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 FOR THE QUARTER ENDED MARCH 31, 1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934 FOR THE TRANSACTION PERIOD FROM __________ TO _________.
Commission file number: 1-100155
________________________
HERITAGE MEDIA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
IOWA 42-1299303
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
13355 Noel Road, Suite 1500
Dallas, Texas 75240
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code:
(214) 702-7380
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 7, 1996
Class A, $.01 Par Value 17,767,438
PART I. SUMMARIZED FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
HERITAGE MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
<CAPTION>
March 31, December 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents 2,834 2,383
Trade receivables, net 90,227 77,068
Prepaid expenses and other 7,836 6,605
Inventory 13,743 5,008
Deferred income taxes 5,698 5,151
________ ________
Total current assets 120,338 96,215
Assets held for sale (note 4) 8,695 -
Property and equipment, net 75,628 56,155
Goodwill and other intangibles, net 609,349 383,848
Other assets 14,689 14,793
________ ________
$ 828,699 551,011
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - 5,000
Current installments of long-term debt 9,974 5,026
(note 3)
Accounts payable and accrued expenses 80,482 52,069
Deferred advertising revenues 19,273 25,219
Other current liabilities 1,589 1,911
________ _______
Total current liabilities 111,318 89,225
Long-term debt, excluding current portion
(note 3) 574,567 334,839
Other long-term liabilities 6,888 2,531
Deferred income taxes 13,105 4,016
Stockholders' equity:
Common stock, $.01 par value:
Class A - 40,000,000 shares authorized.
Issued, 17,779,235 shares in 1996
and 17,743,359 shares in 1995 178 177
Additional paid-in capital 224,131 223,408
Accumulated deficit (99,000) (101,643)
Accumulated foreign currency
translation adjustments (1,134) (1,088)
Common stock in treasury, at cost
(32,828 shares in 1996 and 1995) (454) (454)
__________ _________
Total stockholders' equity 122,821 120,400
Commitments and contingencies (note 4) __________ _________
$ 828,699 551,011
========== ==========
<F1>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
HERITAGE MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share information)
(unaudited)
<CAPTION>
Three Months
ended March 31,
<S> 1996 1995
Net revenues: <C> <C>
Marketing services 99,308 64,324
Broadcasting 19,723 18,939
________ ________
119,031 83,263
Costs and expenses: ________ _________
Cost of services:
Marketing services 63,692 41,412
Broadcasting 4,586 4,383
Selling, general and administrative 26,067 19,584
Depreciation 4,406 3,685
Amortization of goodwill and other assets 4,939 3,337
_________ ________
103,690 72,401
_________ ________
Operating income 15,341 10,862
__________ _________
Other income/(expense):
Interest (11,375) (8,634)
Other, net 4,640 (184)
__________ __________
(6,735) (8,818)
__________ __________
Income before income taxes and
extraordinary item 8,606 2,044
Income taxes (5,314) (552)
____________ _________
Income before extraordinary item 3,292 1,492
Extraordinary item-loss on extinguishment
of debt (note 3) (1,549) -
___________ _________
Net income 1,743 1,492
=========== =========
Average number of common and common
equivalent shares outstanding 18,154,118 17,624,133
========== ==========
Earnings/(loss) per common and common equivalent share:
Before extraordinary item 0.18 0.08
Extraordinary item (0.08) -
_______ ________
Net earnings 0.10 0.08
======= =========
<F2>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
HERITAGE MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1996 and 1995
(Dollars in thousands)
(unaudited)
<CAPTION>
<S>
1996 1995
Cash flows from operating activities: <C> <C>
Net income 1,743 1,492
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 4,406 3,685
Amortization:
Broadcast program rights 492 524
Goodwill and other assets 4,939 3,337
Debt issuance costs 287 157
Write-off of fixed assets 1,111 -
Gain on sale of assets (6,031) -
Loss on extinguishment of debt 1,549 -
Other 11 88
Changes in certain assets and liabilities
net of effects of acquisitions:
Accounts receivable 19,787 9,571
Other assets 369 (542)
Accounts payable and accrued
expenses (13,624) (2,228)
Deferred advertising revenue (5,946) 1,949
_________ _________
Net cash provided by operating 9,093 18,033
activities _________ __________
Cash flows from investing activities:
Acquisitions, net of cash acquired
(note 3) (202,803) (9,035)
Capital expenditures (5,412) (3,309)
Proceeds from sale of assets (note 3) 13,759 -
Purchase of in-store marketing rights (39) (305)
__________ __________
Net cash used by investing
actitivites (194,495) (12,649)
__________ __________
Cash flows from financing activities:
Long-term borrowings 327,719 28,803
Retirements:
Long-term debt (136,127) (26,563)
Other long-term liabilities (549) (599)
Issuance of common stock 494 374
Retirement of settlement and
stock appreciation rights - (3,800)
Payment of debt issuance costs (5,684) -
__________ __________
Net cash provided/(used)
by financing activities 185,853 (1,785)
___________ __________
Net change during period 451 3,599
Cash and cash equivalents at beginning of
year 2,383 4,270
=========== ===========
Cash and cash equivalents at end of period 2,834 7,869
=========== ===========
Cash paid for interest 3,782 2,541
=========== ===========
Cash paid for income taxes 847 305
=========== ===========
<F3>
See accompanying notes to consolidated financial statements.
