SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended September 30, 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 1-8309.
PRICE COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its Charter)
NEW YORK 13-2991700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45 Rockefeller Plaza, Suite 3201, New York, New York 10020
(Address of Principal Executive Offices)
(Zip Code)
(212) 757-5600
(Registrant's telephone number, including area code)
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
Applicable only to issuers involved in bankruptcy proceedings
during the preceding five years. Indicate by check mark whether
the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
subsequent to the distribution of securities under the plan
confirmed by the court.
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.
9,964,792 shares of Common Stock, par value $.01 per share,
outstanding as of September 30, 1994.
Page 1 of 19 Pages.
There are Exhibits.<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1994
__________
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements (unaudited) Number
Consolidated Balance Sheets at September 30,
1994 and December 31, 1993 . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Operations for
Nine Months and Three Months ended September 30,
1994 and 1993. . . . . . . . . . . . . . . . . . . . . . . .4-5
Consolidated Statements of Cash Flows
for Nine Months and Three Months ended
September 30, 1994 and 1993. . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . .7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . .16-17
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 18
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 18
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDI
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1994 1993
Unaudited
ASSETS
Current Assets:
Cash and cash equivalents $823,662 $1,395,102
Accounts receivable, net 5,629,761 4,006,801
Film broadcast rights 2,063,928 565,929
Escrow deposits 1,000,000 1,500,000
Prepaid expenses and other
current assets 1,731,739 1,457,235
Total current assets 11,249,090 8,925,067
Property and equipment, at cost,
less accumulated depreciation 15,554,730 13,728,171
Broadcast licenses and other
intangible assets, less
accumulated amortization 57,005,175 12,797,559
Noncurrent film broadcast rights 2,442,587 138,383
Noncurrent notes receivable 1,215,000 --
Other assets 241,348 470,031
Reorganization value in excess
of amounts allocable to identifiable
assets, less accumulated amortization 1,040,536 1,212,289
Total assets $88,748,466 $37,271,500
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued expenses $1,982,732 $2,249,404
Accrued interest 136,001 7,233
Current portion of long-term debt
(See note 5) 23,109,235 --
Other current liabilities 3,007,027 1,035,585
Total current liabilities 28,234,995 3,292,222
Long-term debt (See note 5) 21,912,850 3,200,000
Other liabilities 4,872,338 74,747
Shareholders' equity:
Common stock, par value $.01 per
share; authorized 40,000,000 shares;
outstanding: 9,964,792 in 1994
and 9,883,717 in 1993 99,647 98,837
Additional paid-in capital 32,525,944 32,310,285
Accumulated earnings (deficit) 1,102,692 (1,704,591)
33,728,283 30,704,531
Total liabilities and
shareholders' equity $88,748,466 $37,271,500
The accompanying notes are an integral part
of the consolidated financial statements.<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Nine Months Ended September 30,
1994 1993
Revenue $18,681,053 $19,098,338
Agency and representatives'
commissions 2,487,223 2,369,443
Net revenue 16,193,830 16,728,895
Operating expenses 10,773,162 11,926,690
Corporate expenses 2,918,640 2,604,631
Other (income) expense - net (2,543,000) (978,653)
Interest expense 214,987 1,332,415
Depreciation and amortization 1,803,397 1,740,937
Amortization of debt discount and,
in 1994, deferred debt expense 176,361 680,511
Unrealized noncash loss on
marketable securities - 145,884
Share of loss of partially
owned companies - 1,120,532
Income (loss) before
income taxes 2,850,283 (1,844,052)
Income tax expense (43,000) (93,035)
Net income (loss) 2,807,283 (1,937,087)
Net income (loss) per share $0.28 ($0.16)
Average shares outstanding 10,034,835(a) 12,109,583
(a) Pursuant to generally accepted accounting principals, average
shares outstanding was calculated using the treasury stock
method. All common stock equivalents, employee stock options
and a warrant for 124,000 shares of common stock, are included in
the computation of average shares outstanding for the nine months
ended September 30, 1994, although the balance sheet does not
include any cash received upon the exercise of such options and
warrants.
The accompanying notes are an integral part of the
consolidated financial statements.<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Ended September 30,
1994 1993
Revenue $6,413,942 $6,217,466
Agency and representatives' commissions 871,177 748,595
Net revenue 5,542,765 5,468,871
Operating expenses 3,450,118 3,939,762
Corporate expenses 868,404 743,963
Other (income) expense - net (89,115) (445,000)
Interest expense 156,498 388,255
Depreciation and amortization 755,955 588,112
Amortization of debt discount and,
in 1994, deferred debt expense 142,420 231,227
Share of loss of partially
owned companies - 389,532
Income (loss) before
income taxes 258,485 (366,980)
Income tax expense (38,000) (72,800)
Net income (loss) $220,485 ($439,780)
Net income (loss) per share $0.02 ($0.04)
Average shares outstanding 10,146,080(a) 12,109,583
(a) Pursuant to generally accepted accounting principals, average
shares outstanding was calculated using the treasury stock
method. All common stock and common stock equivalents, employee
stock options and a warrant for 124,000 shares of common stock,
are included in the computation of average shares outstanding for
the three months ended September 30, 1994, although the balance
sheet does not include any cash received upon the exercise of
such options and warrants.
The accompanying notes are an integral part of the
consolidated financial statements.<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Nine Months Ended September 30,
1994 1993
Net cash provided by (used in)
operating $2,422,390 ($80,805)
Cash flows from investing activities:
Sale of businesses, net 5,713,352 -
Investment in businesses (50,365,979) (454,337)
Capital expenditures (357,673) (509,756)
Purchases of marketable securities
and U.S. Treasury bills - (31,750,390)
Purchases of securities
under agreements to resell - (8,050,811)
Proceeds from sale of
marketable securities - 37,713,280
Proceeds from notes receivable - 3,215,712
Net cash (used in) provided
by investing (45,010,300) 163,698
Cash flows from financing activities:
Net borrowings under the line of
credit agreement 41,800,000 -
Net repayment of repurchase agreements - (4,930,083)
Proceeds from stock exercised 216,470 -
Net cash provided by (used in)
financing activities 42,016,470 (4,930,083)
Net (decrease) increase in cash
and cash equivalents (571,440) (4,847,190)
Cash and cash equivalents at
beginning of period 1,395,102 9,119,527
Cash and cash equivalents at
end of period 823,662 4,272,337
Supplemental disclosures of cash
flow information:
Income taxes paid, net of refunds $151,133 $326,351
Interest paid 86,219 1,683,250
The accompanying notes are an integral part of the
consolidated financial statements.<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis for Preparation of Financial Statements
The accompanying consolidated financial statements have been
prepared by Price Communications Corporation ("Company") without
audit, in accordance with rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the
statements reflect all adjustments consisting only of normal
recurring adjustments necessary for a fair presentation of the
results for the interim periods. The results of operations for
any interim period are not necessarily indicative of the results
for a full year.
The acquisition of the corporation which owns WHTM-TV,
Harrisburg, Pennsylvania, is accounted for as a purchase and
accordingly the acquired assets and liabilities have been
recorded at their estimated fair value at the date of
acquisition. The operating results of the station are included
in the consolidated statements of operations from the acquisition
date. The Company recorded $44 million in goodwill resulting
from this transaction.
Note 2 - Per Share Data
Earnings/(losses) per common share are based on the weighted
average number of shares of common stock outstanding. Shares
issuable upon the exercise of all common stock equivalents and
other potentially dilutive securities are included in the
computation in those periods where their effect is considered
dilutive using the treasury stock method.
Note 3 - Recent Developments
On September 16, 1994, the Company consummated the purchase of
the stock of the corporation which owns WHTM-TV, Channel 27,
serving Harrisburg-York-Lancaster-Lebanon, Pennsylvania. The
Company paid at the closing cash consideration of approximately
$47 million plus a $4 million working capital adjustment. The
funds utilized to make such acquisition were provided by a $45
million credit facility from Bank of Montreal("BMO") and the
Company's own funds.
