<PAGE> 1
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 QUARTER ENDED DECEMBER 31, 1996
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 0-24516
HEFTEL BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 99-0113417
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6767 West Tropicana Avenue, Suite 102 89103
Las Vegas, Nevada (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (702) 367-3322
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.001 Par Value
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
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 practical date.
<TABLE>
<CAPTION>
Class Outstanding at February 13, 1997
- ----- --------------------------------
<S> <C>
Class A Common Stock, $.001 Par Value 16,377,731 shares
Class B Common Stock, $.001 Par Value None
</TABLE>
<PAGE> 2
HEFTEL BROADCASTING CORPORATION
December 31, 1996
INDEX
<TABLE>
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheets as of December 31, 1996
and September 30, 1996 3
Condensed Consolidated Statements of Income for the Three Months
Ended December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
--------------------------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,787,652 $ 5,131,960
Accounts receivable, net 16,995,571 17,015,323
Other current assets 631,791 1,012,232
------------- ------------
Total current assets 22,415,014 23,159,515
Property and equipment, at cost 27,256,294 26,855,898
Less accumulated depreciation and amortization (7,590,009) (7,019,970)
------------ ------------
19,666,285 19,835,928
Intangible assets 130,365,925 130,365,925
Less accumulated amortization (9,773,591) (8,624,020)
------------ ------------
120,592,334 121,741,905
Other non-current assets 1,051,462 1,013,778
------------ ------------
Total assets $ 163,725,095 $ 165,751,126
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,860,237 $ 1,859,301
Accounts payable and accrued expenses 12,194,922 14,131,858
---------- ----------
Total current liabilities 14,055,159 15,991,159
Long-term debt and other obligations, less current portion 135,504,232 137,658,578
Stockholders' equity (Note 4):
Series A Preferred Stock, cumulative, $.001 par value -- --
Undesignated series preferred stock, $.001 par value -- --
Class A Common Stock, $.001 par value 11,548 11,548
Class B Common Stock, $.001 par value -- --
Other stockholders' equity 14,154,156 12,089,841
----------- -----------
Total stockholders' equity 14,165,704 12,101,389
----------- -----------
Total liabilities and stockholders' equity $ 163,725,095 $ 165,751,126
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
NOTE: The balance sheet at September 30, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
-----------------------------
1996 1995
-----------------------------
(UNAUDITED)
<S> <C> <C>
Net revenues $ 18,308,968 $ 17,457,686
Operating expenses 13,322,115 13,616,443
------------ ------------
Operating income 4,986,853 3,841,243
Other income (expense):
Interest expense, net (2,840,582) (2,350,438)
Other, net 18,044 (123,567)
------------ ------------
(2,822,538) (2,474,005)
------------ ------------
Income before provision for
income taxes 2,164,315 1,367,238
Provision for income taxes (100,000) (65,000)
------------ ------------
Income from continuing operations 2,064,315 1,302,238
Loss on discontinued operations - CRC -- (444,043)
------------ ------------
Net income $ 2,064,315 $ 858,195
============ ============
Income from continuing operations per common
and common equivalent share $0.18 $0.12
============ ============
Net income per common and
common equivalent share $0.18 $0.08
============ ============
Weighted average common
shares outstanding 11,547,731 10,732,342
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31
-------------------------------
1996 1995
-------------------------------
(UNAUDITED)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,607,182 $ 757,613
INVESTING ACTIVITIES:
Purchases of property and equipment (400,396) (926,538)
Payments relating to pending and business
acquisitions and stock offering (397,684) (1,916,001)
-------------- --------------
Net cash used in investing activities (798,080) (2,842,539)
FINANCING ACTIVITIES:
Advances from officers and stockholders -- 491,485
Repayment of long-term debt (2,153,410) (394,473)
-------------- --------------
Net cash (used in) provided by financing activities (2,153,410) 97,012
-------------- --------------
Net decrease in cash (344,308) (1,987,914)
Cash and cash equivalents at beginning of period 5,131,960 5,404,310
-------------- --------------
Cash and cash equivalents at end of period $ 4,787,652 $ 3,416,396
============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended December 31, 1996 are not necessarily indicative of the results
that may be expected for the year ended September 30, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Heftel Broadcasting Corporation's Annual Report on Form
10-K/A for the year ended September 30, 1996.
