Document/Exhibit Description Pages Size
1: 10-Q Paxson Communications Form 10-Q 22 143K
2: EX-4.2 Second Amendment, Dated May 2, 1997 With Respect 7 21K
3: EX-10.158 Loan Agreement by and Between Paxson Communication 22 82K
4: EX-10.159 Asset Purchase Agreement by and Between Paxson 33 123K
5: EX-10.160 Asset Purchase Agreement Dated May 5, 1997 by 41 169K
6: EX-10.161 Asset Purchase Agreement Dated April 15, 1997 32 126K
7: EX-10.162 Assignment and Acceptance Agreement Dated April 18 20 59K
8: EX-10.164 Asset Purchase Agreement Dated April 22, 1997 39 157K
9: EX-10.165 Asset Purchase Agreement Dated April 22, 1997 39 162K
10: EX-10.166 Asset Purchase Agreement Dated, April 30, 1997 40 168K
11: EX-10.167 Asset Purchase Agreement Dated May 12, 1997 50 147K
12: EX-10.167.1 Time Brokerage Agreement, Dated May, 1997 20 84K
13: EX-27 Financial Data Schedule 1 8K
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, 1997
----------------------------
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, 1997:
[Download Table]
CLASS OF STOCK NUMBER OF SHARES
---------------------------- ----------------
COMMON STOCK-CLASS A, $0.001
PAR VALUE PER SHARE ........................ 40,481,482
COMMON STOCK-CLASS B, $0.001
PAR VALUE PER SHARE ........................ 8,311,639
PAXSON COMMUNICATIONS CORPORATION
INDEX
[Download Table]
Page
----
Part I - Financial Information
Item 1. Financial Statements
--------------------
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Changes in
Common Stockholders' Equity 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations 10-20
---------------------------------------------
Part II - Other Information
Item 1. Legal Proceedings 21
-----------------
Item 6. Exhibits and Reports on Form 8-K 21-22
--------------------------------
Signatures 23
2
PAXSON COMMUNICATIONS CORPORATION
Consolidated Balance Sheets
[Enlarge/Download Table]
March 31, December 31,
1997 1996
------------- -------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 42,914,912 $ 61,748,788
Accounts receivable, less allowance for doubtful
accounts of $1,418,284 and $1,576,593 respectively 26,499,352 29,860,998
Prepaid expenses and other current assets 4,164,169 2,713,565
Current program rights 1,383,524 1,512,019
------------- -------------
Total current assets 74,961,957 95,835,370
Property and equipment, net 153,105,125 144,415,412
Intangible assets, net 306,084,264 220,409,421
Investments in broadcast properties 73,159,860 53,297,022
Program rights, net 796,693 1,075,536
Other assets, net 26,230,157 28,149,699
------------- -------------
Total assets $ 634,338,056 $ 543,182,460
============= =============
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 10,469,748 $ 10,676,692
Accrued interest 14,693,070 6,684,373
Current portion of program rights payable 1,420,247 1,628,959
Current portion of long-term debt 649,302 644,509
------------- -------------
Total current liabilities 27,232,367 19,634,533
Program rights payable 765,561 1,000,260
Deferred gain 12,100,000 --
Long-term debt 83,208,980 3,407,688
Senior subordinated notes, net 227,728,199 227,655,096
Redeemable Cumulative Compounding Junior preferred stock, $0.001 par value; 12%
dividend rate per annum,
33,000 shares authorized, issued and outstanding 38,200,431 36,780,496
Redeemable Exchangeable Preferred stock, $.001 par value;
12.5% dividend rate per annum, 440,000 shares authorized,
150,000 shares issued and outstanding 152,731,836 147,929,150
Class A common stock, $0.001 par value; one vote per share; 150,000,000 shares
authorized, 40,480,482 shares issued and outstanding 40,480 40,442
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 C common stock, $0.001 par value; non-voting; 12,500,000 shares
authorized, 0 shares issued and outstanding -- --
Class A & B common stock warrants 6,862,647 6,862,647
Class C common stock warrants 2,335,528 2,335,528
Stock subscription notes receivable (2,713,250) (1,873,139)
Additional paid-in capital 209,751,163 209,621,241
Deferred option plan compensation (5,361,685) (6,397,916)
Accumulated deficit (118,552,513) (103,821,878)
Commitments and contingencies
------------- -------------
Total liabilities, redeemable securities and
common stockholders' equity $ 634,338,056 $ 543,182,460
============= =============
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
3
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Operations
[Enlarge/Download Table]
For the Three Months
Ended March 31,
----------------------------------
1997 1996
------------ ------------
(Unaudited)
-----------
Revenue:
Local and national advertising $ 41,006,119 $ 26,035,309
Other 1,207,880 866,803
Trade and barter 861,896 685,987
------------ ------------
Total revenue 43,075,895 27,588,099
Operating expenses:
Direct 9,929,765 6,077,210
Programming 5,853,899 3,184,957
Sales and promotion 3,278,965 2,175,058
Technical 3,077,169 1,392,600
General and administrative 10,491,044 6,022,966
Trade and barter 659,574 511,419
Time brokerage agreement fees 1,251,780 478,547
Sports rights fees 794,395 758,961
Option plan compensation 1,027,471 1,758,368
Depreciation and amortization 7,982,145 4,924,751
------------ ------------
Total operating expenses 44,346,207 27,284,837
------------ ------------
Operating (loss) income (1,270,312) 303,262
Other income (expense):
Interest expense (8,749,416) (7,724,778)
Interest income 1,443,232 831,072
Other income, net 107,696 (43,186)
------------ ------------
Loss from continuing operations (8,468,800) (6,547,258)
Income (loss) from discontinued operations 9,804 (71,402)
------------ ------------
Net loss (8,458,996) (6,618,660)
Dividends and accretion on preferred stock and common stock warrants
(6,271,639) (4,947,949)
------------ ------------
Net loss attributable to common stock and common stock equivalents
$(14,730,635) $(11,566,609)
============ ============
Per share data:
Loss from continuing operations $ (0.17) $ (0.19)
Income (loss) from discontinued operations -- --
------------ ------------
Net loss (0.17) (0.19)
Dividends and accretion on preferred stock and
common stock warrants (0.13) (0.14)
------------ ------------
Net loss attributable to common stock and
common stock equivalents $ (0.30) $ (0.33)
============ ============
Weighted average shares outstanding; primary and fully
diluted 48,777,893 34,556,861
============ ============
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
4
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Changes in Common Stockholders' Equity
[Enlarge/Download Table]
Class
Common Stock A & B Class Stock Deferred
-------------- Common C Subscription Additional Option
Class Class Class Stock Stock Notes Paid-in Plan Accumulated
