<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995.
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 0-15392
FAIRCOM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0394057
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 GLEN HEAD ROAD, OLD BROOKVILLE, NEW YORK 11545
(Address of principal executive offices)
(516) 676-2644
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of August 11, 1995:
COMMON STOCK, PAR VALUE $.01 7,378,199
(Title of each class) (Number of Shares)
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1.FINANCIAL STATEMENTS
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
------------------------------- -------------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross broadcasting
revenues $ 2,779,520 $ 2,552,626 $ 1,687,917 $ 1,440,796
Less: agency
commissions (323,423) (276,830) (200,143) (160,347)
----------- ----------- ----------- -----------
Net broadcasting
revenues 2,456,097 2,275,796 1,487,774 1,280,449
----------- ----------- ----------- -----------
Programming and
technical expenses 585,934 553,276 321,991 305,281
Selling, general and
administrative
expenses 838,902 847,538 421,828 435,387
Depreciation and
amortization 120,000 123,000 60,000 50,100
Corporation expenses 151,943 100,849 80,412 67,089
----------- ----------- ----------- -----------
Operating expenses 1,696,779 1,624,663 884,231 857,857
----------- ----------- ----------- -----------
Income from operations 759,318 651,133 603,543 422,592
Interest expenses (410,755) (373,716) (206,758) (194,926)
Other income 3,919 3,368 1,385 919
----------- ----------- ----------- -----------
Income before
preferred stock
dividend requirement
of subsidiaries and
provision for
income taxes 352,482 280,785 398,170 228,585
Preferred stock
dividend requirement
of subsidiaries -- 118,110 -- 59,055
Provision for
income taxes 35,000 15,000 35,000 15,000
----------- ----------- ----------- -----------
Net income $ 317,482 $ 147,675 $ 363,170 $ 154,530
=========== =========== =========== ===========
</TABLE>
2
<PAGE> 3
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
---------------------- ----------------------
1995 1994 1995 1994
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Primary net income
per common share $ .04 $ .02 $ .05 $ .02
========== ========= ========== =========
Weighted average shares
outstanding-primary 7,378,199 7,378,199 7,378,199 7,378,199
========== ========= ========== =========
Fully diluted net
income per common
share $ .02 $ .02 $ .02 $ .02
========== ========= ========== =========
Weighted average shares
outstanding-fully
diluted 16,459,701 7,378,199 16,459,701 7,378,199
========== ========= ========== =========
</TABLE>
3
<PAGE> 4
FAIRCOM INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 56,614 $ 252,276
Accounts receivable (less allowance
of $20,000 for possible losses in
1995 and 1994) 1,097,793 956,321
Prepaid expenses 32,662 37,507
------------ ------------
Total current assets 1,187,069 1,246,104
------------ ------------
Property and equipment, at cost 6,091,597 5,940,485
Less accumulated depreciation and
amortization (4,830,483) (4,758,483)
------------ ------------
Property and equipment, net 1,261,114 1,182,002
------------ ------------
Intangible assets (net of accumulated
amortization of $431,435 in 1995 and
$401,435 in 1994) 1,712,002 1,742,002
Other assets:
Deferred financing costs 230,805 248,805
Other 70,000 70,000
------------ ------------
2,012,807 2,060,807
------------ ------------
$ 4,460,990 $ 4,488,913
============ ============
LIABILITIES AND CAPITAL DEFICIT
Current liabilities:
Accounts payable $ 51,257 $ 45,039
Accrued expenses and liabilities 235,346 285,651
Taxes payable 111,275 121,068
Current portion of interest payable 236,624 187,975
Current portion of long-term debt 492,076 490,142
Current portion of obligations under
capital leases 20,662 20,662
------------ ------------
Total current liabilities 1,147,240 1,150,537
------------ ------------
Long-term debt, less current portion 8,074,884 8,347,547
Interest payable, less current portion 559,489 618,628
Obligations under capital leases,
less current portion 9,492 19,798
Appraisal rights liability 712,000 712,000
------------ ------------
Total liabilities 10,503,105 10,848,510
------------ ------------
Capital Deficit:
Common stock, $.01 par value,
35,000,000 shares authorized,
7,378,199 shares issued and
outstanding 73,782 73,782
Additional paid-in capital 2,605,813 2,605,813
