<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 17, 1995
PAXSON COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-13452 59-3212788
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
601 Clearwater Park Road, West Palm Beach, FL 33401
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 659-4122
----------------------------
PAXSON COMMUNICATIONS CORP., 18401 U.S. Highway 19 North, Clearwater, FL 34624
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Amendment To File Acquisition Financial Statements.
On June 1, 1995, the Registrant filed a report on Form 8-K with respect to
its acquisition of the assets comprising KZKI (TV-30) serving the Los Angeles,
California market and the assets comprising WGOT (TV-60) serving the Boston,
Massachusetts market. At that time, it was impracticable to provide the
financial statements and pro forma financial information required to be filed
therewith relative to the acquired assets, and the Registrant stated in such
Form 8-K that it intended to file the required financial statements and pro
forma financial information as soon as practicable thereafter, but no later
than July 31, 1995. By this amendment to such Form 8-K, the Registrant is
amending and restating Item 7 thereof to include such required financial
statements and pro forma financial information herewith.
Item 7. Financial Statements and Exhibits.
(a) Pro Forma Financial Information.
Paxson Communications Corporation Unaudited Pro Forma Combined
Balance Sheet at March 31, 1995
Paxson Communications Corporation Unaudited Pro Forma Combined
Statement of Operations:
For the three months ended 3/31/95
For the year ended 12/31/94
(b) Financial Statements of Businesses Acquired.
KZKI-TV (A division of Sandino Telecasters, Inc.) Financial
Statements, January 31, 1995
Paugus Television, Inc. (WGOT-TV) Financial Statements, December
31, 1994
-2-
<PAGE> 3
PAXSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined balance sheet and statements
of operations present the pro forma combined financial position at March 31,
1995 and pro forma combined results of operations for the three months ended
March 31, 1995 and for the year ended December 31, 1994 while giving effect to
PCC's acquisitions of KZKI-TV for $18 million and WGOT-TV for $3.05 million
under the purchase method of accounting. The financial statements of KZKI-TV
are presented using the station's fiscal year reporting period with the balance
sheet presented as of April 30, 1995, statement of operations for the three
months ended April 30, 1995 and statement of operations for the year ended
January 31, 1995. The unaudited pro forma combined statements of operations
for the three months ended March 31, 1995 and for the year ended December 31,
1994 assume that these acquisitions had been completed on January 1, 1994. The
unaudited pro forma combined balance sheet at March 31, 1995 assumes that these
acquistions had been completed on March 31, 1995. The Unaudited Pro Forma
Combined Financial Statements give effect only to the adjustments set forth in
the accompanying notes. These financial statements are not necessarily
indicative of the results of operations or financial position which would have
been achieved had the acquisitions been completed as of the beginning of the
earliest period presented, nor are the statements necessarily indicative of
PCC's future results of operations or financial position.
-3-
<PAGE> 4
PAXSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
================================================================================
At 3/31/95
<TABLE>
<CAPTION>
Pro Forma Pro Forma
ASSETS PCC KZKI-TV(1) WGOT-TV Adjustments Combined
------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 3,442,238 $ 41,504 $ 18,061 $ 3,501,803
Accounts receivable 12,975,050 2,762 101,312 13,079,124
Other receivables 1,750,000 0 0 1,750,000
Prepaid and other current assets 3,332,117 79,384 102,665 3,514,166
------------ ----------- ------------ ------------ ------------
Total current assets 21,499,405 123,650 222,038 0 21,845,093
Property and equipment, net 57,061,102 2,068,617 141,270 4,883,272 (a) 64,154,261
Intangible assets, net 63,026,497 6,723,084 579,088 6,772,557 (a) 77,101,226
Other assets, net 13,341,994 0 34,671 13,376,665
------------ ----------- ------------ ------------ ------------
Total assets $154,928,998 $ 8,915,351 $ 977,067 $ 11,655,829 $176,477,245
============ =========== ============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 4,843,539 $ 58,593 $ 410,339 $ 5,312,471
Unearned revenue 0 29,315 0 29,315
Current portion of long-term debt 10,267,461 11,951,824 7,963,217 (19,915,041)(b) 10,267,461
Current deferred income taxes 0 0 0 0
------------ ----------- ------------ ------------ ------------
Total current liabilities 15,111,000 12,039,732 8,373,556 (19,915,041) 15,609,247
Long-term debt 79,861,069 0 36,089 21,013,911 (b) 100,911,069
Deferred income taxes 1,154,940 0 0 1,154,940
Minority interest 1,155,944 0 0 1,155,944
Redeemable preferred stock 44,188,637 0 0 44,188,637
Redeemable common stock warrants 1,881,952 0 0 1,881,952
Common stock 5,373,306 0 284 (284)(d) 5,373,306
Treasury stock (77,666) 0 0 (77,666)
Additional paid-in-capital 20,647,647 0 2,843,516 (2,843,516)(d) 20,647,647
Accumulated deficit (14,367,831) (3,124,381) (10,276,378) 13,400,759 (d) (14,367,831)
------------ ----------- ------------ ------------ ------------
Total liabilities & stockholders' equity $154,928,998 $ 8,915,351 $ 977,067 $ 11,655,829 $176,477,245
============ =========== ============ ============ ============
</TABLE>
(1) The financial statements of KZKI-TV are presented using the station's
fiscal year reporting period with the balance sheet presented as of
April 30, 1995, statement of operations for the three months ended April
30, 1995 and statement of operations for the year ended January 31, 1995.