A B C Warrants Warrants Receivable Capital Compensation Deficit
------- ------ ---- ---------- ---------- ----------- ------------ ----------- -------------
Balance at December 31, 1995 $26,227 $8,312 $ -- $ -- $5,338,952 $ (115,714) $ 34,342,086 $(1,384,267) $ (55,694,393)
Release of Put option on Class
A&B common stock warrants 9,116,399
Issuance of common stock, net
of issuance costs 10,300 154,789,700
Exercise of Class A,B&C common
stock warrants 3,623 (2,253,752) (3,003,424) 5,253,548
Stock issued for Todd
Communications acquisition 139 1,534,967
Deferred option plan
compensation 12,932,506 (12,932,506)
Option plan compensation 7,918,857
Increase in stock subscription
notes receivable (1,873,139)
Stock options exercised 153 768,434
Repayment of stock subscription
note receivable 115,714
Dividends on redeemable
preferred stock (13,223,227)
Accretion on Senior redeemable
preferred stock (1,805,599)
Accretion on Series B
preferred stock (3,418,615)
Accretion on Junior
preferred stock (650,084)
Accretion on Redeemable
Exchangeable preferred stock (159,977)
Accretion on Class A & B common
stock warrants (2,651,082)
Net loss (26,218,901)
------- ------ ----- ---------- ---------- ----------- ------------ ----------- -------------
Balance at December 31, 1996 40,442 8,312 -- 6,862,647 2,335,528 (1,873,139) 209,621,241 (6,397,916) (103,821,878)
Option plan compensation
(unaudited) 1,036,231
Stock options exercised
(unaudited) 38 129,922
Increase in stock subscription
receivable (unaudited) (840,111)
Dividends on redeemable
preferred stock (unaudited) (5,941,050)
Accretion on Junior preferred
stock (unaudited) (166,385)
Accretion on Redeemable
Exchangeable preferred stock
(unaudited) (164,204)
Net loss (unaudited) (8,458,996)
Balance at March 31, 1997
(unaudited)
------- ------ ----- ---------- ---------- ----------- ------------ ----------- -------------
$40,480 $8,312 $ -- $6,862,647 $2,335,528 $(2,713,250) $209,751,163 $(5,361,685) $(118,552,513)
======= ====== ==== ========== ========== =========== ============ =========== =============
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
[Enlarge/Download Table]
For the Three Months
Ended March 31,
-----------------------------
1997 1996
------------- ------------
(Unaudited)
Cash flows from operating activities:
Net loss $ (8,458,996) $ (6,618,660)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 8,738,098 5,671,742
Option plan compensation 1,036,231 1,758,368
Program rights amortization 302,825 386,671
Provision for doubtful accounts 356,485 174,223
Gain on sale of assets (153,577) (133,883)
Decrease in accounts receivable 3,005,161 1,357,174
Increase in prepaid expenses and other current assets (1,450,604) (783,405)
Increase in other assets (2,399,573) (160,663)
Decrease (increase) in accounts payable and accrued liabilities (373,334) 658,636
Increase in accrued interest 8,008,697 6,871,342
------------- ------------
Net cash provided by operating activities 8,611,413 9,181,545
------------- ------------
Cash flows from investing activities:
Acquisitions of broadcast properties (94,184,131) (42,960,785)
Decrease in deposits on broadcast properties 4,200,000 1,890,000
Proceeds from sale of fixed assets 751,050 220,622
Increase in investments in broadcast properties (4,862,838) (8,376,376)
Purchase of property and equipment (12,106,406) (2,639,383)
------------- ------------
Net cash used in investing activities (106,202,325) (51,865,922)
------------- ------------
Cash flows from financing activities:
Proceeds from long-term debt 80,000,000 17,700,000
Payments of long-term debt (193,915) (108,061)
Payments of loan origination costs -- (516,232)
Proceeds from exercise of common stock options 129,960 92,527
Increase in stock subscription notes receivable (840,111) --
Repayments of stock subscription notes receivable -- 53,747
Payments for program rights (338,898) (383,904)
------------- ------------
Net cash provided by financing activities 78,757,036 16,838,077
------------- ------------
Decrease in cash and cash equivalents (18,833,876) (25,846,300)
------------- ------------
Cash and cash equivalents at beginning of period 61,748,788 68,070,990
------------- ------------
Cash and cash equivalents at end of period $ 42,914,912 $ 42,224,690
============= ============
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)
[Download Table]
For the Three Months
Ended March 31,
------------------------
1997 1996
----------- ----------
(Unaudited)
Supplemental disclosures of cash flow information:
Cash paid for interest $ 245,082 $ 429,399
=========== ==========
Cash paid for income taxes $ -- $ --
=========== ==========
Non-cash operating and financing activities:
Accretion of discount on senior subordinated notes $ 73,103 $ 60,371
=========== ==========
Dividends accreted on redeemable preferred stock $ 5,941,050 $2,031,241
=========== ==========
Accretion on redeemable securities $ 330,589 $2,916,708
=========== ==========
Trade and barter revenue $ 1,012,528 $ 835,462
=========== ==========
Trade and barter expense $ 983,841 $ 644,979
=========== ==========
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, 1997 and
for the three month periods ended March 31, 1997 and 1996, are 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, 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements, footnotes, and
discussions should be read in conjunction with the December 31, 1996 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, 1996, which
was filed with the United States Securities and Exchange Commission.
2. Discontinued Operations
On February 19, 1997, the Company entered into a definitive agreement to sell
its interests in WTVX-TV. In addition, on March 25, 1997, the Company entered
into a definitive agreement to sell WPBF-TV and thus discontinue the operations
of the Paxson Network Affiliated Television segment. Because of the decision to
sell both stations, the results of operations for the Paxson Network Affiliated
Television segment, net of applicable income tax, have been reclassified and
presented as discontinued operations in the accompanying Consolidated
Statements of Operations for all periods presented. The Paxson Network
Affiliated Television segment is expected to be sold for aggregate
consideration of approximately $119,000,000. The Company sold WPBF-TV as
discussed in the following paragraph. The WTVX-TV transaction is expected to
close during the third quarter of 1997 subject to the receipt of all necessary
regulatory approvals and will result in a pre-tax gain to the Company of
approximately $13,000,000. The Company does not anticipate a loss during the
phase-out period of this segment.
