<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 10, 1997
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, Florida 33401-6233
- --------------------------------------------------------------------------------
(Address of principal executive offices)(zip code)
Registrant's telephone number, including area code: (561) 659-4122
-----------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On January 10, 1997, a wholly-owned subsidiary of the Registrant acquired the
assets of the Fort Lauderdale Radio Stations, WPLL-FM (formerly WSHE-FM) and
WSRF-AM, a division of T.K. Communications, L.C. ("the Seller"), serving the
Miami, Florida market, pursuant to an Asset Purchase Agreement between the
Registrant and Seller, dated April 12, 1996, as amended as of January 10, 1997.
The assets acquired included the Federal Communications Commission ("FCC")
licenses for WPLL-FM and WSRF-AM, equipment, furnishings and other property
customarily used in the operation of a radio station, as well as a lease for
the real property upon which the radio station's studio and transmission towers
included within such acquired assets are located. The Registrant's subsidiary
intends to make similar use of the acquired assets. The Company began operating
the stations pursuant to a time brokerage agreement on May 1, 1996.
The aggregate purchase price for the above assets acquisition was approximately
$57.8 million, which was consummated using the Registrant's available cash on
hand at the time of closing.
Item 7. Financial Statements and Exhibits.
(a) Pro Forma Financial Information.
Paxson Communications Corporation Unaudited Pro Forma Combined
Balance Sheet at September 30, 1996
Paxson Communications Corporation Unaudited Pro Forma Combined
Statement of Operations:
For the nine months ended September 30, 1996
For the year ended December 31, 1995
(b) Financial Statements of Business Acquired.
Fort Lauderdale Radio Stations (A Division of T.K.
Communications, L.C.)
Financial Statements, December 31, 1995
(c) Exhibits.
Exhibit Number Description
2.1 Asset purchase agreement, dated as of April
12, 1996 by and between Paxson Broadcasting
of Miami, Limited Partnership and TK
Communications, L.C.(filed as exhibit 10.102
with the Company's Quarterly Report on Form
10-Q dated March 31, 1996)
2
<PAGE> 3
2.2 First amendment to asset purchase agreement,
dated January 10, 1997, by and among Paxson
Broadcasting of Miami, Limited Partnership,
and Paxson Miami License Limited Partnership,
and TK Communications, L.C.
3
<PAGE> 4
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,
Vice President, Chief
Financial Officer, Director
Date: January 10, 1997
4
<PAGE> 5
PAXSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma statements of operations data gives effect to
(i) the significant business acquisition of the Fort Lauderdale Radio Stations
(WPLL-FM and WSRF-AM), and (ii) the consummation of the Company's Cumulative
Exchangeable Preferred Stock offering on October 4, 1996, as if such events had
occurred on January 1, 1995. The following unaudited pro forma balance sheet
data gives effect to the above events as if they had occurred on September 30,
1996.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The unaudited pro forma statements of operations data is not necessarily
indicative of the results that would have occurred if the acquisition and
offering had occurred on the dates indicated, nor are they indicative of the
Company's future results of operations.