Deficit (8,721,710) (9,039,192)
------------ ------------
Total capital deficit (6,042,115) (6,359,597)
------------ ------------
$ 4,460,990 $ 4,488,913
============ ============
</TABLE>
4
<PAGE> 5
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
--------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 317,482 $ 147,675
--------- ---------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 120,000 123,000
Preferred stock dividend
requirement of subsidiaries -- 118,110
Increase(decrease) in cash flows
from changes in operating
assets and liabilities:
Accounts receivable (141,472) (35,874)
Prepaid expenses 4,845 (3,983)
Other assets -- (8,477)
Accounts payable 6,218 409
Accrued expenses and
liabilities (50,305) (29,817)
Taxes payable (9,793) --
Interest payable (10,490) 5,387
--------- ---------
Total adjustments (80,997) 168,755
--------- ---------
Net cash provided by
operating activities $ 236,485 $ 316,430
========= =========
</TABLE>
5
<PAGE> 6
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
-------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures $(151,112) $ (10,234)
--------- ---------
Net cash used in investing
activities (151,112) (10,234)
--------- ---------
Cash flows from financing activities:
Principal payments on long-term
debt (270,729) (332,092)
Principal payments under capital
lease obligations (10,306) (19,461)
Payments for deferred financing costs -- (13,500)
--------- ---------
Net cash used in financing
activities (281,035) (365,053)
--------- ---------
Net decrease in cash and cash
equivalents (195,662) (58,857)
Cash and cash equivalents at
beginning of period 252,276 211,179
--------- ---------
Cash and cash equivalents at
end of period $ 56,614 $ 152,322
========= =========
</TABLE>
6
<PAGE> 7
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for completed financial statements. In the opinion of management, the statements
include 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.
It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994, as filed with the Commission.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Company's net broadcasting revenues increased 7.9% to $2,456,000 in
the six months ended June 30, 1995 from $2,276,000 in the six months ended June
30, 1994, and 16.2% to $1,488,000 in the three months ended June 30, 1995 from
$1,280,000 in the three months ended June 30, 1994. Net revenues in the six
months and three months ended June 30, 1995 as compared with the 1994 periods
increased as a result of higher net revenues at the Company's Flint, Michigan
radio stations. This increase was offset in part by the absence in the 1995
periods of any net revenues from a radio station in Southampton, New York,
formerly owned by the Company and sold in August 1994. Net revenues increased in
the Flint stations as a result of higher local and national advertising revenues
generated by increased economic activity in the market and nationally.
Operating expenses before depreciation, amortization and corporate
expenses increased by 1.7% to $1,425,000 in the six months ended June 30, 1995
from $1,401,000 in the comparable 1994 period, and by 0.4% to $744,000 in the
three months ended June 30, 1995 from $741,000 in the three months ended June
30, 1994. In the six month and three month periods ended June 30, 1995 as
compared with the same periods in 1994, expenses increased slightly as a result
of increased operating expenses in both 1995 periods at the Flint stations,
offset by the absence in the 1995 periods of operating expenses in the
Southampton station formerly owned by the Company.
Net broadcasting revenues in excess of operating expenses before
depreciation, amortization and corporate expenses (broadcast cash flow)
increased 17.9% to $1,031,000 in the six months ended June 30, 1995 from
$875,000 in the comparable 1994 period, and 37.8% to $744,000 in the three
months ended June 30, 1995 from $540,000 in the 1994 period. These increases
resulted from the above-described net broadcasting revenue increases, offset
minimally by the slight increases in operating expenses, in the 1995 periods
compared with 1994.
Corporate expenses increased by 50.7% to $152,000 in the six months ended
June 30, 1995 from $101,000 in the comparable 1994 period, and by 19.9% to
$80,000 in the second quarter of 1995 from $67,000 in the comparable period in
1994. These increases were a result of higher payments in the 1995 periods for
employee compensation and professional fees.
