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, 1996
---------------------
[ ] 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 0-20002
Renaissance Communications Corp.
---------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
-----------
(State or Other Jurisdiction of Incorporation or Organization)
06-1251634
(I.R.S. Employer Identification No.)
One Fawcett Place, Greenwich, Connecticut 06830
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone No., including Area Code 203-629-1888
--------------
- -------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report.
Indicate by check 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 .
---
At November 7, 1996, the Registrant had 30,337,207 shares of Common
Stock outstanding.
<PAGE>
Renaissance Communications Corp.
Consolidated Balance Sheets
September 30, December 31,
1996 1995
(Unaudited) (Audited)
----------------------------
(in thousands)
Assets
Current assets:
Cash and cash equivalents $13,238 $9,912
Accounts receivable, less allowance for
doubtful accounts of $2,209,000 and $2,128,000
in 1996 and 1995, respectively 34,513 41,258
Note receivable from officer 3,154 0
Barter program rights 35,533 29,247
Program rights 35,128 35,451
Prepaid expenses and other current assets 3,747 3,464
-------- ---------
Total current assets 125,313 119,332
Property, plant and equipment, net of accumulated
depreciation of $37,697,000 and $33,061,000
in 1996 and 1995, respectively 35,049 37,215
Barter program rights 18,860 14,247
Program rights 38,186 45,445
Intangible assets, net of accumulated
amortization of $29,000,000 and
$23,412,000 in 1996 and 1995, respectively 152,948 158,858
Deferred financing costs, net of accumulated
amortization of $4,254,000 and $2,642,000
in 1996 and 1995, respectively 1,519 3,131
Note receivable and other assets 4,072 4,331
----------- ---------
Total assets $375,947 $382,559
============ ==========
See accompanying notes
<PAGE>
Renaissance Communications Corp.
Consolidated Balance Sheets (Continued)
September 30, December 31,
1996 1995
(Unaudited) (Audited)
-------------- ------------
(in thousands)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $1,932 $2,464
Accrued expenses 10,641 8,325
Senior secured term loan 10,027 16,209
Barter program payable 35,533 29,247
Program payable 44,853 41,247
---------- ---------
Total current liabilities 102,986 97,492
Senior secured term loan and revolving credit
facility 16,304 47,546
Barter program payable 18,860 14,247
Program payable 47,424 54,563
Deferred income taxes 4,263 4,263
Other noncurrent liabilities 0 301
Common shareholders' equity:
Common Stock, par value $.01 per share, authorized
97,500,000 shares, issued and outstanding
30,337,207 and 30,037,206 shares in 1996 and 1995 303 300
Additional paid - in capital 164,270 162,273
Notes receivable from warrant exercise (2,000) 0
Accumulated earnings 23,537 1,574
--------- ----------
Total shareholders' equity 186,110 164,147
----------- ----------
Total liabilities and shareholders' equity $375,947 $382,559
============ ===========
See accompanying notes
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1996 1995 1996 1995
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net revenue $38,992 $36,795 122,226 $104,808
Barter revenue 9,214 7,205 27,158 20,847
-------- ---------- --------- ---------
Total revenue 48,206 44,000 149,384 125,655
Operating expenses 3,912 3,702 11,759 10,602
Selling, general and administrative expenses 8,406 8,666 27,090 25,488
Amortization of program rights 12,219 10,015 32,667 23,674
Amortization of barter program rights 9,018 6,988 26,442 20,051
Depreciation and amortization 3,684 3,849 11,253 12,042
--------- ---------- --------- --------
Total operating expenses 37,239 33,220 109,211 91,857
--------- ---------- --------- --------
Profit from operations 10,967 10,780 40,173 33,798
Other income (expense) net (90) 19,041 (183) 18,990
Interest income 397 333 976 1,027
Interest expense (763) (1,747) (2,737) (5,809)
--------- ---------- --------- ---------
Income before provision for income taxes and
extraordinary item 10,511 28,407 38,229 48,006
Provision for income taxes 4,297 4,959 15,634 6,759
--------- ---------- --------- --------
Income before extraordinary item 6,214 23,448 22,595 41,247
Extraordinary item:
Loss on early extinguishment of debt, net of
taxes 410 0 632 0
--------- ---------- --------- ---------
Net income $5,804 $23,448 $21,963 $41,247
========== ========== ========== =========
Net income per common and common equivalent
share before extraordinary loss $0.20 $0.76 $0.73 $1.34
Extraordinary loss 0.01 0.00 0.02 0.00
--------- ----------- --------- -------
Net income per common and common equivalent share $0.19 $0.76 $0.71 $1.34
========= =========== ========= =======
Shares used in earnings per share calculation 31,076 30,708 30,958 30,689
========= ========== ========= ========
</TABLE>
See accompanying notes
<PAGE>
Renaissance Communications Corp.