5
<PAGE> 6
PAXSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
At September 30, 1996
------------------------------------------------------------------
Preferred
WPLL-FM Stock Sale
Company WSRF-AM Redemption Pro Forma (a)
------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 34,373 $ (55,800) (b) $143,750 (c) $ 93,867
(28,456)(d)
Accounts receivable, net 22,550 22,550
Prepaid expense and other current assets 2,831 2,831
Current program rights 1,312 1,312
--------- ---------- -------- ---------
Total current assets 61,066 (55,800) 115,294 120,560
--------- ---------- -------- ---------
Property and equipment, net 128,646 2,000 (b) 130,646
Intangible assets, net 178,732 55,800 (b) 234,532
Other assets, net 32,220 (2,000) (b) 30,220
Investment in broadcast properties 43,966 43,966
Program rights, net 1,110 1,110
--------- ---------- -------- ---------
Total $ 445,740 $ - $115,294 $ 561,034
--------- ---------- -------- ---------
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDER'S EQUITY
Current Liabilites:
Accounts payable and accrued liabilities $ 12,393 $ 12,393
Accrued interest 13,369 13,369
Current portion of program rights payable 1,264 1,264
Current portion of long-term debt 599 599
--------- ---------- -------- ---------
Total current liabilities 27,625 - - 27,625
--------- ---------- -------- ---------
Program rights payable 1,173 1,173
Long-term debt 3,594 3,594
Senior subordinated notes, net 227,584 227,584
Redeemable Senior preferred stock 19,192 $(19,192) (d) -
Series B Preferred Stock 3,309 (3,309) (d) -
Redeemable Junior preferred stock 35,435 35,435
Exchangeable preferred, net - 143,750 (c) 143,750
Class A Common Stock 39 39
Class B Common Stock 8 8
Class C Common Stock - -
Class A and B common stock warrants 6,863 6,863
Class C common stock warrants 4,282 4,282
Stock subscription notes receivable (18) (18)
Additional paid-in-capital 197,448 197,448
Deferred option plan compensation (1,514) (1,514)
Accumulated deficit (79,280) (5,955) (d) (85,235)
--------- ---------- -------- ---------
Total liabilities, redeemable securities and
stockholder's equity $ 445,740 $ - $115,294 $ 561,034
========= ========== ======== =========
</TABLE>
6
<PAGE> 7
Paxson Communications Corporation
Notes to Unaudited Pro Forma Consolidated Balance Sheet
September 30, 1996
(in thousands)
(a) The pro forma balance sheet at September 30, 1996 gives effect to: (i) the
acquisition of WPLL-FM and WSRF-AM, and the consummation of the Company's
Exchangeable Preferred Stock Offering on October 4, 1996.
(a) To reflect the use of cash for the acquisition of the assets of WPLL-FM and
WSRF-AM. Use of cash is net of $2 million escrowed at September 30, 1996.
<TABLE>
<S> <C>
Property and equipment $ 2,000
Intangible assets 55,800
Other assets (2,000)
--------
Cash Used for acquisition $ 55,800
========
</TABLE>
(c) To reflect the proceeds from the Exchangeable Preferred Stock Offering.
(d) To reflect the redemption of the Senior Preferred Stock including $950 of
redemption premiums and approximately $5,005 of accretion and accrued
dividends from September 30, 1996 through December 15, 1996, the initial
date at which the Senior Preferred Stock could be redeemed by the Company.
The redemption value of and the accrued dividends on the Senior Preferred
Stock at December 15, 1996 has been discounted by $420 at 7.3% to reflect
the Company's redemption date of October 4, 1996, in accordance with the
revised terms of the Senior Preferred Stock.
7
<PAGE> 8
PAXSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
WPLL-FM Pro Forma
Company WSRF-AM Adjustments Pro Forma
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Revenue $ 103,074 $ 7,684 $ - $ 110,758
Operating expenses, excluding depreciation,
amortization and option plan compensation 82,103 5,329 (736)(b) 86,696
Option plan compensation 10,803 10,803
Depreciation and Amortization 18,719 2,038 (a) 21,284
----------------------------------------- -----------
Income (loss) from operations (8,551) 1,828 (1,302) (8,025)
Interest expense (16,303) (1,116) 1,116 (c) (16,303)
Interest income 1,709 - - 1,709
Other income (expense), net (982) 5 - (977)
Benefit for income taxes 1,280 - - 1,280
Extraordinary item (10,626) - - (10,626)
----------------------------------------- -----------
Net income (loss) (33,473) $ 717 (186) (32,942)
===========
Dividends and accretion on preferred
stock and common stock warrants (13,297) - (13,297)
----------- ----------- -----------
Net loss attributable to common stock $ (46,770) $ (186) $ (46,239)
=========== =========== ===========
Loss per share data:
Net loss $ (0.97) $ (0.96)
Net loss attributable to common stock $ (1.36) $ (1.35)
Weighted average shares outstanding 34,430 - 34,430
=========== =========== ===========
</TABLE>
8
<PAGE> 9
PAXSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
------------------------------------------------------------------
WPLL-FM Pro Forma
Company WSRF-AM Adjustments Pro Forma
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Revenue $ 109,502 $ 1,826 $ - $ 111,328
Operating expenses, excluding depreciation,
amortization and option plan compensation 84,497 1,953 (1,884) (b) 84,566
Option plan compensation 2,727 - - 2,727
Depreciation and Amortization 18,378 66 1,217 (a) 19,661
------------------------------------------ -------------
Income (loss) from operations 3,900 (193) 667 4,374
Interest expense (22,353) (457) 457 (c) (22,353)
Interest income 5,389 - - 5,389
Other income (expense), net (645) 2 - (643)
------------------------------------------ -------------
Net income (loss) (13,709) $ (648) 1,124 (13,233)
==========
Dividends and accretion on preferred
stock and common stock warrants (9,877) - (9,877)
------------- ---------- -------------
Net loss attributable to common stock $ (23,586) $ 1,124 $ (23,110)
============= ========== =============
Loss per share data:
Net loss $ (0.32) $ (0.31)
Net loss attributable to common stock $ (0.55) $ (0.54)
Weighted average shares outstanding 42,721 - 42,721
============= ========== =============
</TABLE>
9
<PAGE> 10
Paxson Communications Corporation
Notes to Unaudited Pro Forma Consolidated
Statements of Operations
For the Year Ended December 31, 1995 and Nine Months Ended September 30, 1996
(in thousands)
(a) To reflect the increase in depreciation and amortization expense for
purchase accounting allocations made for the acquisitions of the assets of
the Fort Lauderdale Radio Stations.