-4-
<PAGE> 5
PAXSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
================================================================================
For The Three Months Ended 3/31/95
<TABLE>
<CAPTION>
Pro Forma Pro Forma
PCC KZKI(1) WGOT Adjustments Combined
----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues
Local & National $18,483,224 $ 855,202 $ 238,356 $ 0 $19,576,782
Retail & Other 1,490,966 0 88,035 0 1,579,001
Trade 645,513 0 46,216 0 691,729
----------- --------- --------- --------- -----------
Total Revenue 20,619,703 855,202 372,607 0 21,847,512
----------- --------- --------- --------- -----------
Operating Expenses
Direct 5,634,155 12,720 49,588 0 5,696,463
Programming 3,126,804 8,193 114,345 0 3,249,342
Sales & Promotion 2,179,513 0 37,140 0 2,216,653
Technical 979,206 95,441 55,377 0 1,130,024
General & Administrative 4,657,850 200,897 70,513 0 4,929,260
Trade 471,541 0 44,603 0 516,144
Retail 0 0 0 0 0
Time Brokerage Fees 239,048 0 0 0 239,048
Broadcast Rights Fees 1,041,582 0 0 0 1,041,582
Program Rights Amortization 351,835 0 17,189 0 369,024
Depreciation & Amortization 3,784,629 181,266 67,819 67,240 (a) 4,100,954
----------- --------- --------- --------- -----------
OPERATING INCOME (LOSS) (1,846,460) 356,685 (83,967) (67,240) (1,640,982)
Other Income (Expense)
Interest Expense, Net (1,794,159) (227,134) (116,103) (160,063)(b) (2,297,459)
Gain (Loss) on Sale of Assets 0 0 0 0 0
Other Income (Expense), Net 67,635 0 (9,031) 0 58,604
----------- --------- --------- --------- -----------
EARNINGS BEFORE TAXES & EXTRAORDINARY ITEMS (3,572,984) 129,551 (209,101) (227,303) (3,879,837)
Benefit (Provision) for Income Taxes 320,000 0 0 0 320,000
----------- --------- --------- --------- -----------
EARNINGS BEFORE EXTRAORDINARY ITEMS (3,252,984) 129,551 (209,101) (227,303) (3,559,837)
Minority Interest & Extraordinary Items 0 0 0 0 0
----------- --------- --------- --------- -----------
NET INCOME (LOSS) (3,252,984) 129,551 (209,101) (227,303) (3,559,837)
Dividends & Accretion on Pfd & Com Stock Warrants (2,190,952) 0 0 0 (2,190,952)
----------- --------- --------- --------- -----------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
& EQUIVALENTS $(5,443,936) $ 129,551 $(209,101) $(227,303) $(5,750,789)
=========== ========= ========= ========= ===========
Pro Forma Weighted Average Shares Outstanding 34,354,201 34,354,201
=========== ===========
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON
STOCK & EQ. $ (0.16) $ (0.17)
=========== ===========
</TABLE>
(1) The financial statements of KZKI-TV are presented using the station's
fiscal year reporting period with the balance sheet presented as of April
30, 1995, statement of operations for the three months ended April 30, 1995
and statement of operations for the year ended January 31, 1995.
