-----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, P3JAvRBaeEvJNn2+dK5rOk5imR4azL7Hxy45AbLtZeQXi0/hwQPiDquUmJE+LP7Y dHLyRlrKOZq/G4TNvRFAUQ== 0000921530-97-000137.txt : 19970813 0000921530-97-000137.hdr.sgml : 19970813 ACCESSION NUMBER: 0000921530-97-000137 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KATZ MEDIA CORP CENTRAL INDEX KEY: 0000864363 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 133563605 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24214 FILM NUMBER: 97656603 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2124246000 FORMER COMPANY: FORMER CONFORMED NAME: KATZ CORP /DE DATE OF NAME CHANGE: 19940531 10-Q 1 10Q RE KATZ MEDIA CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 Commission File Number 0-24214 Katz Media Corporation (Formerly Katz Capital Corporation) (Exact name of registrant as specified in its charter) Delaware 13-3779266 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 125 West 55th Street, New York, New York 10019 (Address of principal executive offices - Zip Code) (212) 424-6000 (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 [_] The Registrant does not have any equity securities registered under the Securities Act of 1933, as amended. All outstanding shares of Common Stock of the Registrant are held indirectly by the Registrant's ultimate parent company, Katz Media Group, Inc. INDEX PAGE ---- Item 1 - Financial Statements - ------ Consolidated Balance Sheets........................................... 2 Consolidated Statements of Operations................................. 3 Consolidated Statements of Cash Flows................................. 4 Notes to Consolidated Financial Statements............................ 5-11 Item 2 - Management's Discussion and Analysis of - ------ Financial Condition and Results of Operations....................12-15 Part II Other Information ----------------- Item 1 - Legal Proceedings................................................ 15 - ------ Signatures................................................................ 16 Financial Data Schedule................................................... 17 1 KATZ MEDIA CORPORATION CONSOLIDATED BALANCE SHEETS (000's Omitted, Except Share and Per Share Information)
June 30, December 31, -------- ------------ 1997 1996 ---- ---- (Unaudited) (Note) Assets Current assets: Cash and cash equivalents...................................................... $ 2,842 $ 3,027 Accounts receivable, net of allowance for doubtful accounts of $1,300......... 62,825 68,884 Deferred costs on purchases of station representation contracts............. 22,015 21,428 Prepaid expenses and other current assets .................................. 1,386 1,293 --------- --------- Total current assets.................................................... 89,068 94,632 --------- --------- Fixed assets, net................................................................. 15,711 15,740 Deferred income taxes............................................................. 1,057 -- Deferred costs on purchases of station representation contracts................... 89,084 74,399 Intangible assets, net ........................................................... 215,000 218,808 Other assets, net ................................................................ 34,323 34,121 --------- --------- Total assets............................................................ $ 444,243 $ 437,700 --------- --------- --------- --------- Liabilities and Stockholder's Equity Current liabilities: Accounts payable and accrued liabilities...................................... $ 58,310 $ 45,447 Deferred income on sales of station representation contracts.................. 12,868 14,548 Income taxes payable........................................................ -- 1,811 --------- --------- Total current liabilities............................................... 71,178 61,806 --------- --------- --------- --------- Deferred income on sales of station representation contracts...................... 8,255 4,787 Deferred income taxes payable..................................................... 1,568 1,568 Long-term debt.................................................................... 215,622 217,622 Other liabilities, principally deferred rent and representation contracts payable 46,978 47,207 Commitments and contingencies..................................................... -- -- Stockholder's equity Common stock, $.01 par value, 100 shares authorized issued and outstanding.... -- -- Paid-in-capital................................................................ 128,812 128,785 Carryover basis adjustment..................................................... (20,047) (20,047) Accumulated deficit............................................................ (8,123) (4,028) --------- --------- Total stockholder's equity.............................................. 100,642 104,710 --------- --------- Total liabilities and stockholders' equity............................... $ 444,243 $ 437,700 --------- --------- --------- --------- Note: The consolidated balance sheet at December 31, 1996 has been derived from audited financial statements at that date. The accompanying notes are an integral part of these consolidated financial statements. 2
