<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 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 0-12743
-----------
PARK COMMUNICATIONS, INC.
----------------------------------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 16-0986694
------------------------------ --------------------
(State or other jurisdiction of (IRS Employer Identi-
incorporation of organization) fication No.)
Terrace Hill, Ithaca, NY 14850
--------------------------------------- -----------
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code (607) 272-9020
--------------
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
--- ---
As of July 25, 1994, 20,717,709 shares of common stock, $.16 2/3 par
value, were outstanding.<PAGE>
FORM 10-Q QUARTERLY REPORT - JUNE 30, 1994
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.................................2-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................6-7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders.. 8
Item 6. Exhibits and Reports on Form 8-K..................... 8
Signatures................................................... 9
<PAGE>
PART I, FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
- - ----------------------------
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in Thousands Except Share and Per Share Amounts)
June 30, December 31,
1994 1993
------------ ------------
Assets (unaudited)
Current Assets:
Cash, cash equivalents and short-term investments $130,406 $116,552
Accounts receivable, less allowance for doubtful
accounts of $1,308 in 1994 and $1,399 in 1993.. 21,620 21,006
Inventory......................................... 1,004 1,201
Film contracts.................................... 2,027 2,485
Consulting/non-compete contracts.................. 903 915
Other............................................. 2,867 3,807
--------- ---------
Total current assets........................... 158,827 145,966
--------- ---------
Property, Plant & Equipment.......................... 136,278 136,209
Less accumulated depreciation and amortization.... (65,218) (64,346)
--------- ---------
71,060 71,863
--------- ---------
Intangible assets, less amortization of $73,733 in
1994 and $70,599 in 1993.......................... 112,962 116,096
--------- ---------
Film contracts....................................... 2,226 2,431
Consulting/non-compete contracts..................... 4,043 4,503
Other assets......................................... 1,588 1,762
--------- ---------
$350,706 $342,621
Liabilities and Shareholders' Equity ========= =========
Current Liabilities:
Current maturities of long-term debt.............. $ 2,705 $ 2,762
Current maturities of film contracts.............. 2,195 2,410
Accounts payable.................................. 1,827 3,052
Consulting/non-compete contracts.................. 939 936
Interest.......................................... 1,120 1,066
Income taxes...................................... 3,010 4,347
Accrued liabilities............................... 3,903 3,964
Deferred income................................... 2,776 2,781
--------- ---------
Total current liabilities...................... 18,475 21,318
--------- ---------
Long-term debt....................................... 53,633 54,368
Consulting/non-compete contracts..................... 4,118 4,591
Deferred income taxes................................ 9,088 8,738
--------- ---------
Total liabilities.............................. 85,314 89,015
Shareholders' Equity: --------- ---------
Common stock-par value $.16 2/3 per share:
Authorized 32,000,000 shares
Issued and outstanding 20,717,709 shares
in 1994 and 20,708,977 in 1993............ 3,454 3,452
Paid in capital................................... 14,092 13,924
Retained earnings................................. 247,846 236,230
--------- ---------
Total shareholders' equity........................... 265,392 253,606
--------- ---------
$350,706 $342,621
See notes to consolidated financial statements ========= =========
-2-
<PAGE>
PARK COMMUNICATIONS, INC. & SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended Six months Ended
June 30 June 30
------------------ -----------------
1994 1993 1994 1993
------ ------ ------ ------
(unaudited) (unaudited)
Revenue:
Broadcasting......................... $ 28,435 $ 22,672 $ 51,072 $ 41,048
Newspapers........................... 19,712 21,563 37,168 41,076
--------- --------- --------- ---------
Gross revenue..................... 48,147 44,235 88,240 82,124
Less agency and national
representative commissions........ 4,233 3,341 7,523 5,963
--------- --------- --------- ---------
Net revenue....................... 43,914 40,894 80,717 76,161
--------- --------- --------- ---------
Operating expenses:
Cost of sales........................ 14,420 15,964 28,574 30,941
Selling, general and administrative.. 12,402 12,318 24,318 24,411
--------- --------- --------- ---------
26,822 28,282 52,892 55,352
--------- --------- --------- ---------
Operating income before depreciation
and amortization................ 17,092 12,612 27,825 20,809
--------- --------- --------- ---------
Depreciation and amortization:
Depreciation......................... 2,038 1,942 4,075 3,885
Amortization......................... 919 1,007 1,858 2,045
Amortization of excess of cost over
net assets acquired............... 637 670 1,276 1,340
--------- --------- --------- ---------
3,594 3,619 7,209 7,270
--------- --------- --------- ---------
Operating income.................. 13,498 8,993 20,616 13,539
Interest expense........................ (940) (930) (1,882) (1,861)
Interest income......................... 1,117 1,245 2,277 2,566
Other income (expense).................. (268) --- (1,064) (328)