-5-
<PAGE> 6
PAXSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
================================================================================
For The Year Ended 12/31/94
<TABLE>
<CAPTION>
Pro Forma Pro Forma
PCC KZKI(1) WGOT Adjustments Combined
----------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues
Local & National $56,668,983 $1,711,911 $ 877,165 $ 0 $ 59,258,059
Retail & Other 2,779,215 0 38,698 0 2,817,913
Trade 2,619,245 0 305,821 0 2,925,066
----------- ---------- ----------- ----------- ------------
Total Revenue 62,067,443 1,711,911 1,221,684 0 65,001,038
----------- ---------- ----------- ----------- ------------
Operating Expenses
Direct 16,221,385 64,363 184,081 0 16,469,829
Programming 8,750,624 22,215 441,303 0 9,214,142
Sales & Promotion 5,753,025 0 141,393 0 5,894,418
Technical 2,113,117 395,512 194,241 0 2,702,870
General & Administrative 11,689,343 558,220 534,430 (152,000)(c) 12,629,993
Trade 2,426,118 0 275,352 0 2,701,470
Retail 568,372 0 0 0 568,372
Time Brokerage Fees 503,698 0 0 0 503,698
Broadcast Rights Fees 2,379,516 0 0 0 2,379,516
Program Rights Amortization 820,754 0 174,034 0 994,788
Depreciation & Amortization 12,403,528 743,396 203,456 318,448 (a) 13,668,828
----------- ---------- ----------- ----------- ------------
OPERATING INCOME (LOSS) (1,562,037) (71,795) (926,606) (166,448) (2,726,886)
Other Income (Expense)
Interest Expense, Net (4,874,710) (855,800) (331,815) (824,635)(b) (6,886,960)
Gain (Loss) on Sale of Assets 28,105 0 (13,146) 0 14,959
Other Income (Expense), Net (33,432) 0 (37,951) 0 (71,383)
----------- ---------- ----------- ----------- ------------
EARNINGS BEFORE TAXES & EXTRAORDINARY ITEMS (6,442,074) (927,595) (1,309,518) (991,083) (9,670,270)
Benefit (Provision) for Income Taxes 1,680,000 0 0 0 1,680,000
----------- ---------- ----------- ----------- ------------
EARNINGS BEFORE EXTRAORDINARY ITEMS (4,762,074) (927,595) (1,309,518) (991,083) (7,990,270)
Minority Interest & Extraordinary Items 0 0 0 0 0
----------- ---------- ----------- ----------- ------------
NET INCOME (LOSS) (4,762,074) (927,595) (1,309,518) (991,083) (7,990,270)
Dividends & Accretion on Pfd & Com Stock Warrants (3,385,456) 0 0 0 (3,385,456)
----------- ---------- ----------- ----------- ------------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK
& EQUIVALENTS $(8,147,530) $ (927,595) $(1,309,518) $ (991,083) $(11,375,726)
=========== ========== =========== =========== ============
Pro Forma Weighted Average Shares Outstanding 33,430,116 33,430,116
=========== ============
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON
STOCK & EQ. $ (0.24) $ (0.34)
=========== ============
</TABLE>
(1) The financial statements of KZKI-TV are presented using the station's
fiscal year reporting period with the balance sheet presented as of April
30, 1995, statement of operations for the three months ended April 30,
1995 and statement of operations for the year ended January 31, 1995.
-6-
<PAGE> 7
PAXSON COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Unaudited Pro Forma Adjustments
The Unaudited Pro Forma Combined Financial Statements reflect the
following unaudited pro forma adjustments:
(a) To reflect the increase in depreciation and amortization expense
for purchase accounting allocations made for the acquisitions of KZKI-TV and
WGOT-TV.
The increase in depreciation expense represents the purchase accounting
step-up of property and equipment to fair value arising from the acquisitions
of KZKI-TV and WGOT-TV of $2,400,000 and $2,483,272, respectively, being
depreciated over six years, for the three months ended March 31, 1995 of
$100,000 and $103,450, respectively, and for the year ended December 31, 1994
of $400,000 and $413,800, respectively.
The increase in amortization expense represents the excess of cost over
fair value of assets acquired, consisting of FCC licenses, goodwill and other
intangible assets, arising from the acquisition of KZKI-TV of $6,772,557, being
amortized over fifteen years, for the three months ended March 31, 1995 of
$112,875 and for the year ended December 31, 1994 of $451,500.
Historical depreciation and amortization expense of KZKI-TV and WGOT-TV
has been eliminated for pro forma financial statement presentation.
A final determination of required purchase accounting adjustments,
including allocation of the purchase price to assets acquired and liabilities
assumed based on their respective fair market values, has not yet been
completed. Accordingly, the purchase accounting adjustments made in presenting
the Unaudited Pro Forma Combined Financial Statements are preliminary and have
been made solely to facilitate the presentation of these Unaudited Pro Forma
Combined Financial Statements. PCC will finalize the purchase accounting
adjustments after performing a study to determine the fair values of assets and
liabilities of the transactions.
(b) To reflect interest expense on debt incurred in connection with
the acquisitions of KZKI-TV and WGOT-TV of $18 million and $3.05 million,
respectively, for the three months ended March 31, 1995 of $430,300 and
$73,000, respectively, and for the year ended December 31, 1994 of $1,721,250
and $291,000, respectively. The annual interest rate assumed for the
indebtedness incurred is 9.5625% (PCC's current borrowing rate). Historical
interest expense and the related debt of KZKI-TV and WGOT-TV has been
eliminated for pro forma financial statement presentation.
(c) To reflect the elimination KZKI-TV transaction expenses of
$152,000 of general and administrative expenses for the year ended December 31,
1994, which represent legal and investment banking expenses incurred and
expensed related to the sale of the station to PCC.
