Document/Exhibit Description Pages Size
1: 10-Q Paxson Communications Corp. Form 10-Q 19 118K
2: EX-10.194 Asset Purchase Agreement Paxson- Atlanta 65 248K
3: EX-10.195 Asset Purchase Agreement Paxson-Portland 36 122K
4: EX-10.196 Membership Purchase Agreement 34 134K
5: EX-27 Financial Data Schedule 1 6K
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
__________________________
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 1-13452
PAXSON COMMUNICATIONS CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 59-3212788
------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 659-4122
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 Act of 1934 during the
proceeding 12 months (or for shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES X NO
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1998:
CLASS OF STOCK NUMBER OF SHARES
---------------------------- ----------------
COMMON STOCK-CLASS A, $0.001
PAR VALUE PER SHARE................................ 51,903,134
COMMON STOCK-CLASS B, $0.001
PAR VALUE PER SHARE................................ 8,311,639
PAXSON COMMUNICATIONS CORPORATION
INDEX
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PAGE
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Part I - Financial Information
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997 4
Consolidated Statement of Changes in
Common Stockholders' Equity 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
Part II - Other Information
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 18
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 18
Signatures 19
2
PAXSON COMMUNICATIONS CORPORATION
Consolidated Balance Sheets
[Enlarge/Download Table]
March 31, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $137,286,453 $ 82,641,444
Restricted cash 17,000,000 17,000,000
Accounts receivable, less allowance for doubtful
accounts of $823,254 and $911,941 respectively 4,924,414 4,813,524
Prepaid expenses and other current assets 3,342,301 2,765,984
-------------- --------------
Total current assets 162,553,168 107,220,952
Cash held by qualified intermediary - 418,949,550
Property and equipment, net 141,143,502 105,896,873
Intangible assets, net 536,789,337 205,400,029
Investments in broadcast properties 106,848,464 72,762,195
Investment in cable network 55,551,260 58,974,491
Other assets, net 71,711,490 87,908,884
-------------- --------------
Total assets $1,074,597,221 $1,057,112,974
============== ==============
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 13,358,699 $ 11,305,782
Accrued interest 13,873,176 8,475,686
Current portion of long-term debt 504,029 496,378
-------------- --------------
Total current liabilities 27,735,904 20,277,846
Deferred gain 12,100,000 12,100,000
Deferred income taxes 97,303,556 95,747,156
Long-term debt 122,166,752 122,299,025
Senior subordinated notes, net 228,041,639 227,958,736
Redeemable Cumulative Compounding Junior preferred
stock, $0.001 par value; 12% dividend rate per annum,
33,000 shares authorized, issued and outstanding 44,189,493 42,610,662
Redeemable Exchangeable Preferred stock, $0.001 par value;
12.5% dividend rate per annum, 440,000 shares authorized,
170,782 shares issued and outstanding 173,879,479 168,375,990
Class A common stock, $0.001 par value; one vote per share;
150,000,000 shares authorized, 51,868,800 and 50,701,600
shares issued and outstanding 51,869 50,702
Class B common stock, $0.001 par value; ten votes per share, 35,000,000
shares authorized, 8,311,639 shares issued and outstanding 8,312 8,312
Class A & B common stock warrants 1,153,987 2,316,225
Stock subscription notes receivable (2,813,250) (2,813,250)
Additional paid-in capital 292,526,935 285,795,787
Deferred option plan compensation (1,898,619) (2,205,240)
Retained earnings 80,151,164 84,591,023
Commitments and contingencies - -
-------------- --------------
Total liabilities, redeemable securities and
common stockholders' equity $1,074,597,221 $1,057,112,974
============== ==============
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
3
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Operations
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FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------------------
1998 1997
------------- -------------
(Unaudited)
Revenue:
Local and national advertising $ 31,401,579 $ 18,498,815
Other 206,721 412,685
Trade and barter 56,584 25,840
------------- -------------
Total revenues 31,664,884 18,937,340
Operating expenses:
Direct 5,146,368 3,337,759
Programming 1,542,514 981,880
Sales 1,467,544 723,513
Promotion 989,675 121,832
Technical 2,973,139 2,036,166
General and administrative 8,913,945 6,354,393
Trade and barter 56,584 12,160
Time brokerage and affiliation agreement fees 6,588,140 1,025,504
Option plan compensation 306,621 714,005
Depreciation and amortization 7,949,978 4,079,730
------------- -------------
Total operating expenses 35,934,508 19,386,942
------------- -------------
Operating loss (4,269,624) (449,602)
Other income (expense):
Interest expense (10,505,642) (8,735,442)
Interest income 6,180,260 1,315,882
Other expenses, net (246,540) 145,742
Gain on sale of television station 14,330,406 -
Equity in loss of unconsolidated investment (1,290,000) -
------------- -------------
Income (loss) from continuing operations before income tax
provision 4,198,860 (7,723,420)
Income tax provision (1,556,400) -
------------- -------------
Income (loss) from continuing operations before
extraordinary item 2,642,460 (7,723,420)
------------- -------------
Loss from discontinued operations, net of applicable
income taxes - (735,576)
------------- -------------
Net income (loss) 2,642,460 (8,458,996)
Dividends and accretion on preferred stock (7,082,319) (6,271,639)
------------- -------------
Net loss attributable to common stock $ (4,439,859) $ (14,730,635)
============= =============
Basic and diluted loss per common share:
Loss from continuing operations $ (0.07) $ (0.28)
Loss from discontinued operations - (0.02)
------------- -------------
Net loss $ (0.07) $ (0.30)
============= =============
Weighted average shares outstanding 59,588,768 48,777,893
============= =============
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
4
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statement of Changes in Common Stockholders' Equity
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COMMON STOCK Class A&B Class C Stock
---------------- Common Common Subscription
Class Class Stock Stock Notes
A B Warrants Warrants Receivable
------ ------ ----------- ----------- -----------
Balance at December 31, 1996 $40,442 $8,312 $ 6,862,647 $ 2,335,528 $(1,873,139)
Stock issued for acquisition 6,069
Exercise of Class A,B and C
common stock warrants 3,923 (4,546,422) (2,335,528)
Deferred option plan compensation
Option plan compensation
Stock options exercised 268
Increase in stock subscription notes
receivable (940,111)
Dividends on redeemable preferred stock
Accretion on Junior preferred stock