Net income per common share is computed by dividing net income by the
weighted average number of common and common equivalent shares (if dilutive)
outstanding during each period. For purposes of this computation, cumulative
preferred stock dividends, if any, are deducted from net income during each
period in which preferred stock is outstanding, whether or not preferred stock
dividends have been actually declared or paid during these periods.
2. RECLASSIFICATIONS/DISCONTINUED OPERATIONS
On September 9, 1996, the Company's Board of Directors approved a plan
to discontinue the operations of the radio network owned by the Company's
wholly owned subsidiary Spanish Coast-to-Coast, Ltd., d.b.a. Cadena Radio Cento
(CRC) effective August 5, 1996. Consequently, the accompanying condensed
consolidated statement of income for the quarter ended December 31, 1995
reflects the effect of the discontinued operations of CRC.
3. LONG-TERM DEBT
On January 21, 1997, the Company received a commitment letter from
new lenders to obtain a new credit facility totaling $300 million (New Credit
Facility). The terms of the New Credit Facility are expected to be comparable
to the existing credit agreement except that principal payments commence in
September 1999. Completion of the New Credit Facility is subject to the
closing of the previously announced merger with Tichenor Media System, Inc.
(Tichenor) and certain other conditions.
On February 4, 1997, the Company borrowed $10 million under its credit
agreement to fund the payment required under an option agreement to purchase
the assets of radio station KSCA-FM serving the Los Angeles market (Note 6). On
February 12, 1997, the entire principal balance outstanding under the credit
agreement was repaid with proceeds from the Company's secondary public stock
offering (Note 6).
6
<PAGE> 7
4. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
-------------- --------------
<S> <C> <C>
Stockholders' equity :
Series A Preferred Stock, cumulative, $.001 par value,
2,600,000 shares authorized, none issued or outstanding $ - $ --
Undesignated series preferred stock, $.001 par value, 2,400,000
shares authorized, none issued or outstanding -- --
Class A Common Stock, $.001 par value, 30,000,000 shares
authorized, 11,547,731 issued and outstanding at December 31,
1996 and September 30, 1996 11,548 11,548
Class B Common Stock, $.001 par value, 7,000,000 shares
authorized, none issued or outstanding -- --
Additional paid-in capital 102,578,149 102,578,149
Accumulated deficit (88,423,993) (90,488,308)
-------------- --------------
Total stockholders' equity $ 14,165,704 $ 12,101,389
============== ==============
</TABLE>
On February 10, 1997, the Company completed its secondary public stock
offering selling an additional 4,830,000 shares of its Class A Common Stock for
$36.80 per share, after underwriters discount (Note 6).
5. STATION LOCAL MARKETING AGREEMENT
On December 1, 1996, the Company and Tichenor entered into a Local
Marketing Agreement (LMA) whereby Tichenor commenced programming radio station
WLXX-AM in Chicago, owned by the Company. The LMA will be terminated upon
consummation of the merger with Tichener.
6. SUBSEQUENT EVENTS
STATION PURCHASE OPTION / TIME BROKERAGE AGREEMENT
In exchange for an initial payment of $10 million made on February 4,
1997, the Company acquired from Golden West Broadcasters, a California
corporation ("Golden West"), an option to purchase all of the assets used or
held for use in connection with the operation of radio station KSCA-FM, which
serves the Los Angeles market (Option Agreement). The Company borrowed the $10
million under its credit agreement. The option is exercisable upon the death
of Gene Autry. The option has an initial term which expires on December 30,
1997, however the term may be renewed for additional one year terms provided
the Company pays to Golden West an additional $3 million on or before the
expiration date for the one-year option period then in effect. If the sale of
the KSCA assets is not consummated, Golden West is obligated to refund to the
Company a portion of the option payments only under certain circumstances. If
the purchase of the KSCA assets is completed, the option payments will be
credited against the purchase price. If the option is exercised, the purchase
price for the KSCA assets will be the greater of (a) $112.5 million, or (b) the
sum of (I) $105 million, plus (ii) an amount equal to $13,698.63 per day during
the term of the time brokerage agreement for KSCA to which the Company is a
party. The Company commenced programming KSCA under such time brokerage
agreement on February 5, 1997.