</TABLE>
HERITAGE MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
Note 1. Results of Operations.
The results of operations for the 1996 interim period reported are not
necessarily indicative of results to be expected for the year. The
information reflects all adjustments (none of which were other than
normal recurring items) which are, in the opinion of management, necessary
to present a fair statement of the results for the interim periods.
It is suggested that this interim period financial information be read
in conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.
Note 2. Organization.
Heritage Media Corporation ("HMC" or "the Company"), operates
in two segments - Marketing Services and Broadcasting. The Company's
Marketing Services operations are conducted in the United States,
Canada, New Zealand and Australia. Broadcasting operations are
conducted in the United States.
Note 3. Long-term Debt.
Long-term debt at March 31, 1996 and December 31, 1995 is summarized
as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
March 31,1996 December 31,1995
<S> <C> <C>
8.75% Senior Subordinated Notes $ 175,000 ----
11% Senior Notes 133,425 150,000
HMSI credit agreement 148,900 113,400
DIMAC credit agreement 64,450 ----
11% Senior Subordinated Notes 40,000 50,000
Canadian credit agreement 15,598 15,674
Other 7,168 10,791
________ _________
584,541 339,865
Less current installments 9,974 5,026
________ _________
$ 574,567 334,839
========== ==========
Long-term debt increased by $244.7 million during the three month period
ended March 31, 1996. The increase was primarily due to credit agreement
borrowings and the issuance of 8.75% Senior Subordinated Notes, related
to the DIMAC Marketing Corporation ("DIMAC") merger completed during the
quarter, offset by the extinguishment of a portion of the 11% Senior and
Senior Subordinated Notes. In addition to the extinguishment of the notes
and the completion of the DIMAC merger, the credit agreement borrowings
were used for the completion of the WMYU-FM and WWST-FM acquisition in
Knoxville, Tennessee and the acquisition of Wilcox & Associates, Inc.
by the Company's direct marketing subsidiary, DIMAC. (See note 4 for a
further discussion of the acquisitions.)
The Company issued $175 million of 8.75% Senior Subordinated Notes
due February 15, 2006 to assist in the funding of the Company's merger
with DIMAC. The 8.75% Notes are redeemable, in whole or in part, at the
option of the Company at any time on or after February 15, 2001, at
amounts decreasing from 104.375% to 100% of par on February 15, 2004.
The 8.75% Notes are subordinated to all existing and future Senior
indebtedness and are unsecured.
The Company, through DIMAC, entered into a $175 million bank credit
facility with a group of banks primarily to refinance the long-term
obligations the Company acquired through the DIMAC merger and
finance the balance of the transaction. The DIMAC credit agreement
provides for a $50 million term loan and a reducing revolving credit
facility of up to $125 million. The revolving credit commitment will
reduce quarterly beginning March 31, 1998 and the term loan's
quarterly payments commence on September 30, 1997 and continue until
June 30, 2003. DIMAC pays a commitment fee on the unadvanced portion
of the credit agreement at a rate ranging from .25% to .375% determined
by DIMAC's leverage ratio. Loans under the credit agreement bear
interest at rates based on the agent bank's base rate or a Eurodollar
rate plus a margin depending on DIMAC's total leverage ratio
(as defined). The loans under the DIMAC Credit agreement are secured
by the stock of DIMAC and all of its subsidiaries.