On October 17, 1994, the Company sold substantially all of the
assets, together with certain liabilities of radio stations WBZT-
AM and WIRK-FM, West Palm Beach, Florida, for approximately $23
million in cash. The Company realized a pre-tax book gain of
approximately $13 million on this transaction. The net proceeds
were used to retire $22.5 million due under the BMO Line of
Credit (which was classified as a current liability on September
30, 1994 balance sheet.)
On October 28, 1994 the Company sold its building in Red Bank,
New Jersey for $1.7 million in cash. The Company realized a
small gain on the sale.<PAGE>
Note 3 - Recent Developments (continued)
In October, 1994, the Company's Board of Directors enacted a
Stockholders' Rights Plan designed to protect the interests of
the Company's shareholders in the event of a potential takeover
for a price which does not reflect the Company's full value or
which is conducted in a manner or on terms not approved by the
Board as being in the best interests of the Company and its
shareholders. The Board has declared a dividend distribution of
one Common Stock Purchase Right on each outstanding share of
Common Stock of the Company. The Rights provide, in substance,
that should any person or group acquire 20% or more of the
Company's Common Stock, each Right, other than Rights held by the
acquiring person or group , would entitle its holder to purchase
a specified number of Price Communications Corporation common
shares for 50% of their then-current market value. Unless a 20%
acquisition has occurred, the Rights may be redeemed by the
Company at any time prior to the termination date of the Plan.
On November 11, 1994, the Company plans to sell substantially all
the assets together with certain liabilities of radio stations
WOWO-AM, Fort Wayne, Indiana and WOWO-FM, Huntington, Indiana for
approximately $2.3 million in cash. The Company will realize a
pre-tax gain of approximately $.7 million on this transaction.
Note 4 - Income Taxes
The Company is utilizing net operating losses accumulated in
prior periods to offset current periods tax expenses.
Note 5 - Long-Term Debt
Long-term debt consists of the following note payable by certain
of the Company's wholly-owned subsidiaries at September 30, 1994
and December 31, 1993 as follows:
(in thousands)
Sept. 30, Dec. 31,
1994 1993
Subsidiaries:
Atlantic Broadcasting Corporation,
Federal Broadcasting Corporation,
Southeast Texas Broadcasting Corporation,
Texoma Broadcasting Corporation and
Tri-State Broadcasting Corporation:
Note payable to Bank of Montreal under
amended and restated line of credit
agreement(A) Note payable to Bank
of Montreal under term loan agreement
$45,000 $3,200
(A) On September 16, 1994 certain subsidiaries of the Company
entered into an amended and restated Line of Credit Agreement
("Line of Credit") with the Bank of Montreal. The Agreement
provided a seven year revolving credit facility of up to $45
million. The Line of Credit is reduced permanently periodically
over its seven year term. Borrowings under the Line of Credit
bear interest at either the prime rate plus up to .75% or LIBOR
plus up to 2.00% and are secured by the common stock of the
subsidiaries. There is a commitment fee of 1/2 of 1% on the
unused portion of the Line of Credit.<PAGE>
Note 5 - Long-Term Debt (continued)
On September 16, 1994, the Company borrowed $45 million at an
initial interest rate of 8.5% pursuant to this Agreement and the
proceeds were used to purchase WHTM-TV. On October 17, 1994, the
net proceeds from the sale of the Company's radio stations in
West Palm Beach, Florida, were used to repay $22.5 million of
borrowings under the Line of Credit. The Line of Credit facility
was permanently reduced to $22.5 million by the aforementioned
payment.
Note 6 - Pro Forma Schedules
The unaudited pro forma financial information includes the
following acquisition and dispositions:
Acquisition Transaction Date
WHTM-TV, Harrisburg, PA September 16, 1994
Disposition Transaction Date
Radio Stations
WWKB-AM/WKSE-FM, Buffalo, NY April 14, 1994
WIRK-FM/WBZT-AM, West Palm Beach, FL October 17, 1994
WOWO-AM, FM, Fort Wayne, IN November 11, 1994
Other
Outdoor advertising business February 16, 1994
Eimar Realty Corporation May 20, 1994
Red Bank Register, Building October 28, 1994
The following unaudited pro forma financial information has been
prepared on the assumption that the aforementioned acquisition
had occurred as of the beginning of the respective periods or on
the balance sheet date of September 30, 1994.
The pro forma financial information is not necessarily indicative
either of results of operations that would have occurred had the
purchases or sales been made at the beginning of the period, or
of future results of operations of the Company or the acquired
property.
(The remainder of this page is blank)<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
UNAUDITED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
PURCHASED SOLD
As Reported Radio
By Price WHTM-TV(a) Stations Other Adjustments
Revenue
$18,681,053 $11,054,099 ($7,746,884) ($50,108)
Agency & representatives' commissions
2,487,223 1,931,651 (956,805) (688)
Net
revenue 16,193,830 9,122,448 (6,790,079) (49,420)
Operating
expenses 10,773,162 4,631,255 (4,843,282) (59,018)
Corporate
expenses 2,918,640
Other (income)
expense
- net (2,543,000) 1,481,733 43,834 (153,054) (1,470,741)(e)
Interest
expense 214,987 1,743,472 - - (465,595)(b)
Depreciation &
amortization
1,803,397 826,526 (536,169) (170,250) 526,785(c)
Amortization of
deferred debt
expense 176,361
Income before income
taxes 2,850,283 439,462 (1,454,462) 332,902 1,409,551
Income tax
expense (43,000) (441,328) - - 441,328(f)
Net income $2,807,283 ($1,866) (1,454,462) $332,902 1,850,879
ProForma
Combined
Revenue $21,938,160
Agency & representatives' commissions 3,461,381
Net
Revenue 18,476,779
Operating
Expenses 10,502,117
Corporate
Expenses 2,918,650
Other (income)
expense
-net (2,641,228)
Interest
expense 1,492,864
Depreciation &
amortization 2,450,289
Amoritization
deferred debt
expense 176,361
Income before income
taxes 3,577,736
Income tax
expense (43,000)
Net Income 3,534,736
<PAGE>
Net income
per share $0.28 $0.35
Average shares outstanding
10,034,835 10,034,835
(a) WHTM's Statement of Operations from January 1, 1994 through
September 16, 1994.
(b) Adjust interest expense to the amount calculated under the Line of
Credit agreement with the Bank of Montreal. Price originally borrowed
$45 million under the Line of Credit and immediately repaid $22.5
million on the Line of Credit with the net proceeds from the sale
of WIRK/WBZT, West Palm Beach, FL. The interest rate assumed is
8.5% (rate as of September 30, 1994)
Outstanding Line of Credit $22,500,000
Interest rate 8.5%
Nine months interest $1,434,375
(c) Adjust goodwill amortization to reflect the purchase of
WHTM-TV: amortize over 40 years.
Amortization in WHTM's Financials $528,476
Amortization in PCC's Financials $20,794
Adjustment $337,363
Nine months of amortization $865,833
(d) Adjust to include depreciation on the excess of the appraised value
over the net book value of the property and equipment.
Depreciation in WHTM's Financials $298,050
Depreciation in PCC's Financials $21,692
Additional depreciation $189,422
Nine months of amortization $509,164
(e) Eliminate management fee $131,247 and one time charge incurred by
WHTM's previous owner $1,339,494.