(d) To eliminate the equity balances of KZKI-TV and WGOT-TV acquired
through the acquisitions and reported using the purchase method of accounting.
-7-
<PAGE> 8
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
KZKI-TV (A division of Sandino Telecasters, Inc.)
Financial Statements -- January 31, 1995
Report of Independent Certified Public Accountants.................................................. F-1
Balance Sheet....................................................................................... F-2
Statement of Operations............................................................................. F-3
Statement of Changes in Divisional Deficit.......................................................... F-4
Statement of Cash Flows............................................................................. F-5
Notes to Financial Statements....................................................................... F-6
Paugus Television, Inc. (WGOT-TV)
Financial Statements -- December 31, 1994
Report of Independent Certified Public Accountants.................................................. F-10
Balance Sheet....................................................................................... F-11
Statement of Operations............................................................................. F-12
Statement of Changes in Stockholders' Deficit....................................................... F-13
Statements of Cash Flows............................................................................ F-14
Notes to Financial Statements....................................................................... F-15
</TABLE>
<PAGE> 9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
of KZKI-TV (a division of Sandino Telecasters)
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in divisional deficit and of cash flows present fairly,
in all material respects, the financial position of KZKI-TV (a division of
Sandino Telecasters), (the "Station") at January 31, 1995 and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Station's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Station will continue as a going concern. As discussed in Note 1 to the
financial statements, the Station has incurred cumulative net losses and has
significant notes payable which are due on demand, which raise substantial
doubt about the Station's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Tampa, Florida
July 17, 1995
F-1
<PAGE> 10
KZKI-TV (A division of Sandino Telecasters)
<TABLE>
<CAPTION>
BALANCE SHEET
- -----------------------------------------------------------------------------------------------------------
APRIL 30, JANUARY 31,
1995 1995
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41,504 $ 91,180
Accounts receivable 2,762 6,695
Prepaid expenses and other assets 79,384 10,813
-------------- --------------
Total current assets 123,650 108,688
Property and equipment, net 2,068,617 2,180,634
Intangible assets, net 6,723,084 6,792,333
-------------- --------------
Total assets $ 8,915,351 $ 9,081,655
============== ==============
LIABILITIES AND DIVISIONAL DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 58,593 $ 41,261
Unearned revenue 29,315 71,074
Related party payables
Accrued interest 2,878,950 2,650,378
Notes payable 9,072,874 9,572,874
-------------- --------------
Total current liabilities 12,039,732 12,335,587
-------------- --------------
Divisional deficit (3,124,381) (3,253,932)
-------------- --------------
Commitments and contingencies (see Note 6)
Total liabilities and divisional deficit $ 8,915,351 $ 9,081,655
============== ==============
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of the financial statements.
F-2
<PAGE> 11
KZKI-TV (A division of Sandino Telecasters)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
QUARTER ENDED YEAR ENDED
APRIL 30, JANUARY 31,
1995 1995
(UNAUDITED)
<S> <C> <C>
Revenue:
Network programming $ 277,422 $ 871,701
Paid programming and other 577,780 840,210
-------------- --------------
Total revenue 855,202 1,711,911
-------------- --------------
Operating expenses:
Technical 95,441 395,512
Direct 12,720 64,363
Programming 8,193 22,215
General and administrative 200,897 558,220
Depreciation and amortization 181,266 743,396
-------------- --------------
Total operating expenses 498,517 1,783,706
-------------- --------------
Income (loss) from operations 356,685 (71,795)
Related party interest expense (227,134) (855,800)
-------------- --------------
Net income (loss) $ 129,551 $ (927,595)
============== ==============
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of the financial statements.
F-3
<PAGE> 12
KZKI-TV (A division of Sandino Telecasters)
<TABLE>
STATEMENT OF CHANGES IN DIVISIONAL DEFICIT
- ------------------------------------------------------------------------------------------
<S> <C>
Balance at February 1, 1994 $ (2,326,337)
Net loss (927,595)
--------------
Balance at January 31, 1995 (3,253,932)
Net income through April 30, 1995 (unaudited) 129,551
--------------
Balance at April 30, 1995 (unaudited) $ (3,124,381)
==============
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of the financial statements.