During the quarter, Heritage Media Services, Inc. ("HMSI"),
a wholly-owned subsidiary, repurchased the Company's outstanding
11% Senior Subordinated Notes with a face amount of $10 million
prior to scheduled maturity. This resulted in an extraordinary loss
of $.5 million, net of taxes.
Also during the quarter, HMSI repurchased outstanding HMSI 11% Senior
Notes with a face amount of $16.6 million prior to scheduled maturity.
The result was an extraordinary loss of $1 million, net of taxes, and
includes the write-off of $.2 million of debt issuance costs.
An additional $5.0 million of the HMSI credit agreement term facility
was reclassified to current installments at March 31, 1996 per the
credit agreement.
Note 4. Acquisitions.
In February 1996, the Company completed its merger with DIMAC Marketing
Corporation, the largest full service, vertically integrated direct
marketing services company in the United States. The Company acquired
DIMAC for cash in a transaction valued at approximately $260 million.
Under the terms of the merger agreement, each of the approximately
6.5 million shares of DIMAC common stock were exchanged for merger
consideration of $28. The merger was accounted for by the Company
as a purchase. The Company included the financial results of DIMAC
beginning February 1, 1996. Revenues of $29.4 million and operating
income of $3.1 million were recognized for the period ending
March 31, 1996. The purchase price allocation is preliminary.
(See note 3 for financings related to this acquisition.)
In February 1996, the Company completed the acquisition of radio
stations WMYU-FM and WWST-FM both serving Knoxville, Tennessee
for cash consideration of $6.5 million. The Company included the
financial results of the Knoxville stations from February 17, 1996.
Revenues of $198,000 were recognized for the period ending
March 31, 1996 and operating income was immaterial.
Notes to Consolidated Financial Statements, (continued)
In March 1996, the Company agreed to exchange its Seattle, Washington
radio stations KCIN-FM and KRPM-AM for EZ Communications, Inc. radio
stations WRNO-FM, WEZB-FM and WBYU-AM serving New Orleans, Louisiana
and $7.3 million in cash. The Company included the financial results
of the New Orleans stations from March 18, 1996 under the terms of a
Local Marketing Agreement ("LMA"). Revenues of $194,000 were
recognized for the period ending March 31, 1996 and operating income was
not significant. Completion of the exchange is subject to approval of
the Federal Communications Commission and is expected in the third
quarter of 1996. Assets held for sale of $8.7 million represent
the net assets of the Seattle stations.
In March 1996, the Company entered into an LMA with Television Fit for
Life, Inc. to operate Channel 35, WFGX-TV in Fort Walton Beach, Florida.
The Company will operate WFGX-TV as a commercial television station
with primary focus on local news service and popular entertainment
programming. This station combined with WEAR-TV, the Company's ABC
affiliate in Pensacola, Florida, allows the Company to increase its
broadcasting capacity on the Florida side of the Mobile, Alabama/ Pensacola,
Florida market. Under the agreement the Company has an option to purchase
the station, along with its FCC license.
In March 1996, DIMAC acquired Wilcox & Associates, Inc. ("Wilcox"),
a New York City based direct response advertising agency for $3 million
in cash. Wilcox will continue to operate under its own name as a
subsidiary of DIMAC.
The purchase prices of the DIMAC, Knoxville stations, and Wilcox
acquisitions discussed above were allocated as follows:
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Working capital, net $ (3,186)
Other noncurrent assets 17,648
Goodwill and other intangibles 242,461
Long-term liabilities and debt (54,120)
___________
Total cash paid, net of cash acquired $202,803
===========
</TABLE>
Assuming the acquisitions discussed above were consummated on
January 1, 1995, consolidated revenues and net income on a proforma
basis for the three months ended March 31, 1995 would have been $111
million and $3.3 million loss, respectively. Loss per share on a proforma
basis for the same period would have been $.19. Proforma revenues and
net income for the three month period ended March 31, 1996 would have
been $132.3 million and $.6 million, respectively. Income per share on
a proforma basis for the same period would have been $.04.
In February 1996, the Company completed the sale of its smallest
television station, KEVN-TV, located in Rapid City, South Dakota,
to Blackstar of South Dakota, L.L.C. As a result of this sale, the
Company recognized a gain of approximately $6.0 million in the first
quarter of 1996.