(f) Adjust income taxes for WTHM's inclusion in Price Communications'
consolidated federal tax return. State taxes are also eliminated by
inclusion of expense allocations on WHTM's books.<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
UNAUDITED
FOR THE TWELEVE MONTHS ENDED DECEMBER 31, 1993
PURCHASED SOLD
As Reported Radio
By Price WHTM-TV(a) Stations Other Adjustments
Revenue $26,010,294 $15,117,195 ($11,623,017) ($813,932) -
Agency and representatives' commissions
3,220,102 2,608,252 (1,351,125) (40,179) -
Net
revenue 22,790,192 12,508,943 (10,271,892) (773,753) -
Operating
expenses 16,334,761 6,698,389 (8,226,346) (623,929) -
Corporate
expenses 3,648,524 - - - -
Other (income)
expenses
- net 539,289 150,389 8,650 (75,162)( 175,000)(d)
Interest
expense 1,485,389 2,518,879 - - (2,091,748)(a)
Depreciation &
amortization
2,343,015 1,203,348 (834,346) (337,577) 640,955(b)(c)
Amortization of
debt
discount 766,075 - - - -
Unrealized noncash loss on marketable securities
145,884 -
Share of loss of partially owned companies
1,118,293 - - - -
Income before income taxes, extraordinary item and
cumulative effect of change in accounting principle
(3,591,038) 1,937,938 (1,219,850) 262,915 1,625,793
Income tax
expense (123,885) (1,147,837) - - 1,147,837(e)
ProForma
Combined
Revenue $28,690,540
Agency and representatives' commissions 4,437,050
Net
revenue 24,253,490
Operating
expenses 14,182,875
Corporate
expenses 3,648,524
expenses
- net 448,166
Interest
expense 1,912,520
amortization 3,015,395
Amortization of
debt
discount 766,075
Unrealized noncash loss on marketable securities 145,884
Share of loss of partially owned companies 1,118,293
Income before income taxes, extraordinary item and
cumulative effect of change in accounting principle
(984,242)
Income tax
expense (123,885)
<PAGE>
Loss before extraordinary item
(3,714,923) 790,101 (1,219,850) 262,915 2,773,630
Extraordinary item, net of income tax
2,010,332 - - - -
Cumulative effect of change in accounting principle
- 1,088,066 - - -
Net
loss ($1,704,591) $1,878,167 ($1,219,850) $262,915 $2,773,630
Net loss per share
($0.14)
Average shares outstanding
12,109,583
(a) Adjust interest expense to the amount calculated under the Line of
Credit with Bank of Montreal. Price originally borrowed $45 million under
the Line of Credit and immediately repaid $22.5 million on the Line of
Credit with the net proceeds from the sale of WIRK/WBZT, West Palm Beach,
FL. The interest rate assumed is 8.5% (rate as of September 30, 1994)
Outstanding Line of Credit $22,500,000
Interest rate 8.5%
Twelve months of interest $ 1,912,500
(b) Adjust goodwill amortization to reflect the purchase of WHTM-TV:
amortize over 40 years.
Amortization in WHTM's financials $743,460
Adjustment $366,678
Twelve months of amortiztion $1,110.138
(c) Adjust to include depreciation on the excess of the appraised value
over the net book value of the property and equipment.
Depreciation in WHTM's financials $459,888
Additional depreciation $274,277
Twelve months of depreciation $734,165
(d) Eliminate management fee paid to previous owner.
(e) Adjust income taxes for WTHM's inclusion in Price
Communications' consolidated federal tax return. State taxes are
also eliminated by inclusion of expense allocations on WHTM's books.<PAGE>
Combined
Loss before extraordinary item (1,108,127)
Extraordinary item, net of income tax 2,010,332
Cumulative effect of change in accounting principle 1,088,066
Net
Loss ($1,990,271)
Net los per share ($0.16)
Average shares outstanding 12,109,583
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
UNAUDITED
AS OF SEPTEMBER 30, 1994
SOLD
As Reported Radio
By Price Stations Other Adjustments
ASSETS
Current Assets:
Cash and cash equivalents $823,662 $24,362,443 1,555,404($22,500,000)(a)
Accounts receivable, net 5,629,761 (1,242,398) - -
Film broadcast rights 2,063,928 - - -
Escrow deposits 1,000,000 - - -
Prepaid expenses and other1,731,739 (47,798) - -
Total current assets 11,249,090 23,072,247 1,555,404(22,500,000)
Property and equipment, at cost,
less accumulated depreciation
15,554,730 (1,808,065) (1,533,750) -
Broadcast licenses and other intangible assets,
less accumulated amortization
57,005,175 (7,240,582)
Noncurrent film broadcast rights
2,442,587 - - -
Noncurrent notes receivable 1,215,000 - - -
Other assets 241,348 - - -
Reorganization value in excess of amounts allocable to
identifiable assets, less amortization
1,040,536 - - -
Total assets $88,748,466 $14,023,600 $21,654 ($22,500,000)<PAGE>
Current Assets: Combined
Cash and cash equivalents $4,241,509
Accounts receivable, net 4,387,363
Film broadcast rights 2,063,928
Escrow deposits 1,000,000
Prepaid expenses and other 1,683,941
Total current assets 13,376,741
Property and equipment, at cost,
less accumulated depreciation 12,212,915
Broadcast licenses and other intangible assets, 49,764,593
less accumulated amortization
Noncurrent film broadcast rights 2,442,587
Noncurrent notes receivable 1,215,000
Other assets 241,348
Reorganization value in excess of amounts allocable to
identifiable assets, less amortization 1,040,536
Total assets $80,293,720<PAGE>
Prepaid expenses and other
Total current assets
As Reported Radio
By Price Stations Other Adjustments
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued expenses $1,982,732 ($230,550) - -
Accrued interest 136,001 - - -
Current portion of long-term debt
23,109,235 - -(22,500,000)(b)
Other current liabilities 3,007,027 - - -
Total current liabilities 28,234,995 (230,550) (22,500,000)
Long-term debt 21,912,850 - - -
Other Liabilities 4,872,338 - - -
Shareholders' equity:
Common stock, par
value $.01 per share 99,647 - - -
Additional paid-in capital 32,525,944 - - -
Accumulated earnings
(deficit) 1,102,692 14,254,150 21,654 -
33,728,283 14,254,150 21,654 -
Total liabilities
and shareholder equity $88,748,466 $14,023,600 21,654($22,500,000)
(a) Adjust current portion of long-term debt for the repayment of $22.5 on
the Line of Credit with BMO from the proceeds of the West Palm Beach
radio station sale.<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY ProForma
Combined
Current Liabilities:
Accounts payable and
accrued expenses $1,752,182
Accrued interest 136,001
Current portion of long-term debt
609,235
Other current liabilities 3,007,027
Total current liabilities 5,504,445
Long-term debt 21,912,850
Other Liabilities 4,872,338
Shareholders' equity:
Common stock, par
value $.01 per share 99,647
Additional paid-in capital 32,525,944
Accumulated earnings
(deficit) 15,378,496
48,004,087
Total liabilities
and shareholder equity $80,293,720
<PAGE>
Shareholders' equity:Item 2. Management's Discussion and Analysis of
Financial
Condition and Results of Operations.
References to the "Company" in this Report include Price
Communications Corporation and its subsidiaries, unless the
context otherwise indicates.
Results of Operations
The Company recognized approximately $2.8 million and $.2
million of net income for the nine months and three months ended
September 30, 1994 as compared to a $1.9 million and $.4 million
net loss for the nine months and three months ended September 30,
1993. Net revenues decreased approximately 3% for the nine
months ended September 30, 1994 over the comparable period in
1993, primarily as a result of the sale of the Buffalo radio
stations. Net revenues increased approximately 1% for the three
months ended September 30, 1994 over the three months ended
September 30, 1993 as a result of the inclusion of WHTM,
Harrisburg for part of the month offset by the sale of the
Buffalo radio stations. Related operating expenses decreased 10%
and 12% for the nine and three month over the same periods in
1993. Corporate expenses increased approximately $314,000 and
$124,000 for the nine and three months ended September 30, 1994
compared to the same period in 1993, due to additional legal and
advisory expenses primarily in connection with the 1992
restructuring and the Apollo lawsuit (which was settled during
the second quarter) and the acquisition of WHTM-TV. Interest
expense and amortization of debt discount and deferred debt
expense decreased for the nine and three months ended September
30, 1994 compared to the same periods in 1993 because the Company
retired the $30.8 million face amount of its 5% senior secured
notes during the fourth quarter of 1993 and the $3.2 million of
long-term bank debt during the second quarter of 1994. Other
significant reasons for the improvement in net income were the
recognition of a gain of approximately $3.0 million from the sale
of the Buffalo stations, the absence of unrealized non-cash loss
on marketable securities and loss on partially owned companies
since the Company sold its interest in PriCellular Corporation
during the fourth quarter of 1993.