(a) To reflect the elimination of $499 and $736 of redundant corporate overhead
of WPLL-FM and WSRF-AM for the nine months ended September 30, 1996 and the
year ended December 31, 1995, respectively; and the elimination of time
brokerage expense of $1,385 for WPLL-FM and WSRF-AM for the nine months
ended September 30, 1996.
(b) To reflect the elimination of interest expense related to WPLL-FM and
WSRF-AM for pro forma financial statement presentation.
10
<PAGE> 11
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Fort Lauderdale Radio Stations (a division of T.K. Communications, L.C.) Page
----
<S> <C>
Financial Statements -- December 31, 1995
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Statements of Divisional Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
11
<PAGE> 12
INDEPENDENT AUDITORS' REPORT
To the Members and Board of Directors
Fort Lauderdale Radio Stations
(A Division of T. K. Communications, L. C.)
Ft. Lauderdale, Florida
We have audited the accompanying balance sheet of FORT LAUDERDALE RADIO
STATIONS (A DIVISION OF T. K. COMMUNICATIONS, L. C.) as of December 31, 1995,
and related statements of income and divisional equity (deficit) and cash flows
for the year then ended. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion the financial statements referred to above present fairly, in
all material respects, the financial position of Fort Lauderdale Radio Stations
(a division of T. K. Communications, L. C.) as of December 31, 1995, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
Our audit was for the purpose of forming an opinion on the basic 1995 financial
statements taken as a whole. The financial statements for the four months
ended April 30, 1996 is presented for the purposes of additional analysis and
is not required part of the basic financial statements. Such information has
not been subjected to the auditing procedures applied in the audit of the basic
financial statements, and accordingly, we express no opinion on it.
/S/ Mathieson Aitken Jemison, LLP
- ---------------------------------
MATHIESON AITKEN JEMISON,LLP
February 9, 1996, except for Notes 2 and 7
as to which the date is July 22, 1996
12
<PAGE> 13
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995
------------------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 89,594 $ 306,172
Accounts receivable 960,348 1,065,376
Allowance for doubtful accounts (133,786) (106,118)
Note receivable - noncompete agreement 100,000 100,000
Prepaid expenses 13,948 8,590
------------ ------------
TOTAL CURRENT ASSETS 1,030,104 1,374,020
PROPERTY AND EQUIPMENT 3,024,211 2,930,372
Less, accumulated depreciation 2,505,420 2,470,353
------------ ------------
PROPERTY AND EQUIPMENT, NET 518,791 460,019
OTHER ASSETS, NET 1,735,677 1,618,416
NOTES RECEIVABLE - NONCOMPETE AGREEMENT 300,000 300,000
------------ ------------
$ 3,584,572 $ 3,752,455
============ ============
LIABILITIES AND DIVISIONAL EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable, bank $ 15,950,000 ----
Treasury stock redemption notes 1,829,430 $ 1,829,430
Accounts payable 13,753 77,986
Accrued commissions and management incentives 144,051 149,241
Accrued expenses 148,191 122,064
------------ ------------
TOTAL CURRENT LIABILITIES 18,085,425 2,178,721
LONG-TERM DEBT
Notes payable, bank ---- 13,300,000
Treasury stock redemption notes 240,000 240,000
Stockholder loan 1,453,755 3,580,000
------------ ------------
TOTAL LONG-TERM DEBT 1,693,755 17,120,000
------------ ------------
TOTAL LIABILITIES 19,779,180 19,298,721
DIVISIONAL EQUITY (DEFICIT) (16,194,608) (15,546,266)
------------ ------------
$ 3,584,572 $ 3,752,455
============ ============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 14
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Four Months
Ended Year Ended December 31, 1995
April 30, -------------------------------------
1996 WSHE (FM) WSRF (AM) Total