Consolidated Statement of Changes in Shareholders' Equity
Nine months ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Additional Notes
Common Paid-In Receivable From Accumulated
Stock Capital Warrant Exercise Earnings Total
--------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $300 $162,273 $1,574 $164,147
Net Income 21,963 21,963
Exercise of warrants 3 1,997 (2,000) 0
------ ---------- -------- ------- ---------
Balance at September 30, 1996 $303 $164,270 ($2,000) $23,537 $186,110
======== ========== ========= ======= =========
</TABLE>
See accompanying notes
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended September 30,
1996 1995
--------------------------------
(in thousands)
Cash flows from operating activities:
Net income $21,963 $41,247
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 11,253 12,042
Amortization of program rights,
net of barter 32,667 23,674
Amortization of discount on certain
contracts payable - 3
Provision for bad debts 601 319
Loss on early extinguishment of debt,
net of taxes 632 -
Gain (loss) on disposal of fixed assets 183 52
Program payments (28,617) (21,381)
Decreases (increases) in assets and increases
(decreases) in liabilities:
Accounts receivable 6,144 6,341
Prepaid expenses, other current assets
and other assets (424) (1,056)
Accounts payable (532) (825)
Accrued expenses 2,776 805
-------- --------
Total adjustments 24,683 19,974
--------- ---------
Net cash provided by operating activities 46,646 61,221
Cash flows from investing activities:
Capital expenditures (3,142) (3,942)
Payment associated with the acquisition of KDAF - (34,500)
Issuance of note receivable to officer (3,154) -
Proceeds from principal payment on note receivable 400 400
-------- -----------
Net cash used in investing activities (5,896) (38,042)
---------- -----------
Cash flows from financing activities:
Proceeds from revolving credit facility - 34,500
Principal payments on senior secured
term loan and revolving credit facility (37,424) (57,356)
Principal payments on other noncurrent
liabilities - (63)
Proceeds from exercise of warrants (See Note 2) - 850
---------- ----------
Net cash used in financing activities (37,424) (22,069)
---------- ----------
Net increase (decrease) in cash and cash
equivalents 3,326 1,110
Cash and cash equivalents
Balance at the beginning of the period 9,912 10,129
--------- ---------
Balance at the end of the period $13,238 $11,239
========== ==========
See accompanying notes
<PAGE>
Renaissance Communications Corp.
Notes to Consolidated Financial Statements
(Unaudited)
1. FINANCIAL STATEMENT PRESENTATION
As of September 30, 1996, Renaissance Communications Corp. (the "Company")
owned and operated six television stations: KDAF, Dallas, Texas; WDZL,
Miami/Ft. Lauderdale, Florida; KTXL, Sacramento, California; WTIC,
Hartford/New Haven, Connecticut; WXIN, Indianapolis, Indiana; and WPMT,
Harrisburg, Pennsylvania. The interim financial statements presented herein
include the accounts of the Company and its wholly owned subsidiaries for
the period of time they were owned and operated by the Company. All
significant intercompany items and transactions are eliminated in
consolidation.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all the normal recurring adjustments necessary
for a fair presentation of the results for the interim periods presented.
The results for the interim period are not necessarily indicative of the
results to be expected for the full year.
2. SHAREHOLDERS' EQUITY
On May 21, 1996, certain family members of an officer exercised warrants
for 300,000 shares. The exercise price was satisfied through the issuance
of $2,000,000 in demand notes to the Company. The notes bear interest at an
annual rate of 6%.
3. PENDING TRANSACTIONS
On July 1, 1996, the Company entered into a definitive agreement to be
acquired by Tribune Company for $36.00 per share in cash for an aggregate
purchase price of $1.13 billion. The transaction is subject to shareholder
and FCC approval. Stockholders of the Company who own 60 percent of the
Company's common stock have agreed to vote for the transaction. A meeting
of shareholders has been scheduled for November 12, 1996 and all the
required applications have been filed with the FCC. The transaction is
expected to close in early 1997.
