<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________
FORM 10-Q
QUARTERLY REPORT
Under
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_____________
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarter ended March 31, 1994
--------------
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 1-10321
ACKERLEY COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 91-1043807
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
800 Fifth Avenue,
Suite 3770
Seattle, WA 98104
(206) 624-2888
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 1994
- - - ------------------------------ --------------------------
Common Stock, $.01 par value 9,560,183 shares
Class B Common Stock, $.01 par value 5,904,111 shares
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 and DECEMBER 31, 1993. . . . . . . . . . . 1
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994 AND
MARCH 31, 1993 . . . . . . . . . . . . . . . . . . . . . 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994
AND MARCH 31, 1993. . . . . . . . . . . . . . . . . . . . 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . 5
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . 10
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . 10
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ACKERLEY COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
------------ ------------
ASSETS (In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,034 $ 6,732
Accounts receivable, net of allowance for
doubtful accounts of $858,000 in 1994
and $941,000 in 1993 32,319 37,237
Current portion of broadcast rights 3,431 4,605
Other current assets 5,681 7,625
--------- ---------
Total current assets 52,465 56,199
Property and equipment, net 59,851 61,616
Intangibles, net 21,770 31,769
Other assets 10,049 10,907
--------- ---------
Total assets $ 144,135 $ 160,491
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 4,614 $ 7,463
Accrued interest 6,792 3,979
Other accrued liabilities 11,056 8,721
Deferred revenue 6,803 11,504
Current portion of long-term debt 16,037 16,562
--------- ---------
Total current liabilities 45,302 48,229
Long-term debt - noncurrent portion 200,058 215,114
--------- ---------
Total liabilities 245,360 263,343
Stockholders' deficiency:
Common stock, $.01 par value; 18,000,000 shares authorized,
10,935,129 shares issued at March 31, 1994 (10,901,379 at
December 31, 1993) and 9,560,183 shares outstanding at
March 31, 1994 (9,526,433 at December 31, 1993). 109 109
Class B common stock, $.01 par value; 6,972,230 shares
authorized, 5,904,111 shares issued and outstanding at
March 31, 1994 and December 31, 1993. 59 59
Capital in excess of par value 3,007 2,945
Deficit (94,311) (95,876)
Less common stock in treasury, at cost (10,089) (10,089)
--------- ---------
Total stockholders' deficiency (101,225) (102,852)
--------- ---------
Total liabilities and stockholders' deficiency $ 144,135 $ 160,491
--------- ---------
--------- ---------
</TABLE>
1
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ACKERLEY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-----Three Months Ended-----
March 31, March 31,
1994 1993
------------- -------------
(In thousands except
per share amounts)
<S> <C> <C>
Revenue $ 53,513 $ 48,206
Less agency commissions
and discounts (5,418) (4,832)
--------- ---------
Net revenue 48,095 43,374
Expenses and other income:
Operating expenses (40,392) (37,711)
Gain on disposition of assets 2,522 --
Amortization (859) (952)
Depreciation (1,676) (1,708)
Interest expense (6,145) (5,202)
Other income, net 53 33
--------- ---------
Total expenses and
other income (46,497) (45,540)
--------- ---------
Income(loss) before income tax 1,598 (2,166)
Income tax expense (33) --
--------- ---------
Net income(loss) $ 1,565 $ (2,166)
--------- ---------
--------- ---------
Net income(loss)
per common share $ 0.10 $ (0.14)
--------- ---------
--------- ---------
Weighted average number
of common shares 15,717 15,455
</TABLE>
2
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ACKERLEY COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-----Three Months Ended-----
March 31, March 31,
1994 1993
------------- -------------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 48,060 $ 35,564
Cash paid to suppliers and employees (38,270) (28,279)
Interest paid (2,837) (5,110)
--------- ---------
Net cash provided by operating activities 6,953 2,175
Cash flows from investing activities:
Proceeds from sale of property 13,093 97
Capital expenditures (1,083) (291)
Other, net (285) (151)
--------- ---------
Net cash provided by investing activities 11,725 (345)
Cash flows from financing activities:
Borrowings under new credit agreement 2,000 --
Payments under credit agreements (16,125) (3,250)
Other, net (251) 118
--------- ---------
Net cash used by financing activities (14,376) (3,132)
--------- ---------
Net increase(decrease) in cash and cash equivalents 4,302 (1,302)
Cash and cash equivalents at beginning of year 6,732 7,008
--------- ---------
Cash and cash equivalents at end of period $ 11,034 $ 5,706
--------- ---------
--------- ---------
Reconciliation of net income(loss) to net cash provided
by operating activities:
Net income(loss) $ 1,565 $ (2,166)
Adjustments to reconcile net income(loss) to net
cash provided by operating activities:
Gain on disposition of assets (2,522) --
Depreciation and amortization 2,535 2,660
Gain on the sale of property, plant and equipment (66) --
Change in assets and liabilities:
Decrease in accounts receivable 4,704 1,810
Decrease in other current assets 1,944 2,809
Increase (decrease) in accounts payable
and accruals (514) 4,057
Increase (decrease) in accrued interest 2,813 (97)
Decrease in deferred revenue (4,701) (6,724)
Other, net 1,195 (174)
--------- ---------
Net cash provided by operating activities $ 6,953 $ 2,175
--------- ---------
--------- ---------
Supplemental disclosure of noncash transactions:
Broadcast rights acquired and broadcast
obligations assumed $ 275 $ 744
--------- ---------
--------- ---------
</TABLE>
3
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ACKERLEY COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PREPARATION
The interim financial statements are unaudited but, in the opinion of
management, reflect all normal and recurring adjustments necessary for a fair
presentation of results for such periods. The results of operations for any
interim period are not necessarily indicative of anticipated results for the
full year. These financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1993.