Accretion on Redeemable Exchangeable
preferred stock
Net income
------- ------ ----------- ----------- -----------
Balance at December 31, 1997 50,702 8,312 2,316,225 - (2,813,250)
Stock issued for acquisitions
(unaudited) 600
Exercise of Class A and B common
stock warrants (unaudited) 460 (1,162,238)
Option plan compensation (unaudited)
Stock options exercised (unaudited) 107
Dividends on redeemable
preferred stock (unaudited)
Accretion on Junior preferred stock
(unaudited)
Accretion on Redeemable Exchangeable
preferred stock (unaudited)
Net income (unaudited)
------- ------ ----------- ----------- -----------
Balance at March 31, 1998 (unaudited) $51,869 $8,312 $ 1,153,987 $ - $(2,813,250)
======= ====== =========== =========== ===========
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Additional Deferred Option Retained Earnings
Paid-in Plan (Accumulated
Capital Compensation Deficit)
----------- --------------- -----------------
Balance at December 31, 1996 $209,621,241 $(6,397,916) $(103,821,878)
Stock issued for acquisition 66,118,931
Exercise of Class A,B and C
common stock warrants 6,878,028
Deferred option plan compensation 2,263,167 (2,263,167)
Option plan compensation 6,455,843
Stock options exercised 914,420
Increase in stock subscription notes
receivable
Dividends on redeemable preferred stock (24,942,740)
Accretion on Junior preferred stock (665,540)
Accretion on Redeemable Exchangeable
preferred stock (668,726)
Net income 214,689,907
------------ ----------- -------------
Balance at December 31, 1997 285,795,787 (2,205,240) 84,591,023
Stock issued for acquisitions
(unaudited) 5,249,400
Exercise of Class A and B common
stock warrants (unaudited) 1,161,778
Option plan compensation (unaudited) 306,621
Stock options exercised (unaudited) 319,970
Dividends on redeemable
preferred stock (unaudited) (6,744,549)
Accretion on Junior preferred stock
(unaudited) (170,340)
Accretion on Redeemable Exchangeable
preferred stock (unaudited) (167,430)
Net income (unaudited) 2,642,460
------------ ----------- -------------
Balance at March 31, 1998 (unaudited) $292,526,935 $(1,898,619) $ 80,151,164
============ =========== =============
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
5
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Cash Flows
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FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------------
1998 1997
------------ -----------
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ 2,642,460 $ (8,458,996)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 7,949,978 8,738,098
Option plan compensation 306,621 1,036,231
Program rights amortization - 302,825
Provision for doubtful accounts 575,660 356,485
Deferred income tax provision 1,556,400 -
Loss (gain) on sale or disposal of assets 82,027 (153,577)
Equity in loss of unconsolidated investment 1,290,000 -
Gain on sale of television station (14,330,406) -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (686,550) 3,005,161
Increase in prepaid expenses and other current
assets (576,317) (1,450,604)
Increase in programming deposits (7,013,750) -
Decrease (increase) in other assets 373,829 (2,399,573)
Increase (decrease) in accounts payable and
accrued liabilities 2,052,917 (373,334)
Increase in accrued interest 5,397,490 8,008,697
Payments for program rights - (338,898)
------------ -------------
Net cash (used in) provided by operating
activities (379,641) 8,272,515
------------ -------------
Cash flows from investing activities:
Acquisitions of broadcasting properties (358,669,960) (94,184,131)
Increase in investments in broadcast properties (34,552,839) (4,862,838)
Decrease in deposits on broadcast properties 22,853,732 4,200,000
Decrease in cash held by qualified intermediary 418,949,550 -
Purchases of property and equipment (14,147,177) (12,106,406)
Distribution received from unconsolidated investment 2,133,231 -
Proceeds from sales of broadcast properties 18,262,658 751,050
------------ -------------
Net cash provided by (used in) investing
activities 54,829,195 (106,202,325)
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 80,000,000
Payments of long-term debt (124,622) (193,915)
Proceeds from exercise of common stock options, net 320,077 129,960
Increase in stock subscription notes receivable - (840,111)
------------ -------------
Net cash provided by financing activities 195,455 79,095,934
------------ -------------
Increase (decrease) in cash and cash equivalents 54,645,009 (18,833,876)
Cash and cash equivalents at beginning of period 82,641,444 61,748,788
------------ -------------
Cash and cash equivalents at end of period $137,286,453 $ 42,914,912
============ =============
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
6
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Cash Flows (continued)
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FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------------
1998 1997
=========== ===========
(Unaudited)
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 4,599,246 $ 245,082
=========== ===========
Cash paid for income taxes $ - $ -
=========== ===========
Non-cash operating and financing activities:
Accretion of discount on senior subordinated notes $ 82,903 $ 73,103
=========== ===========
Issuance of common stock for acquisition $ 5,250,000 $ -
=========== ===========
Dividends accrued on redeemable preferred stock $ 6,744,549 $ 5,941,050
=========== ===========
Accretion on redeemable securities $ 337,770 $ 330,589
=========== ===========
Trade and barter revenue $ 56,584 $ 1,012,528
=========== ===========
Trade and barter expense $ 56,584 $ 983,841
=========== ===========
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
7
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Paxson Communications Corporation's (the "Company") financial information
contained in the financial statements and notes thereto as of March 31, 1998 and
for the three month periods ended March 31, 1998 and 1997, is unaudited. In the
opinion of management, all adjustments necessary for the fair presentation of
such financial information have been included. These adjustments are of a normal
recurring nature. There have been no changes in accounting policies since the
period ended December 31, 1997. The composition of accounts has changed since
December 31, 1997 to reflect the operations of acquisitions discussed elsewhere
herein.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Certain reclassifications have been made to the
prior year's financial statements to conform with the 1998 presentation. These
financial statements, footnotes, and discussions should be read in conjunction
with the December 31, 1997 financial statements and related footnotes and
discussions contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, and the definitive proxy statement for the annual
meeting of stockholders held April 17, 1998, and Form 8-K dated March 6, 1998,
all of which were filed with the United States Securities and Exchange
Commission.