The Company's per share earnings were $.28 and $.02 for the
nine and three months ended September 30, 1994 as compared to
losses of $.16 and $.04 for the nine and three months ended
September 30, 1993.
Liquidity and Capital Resources
The Company had approximately $.8 million in cash and cash
equivalents at September 30, 1994 and $1.4 million at December
31, 1993. The Company had negative net working capital of
approximately $17 million at September 30, 1994 primarily as a
result of the payment which was due and has now been made upon
the sale of the Company's West Palm Beach, Florida radio
stations. The Company had positive working capital of $5.6
million at December 31, 1993. The Company entered into a $45
million revolving Line of Credit (see Notes) with the Bank of
Montreal for the purchase of the Harrisburg television station.
During October, 1994 the Company repaid $22.5 of the $45 million
outstanding debt from the net proceeds of the sale of the West
Palm Beach, Florida radio stations. Long-term debt of
approximately $45 million and $3.2 million was owed by the
Company as of September 30, 1994 and December 31, 1993,
respectively.
Use of Funds. The Company does not anticipate the need to
make major capital expenditures in respect of its existing media
properties during the remainder of 1994 and it does not believe
that such lack of major capital expenditures will affect its
competitive position.
Source of Funds. The Company's sources of funds
historically have been provided by its liquid assets, cash flow
from its operating and investment activities, proceeds from the
sale of properties and proceeds from loans and financings. The
Company intends to seek to improve cash flow from operations by
imposing stringent budget procedures on its media properties and
by seeking to increase revenues in excess of increases in
operating expenses. <PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10(A) - Smith Acquisition Corporation (WHTM-TV)
Financial statements for the
years ended December 31, 1993 and 1992.
10(a) - Smith Acquisition Corporation (WHTM-TV)
Financial statements for the years ended
December 31, 1992 and 1991.
(27) Financial Data Schedule
(b) Reports on Form 8-K.
On October 6, 1994, the Company filed a Form 8-K
to report an event of September 16, 1994. The
report included an Item 2 discussion of the
purchase of WHTM-TV, Harrisburg, Pennsylvania.
On October 14, 1994, the Company filed a Form 8-K
to report an event on October 6, 1994. The report
included an Item 2 discussion of the dismissal of
Ernst & Young as Price Communication's auditors
and its appointment of KPMG Peat Marwick LLP as
Price Communications Corporation's auditors for
the fiscal year ended December 31, 1994.
On October 24, 1994 the Company filed a Form 8-K/A
to report an event of October 6, 1994. The report
included an Item 2 discussion of the dismissal of
Ernst & Young as Price Communication's auditors
and its appointment of KPMG Peat Marwick LLP
as Price Communications Corporation's auditors for
the fiscal year ended December 31, 1994. <PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PRICE COMMUNICATIONS CORPORATION
Dated: November 14, 1994 By /s/Robert Price
Robert Price
President and Chief
Financial Officer<PAGE>
EXHIBIT 1
Consolidated Financial Statements
Smith Acquisition Corp.
Years Ended December 31, 1993 and 1992
<PAGE>
Smith Acquisition Corp.
Consolidated Financial Statements
Years Ended December 31, 1993 and 1992
Contents
Audited Consolidated Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 4
Consolidated Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
<PAGE>
Smith Acquisition Corp.
Consolidated Balance Sheets
December 31
1993 1992
Assets
Current Assets:
Cash and cash equivalent $794,562 $986,211
Accounts receivable, less allowance for
doubtful accounts of $140,635 and
$103,191 in 1993 and 1992, respectively 2,994,832 2,951,505
Current portion of program rights 1,318,272 1,850,653
Prepaid expenses and deposits 161,736 324,735
Deferred tax asset 404,262 -
Total current assets 5,673,664 6,113,104
Property and equipment, net 2,366,755 2,253,045
Other assets:
Program rights 1,619,050 1,485,236
Intangible assets and goodwill, net of
accumulated amortization of $8,045,754
and $7,302,294 in 1993
and 1992, respectively 24,169,233 24,858,830
Total assets $ 33,828,702 $ 34,710,215<PAGE>
Smith Acquisition Corp.
Consolidated Balance Sheets (cont.)
December 31
1993 1992
Liabilities and stockholders' equity
Current liabilities:
Current portion of program
contracts payabl $1,315,981 $ 1,718,257
Current portion of long-term debt 20,576,233 1,009,855
Accounts payable 182,972 219,395
Accrued payroll and commissions 75,941 128,594
Accrued interest 160,334 146,625
Other accrued expenses 109,996 561,709
Income taxes payable 56,734 25,325
Total current liabilities 22,478,191 3,809,760
Other liabilities:
Deferred tax liability 368,887 -
Long-term debt 6,906,789 28,842,796
Long-term portion of program
contracts payable 1,474,303 1,335,294
8,749,979 30,178,090
Stockholders' equity:
Common Stock Class A 500 500
Common Stock Class C 100 100
Additional paid-in capital 7,601,374 7,601,374
Retained-earnings (deficit) (5,001,442) (6,879,609)
2,600,532 722,365
Total liabilities and
stockholders' equity $ 33,828,702 $ 34,710,215
See accompanying notes. <PAGE>
Smith Acquisition Corp.
Consolidated Statements of Operations
Year Ended December 31
1993 1992
Revenues:
National $ 7,554,949 $ 8,177,074
Local 7,101,513 6,711,958
Network 359,578 424,333
Other 101,155 137,365
15,117,195 15,450,730
Less agency and national
representative commissions 2,608,252 2,748,712
Net revenues 12,508,943 12,702,018
Operating expenses:
Technical 769,388 693,336
Programming 1,943,680 2,526,365
News 1,527,858 1,422,740
Sales 906,738 953,832
Promotion 177,635 190,892
General and administrative 1,373,090 1,275,722
6,698,389 7,062,887
Operating income before
depreciation expense, trade and barter 5,810,554 5,639,131
Trade and barter revenue 431,678 286,800
Trade and barter expense (407,067) (256,174)
Depreciation expense (459,888) (644,463)
Operating income 5,375,277 5,025,294
Other expenses:
Interest expense 2,518,879 4,182,256
Amortization of intangible assets
and goodwill 743,460 743,460
Management fee to affiliated entity 175,000 175,000
3,437,339 5,100,716
Income (loss) before income taxes,
extraordinary items, and cumulative
effect of change in accounting
principle 1,937,938 (75,422)
Income taxes:
Federal 851,566 239,675
State 296,271 135,325
1,147,837 375,000
Income (loss) before extraordinary
items and cumulative effect of change
in accounting principle 790,101 (450,422)
Extraordinary items:
Gain on extinguishment of debt - 6,703,853
Utilization of net operating loss
carryforwards - 239,675
- 6,943,528
Cumulative effect of change in
accounting principle 1,088,066 -
Net income $ 1,878,167 $ 6,493,106
See accompanying notes. <PAGE>
Consolidated Statements of Stockholders' Equity (Deficit)
<PAGE>
Smith Acquisition Corp.