------------- ---------- ----------- --------
(Unaudited)
<S> <C> <C> <C> <C>
SALES $1,825,621 $7,381,190 $303,174 $7,684,364
Less
Commissions 229,352 1,107,357 2,765 1,110,122
Trade sales 226,940 449,792 449,792
---------- ---------- -------- ----------
NET SALES 1,369,329 5,824,041 300,409 6,124,450
OPERATING EXPENSES
Programming 328,308 787,763 9,084 796,847
General and administrative 892,703 1,671,319 110,726 1,782,045
Sales 231,760 1,055,429 16,989 1,072,418
Technical 42,609 118,415 118,415
Depreciation 35,067 108,647 915 109,562
Amortization 31,436 400,552 16,452 417,004
---------- ---------- -------- ----------
TOTAL OPERATING EXPENSES 1,561,883 4,142,125 154,166 4,296,291
---------- ---------- -------- ----------
OPERATING INCOME(LOSS) (192,554) 1,681,916 146,243 1,828,159
OTHER INCOME 1,654 5,413 5,413
INTEREST EXPENSE (457,442) (1,072,585) (44,055) (1,116,640)
---------- ---------- -------- ----------
NET INCOME (LOSS) $ (648,342) $ 614,744 $102,188 $ 716,932
========== ========== ======== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 15
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
STATEMENTS OF DIVISIONAL EQUITY (DEFICIT)
<TABLE>
<S> <C>
DIVISIONAL EQUITY (DEFICIT), JANUARY 1, 1995 $ (23,564,722)
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 716,932
TRANSFER OF EQUITY FROM DIVISIONAL SALE 58,923,984
DISTRIBUTIONS TO STOCKHOLDERS (31,953,030)
REDEMPTION OF TREASURY STOCK (19,669,430)
-------------
BALANCE, DECEMBER 31, 1995 (15,546,266)
NET LOSS FOR THE FOUR MONTHS ENDED APRIL 30, 1996 (UNAUDITED) (648,342)
-------------
DIVISIONAL EQUITY (DEFICIT), APRIL 30, 1996 (UNAUDITED) $ (16,194,608)
=============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 16
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Four Months
Ended Year Ended
April 30, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (648,342) $ 716,932
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities
Depreciation and amortization 66,503 526,566
(Increase) decrease in Accounts receivable 132,696 227,320
Prepaid expenses (5,358) 144,389
Increase (decrease) in Accounts payable (64,233) (34,093)
Accrued commissions and management incentives (5,190) 79,959
Accrued interest and expenses 26,127 (877,794)
---------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (497,797) 783,279
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (93,839) (160,378)
Acquisition of other assets (148,697) (234,305)
Net transfers from divisions ---- 58,599,361
---------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (242,536) 58,204,678
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings, bank ---- (9,041,666)
Principal payments of stockholders' notes ---- (1,115,000)
Principal payments of subordinated debentures, stockholders' ---- (1,500,000)
Principal payments on subordinated notes, stockholders' ---- (1,000,000)
Proceeds from notes payable, bank 2,650,000 ----
Proceeds from stockholder loan ---- 3,580,000
Purchase of treasury stock ---- (17,600,000)
Distribution to shareholders ---- (31,953,030)
Principal payments of stockholder loan (2,126,245) ----
---------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 523,755 (58,629,696)
---------- -----------
NET INCREASE (DECREASE) IN CASH (216,578) 358,261
CASH AND CASH EQUIVALENTS (OVERDRAFT), BEGINNING OF YEAR 306,172 (52,089)
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 89,594 $ 306,172
========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for Interest - all divisions (see Note 1) $ 448,590 $ 2,539,321
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES
Notes issued in treasury stock redemption $ ---- $ 2,069,430
========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 17
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
General
Effective December 29, 1995, the remaining shareholder of T. K. Communication,
Inc. liquidated and reorganized as a limited liability company, T. K.
Communications, L.C.