Notes to Consolidated Financial Statements, (continued)
Note 5. Subsequent Events.
In May 1996, DIMAC acquired MBS/Multimode, Inc. ("MBS"), a database
marketing firm based in Huntington Station, New York. DIMAC purchased
MBS's assets and working capital for approximately $24 million.
MBS will continue to operate under its own name as a subsidiary of DIMAC.
Note 6. Accounting Principles.
The Company adopted the provisions of SFAS No. 121. "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
on January 1, 1996". The adoption of this statement did not have a material
effect on the Company's financial position or results of its operations.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations: First Quarter 1996 compared to 1995
Consolidated net revenues of $119.0 million increased 43% over the 1995
revenues of $83.3 million. Operating income of $15.3 million in 1996
exceeded the comparable 1995 period by 41%. Pretax income of $8.6 million
in 1996, before extraordinary item, significantly exceeded $2.0 million
in 1995. Earnings per share excluding non-recurring and extraordinary
items was $.03 in 1996 versus $.08 per share in 1995. The improved
results reflect the inclusion of DIMAC Marketing Corporation, effective
February 1, 1996, and increases in revenue and operating income from
the Marketing Services and Broadcasting segments. Consolidated net
revenues and operating income increased 9% and 18%, respectively,
in 1996 versus the 1995 period on a comparable basis. The 1996 period
included a $6 million gain on the sale of the South Dakota television
station, a $1.1 million loss on the write-off of obsolete fixed assets,
and the $1.5 million extraordinary loss on the extinguishment of debt.
Marketing Services. The Marketing Services segment contributed
$99.3 million of revenues in 1996, an increase of 54%, compared to
$64.3 million in 1995. The inclusion of DIMAC Marketing results added
$29.4 million in revenues and ACTMEDIA's revenues grew 9%. Marketing
Services revenues increased 10% in 1996 versus comparable 1995 including
DIMAC Marketing in both periods. ACTMEDIA's growth was spurred by
increases from the Instant Coupon Machine, advertising products, and
promotion programs. DIMAC Marketing generated proforma revenue improvement
of 13% over prior year, reflecting growth from all operations.
Operating income for the Marketing Services segment of $10.7 million in
1996 significantly increased versus $6.0 million in 1995. The inclusion
of DIMAC Marketing's results in 1996 added $3.1 million and ACTMEDIA
generated $1.6 million of operating income growth. Marketing Services
income improved 23% in 1996 versus the comparable 1995 including DIMAC
Marketing in both periods. The improvement in Marketing Services
operating income on a proforma basis including DIMAC Marketing in both
periods was due primarily to increased revenues as the operating margin
was 11% in 1996 versus 10% in the comparable 1995 period.
It is anticipated that the Marketing Services segment will generate
approximately 80% of HMC's consolidated revenues in 1996.
Broadcasting. The Broadcasting segment generated $19.7 million of
revenues in 1996, a 4% increase compared to 1995. The Television
Group, excluding the South Dakota station sold in 1996, grew revenues
by 5% to $10.2 million primarily due to additional political revenues
and network compensation. The Pensacola, FL television station grew
revenues by 8% in 1996 versus 1995. The Radio Group contributed $9.5
million of revenues, a 10% increase over 1995, due primarily to the
continuing improvement of the Portland and Kansas City FM stations
acquired in 1995.
Operating income of $5.5 million in 1996 increased by 11% versus
1995 including the radio acquisitions and excluding the television
station sold in 1996. The improvement reflects a 4% increase from
the Television Group on higher revenues and a 32% improvement from
the Radio Group primarily from the turnaround of the acquired
Portland and Kansas City stations.
The Television industry had modest growth of 4% and the Radio
industry grew 6% in first quarter 1996 versus the comparable
1995 period. Revenues for the second quarter of 1996 for the
Television and Radio industries appear to be improving slightly
compared to the first quarter.
Corporate Expenses. Corporate expenses of $.9 million in 1996
increased versus $.7 million in 1995, but remained less than 1%
of consolidated net revenues.
Depreciation and Amortization. Depreciation and amortization of
$9.3 million in 1996 increased by 33% compared to $7.0 million in 1995.
This increase resulted primarily from the inclusion of DIMAC Marketing,
which added $1.8 million, and an increase in ACTMEDIA depreciation.