2. DISCONTINUED OPERATIONS
During 1997, the Company sold its interests in WTVX-TV and WPBF-TV and
substantially all of its Paxson Radio segment assets and thus discontinued the
operations of the Paxson Network-Affiliated Television and Paxson Radio
segments. The results of operations for the Paxson Network-Affiliated Television
and Paxson Radio segments for the three months ended March 31, 1997, net of
applicable income taxes, have been presented as discontinued operations in the
accompanying Consolidated Statements of Operations. The Paxson Network
Affiliated Television operations generated revenues of approximately $5,284,000
for the three months ended March 31, 1997. The Paxson Radio operations generated
revenues of approximately $24,139,000 for the three months ended March 31, 1997.
The net assets of discontinued operations, totaling approximately $3 million at
March 31, 1998 and December 31, 1997 consist of the assets of two remaining
radio stations which are under contract to be sold for aggregate consideration
of $3 million.
3. CASH HELD BY QUALIFIED INTERMEDIARY
At December 31, 1997, the Company had placed a portion of the proceeds received
from the Paxson Radio segment sale with a qualified intermediary in order to
reinvest such proceeds and, to the extent reinvested, qualify for tax deferred
exchange treatment in connection with such sale. All but approximately $66
million of these funds were reinvested in broadcast properties acquisitions
during the first quarter of 1998. The funds not reinvested in like kind
broadcasting properties were returned to the Company and placed in its operating
cash accounts. The Company does not anticipate paying current income taxes on
the non-deferred gain as it has sufficient net operating loss carryforwards to
offset such gain.
4. INVESTMENT IN CABLE NETWORK
The Company's investment in cable network represents a 30% interest in The
Travel Channel, L.L.C., a joint venture with Discovery Communications, Inc. The
results of operations of The Travel Channel, L.L.C. have been included in the
Company's March 31, 1998 consolidated statement of operations using the equity
method of accounting.
5. LONG-TERM DEBT
In order to address the Company's business plan related to the PAX NET launch,
the Company refinanced, in May 1998, substantially all of its long-term debt
with a $122 million senior credit facility maturing June 2002 (the "Senior
Credit Facility"). Under the terms of the Senior Credit Facility, the
outstanding debt will be secured by substantially all of the Company's assets
and bear interest at a base rate plus 1.75% or LIBOR plus 2.75%, at the
Company's option. The Senior Credit Facility requires the Company to maintain
compliance with certain financial ratios subsequent to March 2000 and also
contains other restrictions. The Senior Credit Facility requires quarterly
principal payments commencing December 31, 2000.
6. COMMON STOCK WARRANTS
In March 1998, the holders of the Company's Class A and B common stock warrants
exercised 16.6217 warrants for 460,000 shares of Class A common stock. The
Company has 16.5036 common stock warrants outstanding which entitle the holders
to purchase 342,929 Class A common shares and 114,309 Class B common shares.
8
7. PER SHARE DATA
Basic and diluted loss per share from continuing operations was computed by
dividing the loss from continuing operations before extraordinary item less
dividends and accretion on redeemable preferred stock by the weighted average
number of common shares outstanding during the period. Because of losses from
continuing operations, the effect of stock options and warrants is antidilutive.
Potentially dilutive common shares in the amount of 4,044,149 and 8,433,108 for
the three months ended March 31, 1998 and 1997, respectively, have been excluded
from the computation of diluted earnings per share as the effect of their
inclusion is antidilutive. Accordingly, the Company's presentation of diluted
earnings per share is the same as that of basic earnings per share.
9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Since its inception in 1991, the Company has grown primarily through the
acquisition or management of radio and television broadcast stations and radio
networks, as well as subsequent improvement in the operation of these
properties. Two of the Company's former business segments, Paxson Radio and
Paxson Network-Affiliated Television, have been classified as discontinued
operations in the consolidated financial statements for the three months ended
March 31, 1997 as a result of the Company's sale of these operations during
1997.
The Company currently is the largest owner and operator of broadcast television
stations in the U.S. Additionally, the Company currently operates a nationwide
network of owned, operated or affiliated television stations carrying its
proprietary network, which broadcasts long form paid programming consisting
primarily of infomercials. Certain of the Company's television stations were and
continue to be operated under time brokerage and affiliation agreements for
various periods. Pursuant to the time brokerage agreements, these stations'
operating revenues and expenses are controlled by the Company and are included
in its consolidated statements of operations. Pursuant to the affiliation
agreements, the Company includes advertising revenue, related sales costs and
affiliation fees in its consolidated statements of operations. The Company
intends to launch its PAX NET programming service on August 31, 1998. PAX NET is
the brand name for the programming that the Company expects to provide to its
television stations, cable systems and satellite television providers. PAX NET
programming will generally consist of family-friendly traditional entertainment
television programs that have had or are having successful first runs on
television. The Company also owns a 30% interest in The Travel Channel, L.L.C.,
a cable television network joint venture with Discovery Communications, Inc.
("DCI"). The Company's interest in the operating results of The Travel Channel,
L.L.C. has been included in the consolidated financial statements using the
equity method of accounting.
The Company's operating data throughout the periods discussed have been impacted
significantly by the timing and mix of television acquisitions throughout such
periods. Operating revenues are derived from the sale of advertising to local,
national and network advertisers. The Company's primary operating expenses
include commissions on revenues, employee salaries and administrative expenses.
Upon launch of PAX NET, the Company will also incur significant expenses for
syndicated program rights fees, ratings services and promotion. Presently, the
costs of operating the Company's television stations do not vary significantly
with revenue, with the exception of costs associated with sales commissions and
agency fees. As such, upon obtaining a certain level of revenue sufficient to
cover fixed costs, additional revenue levels have a significant impact on the
operating results of an individual television station. The Company currently
expects to continue acquiring additional stations which may have similar effects
on the comparability of revenues, operating expenses, interest expense and
operating cash flow as those described above.
The Company's business is subject to various risks and uncertainties which may
significantly reduce revenues and increase operating expenses. For example, a
reduction in expenditures by television advertisers in the Company's markets may
result in lower revenues. The Company may be unable to reduce expenses,
including syndicated program rights fees and certain variable expenses, in an
amount sufficient in the short term to offset lost revenues caused by poor
market conditions. The broadcasting industry continues to undergo rapid
technological change which may increase competition within the Company's markets
as new delivery systems, such as direct broadcast satellite and computer
networks, attract customers. The changing nature of audience tastes and viewing
habits may affect the continued attractiveness of the Company's broadcasting
stations to advertisers, upon whom the Company is dependent for its revenue.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount (contingent or otherwise) of assets and liabilities
at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. The fair values of the Company's
investments in broadcast properties are estimated based on recent market sale
prices for comparable stations and markets and approximates their carrying value
as of March 31, 1998. The fair values of the Company's existing long-term debt
and the senior subordinated notes (the "Notes") were estimated based on market
rates of instruments with similar risks and maturities, and approximates the
carrying value as of March 31, 1998. As a result of the foregoing, the estimates
presented in the Company's financial statements are not necessarily indicative
of the amounts that the Company could realize in a current market exchange and
have not been comprehensively revalued for purposes of the Company's financial
statements.