Two wholly-owned subsidiaries of the Company owned and operated WPBF-TV, the
West Palm Beach, Florida ABC Network affiliate. On March 27, 1997, such
subsidiaries, Paxson Communications of West Palm Beach-25, Inc. ("WPBF-25") and
Paxson West Palm Beach License, Inc. ("Palm Beach License"), entered into an
asset purchase agreement (the "Asset Sale Agreement") with The Hearst
Corporation ("Hearst") pursuant to which the subsidiaries agreed to sell
substantially all of their assets to Hearst for $85 million. The Asset Sale
Agreement is expected to be consummated during the second half of 1997 after,
among other things, receipt of all necessary Federal Communications Commission
and other regulatory approvals.
On April 29, 1997, the Company sold its interests in WPBF-TV, which sale was
consummated through a merger of WPBF-25 with and into WPBF Merger, Inc. ("WPBF
Merger"), and the merger of Palm Beach License with and into WPBF
License, Inc. ("WPBF License"), a wholly-owned subsidiary of WPBF Merger, for
consideration payable to Paxson Communications of Florida, Inc., a wholly-owned
subsidiary of the Company, of $85 million, consisting of $75 million cash
and a subordinated promissory note (the "Note") in the principal amount of $10
million (collectively, the "Merger"). The Note bears interest at the Federal
Funds Rate plus three percent and is payable upon the earlier of (i) April 29,
2007 and (ii) or the closing of the sale of WPBF-TV to Hearst under the Asset
Sale Agreement. WPBF Merger is controlled by Lowell W. Paxson ("Mr. Paxson"),
the Chairman of the Board and Chief Executive Officer of the Company.
WPBF Merger and WPBF License obtained a loan to finance the Merger from Banque
Paribas. Neither the Company nor any of its Subsidiaries is liable for the
repayment of such loan.
In connection with the Merger, the Company entered into a time brokerage
agreement with WPBF Merger pursuant to which the Company acquired the right
to sell substantially all of the air-time of WPBF-TV and agreed to provide
certain management and other services to WPBF Merger. The amounts payable under
such time brokerage agreement are expected to approximate WPBF-TV's operating
costs and the interest and fees payable in connection with
8
the aforementioned loan until the Asset Sale Agreement is closed. An effect of
the Merger was the Company received a majority of the consideration payable
in connection with the sale of WPBF-TV on April 29, 1997 rather than some time
in the second half of 1997 or later. This sale will result in a pre-tax gain to
the Company of approximately $56,000,000.
The Paxson Network Affiliated Television operations generated revenues of
approximately $5,284,000 and $4,541,000 for the three months ended March 31,
1997 and 1996, respectively.
The components of net assets of discontinued operations included in the
consolidated balance sheets at March 31, 1997 and December 31, 1996, are as
follows:
[Download Table]
1997 1996
---- ----
Current assets $ 1,496,753 $ 1,580,249
Noncurrent assets 28,035,286 28,878,167
----------- -----------
Total assets 29,532,039 30,458,416
=========== ===========
Current liabilities 1,962,996 2,610,503
Noncurrent liabilities 765,561 1,000,260
Total liabilities 2,728,557 3,610,763
---------- -----------
Total net assets $26,803,482 $26,847,653
=========== ===========
Net assets of discontinued operations at March 31, 1997 and December 31, 1996
excludes cash and cash equivalents and accounts receivable which will be
retained by the Company. Additionally, Senior Subordinated Notes, the related
deferred loan origination costs and accrued interest payable have been excluded
from the net assets of the discontinued operations as the Senior Subordinated
Notes will not be assumed by the buyers of the discontinued operations.
3. Long-Term Debt
In connection with the WPBF-TV merger transaction discussed above, the Company
was released from its unconditional guarantee of Whitehead Media, Inc.'s
("Whitehead") third party financing by Banque Paribas of Whitehead's
acquisitions of WTVX-TV, WOAC-TV and WNGM-TV. The Company operates these
stations pursuant to time brokerage agreements and as a result of the
third party financing provided to Whitehead, has an option to purchase each of
these stations, which options to purchase would otherwise be prohibited under
FCC rules and regulations as each of such stations serves a market in which the
Company owns another television station serving the same market. During February
and March 1997, the Company contracted to sell its interests in these stations
as discussed elsewhere herein.
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 the subsequent improvement of these properties' operations.
Certain of the Company's radio and television stations were and continue to be
operated pursuant to time brokerage agreements for various periods. Under time
brokerage agreements, the stations' operating revenues and expenses are
controlled by the Company and are included in the consolidated statements of
operations. The Company operates three business segments: (1) inTV, a
nationwide network of owned, operated or affiliated television stations
carrying its proprietary network, which broadcasts long form paid programming
consisting primarily of infomercials; (2) Paxson Radio, consisting of radio
broadcasting stations, radio news and sports networks and billboard operations;
and (3) Paxson Network-Affiliated Television, consisting of network-affiliated
television broadcasting stations in West Palm Beach, Florida. As a result of
the agreements entered into in February and March 1997 to sell WPBF-TV and
WTVX-TV, the Paxson Network Affiliated Television segment has been classified
as discontinued operations for financial reporting purposes. See Note 2 -
of the Notes to Consolidated Financial Statements incorporated by reference
herein.
The Company's operating results throughout the periods discussed have been
affected significantly by the timing and mix of radio, television and inTV
acquisitions. Operating revenues are derived from the sale of advertising to
local and national advertisers. The Company's primary operating expenses
involved in owning and operating Paxson Radio are syndicated program rights
fees, commissions on revenues, employee salaries, news gathering, promotion and
administrative expenses. Comparatively, operation of an inTV station involves
low operating expenses relative to traditional television station operation.
The costs of operating an inTV station 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 inTV station.
The Company's past results are not necessarily indicative of future performance
due to various risks and uncertainties which may significantly reduce revenues
and increase operating expenses. For example, a reduction in expenditures by
radio and television advertisers in the Company's markets may result in lower
revenues. The Company may be unable to reduce expenses, including 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 and listening habits may affect the continued attractiveness of the
Company's broadcasting stations to advertisers, upon whom the Company is
dependent for its revenue.
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. 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 value of the Company's investments in
broadcast properties and programming rights payable were based upon the net
present value of applicable estimated future cash flows using a discounted rate
approximating market rates. The fair values of the Company's long-term debt and
the senior subordinated notes were estimated based on market rates and
instruments with similar risks and maturities. The fair value estimates
presented are based on pertinent information available to management as of March
31, 1997. 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 inTV network stations comprise a valuable
national television broadcasting distribution infrastructure, the value of
which could potentially be greater if employed to air programming other than,
or in addition to, the long form paid programming which is currently being
aired. The Company is considering strategic alternatives with respect to these
television stations, including the possible creation of a new television
network in tandem with a major programming provider as well as a national cable
multiple system operator. The Company is in a preliminary stage of this
process, however, and has not entered into any binding agreements or commitments
relating to a change in the use or character of its group of television
stations.