<PAGE>
Renaissance Communications Corp.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Company's consolidated results include the operations of each of the
stations for the period they were owned and operated by the Company. As of
September 30, 1996, the Company owned and operated six television stations:
KDAF, Dallas, Texas; WDZL, Miami/Ft. Lauderdale, Florida; KTXL, Sacramento,
California; WTIC, Hartford/New Haven, Connecticut; WXIN, Indianapolis, Indiana;
and WPMT, Harrisburg, Pennsylvania.
As of July 3, 1995, the Company exchanged its television station KDVR, Denver,
Colorado, and approximately $34,500,000 in cash for Fox's television station
KDAF, Dallas, Texas. Comparison of results subsequent to this date are affected
by the exchange of KDVR for KDAF.
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995
Total revenue for the Company was $48,206,000 for the three months ended
September 30, 1996, as compared to $44,000,000 for the same period in 1995, an
increase of $4,206,000 or 10%. Of this amount, net revenue increased by
$2,197,000 or 6% and barter revenue increased by $2,009,000 or 28%. The increase
in net revenue was primarily due to higher net revenue at four of the six
stations. The increase in barter revenue was primarily due to the increased use
of barter programming.
Total operating expenses for the Company were $37,239,000 for the three months
ended September 30, 1996, as compared to $33,220,000 for the same period in
1995, an increase of $4,019,000 or 12%. Operating expenses were $3,912,000 for
the three months ended September 30, 1996, as compared to $3,702,000 for the
same period in 1995, an increase of $210,000 or 6%. The increase was primarily
due to start-up costs relating to a news program at WDZL, Miami, and higher news
expenses at WXIN, Indianapolis and KTXL, Sacramento. Selling, general and
administrative expenses were $8,406,000 for the three months ended September 30,
1996, as compared to $8,666,000 for the same period in 1995, a decrease of
$260,000 or 3%. The decrease was primarily due to a decrease in advertising
expenses at WDZL, Miami and KDAF, Dallas, a decrease in relocation expenses at
KDAF, Dallas and WXIN, Indianapolis and a decrease in the legal expense at KTXL,
Sacramento. This net decrease was partially offset by approximately $600,000 of
expenses relating to the transaction with the Tribune Company and an increase in
music license fees at WTIC, Hartford, KTXL, Sacramento, and WXIN, Indianapolis.
Amortization of program rights was $12,219,000 for the three months ended
September 30, 1996, as compared to $10,015,000 for the same period in 1995, an
increase of $2,204,000 or 22%. The increase was primarily due to the
introduction of new programs at the Company's stations in September 1995.
Amortization of barter rights was $9,018,000 for the three months ended
September 30, 1996, as compared to $6,988,000 for the same period in 1995, an
increase of $2,030,000 or 29%. The increase was primarily due to the increased
use of barter programming as described above. Depreciation and amortization
expense was $3,684,000 for the three months ended September 30, 1996 as compared
to $3,849,000 for the same period in 1995, a decrease of $165,000 or 4%. The net
decrease was primarily due to lower depreciation at WPMT, Harrisburg resulting
from certain fixed assets being fully depreciated in the second quarter of 1996.
For the three months ended September 30, 1996, the Company reported a profit
from operations of $10,967,000 as compared to $10,780,000 for the same period in
1995, an increase of $187,000 or 2%.
Other expense was $90,000 for the three months ended September 30, 1996, as
compared to other income of $19,041,000 for the same period in 1995, a decrease
of approximately $19,000,000. This decrease was due to an amount received, net
of expenses, relating to the settlement agreement with National Broadcasting
Company ("NBC") in August, 1995. On June 30, 1995, the Company entered into an
agreement to acquire all of the outstanding shares of Outlet Communications,
Inc. ("Outlet"). On July 28, 1995, NBC made an offer to acquire Outlet at a
higher bid. The Company filed a complaint against NBC and Outlet claiming the
higher bid illegally interfered with the Company's agreement and sought to
restrain NBC from pursuing its offer. On August 2, 1995, the Company entered
into an agreement with NBC in settlement of the complaint against NBC.
Interest expense was $763,000 for the three months ended September 30, 1996, as
compared to $1,747,000 for the same period in 1995, a decrease of $984,000 or
56%. This decrease was due to a decrease in the Company's outstanding
indebtedness and lower interest rates.