The Company believes that its network of television stations comprise a valuable
national television broadcasting distribution infrastructure. Including all
pending station acquisitions, construction projects, divestitures and other
transactions, the Company will broadcast via a total of 78 owned, operated or
affiliated stations in markets reaching more than 72 million U.S. television
households, including stations in each of the nation's top
10
20 markets as well as 43 of the nation's top 50 markets. Additionally, the
Company has entered into an agreement with a subsidiary of Tele-Communications,
Inc. ("TCI"), whereby the Company will receive cable carriage of its PAX NET
programming on certain TCI cable systems in markets not currently served by the
Company's broadcast television station group in return for the payment by the
Company to TCI of certain fees based on the number of cable television
subscribers actually reached and the right to sell certain amounts of
advertising airtime during such programming.
This report contains forward-looking statements which are made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995.
Statements as to what the Company "believes", "intends", "expects" or
"anticipates", and other similarly anticipatory expressions, are generally
forward-looking and are made only as of the date of this Report. Readers of this
Report are cautioned not to place undue reliance on such forward-looking
statements, as they are subject to risks and uncertainties which could cause
actual results to differ materially from those discussed in the forward-looking
statements and from historical results of operations. Among the risks and
uncertainties which could cause such a difference are those relating to the
Company's high level of indebtedness and the restrictions placed on the
Company's business and operations by the terms of its indebtedness and its
outstanding preferred stock, the risks relating to the comprehensive
governmental regulation of the Company's businesses, including the restrictions
on multiple broadcast property ownership, the broadcast licensing renewal
requirements, the risks of industry and economic conditions which could
adversely affect the Company's business operations, and the other factors
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. In addition, the Company's launch of PAX NET entails certain
additional risks and uncertainties, including, those risks associated with the
launch of a new programming service, the ability to obtain desirable programming
at a financially feasible cost and the ability to successfully and profitably
sell advertising spots during such programming.
The following table lists those television properties that the Company owns,
operates or is affiliated with, and those properties which the Company has
agreements to acquire or operate, as identified under "Pending TV Acquisitions"
below. (Television and cable households in thousands.)
[Enlarge/Download Table]
CURRENT CURRENT
NATIONAL STATION CABLE STATION TOTAL STATION
TV CARRIAGE AT CABLE MARKET CABLE TOTAL
MARKET COMMENCEMENT COMMENCEMENT CARRRIAGE CABLE CARRIAGE MERKET TV
MARKET(1) RANK STATION CH OF OPERATIONS (16) (17) HOUSEHOLDS %(17) HOUSEHOLDS
------ ---- ------- -- ------------- ------------ --------- ---------- --------- ----------
Owned or Operated
New York, NY 1 WPXN 31 7/97 4,141 4,469 4,825 92.6% 6,756
New York, NY 1 WIPX (whai)(4) 43 3/96 626 547 4,825 11.3% 6,756
Los Angeles, CA 2 KPXN (kzki) 30 5/95 1,453 2,742 3,133 87.5% 5,009
Philadelphia, PA 4 WPPX (wtgi) 61 2/95 1,225 1,661 2,033 81.7% 2,659
San Francisco, CA 5 KKPX (klxv) 65 6/95 650 1,349 1,640 82.3% 2,298
Boston, MA 6 WPXB (wgot) 60 5/95 604 1,193 1,694 70.4% 2,174
Boston, MA* 6 WBPX (whrc)(5) 46 4/97 0 449 1,694 26.5% 2,174
Washington, D.C. 7 WPXW (wvvi) 66 8/97 940 1,043 1,331 78.3% 1,928
Dallas, TX 8 KPXD (kinz)(6) 68 12/96 0 687 989 69.4% 1,899
Detroit, MI 9 WPXD (wbsx) 31 1/98 624 739 1,191 62.0% 1,782
Atlanta, GA 10 WPXA (wtlk) 14 4/94 300 955 1,144 83.5% 1,675
Atlanta, GA* 10 WNGM(7) 34 4/96 182 353 1,144 30.9% 1,675
Houston, TX 11 KPXB (ktfh) 49 3/95 647 931 918 101.4% 1,624
Seattle, WA 12 KWPX (kbge) 33 3/98 592 540 1,104 48.9% 1,514
Cleveland, OH 13 WVPX (wakc) 23 3/96 560 974 1,026 94.9% 1,469
Minneapolis, MN 14 KPXM (kxli) 41 10/96 605 637 746 85.4% 1,448
Tampa, FL 15 WXPX (wfct) 66 8/94 0 1,052 1,043 100.9% 1,436
Miami, FL 16 WPXM (wctd) 35 4/94 396 1,047 993 105.4% 1,386
Phoenix, AZ 17 KBPX (kwbf) 13 3/96 23 29 755 3.8% 1,289
Phoenix, AZ* 17 KPPX (kajw)(8)(9) 51 0 0 755 0.0% 1,289
Denver, CO 18 KPXC (kubd) 59 8/95 430 522 741 70.4% 1,199
Sacramento, CA* 20 KSPX (kcmy) 29 7/95 624 640 726 88.0% 1,127
Orlando, FL 22 WOPX (wirb) 56 12/94 468 780 796 97.9% 1,041
