-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HjiOl3RzN27889eAF0tZ50wRJRE3B7+w7vVe8gvhObneGiqWhBm6lLy6RXt+4T63 qrmatiXJEMns/2POgvj6+g== 0000950130-99-003095.txt : 19990518 0000950130-99-003095.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950130-99-003095 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEREP NATIONAL RADIO SALES INC CENTRAL INDEX KEY: 0000796735 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 131865151 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-60575 FILM NUMBER: 99627236 BUSINESS ADDRESS: STREET 1: 100 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129160700 MAIL ADDRESS: STREET 1: 100 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 333-60575 ------------- INTEREP NATIONAL RADIO SALES, INC. - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 13-1865151 - ------------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Park Avenue, New York, New York 10017 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (212) 916-0700 - ------------------------------------------------------------------------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of May 10, 1999, there were 297,976 outstanding shares of the registrant's Common Stock, $0.04 par value per share. PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS INTEREP NATIONAL RADIO SALES, INC. CONSOLIDATED BALANCE SHEETS (in thousands except share information) (Unaudited)
March 31, December 31, 1999 1998 ---------- ------------- ASSETS Current assets: Cash and cash equivalents $ 23,216 $ 32,962 Receivables, less allowance for doubtful accounts of $1,584 and $1,626 27,041 35,104 respectively Representation contract buyouts receivable 10,251 11,447 Current portion of deferred representation contract costs 30,405 33,742 Prepaid expenses and other current assets 1,906 1,207 -------- -------- Total current assets 92,819 114,462 -------- -------- Fixed assets, net 5,140 4,311 Deferred costs on representation contract purchases 43,893 45,702 Station contract rights, net 1,427 1,681 Representation contract buyouts receivable 5,421 6,920 Other assets 11,409 11,432 -------- -------- Total assets $160,109 $184,508 ======== ========
-2-
March 31, December 31, 1999 1998 -------- -------- LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Capitalized lease obligations $ 52 $ 103 Accounts payable and accrued expenses 12,054 16,537 Accrued interest 2,500 4,972 Representation contract buyouts payable 18,499 20,219 Accrued employee-related liabilities 3,044 6,520 -------- -------- Total current liabilities 36,149 48,351 -------- -------- Long-term debt 100,000 100,000 -------- -------- Representation contract buyouts payable 22,917 26,706 -------- -------- Other noncurrent liabilities 7,654 16,150 -------- -------- Commitments and contingencies Total common and preferred stock subject to redemption - - Shareholders' deficit: Common stock, $.04 par value-1,000,000 shares authorized, 334,549 shares issued 14 14 Additional paid-in-capital 1,163 1,163 Accumulated deficit (5,697) (5,797) Receivable from Employee Stock Ownership Plan (82) (82) Treasury stock, at cost-36,724 and 36,573 shares, respectively (2,009) (1,997) -------- -------- Total shareholders' deficit (6,611) (6,699) -------- -------- Total liabilities and shareholders' deficit $160,109 $184,508 ======== ========
-3- INTEREP NATIONAL RADIO SALES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands) (unaudited)
For the Three Months Ended March 31, ----------------- 1999 1998 -------- ------- Commission revenue $17,511 $15,898 Contract termination revenue 2,505 24,116 ------- ------- Total revenues 20,016 40,014 ------- ------- Operating expenses: Selling expenses 14,646 13,836 General and administrative expenses 2,599 2,597 Depreciation and amortization expense 9,502 9,096 ------- ------- Total operating expenses 26,747 25,529 ------- ------- Operating (loss) income (6,731) 14,485 Interest expense, net 2,382 1,005 ------- ------- (Loss) Income before (benefit) provision for income taxes (9,113) 13,480 (Benefit) provision for income taxes (3,736) 5,526 ------- ------- Net (loss) income (5,377) 7,954 ------- ------- Preferred stock dividend requirements and - 465 redemption premium ------- ------- Net (loss) income applicable to common shareholders $(5,377) $ 7,489 ======= =======
-4- INTEREP NATIONAL RADIO SALES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
For the Three Months Ended March 31, ------------------ 1999 1998 -------- -------- Cash flows from operating activities: Net (loss) income $(5,377) $ 7,954 Adjustments to reconcile (loss) income to net cash provided by operating activities: Depreciation and amortization 9,502 9,096 Changes in assets and liabilities- Receivables 8,063 2,967 Representation contracts buyout receivable 2,695 (9,175) Prepaid expenses and other current assets (699) (254) Other noncurrent assets (236) (116) Accounts payable and accrued expenses (4,534) (2,049) Accrued interest (2,472) (71) Accrued employee-related liabilities (3,476) (1,806) Other noncurrent liabilities (3,019) 5,744 ------- ------- Net cash provided by operating activities 447 12,290 ------- ------- Cash flows from investing activities: Additions to