F-4
<PAGE> 13
KZKI-TV (A division of Sandino Telecasters)
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
QUARTER ENDED YEAR ENDED
APRIL 30, JANUARY 31,
1995 1995
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 129,551 $ (927,595)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 181,266 743,396
Decrease (increase) in accounts receivable 3,933 (5,297)
Increase in prepaid expenses and other assets (68,571) (7,069)
Increase in accounts payable and
accrued liabilities 17,332 31,209
(Decrease) increase in unearned revenue (41,759) 56,228
Increase in related party accrued interest 228,572 855,800
-------------- --------------
Net cash provided by operating activities 450,324 746,672
-------------- --------------
Cash flows from investing activities:
Purchases of property and equipment - (204,410)
Cash flows from financing activities:
Proceeds from related party note payable - 418,588
Payments of related party note payable (500,000) (935,000)
-------------- --------------
Net cash used for financing activities (500,000) (516,412)
-------------- --------------
(Decrease) increase in cash and cash equivalents (49,676) 25,850
Cash and cash equivalents at beginning of year 91,180 65,330
-------------- --------------
Cash and cash equivalents at end of period $ 41,504 $ 91,180
============== ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 0 $ 0
============== ==============
Cash paid for income taxes $ 0 $ 0
============== ==============
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of the financial statements.
F-5
<PAGE> 14
KZKI-TV (A division of Sandino Telecasters)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
KZKI-TV (A division of Sandino Telecasters) (the "Station"), is engaged in
the operation of a television broadcasting station in the Los Angeles,
California market. Sandino Telecasters operates the television station
under a license granted by the Federal Communications Commission.
The Station has incurred cumulative net losses through January 31, 1995
totaling approximately $3,254,000. Additionally, the Station owes
approximately $12,223,000 on demand notes payable and accrued interest to
a related party. The Station does not have sufficient means to repay the
notes payable if called (see Note 4). These conditions raise substantial
doubt regarding the Station's ability to continue as a going concern.
Owners plan to liquidate the Station's liabilities through a sale of the
Station's assets (see Note 7).
Cash and cash equivalents
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
Property and equipment
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized
at cost and depreciated on a straight-line basis over their estimated
useful lives as follows:
<TABLE>
<S> <C>
Broadcasting tower and equipment 10 years
Leasehold improvements Term of lease
Office furniture and equipment 6 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
Intangible assets
Intangible assets consists of the FCC license which is stated at cost and
is being amortized using the straight-line method over the estimated
useful life of 25 years.
F-6
<PAGE> 15
KZKI-TV (A division of Sandino Telecasters)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995
- --------------------------------------------------------------------------------
Revenue recognition
Revenue is recognized as advertising air time is broadcast.
Income taxes
The Station's operating results have been included in the tax return filed
by Sandino Telecasters. A provision for intercompany income taxes, which
approximates the income tax provision calculated for Station income on a
standalone basis was calculated to be $0 based upon cumulative net losses.
Interim financial data
The interim financial data of the Station is unaudited; however, in the
opinion of Station management, the interim financial data includes all
adjustments, consisting of only normal recurring adjustments, necessary
for a fair statement of results of the interim periods. The results of
operations for the quarter ended April 30, 1995 are not necessarily
indicative of the results that could be expected for the entire fiscal
year ending January 31, 1996.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JANUARY 31,
1995
<S> <C>
Broadcasting tower and equipment $ 2,171,897
Leasehold improvements 473,413
Office furniture and equipment 33,002
--------------
2,678,312
Accumulated depreciation (497,678)
--------------
Property and equipment, net $ 2,180,634
==============
Depreciation expense for the year $ 459,396
==============
</TABLE>
F-7
<PAGE> 16
KZKI-TV (A division of Sandino Telecasters)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
JANUARY 31,
1995
<S> <C>
FCC licenses $ 7,100,000
Accumulated amortization (307,667)
--------------
Intangible assets, net $ 6,792,333
==============
Amortization expense for the year $ 284,000
==============
</TABLE>
4. RELATED PARTY NOTES PAYABLE:
Related party notes payable consist of the following:
<TABLE>
<CAPTION>
JANUARY 31,
1995
<S> <C>
Note payable, prime + 1% interest compounded
annually, interest and principal due on demand $ 7,100,000
Note payable, prime + 1% interest compounded
annually, interest and principal due on demand 2,472,874
--------------
$ 9,572,874
==============
</TABLE>
In 1991, the Station borrowed $7,100,000 from Astrum Management Group
("Astrum"), a minority shareholder of Sandino Telecasters, in order to
purchase the FCC license and begin operations (see Note 5). The note
accrues interest at prime + 1% and is due on demand. At January 31, 1995,
accrued interest payable on the note was $2,319,638; no interest or
principal repayments have been made to date.
Additionally, the Station entered into a revolving credit agreement with
Astrum, whereby Astrum funded initial construction of the Station and
continues to fund working capital shortfalls. The working capital note
accrues interest at prime +1% and is due on demand. At January 31, 1995,
accrued interest payable on the note was $330,740; no interest repayments
have been made to date.
F-8
<PAGE> 17
KZKI-TV (A division of Sandino Telecasters)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995
- --------------------------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS:
The Station has entered into several agreements with related parties. As
discussed in Note 4, the Station has significant outstanding notes payable
and accrued interest payable with Astrum. Additionally, Astrum provides
financial management and accounting services for the Station. The value
of these services based on estimated hours expended by Astrum was
approximately $6,000, for the year ended January 31, 1995. All other
overhead, debt and interest allocations have been appropriately reflected
in the Station's financial statements.