Indianapolis, IN 25 WIPX-LP(10) 51 3/98 0 0 618 0.0% 957
Hartford, CT* 27 WHPX (wtws)(5) 26 3/95 661 832 792 105.1% 916
Raleigh, NC 29 WFPX (wfay) 62 1/98 111 132 512 25.7% 826
Kansas City, MO 31 KPXE (kinb) 50 5/97 397 439 518 84.7% 792
Milwaukee, WI 32 WPXE (whke) 55 7/96 257 401 477 84.1% 791
Nashville, TN 33 WNPX (wkzx) 28 1/98 39 46 496 9.3% 789
Columbus, OH 34 WLWG-LP(10) 62 3/98 0 0 473 0.0% 739
11
[Enlarge/Download Table]
Salt Lake City, UT 36 KUWB (koog)(11) 30 7/97 200 223 387 57.6% 690
San Antonio, TX* 38 Channel 26(8)(9) 26 0 0 422 0.0% 649
Norfolk, VA 39 WPXV (wjcb) 49 8/95 343 405 474 85.5% 636
New Orleans, LA* 41 WCCL 49 1/98 366 366 455 80.6% 623
Memphis, TN* 42 WFBI 50 1/98 259 259 390 66.2% 614
West Palm Beach, 43 WPXP (whbi) 67 0 0 496 0.0% 593
FL* (8)(12)
Oklahoma City, OK 44 KOPX (kmnz) 62 10/96 0 236 374 63.1% 593
Greensboro, NC 46 WGPX (waap) 16 7/96 323 341 367 93.0% 577
Wilkes Barre, PA* 47 WQPX (wswb) 64 0 0 452 0.0% 566
(8)(9)
Providence, RI 49 WPXQ (wost) 69 0 0 433 0.0% 559
(8)(13)
Birmingham, AL 51 WPXH (wnal) 44 10/96 31 105 363 29.0% 547
Albany, NY 52 WYPX (wocd) 55 5/96 251 281 376 74.9% 509
Dayton, OH 53 WDPX (wtjc) 26 10/95 298 310 351 88.3% 503
Jacksonville, FL 54 WDVL-LP(10) 41 4/98 0 0 376 0.0% 502
Fresno, CA 55 KPXF (kkag) 61 6/97 195 183 263 69.4% 496
Little Rock, AR* 56 KYPX (kvut) 42 0 0 301 0.0% 481
(8)(9)
Charleston, WV* 57 WKRP(8)(9) 29 0 0 353 0.0% 480
Tulsa, OK 58 KTPX (kglb) 44 10/97 0 212 299 71.1% 468
Las Vegas, NV 61 KVPX-LP(10) 59 2/98 0 0 302 0.0% 450
Knoxville, TN* 64 WPXK (wpmc) 54 1/98 161 114 299 38.2% 441
Roanoke, VA 68 WPXR (wefc) 38 10/97 182 205 263 77.7% 402
Green Bay, WI 70 WPXG (wsco)(8) 14 0 0 226 0.0% 381
Honolulu, HI* 71 KPXO (kapa)(8) 66 0 0 333 0.0% 380
Syracuse, NY* 72 WAUP(8)(9) 56 0 0 279 0.0% 378
Spokane, WA 73 Channel 34(8) 34 0 0 233 0.0% 375
Shreveport, LA 76 Channel 21(8) 21 0 0 217 0.0% 366
Portland, ME 80 Channel 23(8)(9) 23 0 0 266 0.0% 350
Champaign, IL 81 WPXU (wfhl) 23 4/98 178 178 249 71.2% 331
Ft. Myers, FL 83 W57CJ(10) 57 8/96 0 0 253 0.0% 320
Chattanooga, TN 86 W55CD(10) 55 4/94 0 0 217 0.0% 310
Cedar Rapids, IA 87 KPXR (ktvc) 48 5/97 0 168 198 85.2% 308
Odessa, TX 150 Channel 30 30 0 0 98 0.0% 134
(8)(9)
San Sebastian, PR NR WJWN 38 2/96
Ponce, PR NR WKPV 20 2/96
San Juan, PR NR WJPX (wsjn) 24 2/96 285 366 661 55.4% 1,140
------ ------ ------ ------
Total Owned or Operated(2) 19,627 29,139 41,743 69.8% 61,674
Affiliates
Philadelphia, PA 4 WTVE(14) 51 10/96 414 812 2,033 40.0% 2,659
Washington, D.C. 7 WWPX (wshe)(15) 60 10/96 0 129 1,331 9.7% 1,928
St. Louis, MO 21 WPXS (wcee)(15) 13 1/96 23 107 585 18.3% 1,109
Indianapolis, IN 25 WIIB(14) 63 1/96 401 424 618 68.6% 957
Hartford, CT 27 WHCT(14) 18 7/97 0 183 792 23.1% 916
Raleigh, NC 29 WRPX (wrmy)(15) 47 6/96 0 400 512 78.1% 826
Grand Rapids, MI 37 WZPX (wilv)(15) 43 9/96 0 416 412 101.0% 659
------ ------ ------ ------
Total Affiliates 838 2,471 6,283 39.3% 9,055
Total Owned, Operated and
Affiliates(2) 20,465 31,610 42,739 74.0% 63,443
====== ======= ====== ======
Pending TV Acquisitions or
Affiliates
Chicago, IL 3 WCFC 38 1,950 3,140
San Francisco, CA 5 KWOK(7)(8) 68 1,640 2,298
Pittsburgh, PA 19 Channel 40 40 899 1,140
Portland, OR 24 KBSP 22 611 976
Buffalo, NY 40 WAQF(8) 51 475 630
Albuquerque, NM 48 Channel 14(8) 14 332 560
Mobile, AL 62 Channel 61(8) 61 324 450
Des Moines, IA 69 Channel 39(8) 39 233 383
Davenport, IA 89 Channel 67(8) 67 202 302
12
[Download Table]
Jackson, MS 90 Channel 51(8) 51 177 297
Greenville, NC 106 WEPX(8) 38 152 234
Christiansted, VI NR Channel 15(8) 15 18 36
------ ------
Total Proposed TV Stations(2)
5,373 8,150
------ ------
Total TV
Network(2)(3) 48,113 71,593
====== ======
* Operated or to be operated pursuant to a time brokerage agreement, except
as noted, the Company has an agreement and/or an option to acquire a 100%
ownership interest.
NR Not ranked
(1) Each station is licensed by the FCC to serve a specific community, which
is included in the listed market.
(2) Figures represent total cable and television households in each market
only and are not necessarily indicative of the number of households
reached by each station in its market; totals do not double count markets
where the Company has more than one station.
(3) After accounting for all acquisitions, divestitures and other
transactions, including those stations which the Company does not
anticipate becoming a PAX NET affiliate (see footnote 14) as well as
additional markets served by the Company's station group, including
Rochester, NY (WAQF), Lansing, MI (WZPX), Monterey-Salinas (KKPX), and
Bakersfield, CA (KPXF), the markets served by the Company's television
stations will contain 48,826,050 cable households and 72,578,050
television households.