10
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 businesses 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 business, including the restrictions
on multiple broadcast property ownership, the broadcast licensing renewal
requirements and the status of the Federal Communications Commission's "must
carry" regulations, 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, 1996.
The following table lists those inTV 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 "Announced inTV stations" below.
(Television and cable households in thousands.)
[Enlarge/Download Table]
NATIONAL STATION CABLE CURRENT TOTAL CURRENT TOTAL
TV MARKET COMMENCEMENT CARRIAGE AT STATION CABLE MARKET CABLE STATION CABLE MARKET TV
MARKET (1) RANK STATION OF OPERATIONS COMMENCEMENT(2) CARRIAGE(3) HOUSEHOLDS CARRIAGE %(3) HOUSEHOLDS
------ ---- ------- ------------- ------------ -------- ---------- ---------- ----------
Owned or Operated
New York, NY 1 WHAI TV 3/96 626 785 4,663 16.8% 6,712
Los Angeles, CA 2 KZKI TV 5/95 1,453 2,445 3,049 80.2% 4,942
Philadelphia, PA 4 WTGI TV 2/95 1,225 1,644 2,015 81.6% 2,654
San Francisco, CA 5 KLXV TV 6/95 650 1,189 1,620 73.4% 2,279
Boston, MA 6 WGOT TV 5/95 604 949 1,665 57.0% 2,150
Boston, MA* 6 WHRC TV(5) 6/97 0 0 1,665 0.0% 2,150
Washington, D.C. 7 WSHE TV(6)(10) 10/96 0 118 1,301 9.1% 1,909
Dallas, TX 8 KINZ TV 12/96 0 634 954 66.5% 1,849
Atlanta, GA 10 WTLK TV 4/94 300 964 1,089 88.5% 1,625
Atlanta, GA* 10 WNGM TV(10) 4/96 182 247 1,089 22.7% 1,625
Houston, TX 11 KTFH TV 3/95 647 829 894 92.7% 1,595
Cleveland, OH 13 WAKC TV 3/96 560 708 1,001 70.7% 1,461
Cleveland, OH* 13 WOAC TV(10) 10/95 332 367 1,001 36.7% 1,461
Minneapolis, MN 14 KXLI TV 10/96 605 655 722 90.7% 1,428
Tampa, FL* 15 WFCT TV 8/94 0 975 1,014 96.2% 1,411
Miami, FL* 16 WCTD TV 4/94 396 1,009 1,009 100.0% 1,363
Phoenix, AZ 17 KWBF TV 3/96 23 26 694 3.7% 1,213
Phoenix, AZ 17 KAJW TV(4)(8) 7/97 n/a n/a 694 n/a 1,213
Denver, CO 18 KUBD TV 8/95 430 474 725 65.4% 1,185
Sacramento, CA* 20 KCMY TV 7/95 624 640 711 90.0% 1,116
St. Louis, MO 21 WCEE TV 1/96 23 91 583 15.6% 1,110
Orlando, FL* 22 WIRB TV(5) 12/94 468 757 779 97.2% 1,022
Hartford, CT* 27 WTWS TV(5) 3/95 661 775 790 98.1% 916
Raleigh, NC* 29 WRMY TV(5)(6) 6/96 0 297 505 58.8% 815
Milwaukee, WI 31 WHKE TV 7/96 257 321 468 68.6% 787
Kansas City, MO 32 KINB TV 5/97 397 397 515 77.1% 787
Grand Rapids, MI* 37 WJUE TV(8) 9/96 0 299 404 74.0% 648
Oklahoma City, OK 43 KMNZ TV 10/96 0 0 367 0.0% 588
Greensboro, NC 46 WAAP TV 7/96 323 340 357 95.2% 568
Providence, RI 47 WOST TV(4)(7) 7/97 0 0 423 0.0% 558
Birmingham, AL * 51 WNAL TV 10/96 31 79 347 22.8% 526
Albany, NY 52 WOCD TV 5/96 251 272 368 73.9% 507
Dayton, OH 53 WTJC TV 10/95 298 312 349 89.4% 503
Little Rock, AR* 57 KVUT TV(4)(8) 7/97 n/a n/a 298 n/a 480
Tulsa, OK* 58 KGLB TV(4)(8) 6/97 0 0 288 0.0% 461
Cedar Rapids, IA* 86 KTVC TV n/a n/a 191 n/a 307
Puerto Rico NR WSJN TV 2/96 285 285 298 95.6% 1,064
Puerto Rico NR WKPV TV 2/96
Puerto Rico NR WJWN TV 2/96
Total Owned or Operated(9) 11,651 18,883 30,456 62.4% 46,538
Affiliates
Philadelphia, PA 4 WTVE TV 10/96 414 539 2,015 26.7% 2,654
Indianapolis, IN 25 WIIB TV 1/96 401 424 606 70.0% 939
Norfolk, VA 40 WJCB TV 8/95 343 399 467 85.4% 632
Fresno, CA 55 KGMC TV 1/96 179 164 265 61.9% 491
------ ------ ------ ----- ------
1,336 1,526 3,353 45.5% 4,716
------ ------ ------ ----- ------
Total Owned, Operated and Affiliates(9) 12,574 20,409 31,794 64.6% 48,600
====== ====== ====== ===== ======
Announced inTV Stations
New York, NY 1 WBIS TV 4,663 6,712
San Francisco 5 KWOK TV(4)(6) 1,620 2,279
Washington, D.C. 7 WVVI TV 1,301 1,909
Detroit, MI 9 WBSX TV 1,174 1,772
Seattle, WA 12 KBCB TV(4) 1,071 1,492
Pittsburgh, PA 19 Channel 40 987 1,149
Salt Lake City, UT 36 KOOG TV(4) 372 671
Buffalo, NY 39 WAQF TV(4) 464 633
West Palm Beach, FL 44 WHBI TV(4)(6) 486 587
Wilkes Barre, PA 49 WSWB TV(4) 444 553
Fresno, CA 55 KKAG TV 265 491
Green Bay, WI 70 WSCO TV 216 376
------ ------
Total Announced inTV Stations(9) 5,214 7,233
------ ------
Total inTV Network(9) 37,008 55,833
====== ======
* Operated or to be operated pursuant to a time brokerage agreement;
except as noted, the Company has an option to acquire a 100% ownership
interest.
(1) Each station is licensed by the FCC to serve a specific community,
which is included in the listed market.
(2) Cable households reached at commencement of station's operations.