Method of Presentation
The financial statements present the financial position and related results of
operations and cash flows of the Fort Lauderdale Radio Stations (a division of
T. K. Communication, L. C.). Historically, the Fort Lauderdale Radio Stations
Division's balance sheet has reflected all long-term debt and the accumulation
of all stockholders transactions of the entity.
In 1995, T. K. Communications, Inc. closed on the sales of the divisions of the
Dallas radio station and the Orlando radio stations, and the divisional equity
of these divisions were transferred to the Fort Lauderdale Radio Stations
Division. As of December 31, 1995, the Fort Lauderdale Radio Stations Division
was the only remaining division of T. K. Communications, L. C. and represents
the financial position in its entirety of T. K. Communications, L. C.
Allocation of Corporate Expense
T.K. Communications, Inc. allocated eighty-six percent (86%) of corporate
expenses (included in general and administrative expenses) and sixty-six percent
(66%) of interest expense to the Fort Lauderdale Radio Stations Division for the
year ended December 31, 1995. In the opinion of the Company's management, the
methods of the allocations used are reasonable. Interest paid by the Fort
Lauderdale Radio Stations Division was one hundred percent (100%) of the
interest paid by T.K. Communications, Inc. for the year ended December 31, 1995.
Allocation of Operating Expenses - WSHE (FM) and WSRF (AM)
The Fort Lauderdale division income has been presented reflecting the component
stations WSHE (FM) and WSRF (AM). Operating expenses are allocated on a
percentage of radio station square footage and other analyses. Certain other
expenses are presented on an allocation basis as a percentage of gross sales.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are highly liquid investments with original maturities
of three months or less.
17
<PAGE> 18
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
NOTES TO FINANCIAL STATEMENTS (Continued)
Income Taxes
Both entities, T. K. Communications L.C. (a Florida limited liability company)
and T. K. Communications, Inc. (an S Corporation) are not tax-paying entities
for purposes of Federal and Florida income taxes, and thus, no income taxes for
Federal and Florida have been recorded in the statements. In lieu of these
corporate taxes the members of the limited liability company and the
stockholders of the S Corporation are taxed on their proportionate share of the
entities' taxable income.
Property and Equipment and Depreciation
Property and equipment are recorded at cost. For financial statement purposes,
depreciation is provided on the straight-line method over the estimated useful
lives of the assets.
The estimated useful lives used in computing depreciation are as
follows:
<TABLE>
<S> <C>
Towers, antennas, and ground systems 5 - 10 years
Transmitting equipment 5 - 10 years
Studio, supporting and office equipment 5 - 10 years
Building and improvements 10 - 40 years
</TABLE>
Maintenance and repairs are charged to expense as incurred; major renewals and
betterments are capitalized. When items of property or equipment are sold or
retired, the related cost and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.
Trade - Sales
All trade sales and related expenses are recorded at the value of the
merchandise received. All capital equipment received via trade is capitalized
and depreciated over its estimated useful life.
Other Assets and Amortization
The costs of other assets are amortized over their respective useful lives or
benefit periods. The methods and period of amortization by the type of asset
are disclosed in Note 6.
Fair Value of Financial Instruments
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 107, Disclosures about Fair Value of Financial
Instruments, which requires the Company to disclose the fair value of financial
instruments, both assets and liabilities recognized and not recognized in the
balance sheet. The value of cash and cash equivalents, accounts receivable,
accounts payable and debt recorded on the balance sheet approximates fair value.
18
<PAGE> 19
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
NOTES TO FINANCIAL STATEMENTS (Continued)
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 period. The results of operations for the four
months ended April 30, 1996 are not necessarily indicative of the results that
can be expected for the entire fiscal year ending December 31, 1996.
Note 2. Long-Term Debt
On December 27, 1995, to facilitate the reorganization to T. K. Communications,
L.C., the company amended and restated the Credit Agreement dated July 18, 1995
with Bank One. The loan commitment totaled $16,250,000 which included a
non-conversion portion of the revolving loan of $1,000,000, a conversion portion
of the revolving loan of $3,000,000, a term loan of $8,750,000 and a term loan
of $3,500,000. Interest was payable monthly, at the bank's prime rate plus an
increment ranging to one and a quarter percent determined by the ratio of funded
debt to operating cash flow.