(4) In conjunction with its acquisition of WPXN in New York, the FCC has
required the Company to sell this station.
(5) The Company has no option to acquire this station; it will become an
affiliate upon acquisition by DP Media.
(6) The Company has an 80% ownership interest in this station.
(7) The Company has contracted to sell its interest in this station.
(8) Station is currently under construction or not operating commercially.
(9) 49% ownership interest with an option for the remaining 51%.
(10) A low power station; other low power stations the Company owns or
operates, which simulcast programs aired on an owned or operated full
power television station in the same market, are not presented.
(11) The Company has a contract to swap this station for another in Salt Lake
City, KUPX, Channel 16.
(12) The Company has a 33% ownership interest, with an option to purchase 90%.
(13) 50% ownership interest.
(14) Currently an INTV affiliate only.
(15) The Company has an option to acquire, or first right of refusal upon a
proposed sale of this station.
(16) Cable households reached at commencement of station's operations.
(17) Cable households are those reached at 4/98, per station and local cable
system management and are to be billed in 5/98. Source for total market
cable and total market television households is A.C. Nielsen, published
9/97. Households for the three markets in Puerto Rico per Strategic
Research Corporation and the Virgin Islands per BIA.
PURCHASES OF BROADCAST PROPERTIES:
During January 1998, the Company completed the acquisitions of WFPX-TV serving
the Raleigh, North Carolina market for $4,500,000, KPXF-TV serving the Fresno,
California market for $7,960,000, WNPX-TV serving the Nashville, Tennessee
market for $4,300,000, KPXR-TV serving the Cedar Rapids, Iowa market for total
consideration of $10,250,000 which included 600,000 shares of the Company's
Class A common stock with an approximate market value at the time of $5,250,000
to Fant Broadcasting of Iowa, Inc. ("Fant"), and WPXD-TV serving the Detroit,
Michigan market for $35,000,000. The shares issued to Fant were not registered
under the Securities Act of 1933 and were issued in reliance upon the exemption
from registration provided in Section 4(2) of such Act for transactions not
involving a public offering.
During February 1998, the Company completed the acquisitions of WPXV-TV serving
the Norfolk, Virginia market for $14,750,000, KVPX-LP serving the Las Vegas,
Nevada market for $500,000, and KWPX-TV serving the Seattle, Washington market,
WIPX-LP serving the Indianapolis, Indiana market and K43EK-LP serving the
Portland, Oregon market for total consideration of $24,000,000.
During March 1998, the Company completed the acquisitions of WPXN-TV serving the
New York, New York market for $257,500,000, WLWG-LP serving the Columbus, Ohio
market for $2,500,000 and WDVL-LP serving the Jacksonville, Florida market for
$600,000.
During April 1998, the Company contracted with Roberts Broadcasting of Salt Lake
City to exchange its interest in Channel 30 serving the Salt Lake City, Utah
market for Channel 16 also serving the Salt Lake City, Utah market. The Company
intends to account for this like kind exchange of television stations at book
value with no gain or loss being recognized on the transaction.
During May 1998, the Company completed the acquisition of WPXU-TV (formerly
WFHL-TV) serving the Champaign, Illinois market for $9,250,000.
13
SALES OF BROADCAST PROPERTIES:
During March 1998, the Company sold its interest in television station WOAC-TV
serving the Cleveland, Ohio market in a transaction valued at $23,500,000. The
Company realized a gain of approximately $14,300,000 on the sale of its interest
in this station.
During March 1998, the Company contracted to sell its interest in television
station WNGM-TV serving the Atlanta, GA market for $50,000,000. Approximately
$11,000,000 of the consideration will be paid to Whitehead Media, Inc. for
exercise of the Company's option to acquire WNGM-TV. The Company expects to
realize a pre-tax gain of approximately $37 million on this sale.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected financial
information as a percentage of revenues.
Statements of Operations
[Download Table]
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1998 1997
----- -----
Revenues 100.0% 100.0%
Operating Expenses:
Direct 16.2 17.6
Programming 4.9 5.2
Sales 4.7 3.9
Promotion 3.1 0.6
Technical 9.4 10.8
General and administrative 28.1 33.5
Trade and barter 0.2 0.1
Time brokerage and affiliation agreement fees 20.8 5.4
Option plan compensation 1.0 3.8
Depreciation and amortization 25.1 21.5
------ -----
Total operating expenses 113.5 102.4
------ -----
Operating loss (13.5) (2.4)
Other income (expense):
Interest expense (33.2) (46.1)
Interest income 19.5 7.0
Other expense, net ( 0.8) 0.8
Gain on sale of television station 45.3 -
Equity in loss of unconsolidated investment (4.1) -
------ -----
Income (loss) from continuing operations before
income tax provision 13.2 (40.7)
Income tax provision (4.9) -
------ -----
Income (loss) from continuing operations before
extraordinary item 8.3 (40.7)
====== =====
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Consolidated revenues for the three months ended March 31, 1998 increased 67%
(or $12.8 million) to $31.7 million. This increase was primarily due to
television station acquisitions and new time brokerage operations, with WPXN-TV
in New York which has been operated by the Company since June 30, 1997
accounting for $6.9 million of the increase. Same station television revenues
increased $1.7 million.
Operating expenses for the three months ended March 31, 1998 increased 85% (or
$16.5 million) to $35.9 million. The increase was primarily due to higher direct
expenses such as commissions which rise in proportion to revenues ($1.8
million), other non-direct costs, which were primarily due to operating new
television stations and to startup costs for the launch of PAX NET ($5.7
million), higher depreciation and amortization, primarily related to assets
acquired ($3.9 million), and increased time brokerage and affiliation agreement
fees, primarily related to new time brokerage operations ($5.6 million), of
which $3.6 million is attributable to WPXN-TV.
Operating cash flow for the three months ended March 31, 1998 increased 97% (or
$5.2 million) to $10.6 million. The increase in operating cash flow was
primarily a result of television station acquisitions and new time brokerage
operations, with WPXN-TV accounting for $5.4 million of the increase.
For purposes of this report, "operating cash flow" is defined as net income
excluding non-cash items, non-recurring items including terminated operations,
discontinued operations, interest, other income, income taxes and time brokerage
and affiliation agreement fees, less scheduled program rights payments
(including a ratable portion of programming deposits). The Company has included
operating cash flow data because the financial
14
performance of broadcast companies is frequently evaluated based on some measure
of cash flow from operations. Operating cash flow is not, and should not be used
as an indicator of or alternative to, operating income, net income or cash flow
as reflected in the Consolidated Financial Statements as it is not a measure of
financial performance under generally accepted accounting principles.