fixed assets (1,155) (177) ------- ------- Net cash used in investing activities: (1,155) (177) ------- ------- Cash flows from financing activities: Station representation contracts payments (9,026) (7,294) Debt repayments - (7,250) Borrowings in accordance with credit agreement - 5,725 Purchases of treasury stock (12) (256) Other, net - (16) ------- ------- Net cash used in financing activities (9,038) (9,091) ------- ------- Net (decrease) increase in cash and cash equivalents (9,746) 3,022 Cash and cash equivalents, beginning of period 32,962 1,419 ------- ------- Cash and cash equivalents, end of period $23,216 $ 4,441 ======= ======= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest paid $ 4,972 $ 904 Income taxes paid 403 49 Non-cash investing and financing activities: Station representation contracts acquired $ 2,919 $ 2,597 ======= =======
-5- INTEREP NATIONAL RADIO SALES, INC. NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (in thousands except share information) 1. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Interep National Radio Sales, Inc. ("Interep"), together with its subsidiaries (collectively, the "Company") and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. All significant intercompany transactions and balances have been eliminated. The consolidated financial statements of March 31, 1999 and 1998 are unaudited; however, in the opinion of management, such statements include all adjustments necessary for a fair presentation of the results for the periods presented. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Consolidated Financial Statements for the year ended December 31, 1998, which are available upon request of the Company. Due to the seasonal nature of the Company's business, the results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ended December 31, 1999. Revenue Recognition The Company is a national representation ("rep") firm serving radio broadcast clients throughout the United States. Commission revenue is derived from sales of advertising time for radio stations under representation contracts. Commissions and fees are recognized in the month the advertisement is broadcast. In connection with its unwired network business, the Company collects fees for unwired network radio advertising and, after deducting its commissions, remits the fees to the respective radio stations. Since it is common practice in the industry for rep companies not to pay a station until the corresponding receivable is paid, and since the receivable and payable are equal, except for the commissions, fees payable to stations have been offset against the related receivable from advertising agencies in the accompanying consolidated balance sheets. Representation Contract Termination Revenue and Contract Acquisition Costs The Company's station representation contracts usually renew automatically from year to year unless either party provides written notice of termination at least twelve months prior to the next automatic renewal date. In accordance with industry practice, in lieu of termination, an arrangement is normally made for the purchase of such contracts by a successor representation firm. The purchase price paid by the successor representation firm is generally based upon the historic commission income projected over the remaining contract period, plus two months (the "Buyout Period"). Costs of obtaining station representation contracts are deferred and amortized over the Buyout Period. Such amortization is included in the accompanying consolidated statements of operations as a component of depreciation and amortization expense. Amounts which are to be amortized during the next year are included as current assets in the accompanying consolidated balance sheets. Income earned from the loss of station representation contracts (contract termination revenue) is recognized on the effective date of the buyout agreement. -6- In addition, costs incurred as a result of commission rate reductions are deferred and amortized over the remaining life of the existing representation agreement. Such amortization is included in the accompanying consolidated statements of operations as a component of depreciation and amortization expense. 2. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet and measured at its fair value. This Statement also requires that changes in the derivative's fair value be recognized currently in earnings. To date, the Company has not, and has no present intention, to invest in any derivative instruments or participate in any hedging activities. Accordingly, the adoption of SFAS 133 will not have any effect on the Company. 