<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 March 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-12743
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PARK COMMUNICATIONS, INC.
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(Exact name of the registrant as specified in its charter)
Delaware 16-0986694
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(State or other jurisdiction of (IRS Employer Identi-
incorporation of organization) fication No.)
Terrace Hill, Ithaca, NY 14850
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(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code (607) 272-9020
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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 May 3, 1995, 23,327,316 shares of common stock, $.16 2/3 par value,
were outstanding.
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FORM 10-Q QUARTERLY REPORT - MARCH 31, 1995
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 5. Other Information.................................... 8
Item 6. Exhibits and Reports on Form 8-K..................... 9
Signatures.................................................... 10
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
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PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in Thousands Except Share and Per Share Amounts)
March 31 December 31,
1995 1994
Assets ---------------------------
Current Assets: (unaudited)
Cash, cash equivalents and short-term investments $156,190 $143,500
Accounts receivable, less allowance for doubtful
accounts of $ 1,335 in 1995 and $1,598 in 1994 20,350 22,235
Inventory......................................... 1,150 1,170
Film contracts.................................... 2,485 2,446
Consulting/non-compete contracts.................. 803 825
Other............................................. 2,394 3,597
--------- ---------
Total current assets............................ 183,372 173,773
Property, Plant & Equipment......................... 145,810 144,651
Less accumulated depreciation and amortization.... (70,866) (68,909)
--------- ---------
74,944 75,742
--------- ---------
Intangible assets, less amortization of $78,581 in
1995 and $76,900 in 1994.......................... 108,116 109,797
--------- ---------
Film contracts...................................... 2,461 2,777
Consulting/non-compete contracts.................... 3,195 3,390
Other assets........................................ 648 1,307
--------- ---------
$ 372,736 $366,786
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt.............. $ 715 $ 713
Current maturities of film contracts.............. 2,223 2,521
Accounts payable.................................. 1,967 2,539
Consulting/non-compete contracts.................. 854 877
Interest.......................................... 34 944
Income taxes...................................... 5,324 2,959
Accrued liabilities............................... 3,565 4,027
Deferred income................................... 3,362 2,909
--------- ---------
Total current liabilities....................... 18,044 17,489
--------- ---------
Long-term debt...................................... 3,674 49,248
Consulting/non-compete contracts.................... 3,513 3,718
Deferred income taxes............................... 10,523 10,601
--------- ---------
Total liabilities............................... 35,754 81,056
Shareholders' Equity: --------- ---------
Common stock-par value $.16 2/3 per share:
Authorized 32,000,000 shares
Issued and outstanding 23,327,316 shares
in 1995 and 20,961,205 in 1994............... 3,889 3,494
Paid in capital................................... 63,768 18,701
Retained earnings................................. 269,325 263,535
--------- ---------
Total shareholders' equity.......................... 336,982 285,730
--------- ---------
$ 372,736 $366,786
========= =========
See notes to consolidated financial statements.
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PARK COMMUNICATIONS, INC. & SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings
(Dollars in Thousands Except Per Share Amounts)
Three Months ended
March 31
------------------
1995 1994
(unaudited)
Revenue:
Broadcasting............................. $ 24,412 $ 22,637
Newspapers............................... 18,260 17,456
-------- --------
Gross revenue.......................... 42,672 40,093
Less agency and national
representative commissions............. 3,602 3,290
-------- --------
Net revenue............................ 39,070 36,803
-------- --------
Operating expenses:
Cost of sales............................ 14,746 14,154
Selling, general and administrative...... 11,976 11,916
-------- --------
26,722 26,070
-------- --------
Operating income before depreciation
and amortization..................... 12,348 10,733
-------- --------
Depreciation and amortization:
Depreciation............................. 2,102 2,037
Amortization............................. 1,019 939
Amortization of excess of cost over
net assets acquired.................... 662 639
-------- --------
3,783 3,615
-------- --------
Operating income....................... 8,565 7,118
Interest expense........................... (375) (942)
Interest income............................ 2,181 1,160
Other (expense)............................ (311) (796)
-------- --------
Income before income taxes............. 10,060 6,540