Source: A.C. Nielsen
(3) Cable households reached at 4/97, to be billed in 5/97, and as a
percentage of the total market cable households. Source: A.C. Nielson
(4) Station is currently under construction or not operating commercially.
(5) No option to acquire any ownership.
(6) Pending affiliate.
(7) 50% ownership interest.
(8) 49% ownership interest with remaining 51% to be acquired.
(9) Market Household totals do not double count markets where the Company
has more than one station.
(10) Under contract to sell.
NR Not ranked.
11
The following table sets forth certain information about the radio stations the
Company owns or has agreements to acquire:
[Enlarge/Download Table]
National
Radio Audience Share
Market (persons 25 -54)(3) Revenue (2)
Markets/Station (1) Rank (5) Format 1997 Share Rank
------------------------------------------------------------------------------------------------------------
Miami/Ft. Lauderdale 11
WZTA-FM Active Rock 3.7%
WIOD-AM Hot Talk 2.7%
WLVE-FM Smooth Jazz 4.9%
WPLL-FM Modern Adult Contemporary 2.5%
WINZ-AM News/Talk 1.3%
WFTL-AM Hot Talk 0.3%
----
TOTAL MARKET 15.4% 20.9% 1
Tampa/St. Petersburg 21
WSJT-FM Smooth Jazz 4.8%
WHPT-FM Rock Alternative 6.3%
WZTM-AM Sports 1.3%
WHNZ-AM News/Talk 0.6%
WKES-FM (4) To Be Determined
----
TOTAL MARKET 13.0% 13.0% 3
Orlando 38
WMGF-FM Soft Adult Contemporary 6.9%
WTKS-FM Hot Talk 6.8%
WJRR-FM Active Rock 3.4%
WSHE-FM Modern AC 3.2%
WQTM-AM Sports 1.4%
WWNZ-AM News/Talk 0.5%
----
TOTAL MARKET 22.2% 28.2% 1
Jacksonville, FL 53
WROO-FM Country 6.9%
WFSJ-FM Smooth Jazz 3.0%
WPLA-FM Alternative 2.8%
WNZS-AM Sports 1.5%
WTLK-FM Hot Talk 0.8%
WZNZ-AM News 0.1%
----
TOTAL MARKET 15.1% 16.5% 3
Pensacola, FL 125
WYCL-FM Gold 6.0%
WTKX-FM Active Rock 4.6%
----
TOTAL MARKET 10.6% 16.8% 3
Tallahassee, FL 167
WTNT-FM Country 9.2%
WSNI-FM Gold 6.7%
WXSR-FM Active Rock 3.7%
WJZT-FM Smooth Jazz 2.1%
WNLS-AM Sports 1.2%
----
TOTAL MARKET (6) 22.9% n/r 1
Panama City, FL 225
WPAP-FM Country 10.5%
WFSY-FM Adult Contemporary 8.8%
WSHF-FM Modern Adult Contemporary 4.4%
WPBH-FM Gold 3.5%
WDIZ-AM Adult Standards n/r
----
TOTAL MARKET (6) 27.2% n/r 1
Cookeville, TN N/C
WGSQ-FM Country 27.0%
WGIC-FM Soft Adult Contemporary 14.9%
WPTN-AM Talk 4.1%
WHUB-AM Country 4.1%
----
TOTAL MARKET(6) 50.1% n/r 1
Florida Keys N/C
WFKZ-FM Hot Adult Contemporary n/c
WAVK-FM Adult Contemporary n/c
WKRY-FM Soft Adult Contemporary n/c
TOTAL MARKET n/r 1
(1) Each station is licensed by the FCC to serve a specific community
within the market, which may differ from the listed market.
(2) Source: Miller, Kaplan Market Revenue Report, a monthly publication of
Miller, Kaplan, Anase & Co., Certified Public Accountants ("Miller
Kaplan").
(3) Adults 25-54 Monday-Sunday 6 AM-Midnight in radio market per Winter
1997 Arbitron Radio Market Reports, Fall 1996 for Pensacola and
Tallahassee, Spring 1996 for Cookeville an Panama City.
(4) Pending Acquisition.
(5) Source: BIA's Radio Yearbook 1997.
(6) Revenue shares not reported; rank based upon Company estimates.
n/c Market not covered by Arbitron.
n/r Revenue not independently reported.
Purchases of Broadcast Properties:
During January 1997, the Company completed its purchases of WSJN-TV, WKPV-TV,
WJWN-TV, WPLL-FM (formerly WSHE-FM), WSRF-AM and WTKS-FM for aggregate cash
consideration of $89,500,000.
During January 1997, the Company acquired a 49% interest in KAJW-TV for
$5,400,000.
During February 1997, the Company exercised its option to acquire WHKE-TV from
The Christian Network, Inc. ("CNI") for $100,000 plus forgiveness of related
notes and interest receivable totaling approximately $3,900,000. The Company
also purchased a 50% interest in WOST-TV for $1,000,000 less prior advances of
$168,000.
During March 1997, the Company entered into an agreement to purchase WBSX-TV for
$35,000,000.
During April 1997, the Company exercised its options and entered into agreements
to purchase television stations WCTD-TV and WFCT-TV from CNI for $191,000 and
$100,000, respectively, and forgiveness of outstanding loans aggregating
approximately $1,120,000. As part of the purchase consideration for WCTD-TV, the
Company will repay the remaining principal balance on a third party note payable
with an outstanding balance of approximately $510,000 at March 31, 1997.
During April 1997, the Company entered into agreements to purchase television
stations KKAG-TV, KTVC-TV, WAQF-TV, Channel 40 in Pittsburgh and WSCO-TV for
$7,960,000, $5,000,000, $3,000,000, $35,000,000 and $4,750,000, respectively. On
May 3, 1997, the Company began operating KTVC-TV pursuant to a TBA pending
completion of the acquisition.
During May 1997, the Company entered into an agreement to purchase WBIS-TV in
New York City for $257,500,000. The Company intends to begin operating this
station pursuant to a TBA on June 30, 1997.
Sales of Broadcast Properties:
During February 1997, the Company restructured its investment in WTWS-TV, as
required by the FCC in connection with its prior acquisition of WHAI-TV, by
selling WTWS-TV to Roberts Broadcasting in exchange for a $15,000,000 note
receivable and entered into a five year time brokerage agreement to operate the
station. The note bears interest at LIBOR plus 3.5%. Interest is payable
monthly with principal payments commencing February 1998 and payable monthly in
84 equal installments. The Company expects to recognize a pre-tax gain on the
sale of approximately $12,100,000 using the installment method.