3. Segment Disclosures In 1998, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information". The Statement requires the Company to report segment financial information consistent with the presentation made to the Company's management for decision making purposes. The Company is managed as one segment and all revenues are derived solely from radio representation operations and related activities. The Company's management decisions are based on EBITDA (income before interest, taxes, depreciation and amortization) of $2,771 and $23,581 in the quarters ended March 31, 1999 and 1998, respectively. -7- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is based upon and should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, included elsewhere in this Report. Certain statements contained herein, including without limitation, statements containing the words "believes", "anticipates", "intends", "expects" and words of similar import, constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such factors include, among others, the following: general economic and business conditions, both domestic and foreign; industry capacity; demographic changes; existing government regulations and changes in, or the failure to comply with, government regulations; liability and other claims asserted against the Company; competition; the loss of any significant customers; changes in operating strategy or development plans; the ability to attract and retain qualified personnel; the significant indebtedness of the Company after certain financing transactions in 1998; and other factors referenced in this Report. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. General The Company derives substantially all of its revenues from commissions on sales of national spot radio advertising air time on behalf of radio stations represented by the Company. Generally, national spot advertising time is purchased by advertising agencies or media buying services retained by advertisers to create advertising campaigns and to place advertising with radio stations and other media. The Company receives commissions from its client radio stations based on the national spot radio advertising billings of the station, net of the standard advertising agency and media buying services commissions (typically 15%). Commission rates are negotiated and set forth in a client's representation contract. Since commissions are based on the prices paid to radio stations for spots, the Company's revenue base is constantly adjusted for inflation. The Company's operating results generally are dependent on (i) increases and decreases in the size of the total national spot radio advertising market, (ii) changes in the Company's share of this market, (iii) acquisitions and terminations of representation contracts and (iv) the Company's operating expense levels. The effect of these factors on the Company's financial condition and results of operations has varied from period to period. Total United States national spot radio advertising annual revenues have grown from approximately $1.1 billion to approximately $2.0 billion during the six years ended December 31, 1998. The performance of the national spot radio advertising market is influenced by a number of factors, including, but not limited to, general economic conditions, consumer attitudes and spending patterns, the share of total advertising spent on radio and the share of total radio advertising represented by national spot radio. The Company's share of the national spot advertising market changes as a result of increases and decreases in the amount of national spot advertising broadcast on the Company's client stations. Moreover, the Company's market share increases as the Company acquires representation contracts with new client stations, and decreases if current client station representation contracts are terminated. Thus, the Company's ability to attract new clients, while retaining existing clients, significantly affects its market share. In this regard, the value of representation contracts which have been acquired or terminated during the last few years has tended to increase, due to a number of factors, including the consolidation of ownership -8- in the radio broadcast industry following the enactment of the Telecommunications Act of 1996. Accordingly, in recent years, the Company's rep contract acquisition activity has increased and the Company has devoted a significant amount of its resources to acquiring representation contracts. At the same time, there has been an increase in the amount of revenue received by the Company on the termination of representation contracts. The decision to acquire a representation contract is based on the market share opportunity presented and an analysis of the costs and net benefits to be derived. The Company continuously seeks opportunities to acquire additional representation contracts on attractive terms, while maintaining its current clients. The Company's ability to acquire and maintain representation contracts has had, and will continue to have, a significant impact on its revenues and cash flows. Following industry practice, the Company acts as the exclusive national rep firm for each of its client radio stations pursuant to a written contract. If a station terminates its contract prior to the scheduled termination date, the station is obligated to pay the Company, as required by the contract or in accordance with industry practice, an amount approximately equal to the commissions the Company would have earned during the unexpired term of the canceled contract, plus an additional two months of "spill over" commissions (representing commissions earned on advertising placed or committed to prior to the contract termination but