Interest expense increased by 9.9% to $411,000 in the first six months of
1995 from $374,000 in the corresponding period in 1994, and by 6.1% to $207,000
in the second quarter of 1995 from $195,000 in the comparable period in 1994.
These increases resulted from higher principal amounts of interest bearing debt
outstanding and higher interest rates during the 1995 periods.
8
<PAGE> 9
Preferred stock dividend requirement of subsidiaries decreased by 100.0%
to zero in the six months and the three months ended June 30, 1995 from $118,000
and $59,000, respectively, in the comparable periods of 1994. These decreases
resulted from the extinguishment of the preferred stock in a former subsidiary
of the Company as a result of the sale of the Company's former station in
Southampton in August 1994.
As a result principally of higher net broadcasting revenues, minimal
increases in operating expenses and the elimination of the preferred stock
dividend requirement, net income increased to $317,000 in the six months ended
June 30, 1995 from $148,000 in the first six months of 1994, and to $363,000 in
the three months ended June 30, 1995 from $155,000 in the comparable period of
1994.
Liquidity and Capital Resources
In the six months ended June 30, 1995, net cash provided by operating
activities was $236,000 compared with $316,000 in the comparable 1994 period.
Net decrease in cash and cash equivalents was $196,000 in 1995 compared with a
net decrease of $59,000 in 1994. The net decrease in cash and cash equivalents
was due primarily to capital expenditures in the 1995 period for a building
addition for increased sales and office space and for studio alterations at the
Company's Flint facilities.
Historically, the Company's net cash provided by operating activities is
lower in its first and second quarters, and the Company expects such net cash to
increase in the balance of 1995.
Based upon current interest rates, the Company believes its interest
expense for the balance of 1995 will be approximately $453,000. Scheduled debt
principal payments are $246,000. Corporate expenses and capital expenditures for
the remainder of 1995 are estimated to be approximately $198,000 and $9,000,
respectively. The Company expects to be able to meet such interest expense, debt
repayment, corporate expenses and capital expenditures, aggregating $906,000,
from net cash provided by operations and current cash balances.
The Company is examining various alternatives for obtaining funds for
station acquisitions. No assurance can be given that the Company will
successfully consummate any such acquisitions or any such financing.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule
All other items of this Part are inapplicable.
10
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FAIRCOM INC.
(Registrant)
/s/ Joel M. Fairman
-----------------------------
Joel M. Fairman
Chairman of the Board
President and Treasurer
(Principal Executive Officer
and Chief Financial Officer)
Date: August 11, 1995
11
<PAGE> 12
EXHIBIT INDEX
-------------
Exhibit
No. Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 56,614
<SECURITIES> 0
<RECEIVABLES> 1,117,793
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,187,069
<PP&E> 6,091,597
<DEPRECIATION> 4,830,483
<TOTAL-ASSETS> 4,460,990
<CURRENT-LIABILITIES> 1,147,240
<BONDS> 8,074,884
<COMMON> 73,782
0
0
<OTHER-SE> 2,605,813
<TOTAL-LIABILITY-AND-EQUITY> 4,460,990
<SALES> 2,779,520<FN>
<TOTAL-REVENUES> 2,779,520<FN>
<CGS> 0<FN>
<TOTAL-COSTS> 2,020,202<FN>
<OTHER-EXPENSES> 0<FN>
<LOSS-PROVISION> 0<FN>
<INTEREST-EXPENSE> 410,755<FN>
<INCOME-PRETAX> 352,482<FN>
<INCOME-TAX> 35,000<FN>
<INCOME-CONTINUING> 317,482<FN>
<DISCONTINUED> 0<FN>
<EXTRAORDINARY> 0<FN>
<CHANGES> 0<FN>
<NET-INCOME> 317,482<FN>
<EPS-PRIMARY> .04<FN>
<EPS-DILUTED> .02<FN>
<FN> These figures are year to date.
</FN>
</TABLE>