7
<PAGE> 8
SECONDARY PUBLIC OFFERING
On February 10, 1997, the Company completed its secondary public stock
offering selling an additional 4,830,000 shares of its Class A Common Stock for
$36.80 per share, after underwriters discount. The net proceeds of the
offering were approximately $177.2 million, $142.5 million of which were used
to repay the entire outstanding principal balance under the Company's credit
agreement. The balance of the proceeds will be used to repay long-term debt of
Tichenor, if the Tichenor merger is consummated. The Tichenor merger is
scheduled to close mid February, 1997.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1996 TO THREE MONTHS ENDED
DECEMBER 31, 1995
On September 9, 1996, the Company's Board of Directors approved a plan
to discontinue the operations of the radio network owned by the Company's wholly
owned subsidiary Spanish Coast-to-Coast, Ltd., d.b.a. Cadena Radio Cento (CRC)
effective August 5, 1996. Consequently, the accompanying condensed consolidated
statement of income for the quarter ended December 31, 1995 reflects the effect
of the discontinued operations of CRC.
On December 1, 1996, the Company and Tichenor entered into a Local
Marketing Agreement (LMA) whereby Tichenor commenced programming radio station
WLXX-AM in Chicago, owned by the Company. This LMA will be terminated upon the
consummation of the merger with Tichenor.
Net revenues increased by $851,000, or 4.9%, to $18.3 million in the
quarter ended December 31, 1996 from $17.5 million in the same quarter of 1995.
Operating expenses decreased by $294,000, or 2.2%, to $13.2 million in the
three months ended December 31, 1996 from $13.6 million in the same period of
1995. Operating expenses decreased during the quarter ended December 31, 1996
as compared to the same period of 1995 due primarily to a decrease in
promotional expenses.
Interest expense, net of interest income, increased by $499,000, or
21.3%, to $2.8 million in the three months ended December 31, 1996 from $2.3
million in the same period of 1995 primarily as a result of increased
borrowings of $37.9 million, or 38.8%, over the same period of the prior year.
The increase in interest expense was offset in part by a lower average interest
rate during the quarter ended December 31, 1996 as compared to the same quarter
of 1995.
Net income increased by $1.2 million, or 140.5%, to $2.1 million in
the quarter ended December 31, 1996 as compared to net income of $858,000 in
the same quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the quarter ended
December 31, 1996 was $2.6 million as compared to $758,000 for the same period
in 1995. Generally, capital expenditures are financed from cash generated from
operations and long-term borrowings. As of December 31, 1996, the Company had
$133 million outstanding under its $155 million credit agreement. On February
12, 1997, the entire outstanding balance under the credit agreement of $142.5
million was repaid with proceeds from the Company's secondary public offering
(Note 6). Borrowings under the credit agreement bear interest at varying rates
based on quoted market prices.
On January 21, 1997, the Company received a commitment letter from
new lenders to obtain a new credit facility totaling $300 million. The terms
of the New Credit Facility are expected to be comparable to the existing credit
agreement except that principal payments commence in September 1999.
Completion of the New Credit Facility is subject to the closing of the
previously announced merger with Tichenor and certain other conditions.
On February 4, 1997, the Company borrowed $10 million under its credit
agreement to fund the payment required by the Option Agreement described in
Note 6. The Option Agreement expires on December 30, 1997 and may be renewed
for additional one-year periods upon payment of an additional $3 million. The
$10 million payment and any additional $3 million payments will be applied to
the purchase
9
<PAGE> 10
price of the assets of KSCA-FM upon consummation.
On February 10, 1997, the Company completed its secondary public stock
offering selling an additional 4,830,000 shares of its Class A Common Stock for
$36.80 per share, after underwriters discount. The net proceeds of the offering
were approximately $177.2 million, $142.5 million of which was subsequently used
to repay the entire outstanding principal balance under the Company's credit
agreement. The balance of the proceeds will be used to repay long-term debt of
Tichenor, if the Tichenor merger is consummated. The Tichenor merger is
scheduled to close mid February, 1997.
Available cash on hand plus cash provided by operations were
sufficient to pay interest due under the credit agreement and fund certain
capital expenditures during the quarter ended December 31, 1996. The Company
believes it will have sufficient cash flow to finance its operations and
satisfy its debt service requirements. The Company regularly reviews potential
acquisitions of additional radio stations. Any future acquisitions are
expected to be financed through additional borrowings under the New Credit
Facility and/or cash provided by operations.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included herein.
2.1 Option Agreement, dated as of December 23, 1996, among Clear
Channel Radio, Inc. ("Clear Channel"), Golden West Broadcasters ("GWB"), and
Gene Autry and Stanley B. Schneider, as co-trustees of the Autry Survivor's
Trust, with Exhibits (Schedules omitted) (incorporated by reference to Exhibit
2.5.14 to the Registrant's Registration Statement on Form S-3, as amended (Reg.