broadcast thereafter). In practice, these amounts are usually paid by the successor rep firm which signs a new contract with the station and assumes the responsibility for payment to the former rep firm. Such payments are usually made in equal monthly installments over a period consisting of one-half the number of months remaining under the terminated contract. For example, if the Company acquires the representation contract of a station which is terminating its contract with a competing rep firm with a remaining unexpired term of 12 months, the total obligation would be 14 months of commissions payable in seven equal monthly installments. The Company recognizes revenue resulting from the termination of a contract with a client as of the effective date of the termination. In this regard, when a contract is terminated, the unamortized portion, if any, of the expense originally incurred on acquisition of such contract is written-off entirely. Historically, these amounts have not been material. With respect to its entry into a representation contract with a new client, the Company amortizes the contract acquisition cost incurred in equal monthly installments over the life of the new contract. As a result, the Company's operating income is affected, negatively or positively, by the acquisition or loss of client stations. The Company has been unable to identify a method to forecast any trends in buyout activity, or in the amount of revenue or expense that will likely be associated with buyouts during a particular period. Generally, the amount of revenue resulting from the buyout of a representation contract depends on the length of the remaining term of the contract and the revenue generated under the contract during the 12 months preceding the date of termination (the "trailing period"). The amount recognized by the Company as contract termination revenue in any period is not, however, indicative of such revenue that may be realized in any future period from contract terminations because historically the level of buyout activity has varied from period to period and because the length of the remaining terms, and the commission revenue generation, of the contracts which are terminated in any period vary to a considerable extent. Accordingly, while the consolidation of ownership in the radio broadcast industry that has followed the enactment of the Telecommunications Act of 1996 has increased buyout activity and amounts, the impact of such activity on the Company's revenues and income is expected to be uncertain, due to the variables of contract length and commission generation. While the commission revenue generated under a representation contract during a trailing period is used in the calculation of the payments to be made by the Company on its acquisition of such contract, such revenue should not be relied on as an indication of the future commission revenue to be generated by the Company under that contract. Such revenue will depend on a number of factors, including the amount of national spot advertising broadcast by the station involved. This, in turn, will be affected by factors such as general and local economic conditions, consumer attitudes and spending patterns, the share of total advertising spent on radio and the share of total radio advertising represented by national spot radio. -9- The Company's selling and corporate expense levels are dependent on management decisions regarding operating and staffing levels and on inflation. Selling expenses represent all costs associated with the Company's marketing, sales and sales support functions. Corporate expenses include items such as corporate management, corporate communications, financial services, advertising and promotion expenses, Internet representation development expenses and employee benefit plan contributions. The Company's business normally follows the pattern of advertising expenditures in general and is seasonal to the extent that radio advertising spending increases during the fourth calendar quarter in connection with the Christmas season and tends to be weaker during the first calendar quarter. Radio advertising generally increases during the second and third quarters due to holiday-related advertising, school vacations and back-to-school sales. Additionally, radio tends to experience increases in the amount of advertising revenues as a result of special events such as Presidential election campaigns. Furthermore, the level of advertising revenues of radio stations, and therefore the level of revenues of the Company, is susceptible to prevailing general and local economic conditions and the corresponding increases or decreases in the budgets of advertisers, as well as market conditions and trends affecting advertising expenditures in specific industries. Results of Operations Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998 Commission Revenue. Commission revenue in the first quarter of 1999 increased to $17.5 million, approximately 10.1%, from $15.9 million in the comparable quarter in 1998. This increase is attributable to the fact that commissions generated from new client representation contracts (primarily the ABC radio stations) exceeded the loss