Interest expense for the three months ended March 31, 1998 increased to $10.5
million or 20%, primarily due to a greater level of senior debt throughout the
period and higher interest rates. At March 31, 1998, total long-term debt and
senior subordinated notes were $350.7 million, compared with the balance of
$311.6 million outstanding a year prior.
Interest income for the three months ended March 31, 1998 increased to $6.2
million, primarily due to higher levels of cash and cash equivalents and cash
held by qualified intermediary resulting from segment asset sales, invested
throughout the period.
DISCONTINUED OPERATIONS
During 1997, the Company sold its interest in its Paxson Network-Affiliated
Television and Paxson Radio segments. Losses from these segments in the three
months ended March 31, 1997, net of tax, were $736,000. Paxson
Network-Affiliated Television generated net income of approximately $10,000 and
Paxson Radio incurred losses of approximately $746,000 in the three months ended
March 31, 1997. Paxson Network-Affiliated Television and Paxson Radio generally
experienced their lowest revenue in the first quarter of the year.
Loss from operations of these segments in the three months ended March 31, 1997
was approximately $811,000. Paxson Network-Affiliated Television generated
income from operations of approximately $10,000 and Paxson Radio incurred losses
from operations of $821,000 in the three months ended March 31, 1997,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at March 31, 1998 and December 31, 1997 was $134.8
million and $86.9 million, respectively, and the ratio of current assets to
current liabilities was 5.87:1 and 5.29:1 on such dates, respectively. Working
capital increased primarily due to the return of approximately $66 million of
cash held by qualified intermediary and not reinvested in like kind broadcasting
properties during the first quarter of 1998. The Company does not anticipate
paying current taxes on the non-deferred gain as it has sufficient net operating
loss carryforwards to offset such gain.
Cash (used in) provided by operations of approximately $(380,000) and $8.3
million for the three months ended March 31, 1998 and 1997, respectively,
reflects the operating results of existing properties, acquisitions and time
brokerage properties net of the deferred income tax provision, the equity in
loss of unconsolidated investment and the increase in programming deposits. Cash
provided by investing activities primarily reflects the use of the cash held by
qualified intermediary and proceeds from sales of broadcast properties and the
use of cash in investing activities for the acquisitions and investments
discussed above, and purchases of equipment for these and existing properties.
Cash provided by financing activities primarily reflects the proceeds from
exercise of common stock options net of debt repayments. Non-cash activity
relates to option plan compensation, stock issued for the acquisition of
KPXR-TV, reciprocal trade and barter advertising revenue and expense and
accretion of discount on senior subordinated notes, as well as dividends and
accretion on the redeemable preferred stock.
The Company's primary capital requirements are for the acquisition of
broadcasting properties and related capital expenditures, syndicated programming
rights payments and interest payments on indebtedness. The Notes require
semi-annual interest payments at a fixed rate.
In order to address the Company's business plan related to the PAX NET launch,
the Company refinanced, in May 1998, substantially all of its long-term debt
with a $122 million senior credit facility maturing June 2002 (the "Senior
Credit Facility"). Under the terms of the Senior Credit Facility, the
outstanding debt will be secured by substantially all of the Company's assets
and bear interest at a base rate plus 1.75% or LIBOR plus 2.75%, at the
Company's option. The Senior Credit Facility requires the Company to maintain
compliance with certain financial ratios subsequent to March 2000 and also
contains other restrictions. The Senior Credit Facility requires quarterly
principal payments commencing December 31, 2000.
The Company will require additional financing to enable it to complete
acquisitions which are currently pending, continue its acquisition strategy and
to fund capital expenditures on existing and acquired properties, expand
distribution through cable carriage agreements, syndicated program rights fees
and the Company's
15
working capital requirements. The timing and amount of the Company's additional
financing needs will depend, among other things, upon the timing of closings of
pending acquisitions (which are dependent upon the satisfaction of closing
conditions, some of which are beyond the control of the Company). As the
Company's cash available for acquisitions at March 31, 1998 will not be adequate
to pay the purchase price of all pending acquisitions, the Company is
considering additional sources of financing, including public and private sales
of equity. The failure to raise funds necessary to finance the Company's future
cash requirements could adversely affect the Company's ability to pursue its
business strategy. In addition, should the Company suffer a significant
impairment to its cash flow from operations due to the occurrence of one or more
adverse events, the Company could have insufficient resources to repay
indebtedness under the revolving Senior Credit Facility or the Notes when due or
to make required payments on the outstanding preferred stock.
PROGRAMMING COMMITMENTS
In connection with the launch of PAX NET, the Company has entered into
programming contracts to air syndicated television shows as well as theatrical
and made-for-television movies from 1998 to 2005 that are not currently
available for broadcast and therefore not included in the consolidated financial
statements. As of March 31, 1998, such programming contracts require collective
payments by the Company of approximately $328.2 million over such periods as
follows:
1998 (April - December) $ 41,291,133
1999 78,589,866
2000 73,480,355
2001 63,108,277
2002 32,352,952
Thereafter 39,418,667
------------
$328,241,250
============
The Company had $43,696,250 and $36,682,500 of prepaid broadcast rights recorded
in Other Assets as of March 31, 1998 and December 31, 1997, respectively. The
Company has also committed to purchase at similar terms additional future
episodes of these programs should they be made available. The Company continues
to evaluate additional programming purchases.