As discussed in Note 7, subsequent events, T. K. Communications, L. C. entered
into the First Amendment to the Amended and Restated Credit Agreement dated
December 27, 1995 with Bank One, Indianapolis, National Association. This First
Amendment dated July 22, 1996 was agreed upon to enact certain modifications in
conjunction with the anticipated closing on the sale of the Fort Lauderdale,
Radio Stations (the "Paxson Acquisition") scheduled to occur on January 17,
1997.
Under the First Amendment the term loans available are in place as follows:
<TABLE>
<CAPTION>
Term Loan I Term Loan II Term Loan III
----------- ------------ --------------
<S> <C> <C> <C>
Amount: $ 12,750,000 $3,500,000 $ 3,000,000
Interest Rate: Prime Rate Prime Rate Prime Rate
(Payable Monthly) plus 1 1/4% plus 2.0% plus 3.0%
</TABLE>
Repayment Date: For all three terms loans the entire principal balance shall be
repayable together with all accrued but unpaid interest on January 17,1997.
All the Bank One loans are collateralized by a security interest in all present
and future assets of the Company, a pledge of the outstanding stock of the
Company, an assignment of an insurance policy on the life of John F. Tenaglia
for $5,000,000 and collateral assignment of the escrow agreement under which
Paxson has deposited $2,000,000. All indebtedness of the Company to the
stockholders and former stockholders of the Company is subordinated to the
indebtedness of Bank One under the credit agreements.
Under the credit agreements with Bank One, the Company is required to adhere to
certain restrictive covenants.
19
<PAGE> 20
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 3. Redemption Agreement and Related Party Debt
On March 1, 1995, subsequent to entering into sales agreements to sell the
operating assets of the Dallas Station and the Orlando Stations eighty percent
of the stockholders agreed to have their stock redeemed by the Company.
Under the redemption agreement the net proceeds from the sale of the Dallas and
Orlando radio stations were deposited into an escrow account. The Company, from
the escrow account, repaid all subordinated stockholder debt and accrued
interest on the debt totalling $4,436,936 and paid down the Bank One debt from
$23,000,000 to $13,500,000. On May 1, 1995, settlement was made on the
redemption agreement. Under the redemption agreement, the redeeming
stockholders surrendered their Company's stock and in return received
distributions for their pro rata share of the sum of the escrow account, after
estimated expenses, and $22,000,000 for the Fort Lauderdale radio stations. In
accordance with the agreement, the redeeming stockholders received subordinated
notes representing eighty percent of the Fort Lauderdale radio stations
calculated working capital totalling $1,749,430 and subordinated notes for
eighty percent of the outstanding monies due on the Orlando radio stations
noncompete agreement totalling $320,000. The revised due date for the working
capital notes is the earlier of the closing date of the sale of the Fort
Lauderdale Radio Stations or April 30, 1997. The working capital notes were
non-interest bearing through April 30, 1996, and thereafter interest is payable
at nine percent per annum and due at the repayment of the principal. After the
annual receipt by the Company of the noncompete payments, the Company shall
immediately pay the former stockholders their pro rata share.
On May 19, 1994, the stockholders loaned the Company $1,000,000 from the escrow
account which was established under credit agreements dated June 30, 1992 with
FUNB and MONY. The notes were payable on or before June 30, 2001 as permitted
by the Bank One credit agreement dated May 19, 1994. Interest was payable
quarterly at a fixed rate of 7% per year.
The Company converted $115,000 of accrued interest on subordinated debentures to
notes payable. The notes were non-interest bearing.
In December 1988, a stockholder of the Company loaned the Company $1,000,000.
The note was originally payable on demand with interest payable monthly at prime
rate.
Subordinated debenture notes represent subordinated notes to common stockholders
due June 16, 1998, with interest at 8%. No payment of principal was allowed
unless senior indebtedness had been retired.
In May 1995, proceeds from the escrow account were used to repay all outstanding
debt to redeeming stockholders and former stockholder including the
stockholders' notes, subordinated debentures and notes, stockholder advance and
the accrued interest to date totalling $821,936.
As of December 31, 1995, the outstanding balance on a non-interest bearing
subordinated loan to the non-redeeming stockholder amounted to $3,580,000.
