating earnings for
the three months ended March 31, 1999 were $13 million compared to $10 million
for the three months ended March 31, 1998, an increase of approximately 28%.
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 March
31, 1999 compared to the three months ended March 31, 1998 increased
approximately 56%.
The Company's EBITDA for the three months ended March 31, 1999 was $170 million
compared to $113 million for the three months ended March 31, 1998, an increase
of 51%. Radio EBITDA for the three months ended March 31, 1999 was $151 million
compared to $98 million for the three months ended March 31, 1998, an increase
of approximately 55%. Outdoor EBITDA for the three months ended March 31, 1999
was $19 million compared to $15 million for the three months ended March 31,
1998, an increase of approximately 25%. On a pro forma basis, the Company's
EBITDA for the three months ended March 31, 1999 compared to the three months
ended March 31, 1998 increased approximately 27%.
Income taxes for the three months ended March 31, 1999 were $48 million compared
to $33 million for the three months ended March 31, 1998. The effective tax rate
was 50% for the three months ended March 31, 1999 compared to 51% for the three
months ended March 31, 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.
Net earnings for the three months ended March 31, 1999 totaled $48 million
compared to $31 million for the three months ended March 31, 1998, an increase
of 52%.
-11-
<PAGE> 12
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
In general, the Company's operations generate cash substantially in excess of
that required for recurring operations and capital expenditures. As a result, at
March 31, 1999, the Company's cash and cash equivalents totaling $627 million
exceeded its total debt by $228 million. Management expects that because of the
Company's strong cash position and its equity of $8.9 billion as of March 31,
1999, 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 $241 million of cash during the
first three months of 1999 compared to $127 million during the first three
months of 1998. The increase relates primarily to the improved operating results
during the first quarter 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 provided cash of $12 million during the first
three months of 1999 compared to $7 million during the first three months of
1998. Cash provided during the first three months of 1999 related primarily to
the net impact of cash received from radio station dispositions, cash paid for
outdoor advertising acquisitions (including Alrecon), and capital expenditures.
The Company's capital expenditures totaled $10 million for the first three
months of 1999 compared to $4 million for the first three months of 1998. The
Company's business does not require substantial investment of capital. The
increase in capital expenditures during the first three months of 1999 was due
primarily to the incremental expenditures incurred on the American Radio
stations, which were acquired in June 1998.
Subsequent to the date of the condensed consolidated financial statements, 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.
Financing Activities
Cash used for financing activities totaled $124 million during the first three
months of 1999 compared to $133 million during the first three months of 1998.
Cash used for financing activities during the first three months of 1999 related
to the Company's repayment of outstanding debt. Cash used for financing
activities during the first three months of 1998 reflects net payments to CBS as
the Company generated cash earnings.
The Company has the ability to borrow up to $1.0 billion under CBS's revolving
credit agreement, which expires on August 29, 2001. Borrowing rates under this
agreement are determined at the time of each borrowing and are based generally
on a floating rate index, the London Interbank Offer Rate (LIBOR), plus a
margin. No borrowings were outstanding under this facility at March 31, 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.
-12-
<PAGE> 13
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 $3 million has been incurred to date. CBS will incur
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 expects to fund 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 mid 1999. A
significant portion of the Year 2000 work for radio systems has been performed
or is underway. The Company is currently in the process of developing Year 2000
procedures and guidelines for individual radio stations. The Company plans to
have all radio systems tested and compliant by mid 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.
The Company expects to develop a formal contingency plan to ensure continued
business operations in case of non-compliance with the Year 2000 on a timely
basis. Overall, the Company believes that it will complete its Year 2000 effort
and will be compliant on time. Although there can be no assurances that this
will occur, the Company has, and will continue to monitor its progress and
evaluate the need for a contingency plan. Based on its current plan, the Company
believes that it will have adequate time to prepare for contingency measures if
the need arises.
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 third party business partners. The inability of the
Company or its third party business partners 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.
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 certain
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, that are not 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 Federal Communications Commission regulations; 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 Company undertakes no obligation to publicly release the result
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events.
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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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