INVESTMENT COMMITMENTS
The completion of each of the investments discussed below is subject to a
variety of factors and to the satisfaction of various conditions, and there can
be no assurance that any of such investments will be completed. The Company has
agreements to purchase significant assets of, or to enter into time brokerage
and financing arrangements with respect to, the following properties, which are
subject to various conditions, including the receipt of regulatory approvals:
[Download Table]
STATION MARKET SERVED* PURCHASE PRICE
------- -------------- --------------
WCFC-TV Chicago, IL (1) $135,000,000
WFBI/WCCL Memphis, TN/New Orleans, LA $ 40,000,000
Channel 40 Pittsburgh, PA $ 35,000,000
KBSP-TV Portland, OR $ 30,000,000
KSPX-TV Sacramento, CA (2) $ 17,000,000
WPXP-TV West Palm Beach, FL (3) $ 16,635,000
WFBI/WCCL Affiliation Buyout Memphis, TN/New Orleans, LA $ 15,000,000
Channel 26 San Antonio, TX $ 13,500,000
KAJW-TV Phoenix, AZ (4) $ 12,000,000
WPXU-TV Champaign, IL (7) $ 9,250,000
WKRP-TV Charleston, WV (4) $ 8,070,000
WAUP-TV Syracuse. MY (4) $ 6,750,000
Channel 61 Mobile, AL (6) $ 6,750,000
WQPX-TV Wilkes-Barre, Scranton, PA (4) $ 6,200,000
Channel 34 Spokane, WA (6) $ 5,676,667
KPXO-TV Honolulu, HI $ 5,000,000
WPXK-TV Knoxville, TN $ 5,000,000
Channel 14 Albuquerque, NM (6) $ 4,900,000
Channel 21 Shreveport, LA (6) $ 3,938,000
Channel 67 Davenport, IA (6) $ 3,900,000
Channel 39 Des Moines, IA (6) $ 3,750,000
Channel 23 Portland, ME (4)(6) $ 3,550,000
Channel 38 Greenville, NC $ 3,550,000
WAQF-TV Buffalo, NY (5) $ 3,000,000
KYPX-TV Little Rock, AR (4) $ 2,850,000
Channel 51 Jackson, MS (6) $ 2,250,000
KWOK-TV San Francisco, CA (1)(3) $ 2,215,000
Channel 30 Odessa, TX (4)(6) $ 1,306,000
Channel 15 Christiansted, Virgin Islands (6) $ 300,000
------------
Total $402,340,667
============
----------
16
* Each station is licensed by the FCC to serve a specific community, which
is included in the listed market.
(1) The Company is acquiring the station for consideration of $120 million
cash, the Company's interests in KWOK-TV and up to $15 million of
contingent payments to be determined based upon the seller's ability to
deliver its programming to the Chicago market via cable carriage post
closing.
(2) The Company has loaned an aggregate of $8,500,000 to the station owner and
began operating the station pursuant to a time brokerage agreement on
October 1, 1996, pending completion of the acquisition of the station. The
loan will be applied to the purchase price at the date of closing.
(3) The Company has entered into various agreements with Cocola Broadcasting,
its subsidiaries and other parties, whereby the Company will acquire 100%
and 90% of the ownership of KWOK-TV and WPXP-TV, respectively.
(4) The Company has acquired a 49% interest in this property.
(5) Includes the purchase of two low power television stations, W69CS and
W63BM.
(6) The Company participated in FCC settlements and thereby acquired a
construction permit for this property.
(7) The Company acquired this station during May 1998.
In connection with the above commitments, the Company has made deposits or
advances totaling approximately $76.4 million at March 31, 1998, recorded as
escrow deposits or investments in broadcast properties. The commitment amounts
do not include capital expenditures required to upgrade or construct the above
properties.
17
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On January 27, 1998, in connection with Company's acquisition of KPXR-TV, the
Company issued 600,000 shares of Class A Common Stock with an approximate market
value at the time of $5,250,000 to Fant Broadcasting of Iowa, Inc. The shares
were issued without registration under the Securities Act of 1933 in reliance
upon the exemption from registration provided in Section 4(2) of such Act for
transactions not involving a public offering.
On March 18, 1998, the holders of the Company's Class A and B common stock
warrants exercised 16.6217 warrants entitling them to purchase 460,511 shares of
Class A Common Stock at a price of $0.01 per share. The Company issued 460,000
shares of Class A Common Stock and the balance of the shares issuable pursuant
to the warrant exercise were surrendered in payment of the warrant exercise
price. The shares were issued without registration under the Securities Act of
1933 in reliance upon the exemption from registration provided in Section 4(2)
of such Act for transactions not involving a public offering.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits:
EXHIBIT NO. DESCRIPTION
---------- ------------
3.1.1 Certificate of Incorporation of the Company**
3.1.2 Certificate of Designations of the Company's Junior Cumulative
Compounding Redeemable Preferred Stock**
3.1.3 Certificate of Designations of the Company's 12 1/2% Cumulative
Exchangeable Preferred Stock ****
3.1.4 Bylaws of the Company***
4.1 Form of Stock Certificate of Class A Common Stock*
10.194 Asset Purchase Agreement, dated March 19, 1998, by and between
Paxson Communications of Atlanta-14, Inc. and SKMD Broadcasting
Partnership and USA Station Group of Maryland, Inc.
10.195 Asset Purchase Agreement, dated March 19, 1998, by and among
Paxson Communications of Portland-22, Inc.; Paxson
Communications Corporation; Blackstar Communications of Oregon,
Inc.; and Blackstar of Salem, Inc.
10.196 Membership Purchase Agreement, dated January 14, 1998, by and
among Dr. Joseph A. Zavaletta, South Texas Vision, L.L.C.,
Paxson Communications of San Antonio-26, Inc., and Paxson
Communications Corporation for television station Channel 26,
Uvalde, Texas
27 Financial Data Schedule (for SEC use only)
----------------
* Filed with the Company's Registration Statement on Form S-4,
filed September 26, 1994, Registration No. 33-84416 and
incorporated herein by reference.
** Filed with the Company's Annual Report on Form 10-K, dated
March 31, 1995 and incorporated herein by reference.
*** Filed with the Company's Registration Statement on Form S-1, as
amended, filed January 26, 1996, Registration No. 333-473 and
incorporated herein by reference.
**** Filed with the Company's Registration Statement on Form S-3, as
amended, filed August 15, 1996, Registration No. 333-10267 and
incorporated herein by reference.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K, dated March 6, 1998, reporting under
Item 2. Acquisition or Disposition of Assets the Company's acquisition of
WPXN-TV serving the New York, NY market.
18
PAXSON COMMUNICATIONS CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAXSON COMMUNICATIONS CORPORATION
Date: May 11, 1998 By: /s/ Lowell W. Paxson
-------------------------------
Lowell W. Paxson
Chairman of the Board, Chief
Executive Officer, Director
Date: May 11, 1998 By: /s/ Arthur D. Tek
-------------------------------
Arthur D. Tek
Vice President, Chief
Financial Officer, Director
19
Dates Referenced Herein and Documents Incorporated by Reference
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