6. COMMITMENTS AND CONTINGENCIES:
The Station incurred expenses of approximately $44,922 for the year ended
January 31, 1995 under a non-cancellable operating lease for office space.
Additionally, the Station incurred expenses of approximately $10,695 for
a special use permit from the U.S. Department of Forestry for use of the
land surrounding the station's tower. Future minimum annual payments
under the operating lease as of January 31, 1995, are $31,820, due during
fiscal year 1996.
7. SUBSEQUENT EVENT:
On May 17, 1995, the Owners sold the Station's assets to Paxson
Communications Corporation for approximately $18,000,000.
F-9
<PAGE> 18
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
of Paugus Television, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholders' deficit and of cash flows present
fairly, in all material respects, the financial position of Paugus Television,
Inc. (the "Company"), at December 31, 1994 and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
accompanying financial statements, the Company has incurred cumulative net
losses from operations and has significant notes payable which are due on
demand that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1 to the accompanying financial statements. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Tampa, Florida
July 19, 1995
F-10
<PAGE> 19
Paugus Television, Inc. (WGOT-TV)
<TABLE>
<CAPTION>
BALANCE SHEET
- ------------------------------------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1995 1994
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,061 $ 14,127
Accounts receivable, less allowance for
doubtful accounts of $14,948 and $23,965 101,312 124,510
Prepaid expenses and other assets 51,100 21,319
Current program rights 51,565 68,754
-------------- --------------
Total current assets 222,038 228,710
Property and equipment, net 141,270 202,203
Intangible assets, net 579,088 587,318
Program rights, net 34,671 34,671
-------------- --------------
Total assets $ 977,067 $ 1,052,902
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 134,221 $ 135,340
Other payables 175,243 182,051
Current program rights payable 100,875 111,594
Related party payables:
Accrued interest payable 1,159,417 1,043,505
Notes payable 6,803,800 6,767,800
-------------- --------------
Total current liabilities 8,373,556 8,240,290
Program rights payable 36,089 36,089
-------------- --------------
Total liabilities 8,409,645 8,276,379
Stockholders' deficit:
Common stock, $1 par, 300 shares authorized,
284.38 shares issued and outstanding 284 284
Additional paid-in capital 2,843,516 2,843,516
Retained deficit (10,276,378) (10,067,277)
-------------- --------------
Total stockholders' deficit (7,432,578) (7,223,477)
-------------- --------------
Commitments and contingencies (see Note 8)
Total liabilities and stockholders' deficit $ 977,067 $ 1,052,902
============== ==============
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of the financial statements.
F-11
<PAGE> 20
Paugus Television, Inc. (WGOT-TV)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
QUARTER ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1995 1994
(UNAUDITED)
<S> <C> <C>
Revenue:
Local and national advertising $ 238,356 $ 877,165
Trade 46,216 305,821
Production and other 88,035 38,698
-------------- --------------
Total revenue 372,607 1,221,684
-------------- --------------
Operating expenses:
Technical 55,377 194,241
News 32,912 193,583
Direct 49,588 184,081
Sales 37,140 141,393
Production 33,938 131,089
Programming and promotion 47,495 116,631
General and administrative 70,513 534,430
Trade 44,603 275,352
Program rights amortization 17,189 174,034
Depreciation and amortization 67,819 203,456
-------------- --------------
Total operating expenses 456,574 2,148,290
-------------- --------------
Loss from operations (83,967) (926,606)
Other income (expense):
Related party interest expense (116,103) (331,815)
Loss on sale of assets - (13,146)
Other expense, net (9,031) (37,951)
-------------- --------------
Net loss $ (209,101) $ (1,309,518)
============== ==============
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of the financial statements.
F-12
<PAGE> 21
Paugus Television Inc. (WGOT-TV)
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
- ---------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' DEFICIT
------------------------------------------------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $ 284 $ 2,843,516 $ (8,757,759) $ (5,913,959)
Net loss (1,309,518) (1,309,518)
-------------- -------------- -------------- --------------
Balance at December 31, 1994 284 2,843,516 (10,067,277) (7,223,477)
Net loss through
March 31, 1995 (unaudited) (209,101) (209,101)
-------------- -------------- -------------- --------------
Balance at March 31, 1995
(unaudited) $ 284 $ 2,843,516 $ (10,276,378) $ (7,432,578)
============== ============== ============== ==============
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of the financial statements.