Provision for income taxes................. 4,270 2,876
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NET INCOME............................. 5,790 3,664
Retained earnings, beginning of period 263,535 236,230
-------- --------
RETAINED EARNINGS, end of period....... $269,325 $239,894
======== ========
Earnings per share......................... $ .26 $ .18
======== ========
See notes to consolidated financial statements
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PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in Thousands)
Three months ended March 31
---------------------------
1995 1994
(Unaudited)
Operating Activities:
Net Income............................................... $ 5,790 $ 3,664
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization......................... 3,783 3,615
Amortization of film contract rights and consulting/
non-compete contracts included in operating expenses 986 980
Payments on film contract liabilities................. (810) (714)
Payments on consulting/non-compete contracts.......... (228) (239)
Provision for losses on accounts receivable........... (172) (53)
Provision for deferred income taxes................... (64) 175
Loss on sale of property, plant and equipment......... 6 198
Changes in operating assets and liabilities:
Accounts receivable............................... 2,057 2,552
Inventory and other assets........................ 1,180 799
Accounts payable and accrued liabilities.......... 1,222 (1,948)
Deferred income................................... 453 125
-------- --------
Net cash provided by operating activities...... 14,203 9,154
Investing Activities:
Purchases of short-term investments...................... --- (41,188)
Proceeds from short-term investments..................... 59,431 59,645
Purchases of property, plant and equipment............... (1,310) (1,333)
Purchases of acquired companies, net of cash acquired....
Proceeds from sale of property, plant and equipment...... --- 20
-------- --------
Net cash (used) in investing activities........ 58,121 17,144
Financing Activities:
Principal payments on long-term debt..................... (203) (263)
Proceeds from issuance of Common Stock................... --- 51
-------- --------
Net cash (used) in investing activities........ (203) (212)
Increase in cash and cash equivalents................. 72,121 26,086
Cash and cash equivalents, beginning of period............. 84,069 21,232
-------- --------
Cash and cash equivalents, end of period.............. $156,190 $ 47,318
======== ========
Summary:
Cash and cash equivalents as above....................... $156,190 $ 47,318
Short-term investments................................... --- 76,863
-------- --------
$156,190 $124,181
======== ========
See notes to consolidated financial statements
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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 22,322,270 for the three months ended March 31, 1995,
and 20,711,805 for the three months ended March 31, 1994.
2. Shareholders' Equity
--------------------
During the first quarter of 1995 and 1994, the Company issued 55 and
2,655 shares respectively of Common Stock under the terms of its
Employee Stock Purchase Plan. The issuance increased the value of
Common Stock outstanding by $10 in 1995 and $443 in 1994. The
issuance increased paid-in-capital by $1,418 in 1995 and $50,391 in
1994. The Employee Stock Purchase Plan was terminated by the Company
effective December 31, 1994.
During 1995, the conversion of $45,351,000 principal amount of
convertible subordinated debentures into 2,366,056 shares of Common
Stock increased the value of Common Stock outstanding by $394,412 and
increased paid-in-capital by $45,065,117.
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Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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1995 Compared to 1994
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Three Months Ended March 31
---------------------------
For the first quarter of 1995, the Company's gross revenue increased $2,600,000
(6%). The radio division's gross revenue increased $1,100,000 (17%) due
primarily to strong improvement in local/regional and national advertising.
The newspaper division's gross revenue increased $800,000 (5%) from the same
period last year. The television division's gross revenue increased $700,000
(4%).
Operating income before depreciation and amortization increased $1,600,000
(15%) compared to the first quarter of 1994. The radio division's operating
income increased $600,000 (53%) from the first quarter of 1994. The newspaper
division's operating income increased $600,000 (15%) from the same period last
year. The television division's operating income increased $400,000 (7%).
The net income for the first quarter of 1995 increased $2,100,000 (58%)
compared to the first quarter of 1994.
Operating cash flow (net income plus depreciation and amortization) increased
$2,300,000 (32%) in the first quarter of 1995 from the first quarter of 1994.
LIQUIDITY
For the quarter ended March 31, 1995, the net cash provided by operating
activities was $14,203,000. The net cash provided by investing and financing
activities was $58,121,000 during that same period. As of March 31, 1995, The
Company had $156,190,000 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 10.2 to 1 as of March
31, 1995.