--------- --------- --------- ---------
Income before income taxes........ 13,407 9,308 19,947 13,916
Provision for income taxes.............. 5,455 3,907 8,331 5,913
--------- --------- --------- ---------
NET INCOME........................ 7,952 5,401 11,616 8,003
Retained earnings, beginning of period 239,894 220,052 236,230 217,450
--------- --------- --------- ---------
RETAINED EARNINGS, end of period.. $247,846 $225,453 $247,846 $225,453
========= ========= ========= =========
Earnings per share...................... $ .38 $ .26 $ .56 $ .39
========= ========= ========= =========
See notes to consolidated financial statements
-3-
<PAGE>
Park Communications, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in Thousands)
Six months ended June 30
------------------------
1994 1993
------ ------
(unaudited)
Operating Activities:
Net Income ......................................... $ 11,616 $ 8,003
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................. 7,209 7,270
Amortization of film contract rights and
consulting/non-compete contracts included in
operating expenses.......................... 1,930 1,913
Payments on film contract liabilities.......... (1,402) (1,250)
Payments on consulting/non-compete contracts... (470) (616)
Provision for losses on accounts receivable.... 155 219
Provision for deferred income taxes............ 350 2
Loss on sale of property, plant and equipment.. 189 39
Changes in operating assets and liabilities:
Accounts receivable......................... (769) (624)
Inventory and other assets.................. 1,311 339
Accounts payable and accrued liabilities.... (2,569) (1,249)
Deferred income............................. (5) (1)
--------- ---------
Net cash provided by operating
activities............................... 17,545 14,045
Investing Activities:
Purchase of short-term investments................... (88,303) (21,161)
Proceeds from short-term investments................. 99,073 24,072
Purchases of property, plant and equipment........... (3,546) (3,308)
Proceeds from sale of property, plant and
equipment........................................... 85 8
--------- ---------
Net cash provided (used) by investing
activities............................... 7,309 (389)
Financing Activities:
Principal payments on long-term debt................. (339) (1,148)
Proceeds from issuance of Common Stock............... 109 37
--------- ---------
Net cash (used) in financing activities.. (230) (1,111)
Increase in cash and cash equivalents......... 24,624 12,545
Cash and cash equivalents, beginning of period.......... 21,232 5,684
--------- ---------
Cash and cash equivalents, end of period............. $ 45,856 $ 18,229
========== =========
Summary:
Cash and cash equivalents as above................... $ 45,856 $ 18,229
Short-term investments............................... 84,550 96,752
--------- ---------
$130,406 $114,981
========= =========
See notes to consolidated financial statements.
-4-
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1.Earnings Per Share
------------------
Earnings per share of Common Stock is computed on the weighted average number
of common shares outstanding during each period. The number of shares used was
20,714,858 for the three months ended June 30, 1994, 20,713,340 for the six
months ended June 30, 1994 and 20,700,167 for 1993. Dilution, assuming
conversion of subordinated debentures,is not material.
2.Shareholders' Equity
--------------------
On January 11, 1994, the Company issued 3,182 shares of its Common Stock in
connection with the conversion of $61,000 of its convertible debentures. On
March 31, 1994, and June 30, 1994, the Company issued 2,655 shares and 2,895
shares of its Common Stock respectively, under terms of its Employee Stock
Purchase Plan. The issuances increased the value of Common Stock, by $1,455
and increased paid-in-capital by $167,723.
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
1994 Compared to 1993
- - ---------------------
Three Months Ended June 30
--------------------------
For the second quarter of 1994, the Company's gross revenue increased
$3,900,000 (9%) compared to the second quarter of 1993. The television
division's gross revenue increased $4,500,000 (28%) due first, to strong
improvement in local/regional and political advertising and second, to the
acquisition in November, 1993 of KALB-TV in Alexandria, Louisiana. The radio
division's gross revenue increased $1,300,000 (19%) due to strong improvement
in local/regional and national advertising. The newspaper division's gross
revenue decreased $1,800,000 (9%) because the operating results of the
Company's smaller newspapers that were sold in December, 1993 are not included
in 1994.
Operating income before depreciation and amortization increased $4,500,000
(36%) compared to the second quarter of 1993. The television division's
operating income increased $3,000,000 (50%) due primarily to both a one-time
reduction in music license fees (due to the industry-wide settlement of
litigation between the television industry and BMI) and to the reasons
discussed above. The newspaper division's operating income increased $900,000
(18%) primarily due to both increases in advertising revenues at the Company's
newspapers and the sale in December, 1993 of certain of the Company's smaller
newspapers (discussed above), which were not profitable in 1993. The radio
division's operating income increased $400,000 (33%) due to the reasons
discussed above.
The net income for the second quarter of 1994 increased $2,600,000 (47%)
compared to the second quarter of 1993.
Operating cash flow (net income plus depreciation and amortization)
increased $2,500,000 (28%) in the second quarter of 1994 from the second
quarter of 1993.