Interest Expense. Interest expense increased from $8.6 million in
1995 to $11.4 million in the 1996 period due to both higher interest
rates and higher debt levels associated with the DIMAC Marketing
acquisition.
Other Expense. Other expense in 1996 included the $6 million gain
on the sale of the South Dakota television station and a
$1.1 million loss on the write-off of obsolete ACTRADIO fixed assets.
Income Taxes. Income tax expense for 1995 relates primarily to state
income taxes of $.4 million and Federal income tax of $.2 million.
Income tax expense for 1996 is comprised of Federal income tax of
$4.5 million and state, local and foreign taxes of $.8 million.
Income tax expense in 1995 was reduced by the recognition of the
Company's remaining net operating loss carryforwards in 1995.
The Company expects that its 1996 effective income tax rate for
financial statement purposes will be approximately 53%, up from
26% in 1995, as a result of the Company's utilization of its net
operating loss carryforwards for financial statement purposes in 1995.
Net Income. The Company improved its pretax income from $2.0 million
in 1995 to $8.6 million in 1996 primarily as a result of an additional
$4.5 million of operating income and $4.6 million of net non-recurring
other income, reduced by increased interest expense. Net income of
$1.7 million in 1996 improved 17% versus $1.5 million in 1995 due to
the significant increase in Federal income tax expense discussed above.
Balance Sheet: 1996 Compared to 1995
The March 31, 1996 balance sheet changes from December 31, 1995 to
March 31, 1996 are due primarily to the DIMAC Marketing, Wilcox,
and radio station acquisitions and financings. See note 4 for purchase
price allocation and note 3 for long term debt discussion.
Liquidity and Capital Resources
Cash flows provided by operating activities totaling $9.1 million in
1996 decreased by $9 million versus 1995 due primarily to higher working
capital requirements. In 1996 the $9.1 million of cash provided by
operating activities, $185.9 million from financing activities, and
$13.8 million from sales proceeds, was utilized primarily for
acquisitions, net ($202.8 million) and capital expenditures
($5.4 million).
Cash flows provided by operating activities totaled approximately
$18 million in 1995. These funds were principally utilized for net
capital expenditures and investments ($3.3 million), acquisitions
($9.0 million), and retirement of stock appreciation rights ($3.8 million).
At December 31, 1995, the Company, through its Heritage Media Services, Inc.
subsidiary ("HMSI"), had a $151.4 million bank credit facility
(the "HMSI Credit Agreement"). HMSI is the Company's subsidiary which owns
ACTMEDIA and the Company's broadcasting properties. The HMSI Credit
Agreement was comprised of an $76.4 million term loan and a $75 million
reducing revolving credit facility. At March 31, 1996, $76.4 million of
the term loan facility and $72.5 million of the revolving credit facility
were outstanding and $2.5 million of additional borrowings were
available under the HMSI Credit Agreement. The HMSI Credit Agreement
includes a number of financial and other covenants, including the
maintenance of certain operating and financial ratios and limitations on
or prohibitions of dividends, indebtedness, liens, capital expenditures,
asset sales and certain other items. Loans under the HMSI Credit Agreement
are guaranteed by the Company and HMSI's domestic subsidiaries and are
secured by a pledge of the capital stock of HMSI and its domestic
subsidiaries.
On June 22, 1992, HMSI issued $150 million of 11% Senior Secured
Notes (the "Senior Notes") due June 15, 2002. Interest on the Senior
Notes is payable semi-annually. The Senior Notes rank on a parity
with the obligations under the HMSI Credit Agreement, are guaranteed
by HMC, and HMSI's domestic subsidiaries and are secured by a pledge
of capital stock of HMSI and its domestic subsidiaries.
See note 3 for discussion of the purchases during the first quarter.
On October 1, 1992 the Company issued $50 million of 11% Senior
Subordinated Notes (the "1992 Senior Subordinated Notes") due
October 1, 2002. Interest on the 1992 Senior Subordinated Notes is
payable semi-annually. The 1992 Senior Subordinated Notes are
subordinate in right of payment to the prior payment in full of the
HMSI and DIMAC Credit Agreements and the Senior Notes. See note 3 for
discussion of the purchases during the first quarter.