of commission revenue from terminated representation contracts (primarily Nationwide Communications), as well as a general increase in national spot advertising on client stations. Contract Termination Revenue. Contract termination revenue was $2.5 million during the first quarter of 1999, as compared to $24.1 million in the comparable 1999 period, a decrease of $21.6 million, or 89.6%. This difference is attributable to the fact that a substantial amount of contract termination revenue was generated in the first quarter of 1998 as a result of the termination of the Company's representation contracts with stations owned by SFX Broadcasting, Inc., when SFX was acquired by an affiliate of a competitor of the Company. The loss of representation contracts during the first quarter of 1999 was not as significant. The value of representation contracts acquired or terminated during the last few years has generally tended to increase, due to a number of factors, including the consolidation of ownership in the radio broadcast industry following the enactment of the Telecommunications Act of 1996. Selling Expenses. Selling expenses for the first three months of 1999 increased to $14.6 million from $13.8 million during the same period of 1998. This increase of $0.8 million, or approximately 5.9%, was primarily due to employee compensation increases associated with the growth in commission revenue. General and Administrative Expenses. General and administrative expenses were virtually unchanged at $2.6 million for the first quarter of 1999 and 1998. The benefits of the Company's back office relocation were offset by costs incurred in connection with the Company's entry into Internet representation. Depreciation and Amortization. Depreciation and amortization increased by $0.4 million in the first quarter of 1999, to $9.5 million, from $9.1 million in the first quarter of 1998. This increase of approximately 4.5% was due to the amortization of new representation contracts. Operating Income. Operating income decreased by $21 million, or 146.5%, for the first quarter of 1999, compared with the comparable period in 1998. This decline is essentially attributable to the reduction in contract termination revenue. -10- Interest Expense, net. Interest expense, net increased approximately $1.4 million, or approximately 137%, to $2.4 million for the first quarter of 1999, compared to $1.0 million for the first quarter of 1998. This increase primarily resulted from the interest on the $100.0 million principal amount of 10% Senior Subordinated Notes due 2008 issued by the Company on July 2, 1998. (Benefit) Provision for Income Taxes. Benefit for income taxes was approximately $3.7 million for the first quarter of 1999 compared to a provision for income taxes of $5.5 million in the comparable 1998 period, as the loss incurred during the quarter generated a credit which will be applied against income earned later in the year. Net Income (Loss). The Company's net loss after tax of approximately $5.3 million for the three months ended March 31, 1999, a $13.3 million reduction from the $7.9 million net income for the comparable period in 1998, is essentially attributable to the reduction in contract termination revenue discussed above. It also reflects the fact that, due to the seasonality of the Company's business, the first quarter is the normally the Company's weakest quarter. Liquidity and Capital Resources The Company's cash requirements have been primarily funded by cash provided from operations and bank debt. Cash provided by operating activities for the quarter ended March 31, 1999 amounted to $0.4 million. As noted above, the first quarter is the Company's weakest quarter due to seasonality. Net cash used in investing activities is attributable to capital expenditures. Capital expenditures of $1.2 million during the first quarter of 1999 were primarily for computer equipment and upgrades. Overall cash used for financing activities of $9.0 million during the first quarter of 1999 was primarily used for acquisitions of station representation contracts. In general, as the Company acquires new representation contracts, it uses more cash and, as its contracts are terminated, it receives additional cash. For the reasons noted in "General" above, the Company is not able to predict the amount of cash it will require for contract acquisitions, or the cash it will receive on contract terminations, from period to period. The Company believes, however, that based on its historical performance, it will generate sufficient cash from operations and borrowings to fund its foreseeable contract acquisition payment requirements. On July 2, 1998, the Company issued $100.0 million aggregate principal amount of 10% Senior Subordinated Notes due July 1, 2008 (the "Notes"). A portion of the net proceeds of this issuance was used to repay the then outstanding balance of the Company's bank debt. Additionally, the Company redeemed all of the outstanding shares of the Company's Series A Preferred Stock and Series B Preferred Stock, together with all of the outstanding shares of Common Stock subject to redemption. The Company also entered into an agreement with two banks to