As previously reported, the Company's Board of Directors voted on March 25,
1994 to seek a sale of the Company. At this time, it is intended that such a
sale be accomplished through a sale of the Company's outstanding Common Stock
to a third party. However, there is no guarantee that such a sale will be
achieved. An alternative method for selling the Company would be selling the
Company's assets to one or more purchasers (e.g., selling one or more divisions
or particular properties). Depending on how such a transaction were
structured, the Company's revenues, income and cash flows could be
significantly affected.
Six Months Ended June 30
------------------------
For the first six months of 1994, the Company's gross revenue increased
$6,100,000 (7%) compared to the first six months of 1993. The television
division's gross revenue increased $7,900,000 (27%) due first, to the
acquisition in November, 1993 of KALB-TV in Alexandria, Louisiana and second,
to strong improvement in local/regional, national and political advertising.
The radio division's gross revenue increased $2,100,000 (18%) due to strong
improvement in local/regional and national advertising. The newspaper
division's gross revenue decreased $3,900,000 (10%) because the operating
results of the Company's smaller newspapers that were sold in December, 1993
are not included in 1994.
-6-<PAGE>
Operating income before depreciation and amortization increased $7,000,000
(34%) compared to the first six months of 1993. The television division's
operating income increased $4,500,000 (47%) due primarily to both a one- time
reduction in music license fees (due to the industry-wide settlement of
litigation between the television industry and BMI) and the reasons discussed
above. The newspaper division's operating income increased $1,700,000 (19%),
primarily due to both increases in advertising revenues at the Company's
newspapers and the sale in December, 1993 of certain of the Company's smaller
newspapers (discussed above), which were not profitable in 1993. The radio
division's operating income increased $600,000 (29%) due to the reasons
discussed above.
The net income for the first six months of 1994 increased $3,600,000 (45%).
Operating cash flow (net income plus depreciation and amortization)
increased $3,600,000 (23%) in the first six months of 1994 from the same period
in 1993.
Liquidity
---------
For the first six months of 1994, the net cash provided by operating
activities was $17,500,000. In addition, the net cash flow from investing and
financing activities was $7,100,000 during the first six months of 1994. As of
June 30, 1994, the Company had $130,000,000 in cash, cash equivalents, and
short-term investments. The Company's current ratio (comparison of current
assets to current liabilities), a key indicator of liquidity, was a strong 8.6
to 1 as of June 30,1994.
The Company expects that in calendar 1994, net cash provided by operating
activities will enable it to fund known investing and financing activity
requirements.
Previously, the Company's dividend policy has been to retain its earnings
for use in its business and not to pay cash dividends. In view of the decision
to sell the Company (discussed above), and depending upon how such a
transaction were structured, it is unclear whether this policy will continue.
Over the last three calendar years inflation affected the Company's
performance in terms of higher costs for wages and salaries, equipment, and
newsprint. The Company, however, was able to offset these rising costs in part
by increasing advertising and circulation rates at most newspapers and by
raising the effective advertising rates in most television and radio
broadcasting stations. Management does not anticipate that inflation will have
a material effect on the Company's operations during the calendar year 1994.
-7-<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- - ------------------------------------------------------------
The Company held its Annual Meeting of stockholders on May 3, 1994 at which
all incumbent directors were re-elected for a one year term. The directors
elected at the meeting were:
Number of Votes Cast
------------------------------------------
Broker
---------
Directors For Withheld Abstentions Non-Votes
--------- ---------- -------- ----------- ---------
Dorothy D. Park - Chairman of
the Board 19,846,235 1,506 1,312 -
Harry F. Byrd, Jr. - Director 19,846,235 1,506 1,312 -
John F. McNair III - Director 19,846,235 1,506 1,312 -
Roy H. Park, Jr. - Director 19,846,235 1,506 1,312 -
Wright M. Thomas - Director 19,846,235 1,506 1,312 -
J. Markham Green - Director 19,846,235 1,506 1,312 -
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits - Not Applicable
----------
(b) Reports on Form 8-K -
---------------------
A report on Form 8-K was filed on June 29, 1994 reflecting in Item 5
an action taken by the Estate of Roy H. Park.
-8-<PAGE>
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.
PARK COMMUNICATIONS, INC.
Date July 25, 1994 /s/ Dorothy D. Park
---------------------------- ----------------------------------------
Dorothy D. Park
Chairman of the Board of Directors
and Secretary
Date July 25, 1994 /s/ Wright M. Thomas
----------------------------- ----------------------------------------
Wright M. Thomas
President, Chief Operating Officer,
Assistant Secretary and Director
Date July 25, 1994 /s/ Randel N. Stair
------------------------------ ----------------------------------------
Randel N. Stair
Vice President - Chief Financial Officer,
Treasurer, Controller and
Assistant Secretary (Principal
Financial Officer)
-9-<PAGE>