Consolidated Statements of Cash Flows
Year Ended December 31
1993 1992
Operating activities
Net income $1,878,167 $ 6,493,106
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cumulative effect of change in
accounting principle (1,088,066) -
Extraordinary gain - (6,703,853)
Depreciation and amortization of
property and equipment and
intangible assets 1,203,348 1,387,923
Amortization of program rights 1,727,912 1,832,902
Interest converted to long-term debt 586,500 2,009,077
(Gain) loss on sale of equipment (387) 7,606
Trade and barter revenues (431,678) (286,800)
Trade and barter expenses 407,067 256,174
Payments for program rights (1,585,587) (1,773,958)
Provision for deferred income taxes 834,970 -
Changes in operating assets and liabilities:
Increase in accounts receivable (48,580) (23,784)
Decrease in prepaid expenses and deposits162,999 65,842
Decrease in accounts payable and
accrued expenses (473,715) (985,740)
Net cash provided by operating activities 3,172,950 2,278,495
Investing activities
Purchase of property and equipment (379,857) (416,241)
Proceeds from sale of equipment 25,250 5,550
Increase in intangible assets (53,863) -
Net cash used in investing activities (408,470) (410,691)
Financing activities
Principal payments on long-term debt (2,956,129) (2,758,017)
Payments for restructuring fees - (750,957)
Net cash used in financing activities (2,956,129) (3,508,974)
Decrease in cash and cash equivalents (191,649) (1,641,170)
Cash and cash equivalents at beginning 986,211 2,627,381
of year
Cash and cash equivalents at end $794,562 $ 986,211
of year
See accompanying notes.<PAGE>
Smith Acquisition Corp.
Notes to Consolidated Financial Statements
December 31, 1993
1. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
Smith Acquisition Corp. (Corporation) and its wholly-owned
subsidiary, WHTM-TV, Inc. (WHTM-TV). All significant
intercompany transactions and balances have been eliminated.
Program Rights
Program rights represent rights under contract to telecast
certain events or shows. The rights and the related contract
liabilities are recorded on a gross basis when available for use.
The program rights are amortized using accelerated rates over the
term of the respective contract. The current portion of program
rights represents management's estimate of amortization for the
succeeding year. Based on management's expectations of program
usefulness, unamortized cost may be written down to net
realizable value.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is
computed using the straight-line method based upon the estimated
useful lives of the respective assets.
Intangible Assets
Intangible assets and goodwill are being amortized generally over
a forty-year period using the straight-line method.
Income Taxes
The Corporation files a consolidated federal return with WHTM-TV
and separate state tax returns. Effective January 1, 1993, the
Corporation adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," issued by the Financial
Accounting Standards Board (see Note 7). As permitted under the
new rules, prior years' financial statements have not been
restated. Under the liability method of Statement No. 109,
deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date.
1. Significant Accounting Policies (continued)
Prior to January 1, 1993, the Corporation accounted for income
taxes pursuant to the deferred method under APB Opinion 11.
Under the deferred method, deferred income taxes are recognized
for income and expense items that are reported in different years
for financial reporting purposes and income tax purposes using
the tax rate applicable for the year of calculation.
Cash Equivalents
The Corporation considers investments with a maturity of three
months or less when purchased to be cash equivalents.
2. Concentration of Credit Risk
The Corporation sells advertising spots to a broad range of
national and local advertising agencies. No individual
customers balance typically exceeds 10% of total receivables.
The Corporation performs periodic credit evaluations of its
customers financial condition and generally does not require
collateral. Credit losses are provided for in the financial
statements and consistently have been within management's
expectations.
3. Property and Equipment
Property and equipment consisted of the following:
December 31
1993 1992
Land $ 233,665 $ 233,665
Buildings 1,179,219 973,018
Equipment 6,285,837 6,035,739
Furniture and fixtures 510,855 472,161
Vehicles 292,535 263,540
8,502,111 7,978,123
Less accumulated depreciation 6,135,356 5,725,078
$ 2,366,755 $ 2,253,045
<PAGE>
Smith Acquisition Corp.
Notes to Consolidated Financial Statements (continued)
4. Long-Term Debt
Long-term debt consisted of the following (see Note 6):
December 31
1993 1992
Term loan due June 30, 1994;
interest at 2.0% over prime
(8.00% at December 31, 1993) (a) $ 16,651,576 $19,038,714
Senior secured notes; interest
at 11.15% payable quarterly;
due June 30, 1994 (a) (d) 3,915,913 4,477,315
Senior subordinated notes subsequent
to restructuring (see Note 6);
interest at 10.5%; interest and
principal payable in full
September 30, 1997; includes
deferred interest of $136,500 at
December 31, 1993 (b) (d) 1,436,500 1,300,000
Junior subordinated notes subsequent
to restructuring (see Note 6);
interest at 9.0%; interest and
principal payable in full
September 30, 1997; includes
deferred interest of $450,000 at
December 31, 1993 (c) (d) 5,450,000 5,000,000
Capitalized lease obligations 29,033 36,622
27,483,022 29,852,651
Less current portion 20,576,233 1,009,855
$ 6,906,789 $ 28,842,796
(a) The term loan and the senior secured notes (collectively,
the "senior debt") are secured by a first priority interest
in substantially all of the assets of the Corporation and
WHTM-TV and the pledge of all of the outstanding common
stock of the Corporation. The senior debt is guaranteed by
WHTM-TV.
(b) The senior subordinated debt is subordinate to the senior
debt and is secured by a pledge of the outstanding common
stock of WHTM-TV and is guaranteed by WHTM-TV.
<PAGE>
Smith Acquisition Corp.
Notes to Consolidated Financial Statements (continued)
4. Long-Term Debt (continued)
(c) The junior subordinated debt is subordinate to the
senior debt and senior subordinated debt and is
guaranteed by WHTM-TV (which guarantee is subordinate
to WHTM-TV guarantee to the senior subordinated
lenders).
(d) The senior secured notes, senior subordinated notes,
and the junior subordinated debt are held by owners of
the Corporation's Class B Common Stock warrants (see
Note 6).
The term loan and senior secured notes are due on June 30, 1994.
The Corporation does not currently have sufficient liquidity to
repay this debt without restructuring of the debt or substantial
disposition of assets. This condition raises substantial doubt
about the Corporation's ability to continue as a going concern.
On February 15, 1994, the Corporation signed a Securities
Purchase Agreement (the Agreement) to sell all of the
outstanding stock and warrants of the Corporation to Price
Communications Corporation (the Purchaser) (see Note 8). The
Agreement provides that on the closing date, the Purchaser shall
deliver funds to the Corporation which the Corporation shall use
to satisfy in full, all of the Corporation's outstanding debt,
which is defined to include the term loan, senior secured notes,
senior subordinated notes, and junior subordinated notes. The
sale is subject to various conditions, including FCC approval for
transfer of control, and the FCC license renewal of WHTM-TV. The
Agreement provides that the earliest date at which the sale will
close
is July 18, 1994.
Management intends to negotiate with its senior lenders to
extend the due date and terms of the debt that is due June 30,
1994. Extension of the due date to coincide with the closing
date of the sale would enable the Corporation to continue
operations and to satisfy all of the Corporation's outstanding
debt upon closing of the sale.
At December 31, 1993, the aggregate maturities of long-term debt,
including capitalized lease obligations by year are as follows:
1994 $ 20,576,233
1995 9,983
1996 10,306
1997 6,886,500
$ 27,483,022
4. Long-Term Debt (continued)
The Corporation incurred interest expense as follows:
Year Ended December 31
1993 1992
Senior bank debt $ 1,450,941 $ 1,699,756
Senior secured notes 467,730 543,594
Senior subordinated notes
prior to restructuring - 790,151
Senior subordinated notes
subsequent to restructuring 140,083 34,125
Junior subordinated notes prior
to restructuring - 1,002,130
Junior subordinated notes
subsequent to restructuring 460,125 112,500
$2,518,879 $ 4,182,256
Interest paid was $1,918,671 and $2,891,518, and interest
converted to long-term debt was $586,500 and $2,009,077 for the
years ended December 31, 1993 and 1992, respectively.