During March 1997, the Company entered into agreements to sell its interests in
television stations WOAC-TV and WNGM-TV, each of which is currently operated
under time brokerage agreements with Whitehead, for aggregate consideration of
$73,500,000, in separate agreements with the same buyer. To date, the Company
has only received the required escrow deposit for the WOAC-TV sale. Accordingly,
the Company may have to terminate the WNGM-TV contract and seek a new buyer.
These stations operate in the Cleveland and Atlanta television markets where the
Company owns and will continue to operate stations WAKC-TV and WTLK-TV,
respectively.
During March 1997, the Company entered into an agreement to sell the assets of
WSRF-AM in the Miami Radio market for aggregate consideration of approximately
$500,000. The sales
12
price includes $100,000 in cash with a note receivable for the remaining
$400,000 bearing interest at 9.5% payable over 48 months in equal monthly
payments of principal and interest commencing on the first day of the thirteenth
month following the sale closing. The buyer began operating the station pursuant
to a time brokerage agreement with the Company on May 1, 1997 pending the sale
closing.
The Company has also entered into an agreement to restructure its investment in
WSHE-TV (formerly WYVN-TV) pursuant to which DP Media, Inc. ("DP Media") will
acquire WSHE-TV for $2,470,000 in the form of a promissory note. The note bears
interest at 8.25% payable monthly with the entire principal due twenty four
months from the date of close. The Company plans to operate the station
pursuant to an affiliation agreement.
Other:
The Company, DP Media and Roberts Broadcasting have entered into agreements
whereby the Company will loan DP Media approximately $10,000,000 (of which
approximately $7,500,000, to be assumed by DP Media, has been advanced to
Roberts Broadcasting as of March 31, 1997 and has been recorded as investments
in broadcast properties), allowing DP Media to purchase a 100% ownership
interest in WRMY-TV. The Company plans to operate the station pursuant to an
affiliation agreement.
The Company has amended its agreements with Roberts Broadcasting for KZAR-TV,
Salt Lake City, Utah, to terminate its option to acquire 50% of this station. In
addition, Roberts Broadcasting has agreed to apply a portion of the proceeds
from its sale of WRMY-TV to DP Media to repay the Company substantially all of
the amounts advanced to Roberts Broadcasting as loans or option payments in
respect of KZAR-TV.
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,
--------------------
1997 1996
---- ----
Revenues 100.0% 100.0%
Operating Expenses:
Direct 23.1 22.0
Programming 13.6 11.5
Sales and promotion 7.6 7.9
Technical 7.1 5.0
General and administrative 24.4 21.8
Trade and barter 1.5 1.9
Time brokerage agreement fees 2.9 1.7
Sport rights fees 1.8 2.8
Option plan compensation 2.4 6.4
Depreciation and amortization 18.5 17.9
----- -----
Total operating expenses 102.9 98.9
----- -----
Operating income (loss) (2.9) 1.1
Other income (expense):
Interest expense (20.3) (28.0)
Interest income 3.3 3.0
Other income, net 0.2 0.2
----- -----
Loss from continuing operations (19.7) (23.7)
Income (loss) from discontinued operations 0.1 (0.3)
----- -----
Net loss (19.6) (24.0)
===== =====
13
The following sets forth, for the periods indicated, selected information for
the Company's business segments:
[Download Table]
As of and for the three
months ended March 31,
-----------------------
1997 1996
---- ----
INTV
Total revenue $ 18,524,655 $ 12,715,920
Operating expenses, less
depreciation, amortization
and option plan compensation 11,534,015 6,633,622
Depreciation and amortization 3,746,655 2,070,930
Option plan compensation 89,961 3,563
------------- -------------
Operating income $ 3,154,024 $ 4,007,805
============= =============
Operating cash flow $ 8,002,000 $ 6,525,000
============= =============
Total identifiable assets $ 275,533,858 $ 156,675,990
============= =============
Capital expenditures $ 8,754,303 $ 1,520,666
============= =============
PAXSON RADIO
Total revenue $ 24,138,555 $ 14,535,690
Operating expenses, less
depreciation, amortization
and option plan compensation 20,395,808 12,115,096
Depreciation and amortization 3,902,415 2,589,026
Option plan compensation 313,466 33,404
------------- -------------
Operating loss $ (473,134) $ (201,836)
============= =============
Operating cash flow $ 3,780,000 $ 2,346,000
============= =============
Total identifiable assets $ 231,454,329 $ 68,510,770
============= =============
Capital expenditures $ 2,694,722 $ 743,357
============= =============
PAXSON NETWORK-AFFILIATED TELEVISION
Total revenue $ -- $ --
Operating expenses, less
depreciation, amortization
and option plan compensation -- --
Depreciation and amortization -- --
Option plan compensation -- --
------------- -------------
Operating income $ -- $ --
============= =============
Operating cash flow $ -- $ --
============= =============
Total identifiable assets $ 39,363,643 $ 37,351,207
============= =============
Capital expenditures $ 149,560 $ 119,941
============= =============
CORPORATE AND OTHER
Total revenue $ 412,685 $ 336,489
Operating expenses, less
depreciation, amortization
and option plan compensation 3,406,768 1,853,000
Depreciation and amortization 333,075 264,795
Option plan compensation 624,044 1,721,401
------------- -------------
Operating loss $ (3,951,202) $ (3,502,707)
============= =============
Operating cash flow $ (2,994,000) $ (1,517,000)
============= =============
Total identifiable assets $ 87,986,228 $ 51,438,115
============= =============
Capital expenditures $ 507,821 $ 255,419
============= =============
CONSOLIDATED
Total revenue $ 43,075,895 $ 27,588,099
Operating expenses, less
depreciation, amortization
and option plan compensation 35,336,591 20,601,718
Depreciation and amortization 7,982,145 4,924,751
Option plan compensation 1,027,471 1,758,368
------------- -------------
Operating (loss) income $ (1,270,312) $ 303,262
============= =============
Operating cash flow $ 8,788,000 $ 7,354,000
============= =============
Total identifiable assets $ 634,338,056 $ 313,976,082
============= =============
Capital expenditures $ 12,106,406 $ 2,639,383
============= =============
"Operating cash flow" is defined as net income excluding non-cash items,
non-recurring items including terminated operations, interest, other income,
income taxes and time brokerage fees, less scheduled program rights payments.
The Company has included operating cash flow data because the financial
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 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.
14
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Consolidated revenues for the three months ended March 31, 1997 increased 56%
(or $15.5 million) to $43.1 million from $27.6 million for the three months
ended March 31, 1996. This increase was primarily due to new television station
acquisitions and time brokerage operations ($5.0 million), new radio stations
($8.3 million) and increased revenues from existing television stations ($0.8
million) and radio stations ($1.5 million).