The Company expects that in calendar 1995, 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. On October 25,
1994, the Company entered into an agreement to sell the Company through an
all-cash merger to a private investment concern for a total purchase price of
$711,427,000. A portion of the purchase price will be paid from the proceeds
of a $573,427,000 loan to be made to the acquiror; the remainder of the
purchase price ($138,000,000) will be derived from cash in the Company's
principal bank account (after payment of expenses incurred in connection with
the merger) at closing of the acquisition. Under the terms of the merger
agreement relating to the proposed acquisition, as amended, the Company is
obligated to ensure that such amount will be in the Company's principal bank
account at closing; if such amount is not in the Company's principal bank
account at closing, the purchase price will be reduced by the amount of any
shortfall, which could, in turn, reduce the per share price received by the
Company's shareholders. However, as of March 31, 1995, the Company had
approximately $145,000,000 (after reduction for estimated expenses to be
incurred in connection with the merger) in its principal bank account, and it
is anticipated that the Company will have approximately
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$146,000,000 (after payment of expenses incurred in connection with the
merger) in its principal bank account at closing. Under the terms of the
merger agreement, as amended, shareholders will be entitled to the cash in the
Company's principal bank account at closing in excess of $150,000,000 (after
payment of expenses incurred in connection with the merger), if any. The
Company is also obligated to refrain from making dividends, distributions and
certain significant expenditures prior to the closing date, unless consented to
by PAI. The Company believes that its cash flows will be sufficient to meet
its liquidity needs.
If the acquisition is not consummated, the Company might seek to sell to
another purchaser or might seek to sell the Company's assets to one or more
purchasers (e.g., selling one or more divisions or particular properties).
Depending upon how such a transaction were structured, the Company's liquidity
could be significantly affected.
Over the last three calendar years inflation affected the Company's performance
in terms of higher costs for wages, salaries and equipment. 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 1995.
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PART II. OTHER INFORMATION
Item 5. Other Information
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The Company has set May 11, 1995, as the date for the Special Meeting of
Stockholders to be held for the purpose of voting on the sale of the Company to
Park Acquisitions, Inc. ("PAI") for approximately $711.4 million (the
"Acquisition"). In addition, the Company and PAI have set May 11, 1995,
immediately following the Special Meeting, as the closing date of the
Acquisition.
As disclosed in the proxy statement relating to the Special Meeting, on April
12, 1995, a potential bidder indicated an intention to submit what was
described as a "superior acquisition proposal" for the Company on or before
April 24, 1995. However, no such bid was received by that date and no such bid
has been received as of the date of filing this report on Form 10-Q.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits -
--------
27. - Financial Data Schedule
(b) Reports on Form 8-K -
-------------------
A report on Form 8-K was filed on January 13, 1995 reflecting in
Item 5 the Company's Notice of Redemption concerning the
Company's Convertible Subordinated Debentures.
A report on Form 8-K was filed on April 11, 1995 reflecting
in Item 5 the Company's press release regarding the Federal
Communications Commission's consent to the transfer of
control of the Company and its broadcast licensee facilities
to Park Acquisition's, Inc. ("PAI") in connection with the
sale of the Company to PAI for approximately $711.4 million.
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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 May 3, 1995 /s/ Wright M. Thomas
- ------------------ -----------------------------------
Wright M. Thomas
President, Chief Operating Officer,
Assistant Secretary and
Director
Date May 3, 1995 /s/ Randel N. Stair
- ------------------ -----------------------------------
Randel N. Stair
Vice President - Chief Financial
Officer, Controller, Treasurer and
Assistant Secretary (Principal
Financial Officer)
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EXHIBIT INDEX
27.0 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 156
<SECURITIES> 0
<RECEIVABLES> 21,685
<ALLOWANCES> 1,335
<INVENTORY> 1,150
<CURRENT-ASSETS> 183,372
<PP&E> 145,810
<DEPRECIATION> (70,866)
<TOTAL-ASSETS> 372,736
<CURRENT-LIABILITIES> 18,044
<BONDS> 3,674
<COMMON> 3,889
0
0
<OTHER-SE> 333,093
<TOTAL-LIABILITY-AND-EQUITY> 372,736
<SALES> 0
<TOTAL-REVENUES> 42,672
<CGS> 0
<TOTAL-COSTS> 14,746
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 375
<INCOME-PRETAX> 10,060
<INCOME-TAX> 4,270
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