provide the Company with a $10.0 million revolving credit facility. The Company believes that its enhanced liquidity resulting from the transactions described above, together with anticipated cash from continuing operations, should be sufficient to fund its operations and anticipated needs for required representation contract acquisition payments, and to make required payments of principal and interest under its new credit facility and 10.0% annual interest payments on the Notes. The Company may not, however, generate sufficient cash flow for these purposes or to repay the Notes at maturity. The Company's ability to fund its operations and required contract buyout payments and to make scheduled principal and interest payments will depend on its future performance, which, to a certain -11- extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. The Company may also need to refinance all or a portion of the Notes on or prior to maturity. There can be no assurance that the Company will be able to effect any such refinancing on commercially reasonable terms or at all. Year 2000 Assessment Many computer systems experience problems handling dates beyond the year 1999. Therefore, some computer hardware and software will need to be modified prior to the year 2000 in order to remain functional. During 1998, the Company completed an assessment of its internal readiness to implement Year 2000 compliant systems on a timely basis. The Company currently utilizes software systems for its accounting, billing and database management functions, among others, which were developed by third parties or developed by the Company using third party software development tools. These third parties have advised the Company that such systems are Year 2000 compliant or, in some cases, will be made Year 2000 compliant through the installation of software patches or upgrades. The Company completed implementation of programming changes needed to make its systems Year 2000 compliant during the first quarter of 1999 and does not believe that the related cost will have a material adverse effect on the Company. The Company estimates that its expenditures for Year 2000 compliance implementation during 1999 could be $250,000. There can be no assurance, however, that there will not be a delay in, or increased costs associated with, the implementation of such changes, and any inability to implement such changes could have a material adverse effect on the Company. The Company has not completed its assessment of the Year 2000 compliance of its radio station clients, nor of the possible consequences to the Company of the failure of one or more of its radio station clients to become Year 2000 compliant on a timely basis. It is possible that if a substantial number of the Company's radio station clients failed to implement Year 2000 compliant billing or payment systems, for example, their payments to the Company of commissions on the sale of radio advertising time might be disrupted, which might adversely affect the Company's cash flow. The Company will discuss these matters with its key radio station clients during 1999 to attempt to ascertain whether and to what extent such problems are likely to occur. It is not clear, however, what measures (if any) the Company could take to deal with such eventualities while still maintaining client relationships. The Company has been advised by its principal suppliers of data base information services and payroll services that those services will be Year 2000 compliant on a timely basis. The Company does not believe that it has other relationships with vendors or suppliers which, if disrupted due to the failure of such vendors and suppliers to deal adequately with their own Year 2000 compliance issues, would have a material adverse effect on the Company. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from changes in interest rates that may adversely affect its results of operations and financial condition. The Company seeks to minimize the risks from these interest rate fluctuations through its regular operating and financing activities. The Company's policy is not to use financial instruments for trading or other speculative purposes. The Company is not currently a party to any financial instruments. PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K -12- (a) Exhibits. The Exhibits filed with this Report are listed on the Exhibit Index immediately following the signature page. (b) Reports on Form 8-K. No Reports on Form 8-K were filed during the three months ended March 31, 1999. -13- 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. INTEREP NATIONAL RADIO SALES, INC. May 17, 1999 By WILLIAM J. McENTEE, JR. ---------------------------------------- William J. McEntee, Jr. Vice President and Chief Financial Officer -14- EXHIBIT INDEX 10.1 Amendment to Revolving Line of Credit Agreement, dated as of April 30, 1999, among the Registrant, its subsidiaries, BankBoston, N.A., and Summit Bank 27.1 Financial Data Schedule EX-10.1 2 AMENDMENT TO REVOLVING LINE OF CREDIT AGREEMENT Exhibit 10.1 INTEREP NATIONAL RADIO SALES, INC. 100 Park Avenue New York, New York 10017 BankBoston, N.A. Individually and as Agent Summit Bank Dated