F-13
<PAGE> 22
Paugus Television, Inc. (WGOT-TV)
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------------
FOR THE QUARTER FOR THE YEAR
ENDED ENDED
MARCH 31, 1995 DECEMBER 31,
(UNAUDITED) 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (209,101) $ (1,309,518)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 67,819 203,456
Program rights amortization 17,189 174,034
Allowance for doubtful accounts (9,017) 708
Loss on sale of assets - 13,146
Decrease (increase) in accounts receivable 32,215 (62,644)
(Increase) decrease in prepaid expenses and other assets (29,781) 157,833
(Decrease) increase in accounts payable and accrued liabilities (1,119) 8,466
Decrease in other payables (6,808) (193,227)
Increase in related party accrued interest 115,912 322,947
-------------- --------------
Net cash used for operating activities (22,691) (684,799)
-------------- --------------
Cash flows from investing activities:
Purchases of property and equipment (168) (43,374)
Sale of property and equipment - 42,000
-------------- --------------
Net cash used for investing activities (168) (1,374)
-------------- --------------
Cash flows from financing activities:
Payments for program rights (9,207) (142,581)
Proceeds from related party notes payable 36,000 791,888
-------------- --------------
Net cash provided by financing activities 26,793 649,307
-------------- --------------
Increase (decrease) in cash and cash equivalents 3,934 (36,866)
Cash and cash equivalents at beginning of year $ 14,127 $ 50,993
-------------- --------------
Cash and cash equivalents at end of period $ 18,061 $ 14,127
============== ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 0 $ 0
============== ==============
Non-cash operating activities:
Trade revenue $ 46,216 $ 305,821
============== ==============
Trade expense $ 44,603 $ 275,352
============== ==============
</TABLE>
The accompanying Notes to Financial Statements
are an integral part of the financial statements.
F-14
<PAGE> 23
Paugus Television, Inc. (WGOT-TV)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Paugus Television, Inc. (the "Company"), a Delaware Corporation, was
organized in 1988 for the purpose of owning and operating a television
station, WGOT-TV, in Manchester, New Hampshire, serving the Boston,
Massachusetts market.
The Company has incurred substantial cumulative net losses through
December 31, 1994 totalling approximately $10,067,000. Additionally, the
Company owes approximately $7,811,000 on demand notes payable and accrued
interest to a related party. The Company does not have sufficient means
to repay the notes payable (see Note 6). These conditions raise
substantial doubt regarding the Company's ability to continue as a going
concern. Management plans to liquidate the Company's liabilities through
a sale of the Company's assets (see Note 9).
Property and equipment
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized
at cost and depreciated on a straight-line basis over their estimated
useful lives as follows:
<TABLE>
<S> <C>
Broadcasting tower and equipment 7 years
Office furniture equipment and other 5 years
Leasehold improvements Term of lease
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
Intangible assets
Intangible assets are stated at cost and are being amortized using the
straight-line method over the estimated useful life as follows:
<TABLE>
<S> <C>
Goodwill 25 years
Favorable lease agreement Term of lease
Organization costs 5 years
</TABLE>
Program rights
The Company obtains licenses for program rights which allow the Company to
broadcast program material in accordance with contractual agreements.
Pursuant to a licensing agreement, an asset is recorded for the program
rights acquired and a liability is recorded for the obligation incurred,
at the gross amount of the liability. Program rights are amortized on a
method that approximates the straight-line basis over the related term.
Program rights which will not be aired are charged to expense. Current
program rights represent programs
F-15
<PAGE> 24
Paugus Television, Inc. (WGOT-TV)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
which will be amortized during the next year, current liabilities
represent program rights which will be paid within the year under
contractual agreement.
Income taxes
Provisions are made to record deferred income taxes in recognition of
items reported differently for financial reporting purposes than for
federal and state income tax purposes. The Company records deferred
income taxes using the liability method in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Revenue recognition
Revenue is recognized as advertising air time is broadcast.
Trade agreements
The Company enters into trade agreements which give rise to advertising
air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertised air time is broadcast. Products and services
received are expensed when used in the broadcast operations. If the
Company uses exchanged products or services before advertising air time is
provided, a trade liability is recognized.
Interim financial data
The interim financial data of the Company is unaudited; however, in the
opinion of the Company's management, the interim data includes all
adjustments, consisting of only normal recurring adjustments, necessary
for a fair statement of results for the interim periods. The results of
operations for the quarter ended March 31, 1995 are not necessarily
indicative of the results that can be expected for the entire fiscal year
ending December 31, 1995.