20
<PAGE> 21
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 4. Operating Lease Commitments
Effective January 1992, the Company agreed to a ten year lease for the radio
station office with a monthly base rent of $7,030 with annual consumer price
index adjustment. The Company leases tower space for an antenna under a 15-year
lease agreement through December 31, 2000. The agreement calls for an annual
lease amount of $60,000 for the first five years, $75,000 for the next five
years, and $93,750 for the final five years. The Company leases tower space for
an auxiliary FM antenna at an annual amount of $11,544 plus an annual adjustment
for Consumer Price Index increases. The contract extends to February 28, 2023.
The Company made a buy out settlement for its lease term for its corporate
office space through August 31, 1996 in the amount of $68,158.
The total rent expense for 1995 for the Fort Lauderdale Radio Stations was
$247,539.
The aggregate minimum lease payments are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ----------
<S> <C>
1996 $ 172,463
1997 189,651
1998 189,651
1999 189,651
----------
$1,166,022
==========
</TABLE>
Note 5. Property and Equipment
Major classifications of property, equipment and depreciation are summarized as
follows:
<TABLE>
<CAPTION>
Accumulated
Assets Depreciation Book Value
----------- ------------ ----------
<S> <C> <C> <C>
Towers, antennas, and
ground systems $ 518,587 $ 516,976 $ 1,611
Transmitting equipment 311,744 295,785 15,959
Studio, supporting and office equipment 1,071,430 870,571 200,859
Building and improvements 1,028,611 787,021 241,590
----------- ----------- --------
$ 2,930,372 $ 2,470,353 $460,019
=========== =========== ========
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION
Accumulated
Cost Depreciation
------- ------------
<S> <C> <C>
BALANCE, DECEMBER 31, 1994 $2,769,994 $2,360,791
ADDITIONS
Towers, antennas and
ground systems ---- 1,239
Transmitting equipment 2,640 16,212
Studio, supporting and office equipment 56,873 79,566
Building and improvements 100,865 12,545
---------- ----------
160,378 109,562
---------- ----------
BALANCE, DECEMBER 31, 1995 $2,930,372 $2,470,353
========== ==========
</TABLE>
21
<PAGE> 22
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 6. Other Assets
As of December 31, 1995 other assets and accumulated amortization are as
follows:
<TABLE>
<CAPTION>
Accumulated
Cost Amortization Net
----------- --------- ----------
<S> <C> <C> <C>
Goodwill and licenses $ 2,299,760 $ 919,906 $1,379,854
Patents and trademarks 14,029 13,840 189
Loan procurement costs 161,747 14,464 147,283
Organization expense 68,346 9,113 59,233
Deposits 31,857 ---- 31,857
----------- --------- ----------
$ 2,575,739 $ 957,323 $1,618,416
=========== ========= ==========
</TABLE>
Organization Expense
The costs to reorganize to a limited liability company have been capitalized and
are being amortized over 60 months.
Transmitter Site Leasehold Interest
The cost of the lease is being amortized over the life of the lease.
Goodwill and Licenses
Goodwill and licenses represent the excess of acquisition cost over the fair
value of net tangible assets at the date of purchase. Management has elected to
amortize these costs over forty years.
Patents and Trademarks
These costs are amortized over 17 years.
Loan Procurement Costs
These costs are amortized over the term of the financing. In 1995, amortization
expense of $322,291 of the total $417,004 resulted from a write-off of
unamortized prior loans' procurement costs.
Note 7. Subsequent Event
In March 1996, Paxson Broadcasting of Miami, Limited Partnership agreed to
purchase all assets used in the operation of the Company's Fort Lauderdale Radio
Stations WSHE (FM) and WSRF (AM) for $57,500,000. At settlement, the Company
will receive $47,500,000 in cash and $10,000,000 in unregistered stock valued at
the registration price of the future public offering of Paxson Communications
Corporation. If the registration price is less than the average of the closing
market price of the following thirty days after settlement, additional
unregistered shares will be issued to the Company for the difference.
22
<PAGE> 23
FORT LAUDERDALE RADIO STATIONS
(A Division of T. K. Communications, L. C.)
NOTES TO FINANCIAL STATEMENTS (Continued)
After FCC consent is received, the Company has the election to postpone the
settlement until January 12, 1997. In conjunction with the purchase agreement,
the parties agreed to a time brokerage agreement whereby the parties defined the
operations and management of the stations to the eventual closing date.
On July 22, 1996, T. K. Communications, L. C. entered into the First Amendment
to the Amended and Restated Credit Agreement dated December 27, 1995 with Bank
One, Indianapolis, National Association, See Note 2 for additional details.