5. Program Contracts Payable
WHTM-TV has entered into long-term, noninterest-bearing contracts
for program rights requiring payments through 1997. Contracts
entered into totaled $1,687,677 in 1993 and $1,323,515 in 1992.
As of December 31, 1993 commitments under these contracts are due
as follows:
1994 $ 1,315,981
1995 1,036,642
1996 431,160
1997 6,501
$ 2,790,284
<PAGE>
6. Recapitalization and Debt Restructuring
On September 30, 1992, the Corporation finalized a comprehensive
restructuring. The term loan and senior secured notes were
modified to extend the maturity dates to June 30, 1994.
Principal payments of $2,121,309 and $498,885, respectively, were
made on these loans on September 30, 1992. Interest,
scheduled principal, and mandatory principal payments are
payable quarterly. A final payment of the remaining amount due
is required on June 30, 1994. The interest rate on the term loan
increased to prime plus 2.0%, while the senior secured notes'
interest rate remained at 11.15%. Additionally, the Corporation
has been released from the senior secured and senior subordinated
makewell and assumption agreements, in which the Corporation had
guaranteed the debt of another company.
Senior subordinated notes prior to restructuring of $5,000,000
were exchanged for $5,000,000 of junior subordinated notes
subsequent to restructuring. The notes bear interest at 9%
compounded annually with all principal and interest payable in
full on September 30, 1997. $1,300,000 of accrued and unpaid
interest on the original note was exchanged for $1,300,000 of
senior subordinated notes subsequent to restructuring. The notes
bear interest at 10.5% compounded annually with all
principal and interest payable in full on September 30, 1997.
The remaining accrued and unpaid interest of $2,248,292 and 1,500
shares of Class B Common Stock, also owned by the holders of the
senior subordinated debt, were exchanged for warrants to acquire
5,000 shares of new Class B Nonvoting Stock. The
warrants are exercisable through December 31, 2020 at a price of
$.10 per share.
Junior subordinated notes prior to restructuring of $5,600,000
plus accrued and deferred interest of $6,091,518 along with 9,750
shares of Class B Common Stock and 5,000 shares of
preferred stock, owned by the holders of the junior subordinated
notes, were exchanged for 5,000 shares of new Class A Nonvoting
Stock.
The minority holders of the original Class A Voting Common Stock
transferred and assigned all of their shares to the majority
holder of original Class A Voting Common Stock. The majority
holder of Class A Voting Common Stock exchanged all of its stock
for 100 shares of new Class C Voting Stock.
As a result of this restructuring, the Corporation recognized an
extraordinary gain of $6,703,853 in 1992. The recapitalization
and restructuring were not taxable under current Internal
Revenue Service regulations.<PAGE>
6. Recapitalization and Debt Restructuring (continued)
The Corporation's debt agreements contain many covenants, the
most restrictive of which restrict the Corporation's ability to
incur additional debt, enter into leases, acquire property and
equipment, issue additional shares of common stock or pay
dividends, and require the maintenance of certain levels of net
operating income. All violations of debt covenants through
September 30, 1992 under the previous debt agreements were
waived as part of the restructuring. At December 31, 1993 and
1992, the Corporation was in compliance with the debt covenants.
Subsequent to the restructuring, the Corporation's capital stock
consists of the following:
Class A Nonvoting Common Stock has a $.10 par value. 5,000
shares are authorized, issued and outstanding. Dividends
commence to accrue on September 30, 1992 with respect to
each share of Class A Common Stock at the rate of 8% per
annum of the liquidation value of $1,000 per share, and compound
annually. At December 31, 1993 and 1992, the amounts of
dividends in arrears were $508,000 ($101.60 per share), and
$100,000 ($20 per share), respectively.
Class B Nonvoting Common Stock has a $.10 par value. 5,000
shares are authorized, unissued and reserved for the
exercise of warrants to acquire such shares. Dividends commence
to accrue on September 30, 1992 with respect to each share of
Class B Common Stock (whether or not such shares are
outstanding) at the rate of 8% per annum of the liquidation
value of $360 per share, and compound annually. At December
31, 1993 and 1992, the amounts of dividends in arrears were
$182,900 ($36.58 per share), and $36,000 ($7.20 per share),
respectively.
Class C Voting Common Stock has a $1.00 par value. 200
shares are authorized. 100 shares are issued and outstanding.
Holders of Class C Common Stock are not entitled to receive
dividends. Class C Common Stock has a liquidation value of
$1.00 per share. Holders of Class A Common Stock have the
right to purchase 100 shares of Class C Common Stock at a
price of $1.00 per share.
7. Income Taxes
Effective January 1, 1993, the Corporation changed its method of
accounting for income taxes from the deferred method to the
liability method required by FASB Statement No. 109, "Accounting
for Income Taxes." As permitted under the new rules, prior
years' financial statements have not been restated.<PAGE>
7. Income Taxes (continued)
The cumulative effect of adopting Statement 109 as of January 1,
1993 was to increase net income by $1,088,066. For the year
ended December 31, 1993, application of the new income tax rules
decreased pretax income by $9,494 because of increased
depreciation expense as a result of Statement 109's requirement
to report assets acquired in prior business combinations at their
pretax amounts.
At December 31, 1993, the Corporation has net operating loss
carryforwards of approximately $2,080,000 for income tax
purposes that expire 2005 through 2007. For financial
reporting purposes, a valuation allowance of $395,000 has been
recognized to offset the deferred tax assets related to those
carryforwards. Net operating loss carryforwards of $2,162,000
were utilized during 1993. This resulted in an increase in
deferred tax expense of $735,000. Income taxes paid were
$313,000 in 1993 and $110,000 in 1992.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the
Corporation's deferred tax liabilities and assets as of December
31, 1993 are as follows:
Deferred tax liabilities:
Tax over book depreciation $ 428,492
Prepaid expenses 19,019
Total deferred tax liabilities 447,511
Deferred tax assets:
Loan costs 97,053
Bad debts 18,362
Net operating loss carryforwards 717,471
Alternative minimum tax
credit carryforward 45,000
Total deferred tax assets 877,886
Valuation allowance on deferred
tax assets (395,000)
Net deferred tax assets 482,886
Net deferred tax assets $ 35,375
Net current deferred tax asset $ 404,262
Net deferred tax liability 368,887
$ 35,375<PAGE>
7. Income Taxes (continued)
Significant components of the provision for income taxes
attributable to continuing operations are as follows:
Liability Method Deferred Method
1993 1992
Current:
Federal $ 46,212 $ 239,675
State 266,655 135,325
Total current 312,867 375,000
Deferred:
Federal 805,354 -
State 29,616 -
Total deferred 834,970 -
Provision for
income taxes $ 1,147,837 $ 375,000
The provision for income taxes is higher than that calculated
using the federal statutory income tax rate due primarily to the
effect of goodwill amortization, state income taxes net of the
federal tax benefit, and the federal alternative minimum tax.
8. Subsequent Event
On February 15, 1994, the Corporation signed a Securities
Purchase Agreement to sell all of the outstanding stock and
warrants of the Corporation to Price Communications Corporation
for $41 million plus or minus adjustments for working capital and
cash flow, as defined in the agreement.<PAGE>
EXHIBIT 2
Consolidated Financial Statements
Smith Acquisition Corp.
Years Ended December 31, 1992 and 1991
<PAGE>
Smith Acquisition Corp.
Consolidated Financial Statements
Years Ended December 31, 1992 and 1991
Contents
Audited Consolidated Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 4
Consolidated Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
<PAGE>
Smith Acquisition Corp.