The Company's provision for income taxes was $4,297,000 for the three months
ended September 30, 1996, as compared to $4,959,000 for the same period in 1995.
The 1996 provision consists of federal income taxes at the statutory rate and
state and local income taxes. The 1995 provision consists of federal, state and
local income taxes. During the third quarter of 1995, the Company's taxable
income exceeded its remaining net operating losses and the Company began
providing for federal income taxes at the statutory rate on that excess.
The loss on early extinguishment of debt, net of taxes, for the three months
ended September 30, 1996 was $410,000 due to the write-off of deferred financing
costs in connection with the prepayment of senior debt.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
Total revenue for the Company was $149,384,000 for the nine months ended
September 30, 1996, as compared to $125,655,000 for the same period in 1995, an
increase of $23,729,000 or 19%. Of this amount, net revenue increased by
$17,418,000 or 17% and barter revenue increased by $6,311,000 or 30%.
Approximately $9,000,000 of the increase in net revenue was due to higher net
revenue at KDAF, Dallas as compared to KDVR, Denver and the remainder was due to
higher net revenue at four of the five remaining stations. These four stations
reported double digit percentage increases primarily due to an improved
advertising environment and improved station performance. Approximately
$3,200,000 of the increase in barter revenue was due to higher barter revenue at
KDAF, Dallas as compared to KDVR, Denver and the remainder was primarily due to
the increased use of barter programming at KTXL, Sacramento, WXIN, Indianapolis
and WTIC, Hartford.
Total operating expenses for the Company were $109,211,000 for the nine months
ended September 30, 1996, as compared to $91,857,000 for the same period in
1995, an increase of $17,354,000 or 19%. Operating expenses were $11,759,000 for
the nine months ended September 30, 1996, as compared to $10,602,000 for the
same period in 1995, an increase of $1,157,000 or 11%. Approximately $200,000 of
the increase was due to higher operating expenses at KDAF, Dallas as compared to
KDVR, Denver and the remainder of the increase was primarily due to start-up
costs relating to a news program at WDZL, Miami, the expansion of the news
operation at KTXL, Sacramento and WTIC, Hartford, higher news expenses at WXIN,
Indianapolis and higher repair expenses at WDZL, Miami. Selling, general and
administrative expenses were $27,090,000 for the nine months ended September 30,
1996, as compared to $25,488,000 for the same period in 1995, an increase of
$1,602,000 or 6%. The net increase was primarily due to approximately $600,000
of expenses relating to the transaction with the Tribune Company, an increase in
music license fees at WTIC, Hartford, KTXL, Sacramento and WXIN, Indianapolis
and other non-recurring items. This net decrease was partially offset by a
decrease in relocation expenses at KDAF, Dallas and WXIN, Indianapolis and a
decrease in the legal expense at KTXL, Sacramento. Amortization of program
rights was $32,667,000 for the nine months ended September 30, 1996, as compared
to $23,674,000 for the same period in 1995, an increase of $8,993,000 or 38%.
Approximately $4,500,000 of the increase was due to additional amortization at
KDAF, Dallas as compared to KDVR, Denver and the remainder was primarily due to
the introduction of new programs at the Company's stations in September 1995.
Amortization of barter rights was $26,442,000 for the nine months ended
September 30, 1996, as compared to $20,051,000 for the same period in 1995, an
increase of $6,391,000 or 32%. The increase was due to higher amortization at
KDAF, Dallas as compared to KDVR, Denver and the increased use of barter
programming as described above. Depreciation and amortization expense was
$11,253,000 for the nine months ended September 30, 1996 as compared to
$12,042,000 for the same period in 1995, a decrease of $789,000 or 7%. The net
decrease was primarily due to lower depreciation at WDZL, Miami, KTXL,
Sacramento and WPMT, Harrisburg resulting from certain fixed assets being fully
depreciated.
For the nine months ended September 30, 1996, the Company reported a profit from
operations of $40,173,000 as compared to $33,798,000 for the same period in
1995, an increase of $6,375,000 or 19%. The increase was due to improved results
at KDAF, Dallas as compared to KDVR, Denver and improved results at three of the
five remaining stations.