23
<PAGE> 1
EXHIBIT 2.2
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "First Amendment")
is made and entered into as o f this 10th day of January, 1997, by and among
PAXSON BROADCASTING OF MIAMI, LIMITED PARTNERSHIP, a Florida limited
partnership, and PAXSON MIAMI LICENSE LIMITED PARTNERSHIP, a Florida limited
partnership (collectively, "Buyer"), and TK COMMUNICATIONS, L.C., a Florida
limited liability company ("Seller").
W I T N E S S E T H:
WHEREAS, Seller and Buyer are parties to an Asset Purchase Agreement dated
as of April 12, 1996, as amended by the letter agreement dated as of July 11,
1996, and signed on July 12, 1996 (collectively, the "Purchase Agreement"),
pursuant to which Seller has agreed to sell, and Buyer has agreed to buy,
substantially all of the assets that are used or useful in the business or
operations of Radio Stations WSRF-AM and WPLL-FM (formerly WSHE-FM), Ft.
Lauderdale, Florida; and
WHEREAS, Buyer and Seller have agreed to amend the Purchase Agreement as
set forth below.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller and Buyer
hereby agree to amend the Purchase Agreement as set forth below.
SECTION 1. PAYMENT OF PURCHASE PRICE. The second sentence of Section 2.3(a) of
the Purchase Agreement shall be deleted in its entirety and the following
sentence shall be substituted in its place:
(a) The Purchase Price shall be payable by Buyer on the Closing Date as
follows: Buyer shall pay Seller $57,500,000 in cash on the Closing Date
(the "Purchase Price"), adjusted as set forth in Section 2.3(b), by
federal wire transfer of immediately available funds pursuant to wire
instructions which shall be delivered by Seller to Buyer at least two
business days prior to the Closing Date.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF BUYER. Section 4.5 of the Purchase
Agreement shall be deleted in its entirety.
<PAGE> 2
2
SECTION 3. RENEWAL FILING. Seller shall fully cooperate with Buyer and take
such actions, at Seller's expense, as Buyer may reasonably request to obtain,
as expeditiously as practicable, a replacement authorization from the FCC for
Remote Pickup Station KJM-543 (the "Station"). Notwithstanding any provision
in the Purchase Agreement to the contrary, Seller hereby agrees to indemnify
and hold Buyer harmless against and with respect to, and shall reimburse Buyer
for, any and all costs, expenses or liabilities incurred by Buyer as a result
of the expiration of the authorization for the Station.
SECTION 4. MOTOR VEHICLE TITLES. Seller hereby agrees to take such actions, at
Seller's expense, as are necessary to obtain replacement Certificates of Title
(the "Titles") from the Florida Department of Highway Safety and Motor Vehicles
for the 1991 Master Cruiser, 1988 Winnabago, and 1985 Winnabago, listed in
Schedule 3.6 of the Purchase Agreement, and will convey the Titles to Buyer as
expeditiously as practicable.
SECTION 5. MISCELLANEOUS.
5.1 Other Provisions. Except where inconsistent with the express terms of
this First Amendment, all provisions of the Purchase Agreement as originally
entered into shall remain in full force and effect. All terms defined in the
Purchase Agreement shall have the same meanings in this First Amendment.
5.2 Governing Law. This First Amendment shall be governed, construed, and
enforced in accordance with the laws of the State of Florida (without regard to
the choice of law provisions thereof).
5.3 Further Assurances. The parties shall take any actions and execute any
other documents that may be necessary or desirable to the implementation and
consummation of this First Amendment.
5.4 Counterparts. This Agreement may be signed in counterparts with the
same effect as if the signature on each counterpart were upon the same
instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Asset Purchase Agreement to be executed on their behalf as of the day and year
first above mentioned.
PAXSON BROADCASTING OF MIAMI, TK COMMUNICATIONS, L.C.
LIMITED PARTNERSHIP
By: Paxson Communications of Florida,
Inc., its General Partner
By: /s/ William L. Watson By: /s/ John Tenaglia
------------------------------ ---------------------------
William L. Watson John F. Tenaglia
Secretary Manager
PAXSON MIAMI LICENSE LIMITED
PARTNERSHIP
By: Paxson Communications of Florida,
Inc., its General Partner
By: /s/ William L. Watson
-----------------------------
William L. Watson
Secretary