Consolidated Balance Sheets
December 31
1992 1991
Assets
Current Assets:
Cash and cash equivalents $986,211 2,627,381
Accounts receivable, less allowance for
doubtful accounts of $103,191 and
$57,715 in 1992 and 1991, respectively 2,951,505 2,927,721
Current portion of program rights 1,850,653 1,721,312
Prepaid expenses and deposits 324,735 152,354
Deferred tax asset
Total current assets 6,113,104 7,428,768
Property and equipment, net 2,253,045 2,494,425
Other assets:
Program rights 1,485,236 1,306,846
Intangible assets and goodwill, net of
accumulated amortization of $7,302,294
and $6,558,834 in 1992
and 1991, respectively 24,858,830 25,886,817
Total assets $ 34,710,215 $ 37,116,856<PAGE>
December 31
1992 1991
Liabilities and stockholders' equity
Current liabilities:
Current portion of program
contracts payable $1,718,257 $ 1,647,588
Current portion of long-term debt 1,009,855 2,757,655
Accounts payable 219,395 192,582
Accrued payroll and commissions 128,594 134,960
Accrued interest 146,625 1,151,642
Other accrued expenses 561,709 582,201
Income taxes payable 25,325 -
Total current liabilities 3,809,760 6,466,628
Other liabilities:
Deferred tax liability
Long-term debt 28,842,796 41,496,683
Long-term portion of program
contracts payable 1,335,294 1,124,760
30,178,090 42,621,443
Stockholders' equity:
Preferred Stock - 5,000
Common Stock Class A - 375
Common Stock Class B - 1,125
Common Stock Class A (new) 500 -
Common Stock Class C (new) 100 -
Additional paid-in capital 7,601,374 1,395,000
Retained-earnings (deficit) (6,879,609) (13,372,715)
722,365 (11,971,215)
Total liabilities and
stockholders' equity $ 34,710,215 $ 37,116,856
See accompanying notes.
<PAGE>
Smith Acquisition Corp.
Consolidated Statements of Operations
Year Ended December 31
1992 1991
Revenues:
National $ 8,177,074 $ 7,474,916
Local 6,711,958 6,255,092
Network 424,333 456,864
Other 137,365 142,536
15,450,730 14,329,408
Less agency and national
representative commissions 2,748,712 2,491,196
Net revenues 12,702,018 11,838,212
Operating expenses:
Technical 693,336 631,723
Programming 2,526,365 2,721,029
News 1,422,740 1,299,019
Sales 953,832 889,881
Promotion 190,892 176,867
General and administrative 1,275,722 1,109,903
7,062,887 6,828,422
Operating income before
depreciation expense, trade and barter 5,639,131 5,009,790
Trade and barter revenue 286,800 250,902
Trade and barter expense (256,174) (215,244)
Depreciation expense (644,463) (1,122,685)
Operating income 5,025,294 3,922,763
Other expenses:
Interest expense 4,182,256 4,772,473
Amortization of intangible assets
and goodwill 743,460 810,990
Management fee to affiliated entity 175,000 175,000
5,100,716 5,758,463
Income (loss) before income taxes,
extraordinary items, and cumulative
effect of change in accounting
principle (75,422) (1,835,700)
Income taxes:
Federal 239,675 -
State 135,325 -
375,000 -
Income (loss) before extraordinary
items and cumulative effect of change
in accounting principle (450,422) (1,835,700)
Extraordinary items:
Gain on extinguishment of debt 6,703,853 -
Utilization of net operating loss
carryforwards 239,675 -
Cumulative effect of change in
accounting principle 6,943,528 -
Net income $ 6,493,106
$(1,835,700)
See accompanying notes. <PAGE>
Consolidated Statements of Stockholders' Equity (Deficit)
<PAGE>
Smith Acquisition Corp.
Consolidated Statements of Cash Flows
Year Ended December 31
1992 1991
Operating activities
Net income $ 6,493,106 $(1,835,700)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cumulative effect of change in
accounting principle
Extraordinary gain (6,703,853) -
Depreciation and amortization of
property and equipment and
intangible assets 1,387,923 1,933,675
Amortization of program rights 1,832,902 2,102,439
Interest converted to long-term debt 2,009,077 2,071,930
(Gain) loss on sale of equipment 7,606 49,657
Trade and barter revenues (285,800) (250,902)
Trade and barter expenses 256,174 215,244
Payments for program rights (1,773,958) (1,659,947)
Provision for deferred income taxes
Changes in operating assets and liabilities:
Increase in accounts receivable (23,784) (574,346)
Decrease in prepaid expenses and deposits 65,842 19,975
Decrease in accounts payable and
accrued expenses (985,740) (169,996)
Net cash provided by operating activities 2,278,495 1,902,029
Investing activities
Purchase of property and equipment (416,241) (392,174)
Proceeds from sale of equipment 5,550 8,465
Increase in intangible assets
Net cash used in investing activities (410,691) (383,709)
Financing activities
Principal payments on long-term debt 2,758,017) (9,408)
Payments for restructuring fees (750,957) (271,077)
Net cash used in financing activities (3,508,974) (280,485)
Decrease in cash and cash equivalents (1,641,170) (1,237,835)
Cash and cash equivalents
at beginning of year 2,627,381 1,389,546
Cash and cash equivalents at end of year $ 986,211 $2,627,381
See accompanying notes.<PAGE>
Smith Acquisition Corp.
Notes to Consolidated Financial Statements
December 31, 1992
1. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
Smith Acquisition Corp. (Corporation) and its wholly-owned
subsidiary, WHTM-TV, Inc. (WHTM-TV). All significant
intercompany transactions and balances have been eliminated.
Program Rights
Program rights represent rights under contract to telecast
certain events or shows. The rights and the related contract
liabilities are recorded on a gross basis when available for use.
The program rights are amortized using accelerated rates over the
term of the respective contract. The current portion of program
rights represents management's estimate of amortization for the
succeeding year. Based on management's expectations of program
usefulness, unamortized cost may be written down to net
realizable value. During 1991, the Corporation wrote down two
programs by approximately $216,000.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is
computed using the straight-line.
Intangible Assets
Intangible assets and goodwill are being amortized generally over
a forty-year period using the straight-line method.
Income Taxes
The Corporation files a consolidated federal return with WHTM-TV
and separate state tax returns. At December 31, 1992 the
Corporation had unused net operating loss carryforwards for
accounting purposes of approximately $4,258,000, which expire
through 2006. For tax purposes, the Corporation had unused net
operating loss carryforwards of approximately $3,872,000, which
expire through 2006. The difference is principally due to
accelerated tax depreciation and accrued liabilities for
financial reporting purposes which are not deductible for tax
purposes. Income taxes paid were $110,000 in 1992 and $-0 in
1991.
Cash Equivalents
The Corporation considers investments with a maturity of three
months or less when purchased to be cash equivalents.
2. Concentration of Credit Risk
The Corporation sells advertising spots to a broad range of
national and local advertising agencies. No individual
customer's balance typically exceeds 10% of total receivables.
The Corporation performs periodic credit evaluations of its
customers' financial condition and generally does not require
collateral. Credit losses are provided for in the financial
statements and consistently have been within management's
expectations.
3. Property and Equipment
Property and equipment consisted of the following:
December 31
1992 1991
Land $ 233,665 $ 233,665
Buildings 973,018 973,018
Equipment 6,035,739 5,889,592
Furniture and fixtures 472,161 428,792
Vehicles 263,540 232,331
7,978,123 7,757,398
Less accumulated depreciation 5,725,078 5,262,973
$ 2,253,045 $ 2,494,425
<PAGE>
Smith Acquisition Corp.