as of: April 30, 1999 Re: Amendment to Revolving Line of Credit Agreement ----------------------------------------------- Ladies and Gentlemen: We refer to the Revolving Line of Credit Agreement, dated as of July 2, 1998 (the "Credit Agreement"), by and among Interep National Radio Sales, Inc. (the "Company"), the several Subsidiary Borrowers party thereto (the Company and such Subsidiary Borrowers being hereinafter called, collectively, the "Borrowers"). BankBoston, N.A., as Administrative Agent (the "Agent"), Summit Bank, as Documentation Agent, and the undersigned Lenders and other Lenders that may from time to time be parties to the Credit Agreement. All of the terms in this letter of amendment (the "Amendment") that are not defined herein, but that are defined in the Credit Agreement, shall have the meanings specified for such terms in the Credit Agreement. Each of the parties signing below desires to amend the Credit Agreement in accordance with the terms and conditions set forth herein and, in consideration of the promises herein contained and for other valuable consideration, each such party agrees as follows: ARTICLE I AMENDMENT TO CREDIT AGREEMENT ----------------------------- Effective as of December 31, 1998, the Credit Agreement is amended as follows: 1.1. Total Leverage. The Credit Agreement is amended by deleting the -------------- phrase "in excess of $5,000,000" from clause (i)(b) of Section 8.22 thereof, such that, as of and after December 31, 1998, such clause (i)(b) shall read in its entirety as follows: -2- "(b) the aggregate amount of cash and Permitted Investments of the Borrowers to" ARTICLE II REPRESENTATIONS AND WARRANTIES ------------------------------ The Borrowers jointly and severally represent and warrant to the Agent and the Lenders as follows: 2.1 Representations and Warranties. Each of the representations and ------------------------------ warranties made by or on behalf of the Borrowers to the Agent and the Lenders in the Credit Documents was true and correct when made and is true and correct on and as of the date hereof (after giving effect to the amendment contemplated hereby from and after the effective date therefor), except to the extent that any such representation or warranty relates by its express terms solely to a prior date. After giving effect to this Amendment, no Defaults or Events of Default are continuing. 2.2 Corporate Authority. Each of the Borrowers has taken all ------------------- necessary corporate proceedings to authorize this Amendment and the matters contemplated hereby. 2.3 Enforceability. This Amendment has been duly executed and -------------- delivered by each of the Borrowers and is in full force and effect on and as of the date hereof, and the agreements and obligations of the Borrowers contained in this Amendment and in each of the Credit Documents after giving effect hereto, constitute the legal, valid and binding obligations of the Borrowers enforceable against the Borrowers in accordance with their respective terms. ARTICLE III PROVISIONS OF GENERAL APPLICATION --------------------------------- This Amendment constitutes and shall, for all purposes of the Credit Agreement, be deemed to be a "Credit Document". Except as otherwise expressly provided by this Amendment, all of the terms, conditions and provisions of the Credit Agreement and each of the other Credit Documents remain unaltered. This Amendment and the rights and obligations hereunder of each of the parties hereto shall be governed by and interpreted and determined in accordance with the internal laws of The Commonwealth of Massachusetts. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors in title and assigns. This Amendment may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart hereof signed by each of the parties hereto. -3- If you are in agreement with the foregoing, please sign the enclosed counterparts of this Amendment and return such counterparts to the undersigned. Very truly yours, INTEREP NATIONAL RADIO SALES, INC. By: /s/ William J. McEntee ------------------------- Title: CFO ------------------------- The Subsidiary Borrowers: ------------------------ MCGAVERN GUILD, INC. D&R RADIO, INC. CBS RADIO SALES, INC. ALLIED RADIO PARTNERS, INC. CABALLERO SPANISH MEDIA L.L.C. CLEAR CHANNEL RADIO, LLC By: /s/ William J. McEntee ------------------------- Title: CFO ------------------------- of each of the corporations identified above The foregoing Amendment is hereby accepted by the Agent and the undersigned Lenders on and as of the date first above written and with the effect specified herein. BANKBOSTON, N.A. Individually and as Agent By: /s/ --------------------------------- Title: Director ------------------------------ SUMMIT BANK By: /s/ ------------------------------- Title: Vice President ------------------------------ EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE SHEETS OF INTEREP NATIONAL RADIO SALES, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1999 MAR-31-1999 23216 0 38876 1584 0 92819 21803 16663 160109 36149 100000 0 0 14 (6625) 160109 17511 20016 0 26747 0 0 2382 (9113) (3736) (5377) 0 0 0 (5377) 0 0
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