NOTE 2. INVESTMENTS: DEBT AND EQUITY SECURITIES
Beginning with the current fiscal year, the Company has implemented FASB 115
which has not and is not expected to have a material impact on the financial
statements.
NOTE 3. SALE OF WAXY(FM)
On March 9, 1994, the Company sold radio station WAXY(FM) in Fort Lauderdale,
Florida to Clear Channel Radio, Inc. for approximately $14.0 million in cash, of
which $13.0 million was for the assets of the radio station and $1.0 million was
for a prepaid outdoor advertising contract. At the sale date, the net book value
of WAXY(FM) was approximately $10.5 million.
4
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company reported record first quarter net income of $1.6 million. This
first quarter net income included a one-time gain on the disposition of assets
related to the sale of WAXY(FM) in March 1994. In the first three months of
1994, the Company's net revenues increased over the same period last year by
$4.7 million or 10.9%. The Company's Operating Cash Flow for the quarter
increased $2.1 million or 36.2% from the same period last year, while the net
income for the quarter reflected a $3.8 million improvement over the net loss
for last year's first quarter.
On January 5, 1994, the Company completed the exchange of 10.75% Series A Senior
Secured Notes for 10.75% Senior Secured Notes due 2003 (the "Senior Notes")
pursuant to an effective registration statement filed with the SEC as required
by the terms of a Registration Agreement with holders of the Series A Senior
Secured Notes. The financial terms of the Senior Notes are essentially identical
to those of the Series A Senior Secured Notes. The Company received no proceeds
from such exchange.
As with many media companies that have grown through acquisitions, the Company's
acquisitions and dispositions of television and radio stations have resulted in
significant non-cash and non-recurring charges to income. For this reason, in
addition to net income (loss), management believes that Operating Cash Flow
(defined as net revenue less operating expenses plus other income before
amortization, depreciation, interest expense and disposition of assets) is an
appropriate measure of the Company's financial performance. This measure
excludes expenses consisting of depreciation, amortization, interest and
disposition of assets because these are not considered by the Company to be
costs of ongoing operations. The Company uses Operating Cash Flow to pay
interest and principal on its long-term debt as well as to finance capital
expenditures. Operating Cash Flow, however, is not to be considered as an
alternative to net income (loss) as an indicator of the Company's operating
performance or to cash flows as a measure of the Company's liquidity.