Operating expenses for the three months ended March 31, 1997 increased 62% (or
$17.0 million) to $44.3 million from $27.3 million for the three months ended
March 31, 1996. The increase was primarily due to higher direct expenses such as
commissions which rise in proportion to revenues ($3.9 million), other
non-direct costs of operating new television stations ($2.9 million) and radio
stations ($5.2 million), higher depreciation and amortization primarily related
to assets acquired ($3.1 million), and increased time brokerage agreement fees
($0.8 million).
Operating cash flow for the three months ended March 31, 1997 increased 19% (or
$1.4 million) to $8.8 million, from $7.4 million for the three months ended
March 31, 1996. The increase in operating cash flow was primarily a result of
television station acquisitions and time brokerage operations ($0.9 million),
new radio stations ($0.6 million) and improved performance of existing
television ($0.6 million) and radio stations ($0.8 million), all of which were
partially offset by increased corporate overhead and other costs.
Interest expense for the three months ended March 31, 1997 increased to $8.7
million from $7.7 million for the three months ended March 31, 1996, an increase
of 13% primarily due to a greater level of debt throughout the period and higher
borrowing rates. As a result of acquisitions, at March 31, 1997, total long-term
debt and senior subordinated notes were $311.6 million, compared with the
balance of $257.9 million outstanding a year prior.
Interest income for the three months ended March 31, 1997 increased to $1.4
million from $0.8 million, primarily due to greater levels of cash and cash
equivalents invested throughout the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at March 31, 1997 and December 31, 1996 was $47.7
million and $76.2 million, respectively, and the ratio of current assets to
current liabilities was 2.75:1 and 4.88:1 on such dates, respectively. Working
capital decreased primarily due to the acquisitions previously discussed and the
greater accrued interest payable.
Cash provided by operations of $8.6 million and $9.2 million for the three
months ended March 31, 1997 and 1996, respectively, reflects the improvement in
operating results of existing properties, acquisitions and time brokerage
properties net of increased interest expense and increases in other assets. Cash
used for investing activities primarily reflects 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 the long term debt borrowings net of debt repayments. In addition,
the Company has advanced $550,000 to CNI during the three months ended March 31,
1997 under a demand note bearing interest at the prime rate (currently 8.50%).
At March 31, 1997 the Company had total advances to CNI outstanding of
approximately $3,543,000 million, which has been included in investments in
broadcast properties. Non-cash activity relates to option plan compensation,
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 sale of WTWS-TV discussed elsewhere herein was a
non cash transaction and accordingly, the statement of cash flows does not
reflect the increase in investments in broadcast properties of $15 million for
the note receivable from the sale, the sale of property and equipment of
approximately $2.5 million, the accrual of transaction expenses of $0.4 million
or the deferred gain on sale of broadcast property of approximately $12.1
million.
The Company's primary capital requirements are for the acquisition of
broadcasting properties and related capital expenditures and interest and
principal payments on indebtedness. The Company's outstanding senior
subordinated notes require semi-annual interest payments at a fixed rate. The
Company presently has $80 million of outstanding borrowings under its $200
million senior secured revolving credit facility ("Senior Facility").
Borrowings under the Senior Facility bear interest at floating rates and
require interest payments on varying dates, but at least quarterly, depending
on the interest rate option selected by the Company.
The Company believes that it will require additional financing to complete the
acquisitions discussed below (including the expected capital expenditures
associated therewith), and to meet its anticipated short term and long term
working capital
15
requirements for its existing properties. The timing and amount of additional
financing needs will depend, among other things, upon the completion and timing
of the completion of the television station sales previously discussed, the
amount of net proceeds to the Company from the television station sales
(estimated to be $150 million after repayment of associated indebtedness and
transaction expenses and prior to payment of taxes), whether the Company
completes a sale of its billboard operations and the timing and net proceeds
thereof, 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), and the amount of borrowing capacity available to the
Company under the Senior Facility. While the Company currently has maximum
additional borrowing capacity of $120 million under its Senior Facility, the
amount actually available to the Company for borrowing is subject to covenant
compliance, including limitations on indebtedness and other financial ratios.
The Company has recently obtained an amendment to these covenant borrowing
limitations and as of March 31, 1997, based upon these amended covenants, had
approximately $50 million of additional borrowing capacity under the amended
Senior Facility. The amount available for borrowing under the Senior Facility
will be affected by changes in the Company's cash flow position, including cash
flow generated by acquired stations and cash flow reductions from station sales.
The anticipated proceeds of the asset sales previously discussed and the
available borrowings under the Company's Senior Facility will not be adequate
to fund the Company's commitments for pending acquisitions. The Company is
therefore considering additional sources of financing, including public and
private sales of equity and debt securities. The Company has discussed
financing sources with potential underwriters and, based on those discussions
and the receipt of a "highly confident letter", management believes that
sufficient funds can be secured. There can be no assurance that the Company
will be able to obtain additional financing which could adversely affect the
Company's ability to complete such acquisitions.
The Company will require additional financing to enable it to continue its
acquisition strategy and to fund capital expenditures on existing and acquired
properties. 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 Senior Facility or the senior subordinated notes when
due or to make required payments on its preferred stock.
16
ACQUISITION COMMITMENTS
The completion of each of the acquisitions 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 acquisitions 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:
[Enlarge/Download Table]
Property Market Served * Purchase Price
--------------------------------------------------------------------------------------
inTV:
WBIS-TV New York City, NY (1) $257,500,000
WVVI-TV Washington, DC (2) $ 40,000,000
WBSX-TV Detroit, MI $ 35,000,000
Channel 40 Pittsburgh, PA $ 35,000,000
KCMY-TV Sacramento, CA (3) $ 17,000,000
KINB-TV Kansas City, MO (4) $ 16,400,000
WHRC-TV Boston, MA $ 15,000,000
WNAL-TV Birmingham, AL (5) $ 10,000,000
KBCB-TV Seattle, WA $ 8,000,000
KKAG-TV Fresno, CA $ 7,960,000
KOOG-TV Salt Lake City, UT $ 7,500,000
WHBI-TV West Palm Beach, FL (6) $ 7,000,000
KAJW-TV Phoenix, AZ (7) $ 6,600,000
WSWB-TV Wilkes-Barre, Scranton, PA $ 6,160,000
KTVC-TV Cedar Rapids, IA (8) $ 5,000,000
WSCO-TV Green Bay, WI $ 4,750,000
KWOK-TV San Francisco, CA (6) $ 4,500,000
WOST-TV Providence, RI (9) $ 3,000,000
WAQF-TV Buffalo, NY (10) $ 3,000,000
WRMY-TV Raleigh, Durham, NC $ 2,500,000
KVUT-TV Little Rock, AR (11) $ 2,500,000
WFCT-TV, WCTD-TV Tampa and Miami, FL $ 801,000
WJUE-TV Grand Rapids, MI (12) $ 500,000
KGLB-TV Tulsa, OK (7) $ 421,000
Paxson Radio:
WKES-FM Tampa, FL $ 35,323,000
WFKZ-FM Plantation Key, FL (13) $ 3,500,000
WAVK-FM Marathon, FL
WKRY-FM Key West, FL
* Each station is licensed by the FCC to serve a specific community,
which is included in the listed market.