Notes to Consolidated Financial Statements (continued)
4. Long-Term Debt
Long-term debt consisted of the following (see Note 6):
December 31
1992 1991
Term loan due June 30, 1994;
interest at 2.0% over prime
(8.00% at December 31, 1992) (a) $ 19,038,714 $21,261,223
Senior secured notes; interest
at 11.15% payable quarterly;
due June 30, 1994 (a) (d) 4,477,315 5,000,000
Senior subordinated notes subsequent
to restructuring (see Note 6);
interest at 10.5%; interest and
principal payable in full
September 30, 1997; includes
deferred interest of $136,500 at
December 31, 1991 (b) (d) 1,300,000 -
Junior subordinated notes subsequent
to restructuring (see Note 6);
interest at 9.0%; interest and
principal payable in full
September 30, 1997; includes
deferred interest of $450,000 at
December 31, 1991 (c) (d) 5,000,000
Capitalized lease obligations 36,622 49,057
29,852,651 44,254,338
Less current portion 1,009,855 2,757,655
$ 28,842,796 $41,496,683
<PAGE>
Long-Term Debt (continued)
(a) The term loan and the senior secured notes (collectively,
the "senior debt") are secured by a first priority interest
in substantially all of the assets of the Corporation and
WHTM-TV and the pledge of all of the outstanding common
stock of the Corporation. The senior debt is guaranteed by
WHTM-TV.
(b) The senior subordinated debt is subordinate to the senior
debt and is secured by a pledge of the outstanding common
stock of WHTM-TV and is guaranteed by WHTM-TV.
(c) The junior subordinated debt is subordinate to the senior
debt and senior subordinated debt and is guaranteed by
WHTM-TV (which guarantee is subordinate to WHTM-TV
guarantee to the senior subordinated lenders).
(d) Subsequent to the restructuring, the senior secured notes,
senior subordinated notes, and the junior subordinated debt
are held by owners of the Corporation's Class B Common Stock
warrants.
At December 31, 1992, the aggregate maturities of long-term debt,
including capitalized lease obligations by year are as follows:
1993 $ 1,009,855
1994 22,522,971
1995 9,493
1996 10,332
1997 6,300,000
$29,852,651
The Corporation is currently pursuing alternate sources of
financing to repay the term loan senior notes which become due
and payable in June 1994.
<PAGE>
4. Long-Term Debt (continued)
The Corporation incurred interest expense as follows:
Year Ended December 31
1992 1991
Senior bank debt $ 1,699,756 $ 2,081,680
Senior secured notes 543,594 557,500
Senior subordinated notes
prior to restructuring 790,151 945,583
Senior subordinated notes
subsequent to restructuring 34,125 -
Junior subordinated notes prior
to restructuring 1,002,130 1,187,710
Junior subordinated notes
subsequent to restructuring 112,500 -
$ 4,182,256 $ 4,772,473
Interest paid was $2,891,518 and $2,891,067, and interest
converted to long-term debt was $2,009,077 and $2,071,930 for the
years ended December 31, 1992 and 1991, respectively.
During 1991, the Corporation incurred a capital lease obligation
of $44,014 to acquire equipment.
5. Program Contracts Payable
WHTM-TV has entered into long-term, noninterest-bearing contracts
for program rights requiring payments through 1995. Contracts
entered into totaled $1,046,830 in 1992 and $1,159,832 in 1991.
As of December 31, 1992 commitments under these contracts are due
as follows:
1993 $ 1,718,257
1994 657,100
1995 612,772
1996 54,916
1997 10,506
$ 3,053,551
<PAGE>
6. Recapitalization and Debt Restructuring
On September 30, 1992, the Corporation finalized a comprehensive
restructuring. The term loan and senior secured notes of
$5,000,000 were modified to extend the maturity dates to June 30,
1994. Principal payments of $2,121,309 and $498,885,
respectively, were made on these loans on September 30, 1992.
Interest, scheduled principal, and mandatory principal payments
are
payable quarterly. A final payment of the remaining amount due
is required on June 30, 1994. The interest rate on the term loan
increased to prime plus 2.0%, while the senior secured notes'
interest rate remained at 11.15%. Additionally, the Corporation
has been released from the senior secured and senior subordinated
makewell and assumption agreements, in which the Corporation had
guaranteed the debt of another company.
Senior subordinated notes prior to of $5,000,000 were exchanged
for $5,000,000 of junior subordinated notes. The notes bear
interest at 9% compounded annually with all principal and
interest payable in full on September 30, 1997. $1,300,000 of
accrued and unpaid interest on the original note was exchanged
for $1,300,000 of senior subordinated notes subsequent to
restructuring. The notes bear interest at 10.5% compounded
annually with all
principal and interest payable in full on September 30, 1997.
The remaining accrued and unpaid interest of $2,248,292 ($954,668
at December 31, 1991) and 1,500 shares of Class B Common Stock,
also owned by the holders of the senior subordinated debt, were
exchanged for warrants to acquire 5,000 shares of new Class B
Nonvoting Stock. The warrants are exercisable through December
31, 2020 at a price of $.10 per share.
Junior subordinated notes prior to restructuring of $5,600,000
plus accrued and deferred interest of $6,091,518 ($5,089,390 at
December 31, 1991) along with 9,750 shares of Class B Common
Stock and 5,000 shares of preferred stock, owned by the holders
of the junior subordinated notes, were exchanged for 5,000 shares
of new Class A Nonvoting Stock.
The minority holders of the original Class A Voting Common Stock
transferred and assigned all of their shares to the majority
holder of original Class A Voting Common Stock. The majority
holder of Class A Voting Common Stock exchanged all of its stock
for 100 shares of new Class C Voting Stock.
As a result of this restructuring, the Corporation recognized an
extraordinary gain of $6,703,853 in 1992. The recapitalization
and restructuring were not taxable under current Internal
Revenue Service regulations.
<PAGE>
6. Recapitalization and Debt Restructuring (continued)
The Corporation's debt agreements contain many covenants, the
most restrictive of which restrict the Corporation's ability to
incur additional debt, enter into leases, acquire property and
equipment, issue additional shares of common stock or pay
dividends, and require the maintenance of certain levels of net
operating income. All violations of debt covenants through
September 30, 1992 under the previous debt agreements were
waived as part of the restructuring. At December 31, 1992 the
Corporation was in compliance with the debt covenants.
Subsequent to the restructuring, the Corporation's capital stock
consists of the following:
Class A Nonvoting Common Stock has a $.10 par value. 5,000
shares are authorized, issued and outstanding. Dividends
commence to accrue on September 30, 1992 with respect to
each share of Class A Common Stock at the rate of 8% per
annum of the liquidation value of $1,000 per share, and compound
annually.
Class B Nonvoting Common Stock has a $.10 par value. 5,000
shares are authorized, unissued and reserved for the
exercise of warrants to acquire such shares. Dividends commence
to accrue on September 30, 1992 with respect to each share of
Class B Common Stock (whether or not such shares are
outstanding) at the rate of 8% per annum of the liquidation
value of $360 per share, and compound annually.
Class C Voting Common Stock has a $1.00 par value. 200
shares are authorized. 100 shares are issued and outstanding.
Holders of Class C Common Stock are not entitled to receive
dividends. Class C Common Stock has a liquidation value of
$1.00 per share. Holders of Class A Common Stock have the
right to purchase 100 shares of Class C Common Stock at a
price of $1.00 per share.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 823,662
<SECURITIES> 0
<RECEIVABLES> 5,629,761
<ALLOWANCES> 409,763
<INVENTORY> 0
<CURRENT-ASSETS> 11,249,090
<PP&E> 18,195,961
<DEPRECIATION> 2,641,231
<TOTAL-ASSETS> 88,748,466
<CURRENT-LIABILITIES> 28,234,995
<BONDS> 0
<COMMON> 99,647
0
0
<OTHER-SE> 33,628,636
<TOTAL-LIABILITY-AND-EQUITY> 88,728,283
<SALES> 16,193,830
<TOTAL-REVENUES> 16,193,830
<CGS> 10,773,162
<TOTAL-COSTS> 13,343,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 214,987
<INCOME-PRETAX> 2,850,283
<INCOME-TAX> 43,000
<INCOME-CONTINUING> 2,807,283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,807,283
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