5
<PAGE>
RESULTS OF OPERATIONS
The following two tables set forth certain historical financial and operating
data of the Company for the three months ended March 31, 1994 and March 31, 1993
including separate net revenue, operating expenses and other income, and
Operating Cash Flow information by segment:
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1994 1993
------------------ -----------------
AS % AS %
OF NET OF NET
AMOUNT REVENUE AMOUNT REVENUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net revenue. . . . . . . . . . . . . $ 48,095 100.0% $ 43,374 100.0%
Operating expenses and other
income:
Operating expenses . . . . . . . . 40,392 84.0 37,711 86.9
Other (income) expense, net. . . . (53) (0.1) (33) (0.1)
Total operating expenses and --- ---- --- ----
other income. . . . . . . . . . 40,339 83.9 37,678 86.8
------ ---- ------ ----
Operating Cash Flow. . . . . . . . . 7,756 16.1 5,696 13.2
Other expenses:
Depreciation and
amortization . . . . . . . . . . . 2,535 5.3 2,660 6.1
Interest expense. . . . . . . . . . 6,145 12.8 5,202 12.0
----- ---- ----- ----
Total other expenses . . . . . . 8,680 18.1 7,862 18.1
Loss before disposition of assets ----- ---- ----- ----
and income taxes. . . . . . . . . . (924) (2.0) (2,166) (4.9)
Gain on disposition of assets. . . . (2,522) (5.2) -- --
Income tax expense . . . . . . . . . 33 0.1 -- --
-- --- ----- ----
Net income (loss). . . . . . . . . . $ 1,565 3.1 $(2,166) (4.9)
-------- --- ------- ----
-------- --- ------- ----
</TABLE>
6
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OPERATING INFORMATION BY BUSINESS SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
NET REVENUE:
Out-of-home media . . . . . . . . . . . . . . . . . . $ 17,970 $ 15,975
Broadcasting. . . . . . . . . . . . . . . . . . . . . 21,036 18,951
Other . . . . . . . . . . . . . . . . . . . . . . . . 9,089 8,448
----- -----
Total net revenue . . . . . . . . . . . . . . . . $ 48,095 $ 43,374
-------- --------
-------- --------
OPERATING EXPENSES AND OTHER INCOME:
Out-of-home media . . . . . . . . . . . . . . . . . . $ 14,068 $ 13,448
Broadcasting. . . . . . . . . . . . . . . . . . . . . 10,929 10,035
Other . . . . . . . . . . . . . . . . . . . . . . . . 15,342 14,195
------ ------
Total operating expenses and other income . . . . $ 40,339 $ 37,678
-------- --------
-------- --------
OPERATING CASH FLOW:
Out-of-home media . . . . . . . . . . . . . . . . . . $ 3,902 $ 2,527
Broadcasting. . . . . . . . . . . . . . . . . . . . . 10,107 8,916
Other . . . . . . . . . . . . . . . . . . . . . . . . (6,253) (5,747)
------ ------
Total Operating Cash Flow . . . . . . . . . . . . $ 7,756 $ 5,696
-------- --------
-------- --------
CHANGE IN NET REVENUE FROM PRIOR PERIODS:
Out-of-home media . . . . . . . . . . . . . . . . . . 12.5% (3.5)%
Broadcasting. . . . . . . . . . . . . . . . . . . . . 11.0 0.8
Other . . . . . . . . . . . . . . . . . . . . . . . . 7.6 21.0
Change in total net revenue . . . . . . . . . . . 10.9 2.4
OPERATING DATA AS A PERCENTAGE OF NET REVENUE:
Operating expenses and other income:
Out-of-home media. . . . . . . . . . . . . . . . . . 78.3% 84.2%
Broadcasting . . . . . . . . . . . . . . . . . . . . 52.0 53.0
Other. . . . . . . . . . . . . . . . . . . . . . . . 168.8 168.0
Total operating expenses and other income . . . . 83.9 86.9
Operating Cash Flow:
Out-of-home media . . . . . . . . . . . . . . . . . 21.7% 15.8%
Broadcasting. . . . . . . . . . . . . . . . . . . . 48.0 47.0
Other . . . . . . . . . . . . . . . . . . . . . . . (68.8) (68.0)
Total Operating Cash Flow . . . . . . . . . . . . 16.1 13.1
</TABLE>
7
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THREE MONTHS ENDED MARCH 31, 1994 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1993
NET REVENUE. Net revenue for the quarter ended March 31, 1994, increased $4.7
million or 10.9% to $48.1 million from $43.4 million in 1993. The Company's
out-of-home media segment's net revenue increased $2.0 million or 12.5% mainly
due to increased national advertising sales and a return to a normal sales
volume in the South Florida market which had depressed sales in 1993 due to the
effects of Hurricane Andrew. The Company's broadcasting segment showed an
increase of $2.1 million or 11% mainly due to increased rates and sales volume.
Net revenue in the Company's other businesses segment increased $0.6 million
mainly due to increased ticket sales from Sonics home games.
OPERATING EXPENSES AND OTHER INCOME. Operating expenses and other income
increased $2.6 million or 7.1% to $40.3 million in 1994 compared to $37.7
million in 1993. In the Company's out-of-home media segment, operating expenses
and other income increased slightly by $0.6 million or 4.6% to $14.1 million due
to the effects of inflation on operating expenses. Operating expenses and other
income in the Company's broadcasting segment increased by $0.9 million or 8.9%
to $10.9 million mostly due to higher programming and promotion expenses.