In August 1995, the Company entered into several two-year interest
rate swap agreements with a combined notional principal amount of
$50 million to more proportionately balance the mix of floating and
fixed rate debt. Of the total, $40 million matures on June 15, 1997
and the remaining $10 million matures on August 1, 1997. Under
these arrangements, the Company will receive an average rate of
6.13% during the term of these agreements and will pay the respective
six month LIBOR rate at each of the three reset periods (every six months).
The six month LIBOR rate on the day these agreements were executed was 5.90%.
The impact of the swap agreements on interest expense for the year ended
March 31, 1996 was not material.
On February 20, 1996 the Company issued $175 million of 8.75% Senior
Subordinated Notes (the "1996 Senior Subordinated Notes") due
February 15, 2006, to assist in funding the Company's merger with DIMAC.
Interest on the 1996 Senior Subordinated Notes is payable semi-annually
commencing August 15, 1996. The 1996 Senior Subordinated Notes are
subordinate in right of payment to the prior payment in full of the
HMSI and DIMAC Credit Agreements and the Senior Notes.
On February 21, 1996, the Company, through its DIMAC Corporation subsidiary,
entered into a $175 million bank credit facility (the "DIMAC Credit Agreement")
to assist in funding the Company's merger with DIMAC. The DIMAC Credit
Agreement is comprised of a $50 million term loan which begins to amortize
September 30, 1997, continuing until June 30, 2003 and a $125 million
reducing revolving credit facility. At March 31, 1996, $50 million of the
term loan and $14.5 million of the revolver were outstanding and $58.5
million of additional borrowings were available under the DIMAC Credit
Agreement. The DIMAC Credit Agreement includes a number of financial and
other convenants, including the maintenance of certain operating and
financial ratios and limitations on or prohibitions of dividends,
indebtedness, liens, asset sales, and certain other items. Loans under
the DIMAC Credit Agreement are guaranteed by the Company and DIMAC's
subsidiaries and are secured by a pledge of the capital stock of DIMAC
andits subsidiaries.
The Company expects the major requirements for cash for the remainder
of 1996 to include $11 million for early extinguishment of debt which
was completed in April, $5 million for debt principal payments,
approximately $17 million for tax payments, and approximately $20 million
for capital expenditures. The Company has various financial options to
meet these cash requirements including cash on hand, projected cash
provided from operations, and available liquidity under the Credit
Agreements.
Heritage will continue to expand and explore value-creating investments
and acquisitions. The Company will review all expenditures to maximize
financial returns and maintain financial flexibility while continuing
its long-term goal to de-leverage its capital structure.
Some statements contained in this document are forward looking and
actual results may differ materially. Statements not based on historical
facts involve risks and uncertainties, including, but not limited to,
the effect of economic conditions, capacity and supply constraints
or difficulties, actual purchases under agreements, particularly
by certain of the Company's largest clients, and the ability of the
Company to maintain favorable client relationships and competitive factors.
SIGNATURE
Pursuant to the requirement 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.
HERITAGE MEDIA CORPORATION
Dated: May 14, 1996 by /s/ David N. Walthall
David N. Walthall
President and Chief Executive Officer
Dated: May 14, 1996 by /s/ James P. Lehr
James P. Lehr
Sr. Vice President
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-TYPE> 3-MOS
<CASH> 2,834
<SECURITIES> 0
<RECEIVABLES> 94,743
<ALLOWANCES> 4,516
<INVENTORY> 13,743
<CURRENT-ASSETS> 120,338
<PP&E> 125,727
<DEPRECIATION> 50,099
<TOTAL-ASSETS> 828,699
<CURRENT-LIABILITIES> 111,318
<BONDS> 574,567
<COMMON> 178
0
0
<OTHER-SE> 122,643
<TOTAL-LIABILITY-AND-EQUITY> 828,699
<SALES> 0
<TOTAL-REVENUES> 119,031
<CGS> 0
<TOTAL-COSTS> 68,278
<OTHER-EXPENSES> 35,304
<LOSS-PROVISION> 108
<INTEREST-EXPENSE> 11,375
<INCOME-PRETAX> 8,606
<INCOME-TAX> 5,314
<INCOME-CONTINUING> 3,292
<DISCONTINUED> 0
<EXTRAORDINARY> 1,549
<CHANGES> 0
<NET-INCOME> 1,743
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.10
</TABLE>