(1) The purchase price includes $7,500,000 of Class A Common Stock.
(2) The purchase price includes $10,000,000 of Class A Common Stock.
(3) The Company has loaned an aggregate of $8,500,000 to KCMY-TV 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.
(4) The Company completed the purchase on April 25, 1997.
(5) In September 1996, the Company loaned $8,000,000 to WNAL-TV and began
operating the station pursuant to a time brokerage agreement pending
completion of the acquisition of the station. The loan amount of
$8,000,000 will be applied to the purchase price at the date of
closing.
(6) The Company has committed to loan up to $7,000,000 and $4,500,000 to
Cocola Broadcasting ("Cocola") to finance the construction and
acquisition of stations WHBI-TV and KWOK-TV, respectively. At March 31,
1997, the Company had advanced approximately $3,250,000 to Cocola. The
Company plans to provide programming for the stations pursuant to
affiliation agreements upon Cocola's acquisitions and commencement of
operations.
(7) The Company has acquired a 49% interest in this property; commitment
represents purchase price for the remaining 51%.
(8) On May 3, 1997, the Company began operating the station pursuant to a
TBA. The purchase price reflects cash portion only and does not
include 600,000 shares of Class A Common Stock consideration.
(9) The Company has acquired a 50% ownership interest for $1,000,000 and
has committed to loan up to $3 million for capital improvements and
relocation of the station's tower. The station is currently being
relocated.
(10) Includes the purchase of two low power television stations, W69CS and
W63BM.
(11) Station is currently under construction. The Company purchased a 49%
interest during 1996 with an option to acquire the remaining 51%.
17
(12) The Company has a 49% interest in the property and has entered into a
contract to acquire the remaining 51% for approximately $1,250,000 plus
forgiveness of amounts advanced to date. At March 31, 1997, the Company
had advanced approximately $1,450,000.
(13) The Company completed the purchase on May 7, 1997.
18
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
No material legal proceedings are pending to which the Company or any of
its property is subject. To the knowledge of the Company, no such legal
proceedings are contemplated by any governmental authority.
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 The Company's Certificate of Designations of the Company's
Junior Cumulative Compounding Redeemable Preferred Stock**
3.1.3 The Company's 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*
4.2 Second amendment, dated May 2, 1997, with respect to the
Amended and Restated Credit Agreement, dated as of
November 19, 1996, among Paxson Communications Corporation,
the Lenders named therein and Union Bank of California, N.A.,
as Agent
10.158 Loan agreement, dated March 26, 1996, by and between Paxson
Communications Corporation and Cocola Media Corporation of San
Francisco for television station KWOK-TV, Novato, California
10.159 Asset purchase agreement, dated April 1, 1997, by and between
Paxson Communications Corporation and The Kralowec Children's
Family Trust and KKAK-TV, Inc. for television station
KKAG(TV), Porterville, California
10.160 Asset purchase agreement, dated May 5, 1997, by and among
Paxson Communications of Cedar Rapids-48, Inc., Fant
Broadcasting Company of Iowa, Inc. and Paxson Communications
Corporation for television station KTVC-TV, Cedar Rapids, Iowa
10.161 Asset purchase agreement, dated April 15, 1997, by and among
Paxson Communications of Buffalo-51, Inc., Fant Broadcasting
of New York, L.L.C., Anthony Fant and Paxson Communications
Corporation for television station WAQF-TV
10.162 Assignment and acceptance agreement, dated April 18, 1997,
among WQED Pittsburgh and Paxson Communications of
Pittsburgh-40, Inc.
10.163 Merger agreement, dated as of April 29, 1997 among WPBF
Merger, Inc. and WPBF License, Inc. and Paxson Communications
of West Palm Beach-25, Inc. and Paxson West Palm Beach
License, Inc. *****
10.163.1 Paxson Communications of West Palm Beach - 25, Inc. and Paxson
West Palm Beach License, Inc. Subordinated Promissory Note,
dated April 29, 1997 *****
10.163.2 Time brokerage agreement, dated April 29, 1997 by and between
Paxson Communications of West Palm Beach - 25, Inc., and
Paxson West Palm Beach License, Inc., and Paxson
Communications of Florida, Inc. *****
10.164 Asset purchase agreement, dated April 22, 1997, by and between
Paxson Communications of Miami-35, Inc. and Channel 35 of
Miami, Inc.
10.165 Asset purchase agreement, dated April 22, 1997, by and between
Paxson Communications of Tampa-66, Inc. and Channel 66 of
Tampa, Inc.
10.166 Asset purchase agreement, dated April 30, 1997, by and between
Paxson Communications of Green Bay-14, Inc and VCY America,
Inc. for television station WSCO(TV), Green Bay, Wisconsin
19
10.167 Asset purchase agreement, dated May 12, 1997, by and between
The Company, Paxson Communications of New York City, ITT-Dow
Jones Television, ITT Corporation, and Dow Jones & Company
for television station WBIS(TV), New York City, New York
10.167.1 Time brokerage agreement, dated May, 1997, by and between
ITT-Dow Jones Television and Paxson Communications of New
York-31, Inc. for Television Station WBIS(TV), New York
City, New York
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.
***** Filed with the Company's Form 8-K, dated April 29, 1997, under
Item 7. Financial Statements and Exhibits and incorporated
herein by reference.
(b) Reports on Form 8-K.
The Company filed a Form 8-K, dated January 10, 1997, under Item 2, Acquisition
or Disposition of Assets and Item 7. Financial Statements and Exhibits in
connection with the acquisition of the Fort Lauderdale Radio Stations, WPLL-FM
(formerly WSHE-FM) and WSRF-AM.
20
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 15, 1997 By: /s/ James B. Bocock
-----------------------------------
James B. Bocock
President, Chief Operating
Officer, Director
Date: May 15, 1997 By: /s/ Arthur D. Tek
-----------------------------------
Arthur D. Tek
Vice President, Chief
Financial Officer, Director
21
Dates Referenced Herein and Documents Incorporated by Reference
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