Operating expenses and other income from the Company's other segment increased
$1.1 million to $15.3 million or 8.1% mainly from basketball operating expenses
related to players' salaries and transportation costs.
OPERATING CASH FLOW. Because the increase in net revenue was greater than the
increase in operating expense and other income, the Company's Operating Cash
Flow increased $2.1 million or 36.2% for the three months ended March 31, 1994
from the same period in 1993. The $1.4 million increase in the out-of-home
segment's and the $1.2 million increase in the broadcasting segment's Operating
Cash Flow more than offset the $.5 million decrease in the Company's other
segment's Operating Cash Flow for the quarter. Operating Cash Flow as a
percentage of net revenue increased to 16.1% for the three months ended March
31, 1994 from 13.1% for the comparable period in 1993.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses decreased
$0.1 million or 4.7% to $2.5 million in 1994 as compared to $2.6 million in
1993. This decrease is mainly the result of the exclusion of depreciation and
amortization expenses for radio station WAXY which was sold in early March.
INTEREST EXPENSE. Interest expense for the quarter ended March 31, 1994
increased $0.9 million or 18.1% to $6.1 million from $5.2 million in 1993 due to
an increase in the average interest rate applied to outstanding debt as well as
an increase in the expense of deferred charges relating to the Company's
refinancing of its senior debt in October 1993.
GAIN ON DISPOSITION OF ASSETS. In the first quarter of 1994, the Company
realized a $2.5 million gain on the disposition of assets from the sale of WAXY.
INCOME TAX EXPENSE. For the first quarter 1994, the Company had $33,000 in
income tax expense under the alternative minimum tax compared to no income tax
expense for the first quarter 1993. Management anticipates that the Company will
continue to incur income tax expenses under the alternative minimum tax until
operating loss carryforwards are substantially reduced.
8
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NET INCOME(LOSS). The net income of $1.6 million for the three months ended
March 31, 1994 was a $3.8 million improvement over the net loss of $2.2 million
in 1993. This improvement was mainly due to a gain from the disposition of
assets from the sale of WAXY combined with an increase in Operating Cash Flow
which offset an increase in interest expense for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
Under the Credit Agreement, the Company presently has approximately $8.0 million
available for borrowing under the revolving credit facility and has borrowed all
amounts available under the term loans. The Credit Agreement and Subordinated
Note Agreements require the consent of the banks and other lenders prior to any
material expansion of the Company's operations.
Borrowings under the Credit Agreement bear annual interest at either the prime
rate plus 1.75% or LIBOR plus 3.0%. The Senior Notes bear annual interest at
10.75%. The Subordinated Notes bear average annual interest at 10.58%. The
borrowings and the Notes are subject to the Company's compliance with certain
financial ratios and covenants set forth in the Credit Agreement, Senior Note
Indenture and Subordinated Note Agreements. As of March 31, 1994, the Company
was in compliance with all such ratios and covenants. The borrowings under the
Credit Agreement and the Senior Notes are secured by the pledge of stock of the
Company's subsidiaries. The Company's working capital decreased to $7.1 million
at March 31, 1994 from $8.0 million at December 31, 1993.
Substantially all of the $14.0 million received from the sale of WAXY was used
to reduce long-term debt for the first quarter. The remaining reduction of
long-term debt and $1.1 million of capital additions were funded with Operating
Cash Flow.
For the periods presented, the Company financed its working capital needs from
cash provided by operating activities. Historically, the Company's long-term
liquidity needs for acquisitions have been financed by additions to its
long-term debt, principally through bank borrowings or private placements of
senior and subordinated debt. Capital expenditures for new property and
equipment have been financed with both cash provided by operating activities and
long-term debt. Cash provided by operating activities for the first three
months of 1994 increased to $7.0 million from $2.2 million in 1993 due to a $2.3
million decline in interest payments attributable to the timing of interest
payments related to the Senior Notes and to a net $2.5 million increase from
ongoing business operations.
At March 31, 1994, the Company's capital resources consisted of $11.0 million in
cash and cash equivalents and approximately $12.0 million available under the
Credit Agreement.
Capital expenditures for new property and equipment of $1.1 million in the first
three months of 1994 were financed with cash provided by operating activities.
These capital expenditures were primarily for advertising signs, displays,
vehicles and equipment as well as additional broadcast equipment and facilities.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: NONE
(b) No reports on Form 8-K were filed during the three months
ended March 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACKERLEY COMMUNICATIONS, INC.
DATED: __________________ BY _____________________________________
Denis M. Curley
Sr. Vice President and
Chief Financial Officer,
Treasurer and Asst. Secretary
(Principal Financial Officer)
10