F-16
<PAGE> 25
Paugus Television, Inc. (WGOT-TV)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
<S> <C>
Broadcasting tower and equipment $ 1,138,870
Office furniture, equipment and other 188,992
Leasehold improvements 122,491
--------------
1,450,353
Accumulated depreciation (1,248,150)
--------------
Property and equipment, net $ 202,203
==============
Depreciation expense for the year $ 170,537
==============
</TABLE>
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
<S> <C>
Goodwill $ 734,245
Favorable lease agreement 119,500
Organization costs 14,705
--------------
868,450
Accumulated amortization (281,132)
--------------
Intangible assets, net $ 587,318
==============
Amortization expense for the year $ 32,919
==============
</TABLE>
F-17
<PAGE> 26
Paugus Television, Inc. (WGOT-TV)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
4. PROGRAM RIGHTS:
Program rights consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
<S> <C>
Program rights $ 305,751
Accumulated amortization (202,326)
--------------
103,425
Less current program rights (68,754)
--------------
$ 34,671
==============
Amortization expense for the year $ 174,034
==============
</TABLE>
5. PROGRAM RIGHTS PAYABLE:
Program rights payable represent the obligation incurred to secure the
right to broadcast program material in accordance with a contractual
agreement. Future minimum annual payments under these contractual
agreements as of December 31, 1994, are as follows:
<TABLE>
<S> <C>
1995 $ 111,594
1996 36,089
--------------
$ 147,683
==============
</TABLE>
F-18
<PAGE> 27
Paugus Television, Inc. (WGOT-TV)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
6. RELATED PARTY NOTES PAYABLE:
Related party notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
<S> <C>
Note payable to stockholder, interest
at Federal Funds Rate +1%, principal and
interest due on demand $ 3,853,650
Note payable to stockholder, interest
at Federal Funds Rate +1%, principal and
interest due on demand 2,914,150
--------------
$ 6,767,800
==============
</TABLE>
The Company has entered into multiple note payable agreements with its
primary stockholders, the Perceival Lowell Trust and the Roger L. Putnam
Trust (the "Trusts") whereby the Trusts fund working capital shortfalls on
a monthly basis. The notes payable are secured by all assets of the
Company, including the FCC license, accrue interest at the Federal Funds
rate +1% and are due on demand. At December 31, 1994, accrued interest
payable on the notes was $569,047 and $474,458, respectively. No
principal or interest payments were made for the year ended December 31,
1994.
7. INCOME TAXES:
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
<S> <C>
Assets:
Fixed assets $ 9,432
Allowance for doubtful accounts 9,255
Net operating loss carryforwards 4,038,004
Valuation allowance (4,049,045)
Liabilities:
Intangible assets (7,646)
--------------
$ 0
==============
</TABLE>
F-19
<PAGE> 28
Paugus Television, Inc. (WGOT-TV)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax asset will not be realized. A valuation
allowance has been provided for the net operating loss carryforwards.
8. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $94,652 for the year ended
December 31, 1994 under non-cancelable operating leases for office
equipment and tower space. Future minimum annual payments under these
non-cancelable operating leases as of December 31, 1994, are as follows:
<TABLE>
<CAPTION>
PAYMENT
<S> <C>
1995 $ 95,320
1996 15,600
--------------
$ 110,920
==============
</TABLE>
9. SUBSEQUENT EVENT:
On May 17, 1995, the Company sold the assets to Paxson Communications
Corporation for approximately $3,100,000.
F-20
<PAGE> 29
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2.1 Asset Purchase Agreement by and between Paxson Communications Corp. and Sandino Telecasters, Inc.,
dated as of December 5, 1994*
2.2 First Letter Amendment, dated as of December 2, 1994, to Asset Purchase Agreement by and between
Paxson Communications Corp. and Sandino Telecasters, Inc., dated as of December 5, 1994*
2.3 Second Letter Amendment, dated as of December 5, 1994, to Asset Purchase Agreement by and between
Paxson Communications Corp. and Sandino Telecasters, Inc., dated as of December 5, 1994*
2.4 Third Amendment, dated as of May 17, 1995, to Asset Purchase Agreement by and between Paxson
Communications Corp. and Sandino Telecasters, Inc., dated as of December 5, 1994*
2.5 Asset Purchase Agreement by and between Paxson Communications of Boston-60, Inc., Paugus
Television, Inc., The Roger L. Putnam Trust and The Estate of Percival Lowell, dated as of
January 20, 1995*
2.6 First Amendment, dated as of May 17, 1995, to Asset Purchase Agreement by and between Paxson
Communications of Boston-60, Inc., Paugus Television, Inc., The Roger L. Putnam Trust and The
Estate of Percival Lowell, dated as of January 20, 1995*
23.1 Consent of Price Waterhouse LLP.
</TABLE>
- --------------------------
*Previously filed.
<PAGE> 30
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 hereunto duly authorized.
PAXSON COMMUNICATIONS
CORPORATION
(Registrant)
By: /s/ Arthur D. Tek
------------------------
Arthur D. Tek, its Treasurer
Date: July 31, 1995
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in Form 8-K/A of Paxson Communications Corporation
of our report dated July 17, 1995 relating to the financial statements of
KZKI-TV (A division of Sandino Telecasters) and our report dated July 19, 1995
relating to the financial statements of Paugus Television, Inc. (WGOT-TV),
which appear in such Filing
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Tampa, Florida
July 28, 1995