No. 333-14207)).
2.2 Time Brokerage Agreement, dated as of December 23, 1996, between
GWB and Clear Channel (Exhibits omitted) (incorporated by reference to Exhibit
2.5.15) to the Registrant's Registration Statement on Form S-3, as amended
(Reg. No. 333-14207)).
2.3 Assignment and Assumption Agreement, dated as of January 2, 1997,
among the Registrant, Clear Channel and Tichenor Media System, Inc.
(incorporated by reference to Exhibit 2.5.16 to the Registrant's Registration
Statement on Form S-3, as amended (Reg. No. 333-14207)).
3.1 Restated Articles of Incorporation (1).
3.2 Amended and Restated Bylaws of the Registrant (1).
11 Statement re: Computation of Per Share Earnings
(b) Reports on Form 8-K
During the quarter ended December 31, 1996, the Company did not file
any reports on Form 8-K.
__________________
Registrant agrees to furnish supplementally a copy of any omitted
schedules or Exhibits to the Commission upon request.
(1) Incorporated by reference to the identically numbered Exhibit to
the Company's Registration Statement on Form S-1, as amended (Reg. No.
33-78370).
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 13th day of
February, 1997.
HEFTEL BROADCASTING CORPORATION
By: /s/ L. Lowry Mays
-------------------------------
L. Lowry Mays, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ L. Lowry Mays President, Chief Executive Officer February 13, 1997
- ----------------------------- and Director
L. Lowry Mays
/s/ John T. Kendrick Senior Vice President, Chief Financial Officer February 13, 1997
- ----------------------------- and Assistant Secretary (principal accounting
John T. Kendrick officer)
</TABLE>
12
<PAGE> 1
Exhibit 11
Computation of Per Share Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1996 1995
<S> <C> <C>
Primary
Weighted average shares outstanding 11,547,731 9,900,975
Net effect of dilutive stock options - based
on the treasury stock method using
average market price -- 831,367
--------------- ---------------
Total 11,547,731 10,732,342
=============== ===============
Income from continuing operations $ 2,064,315 $ 1,302,238
Subtract $0.08 cumulative preferred stock dividends -- (6,713)
Subtotal 2,064,315 1,295,525
Discontinued operations - CRC -- (444,043)
--------------- ---------------
Net income $ 2,064,315 $ 851,482
=============== ===============
Income per share from continuing operations $ 0.18 $ 0.12
=============== ===============
Net income per share $ 0.18 $ 0.08
=============== ===============
Fully Diluted (Notes 1 and 2)
Weighted average shares outstanding 9,900,975
Net effect of dilutive stock options - based
on the treasury stock method using the
period-end market price, if higher than
the average market price 830,765
---------------
Total 10,731,740
===============
Net income from continuing operations $ 1,302,238
Subtract $0.08 cumulative preferred stock dividends (6,713)
Subtotal 1,295,525
Discontinued operations - CRC (444,043)
Total $ 851,482
===============
Income per share from continuing operations $ 0.12
===============
Net income per share $ 0.08
===============
</TABLE>
Notes:
(1) For the three month period ended December 31, 1996 there were no common
stock equivalents, therefore the fully diluted computation is not
applicable.
(2) For the three month period ended December 31, 1995, under the treasury
stock method, the period-end market price is less than the average
market price during the period, therefore the effect is anti-dilutive.
However, the per share amount is the same under both the primary and
fully-dilutive computations.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,787,652
<SECURITIES> 0
<RECEIVABLES> 16,995,571
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,415,014
<PP&E> 27,256,294
<DEPRECIATION> 7,590,009
<TOTAL-ASSETS> 163,725,095
<CURRENT-LIABILITIES> 14,055,159
<BONDS> 0
0
0
<COMMON> 11,548
<OTHER-SE> 14,154,156
<TOTAL-LIABILITY-AND-EQUITY> 163,725,095
<SALES> 18,308,968
<TOTAL-REVENUES> 18,308,968
<CGS> 0
<TOTAL-COSTS> 13,322,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,840,582
<INCOME-PRETAX> 2,164,315
<INCOME-TAX> (100,000)
<INCOME-CONTINUING> 2,064,315
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,064,315
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0
</TABLE>