Other expense was $183,000 for the nine months ended September 30, 1996, as
compared to other income of $18,990,000 for the same period in 1995, a decrease
of approximately $19,000,000. This decrease was due to the amount received, net
of expenses, relating to the settlement agreement with National Broadcasting
Company ("NBC") in August, 1995 as described above.
Interest expense was $2,737,000 for the nine months ended September 30, 1996,
as compared to $5,809,000 for the same period in 1995, a decrease of $3,072,000
or 53%. This decrease was due to a decrease in the Company's outstanding
indebtedness and lower interest rates.
The Company's provision for income taxes was $15,634,000 for the nine months
ended September 30, 1996, as compared to $6,759,000 for the same period in
1995. The 1996 provision consists of federal income taxes at the statutory rate
and state and local income taxes. The 1995 provision consists of federal, state
and local income taxes. During the third quarter of 1995, the Company's taxable
income exceeded its remaining net operating losses and the Company began
providing for federal income taxes at the statutory rate on that excess.
The loss on early extinguishment of debt, net of taxes, for the nine months
ended September 30, 1996 was $632,000 due to the write-off of deferred financing
costs in connection with the prepayment of senior debt.
Liquidity and Capital Resources
For the three months ended September 30, 1996, the Company reported broadcast
cashflow of $18,922,000, as compared to $18,841,000 for the same period in 1995,
a net increase of $81,000.
For the nine months ended September 30, 1996, the Company reported broadcast
cashflow of $58,688,000, as compared to $50,904,000 for the same period in 1995,
an increase of $7,784,000 or 15%. The increase was primarily due to improved
broadcast cashflow at KDAF, Dallas as compared to KDVR, Denver and improved
broadcast cashflow at four of the five remaining stations.
<PAGE>
The following is a reconciliation of profit from operations to broadcast
cashflow:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
------------- --------------
(in thousands)
Operating Data: 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Profit from operations $10,967 $10,780 $40,173 $33,798
Add:
Depreciation and amortization 3,684 3,849 11,253 12,042
Amortization of program rights,
excluding barter 12,219 10,015 32,667 23,674
Corporate expenses 1,366 978 3,212 2,771
Subtract:
Cash program payments 9,314 6,781 28,617 21,381
----- ----- ------ ------
Broadcast cashflow $18,922 $18,841 $58,688 $50,904
======= ======= ======= =======
</TABLE>
For the nine months ended September 30, 1996, the net cash provided by operating
activities was $46,646,000. This amount was primarily used to make debt service
payments and capital expenditures.
For the nine months ended September 30, 1996, the net cash used in investing
activities was $5,896,000 and was primarily used for capital expenditures and
the issuance of a note to an officer. During 1996, the Company expects to spend
approximately $5,400,000 for capital expenditures and to finance these
expenditures with cash flows from operations.
For the nine months ended September 30, 1996, the net cash used in financing
activities was $37,424,000 and was used to make debt service payments.
At September 30, 1996, the Company had cash and cash equivalents of $13,238,000.
Additionally, the Company had $49,750,000 available for borrowing under its
revolving credit facility.
<PAGE>
Part II - Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K
On July 9, 1996, the Company filed a Report on Form 8-K reporting under
Item 5 on an event which occurred July 1, 1996.
<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.
RENAISSANCE COMMUNICATIONS CORP.
--------------------------------
(Registrant)
November 7, 1996 By:/s/ John C. Ferrara
-----------------
John C. Ferrara
Vice President and Chief
Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 13,238
<SECURITIES> 0
<RECEIVABLES> 39,876
<ALLOWANCES> 2,209
<INVENTORY> 0
<CURRENT-ASSETS> 125,313
<PP&E> 72,746
<DEPRECIATION> 37,697
<TOTAL-ASSETS> 375,947
<CURRENT-LIABILITIES> 102,986
<BONDS> 0
303
0
<COMMON> 0
<OTHER-SE> 185,807
<TOTAL-LIABILITY-AND-EQUITY> 375,947
<SALES> 122,226
<TOTAL-REVENUES> 149,384
<CGS> 0
<TOTAL-COSTS> 109,211
<OTHER-EXPENSES> 183
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,737
<INCOME-PRETAX> 38,229
<INCOME-TAX> 15,634
<INCOME-CONTINUING> 22,595
<DISCONTINUED> 0
<EXTRAORDINARY> 632
<CHANGES> 0
<NET-INCOME> 21,963
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