KATZ MEDIA CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (000's Omitted, Except Share and Per Share Information) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Operating revenues, net...................... $ 45,452 $ 48,115 $ 82,690 $ 86,397 --------- --------- --------- --------- Operating expenses:.......................... Salaries and related costs................... 25,114 25,919 49,026 49,953 Selling, general and administrative.......... 10,103 9,876 20,149 19,466 Depreciation and amortization................ 355 2,830 2,722 5,840 Restructuring Charge......................... 7,095 -- 7,095 -- --------- --------- --------- --------- Total operating expenses............... 42,667 38,625 78,992 75,259 --------- --------- --------- --------- Operating income....................... 2,785 9,490 3,698 11,138 --------- --------- --------- --------- Other expense (income):...................... Interest expense............................. 5,440 5,109 10,841 10,134 Interest income.............................. (135) (21) (227) (50) --------- --------- --------- --------- Total other expense, net............... 5,305 5,088 10,614 10,084 --------- --------- --------- --------- (Loss) income before income tax provision (benefit) ................... (2,520) 4,402 (6,916) 1,054 Income tax provision (benefit)............... 1,098 2,812 (2,821) 679 --------- --------- --------- --------- Net income ........................... ($3,618) $1,590 ($4,095) $375 --------- --------- --------- --------- --------- --------- --------- --------- The accompanying notes are an integral part of these consolidated financial statements. 3
KATZ MEDIA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (000's Omitted, Except Share and Per Share Information) (Unaudited) Six Months Ended June 30, -------------------------- 1997 1996 ---- ---- Cash flows from operating activities: Net (loss) income before adjustments......................................... ($4,095) $ 375 -------- -------- Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization............................................ 2,722 5,840 Amortization of debt issuance costs...................................... 292 -- Deferred rent............................................................ 558 790 Non-cash compensation expense for stock options.......................... 55 593 Non-cash 401K contribution............................................... 786 -- Restructuring Charge..................................................... 7,095 -- Changes in assets and liabilities: Decrease (increase) in accounts receivable.............................. 6,271 (2,987) (Increase) in other assets............................................... (1,213) 423 (Increase) in deferred taxes............................................. (1,057) -- Increase in accounts payable and accrued liabilities.................... 1,791 848 (Decrease)in income taxes payable........................................ (1,811) (888) (Decrease) in other liabilities.......................................... (1,064) -- Other, net.............................................................. 1,277 363 -------- -------- Total adjustments........................................................ 15,702 4,982 -------- -------- Net cash provided by operating activities............................... 11,607 5,357 -------- -------- Cash flows from investing activities: Capital expenditures....................................................... (1,842) (4,106) Payments received on sales of station representation contracts............. 17,363 9,677 Payments made on purchases of station representation contracts............. (23,845) (21,488) -------- -------- Net cash (used in) investing activities......................... (8,324) (15,917) -------- -------- Cash flows from financing activities: Credit facilities borrowing.................................................. 39,800 36,000 Credit facilities repayments................................................. (41,800) (21,700) Repurchase of Company Common Stock........................................... (1,468) -- Retirement of 12 3/4% Senior Subordinated Notes.............................. -- (1,740) -------- -------- Net cash (used in) provided by financing activities..................... (3,468) 12,560 -------- -------- Net decrease in cash and cash equivalents...................................... (185) 2,000 Cash and cash equivalents, beginning of period.................................. 3,027 228 -------- -------- Cash and cash equivalents, end of period........................................$ 2,842 $ 2,228 -------- -------- -------- -------- The accompanying notes are an integral part of these consolidated financial statements. 4
KATZ MEDIA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Due to the seasonality of the business of Katz Media Corporation (the "Company"), operating results for the six months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated 1996 financial statements and footnotes thereto included in the Company's Form 10-K filed March 27, 1997 (File No. 0-24214). 2. EARNINGS PER COMMON SHARE Earnings per share information is not presented as the Company is a wholly owned subsidiary of its ultimate parent Company, Katz Media Group, Inc. ("KMG"). 3. RECENT DEVELOPMENTS On July 14, 1997, KMG entered into a Merger Agreement which provides for the acquisition of KMG by a newly formed company (Morris Acquisition Corporation) jointly owned by Chancellor Broadcasting Company and Evergreen Media Corporation, two clients of the Company. Also on this date, Morris Acquisition Corporation announced a tender offer of $11.00 a share for 100% of the outstanding shares of KMG. It is anticipated the transaction will be completed in the third quarter of 1997, subject to regulatory clearance. 4. RESTRUCTURING CHARGE During the second quarter of 1997, the Company completed a review of its operations, including its real estate requirements, in an effort to promote the effectiveness of its operations and enhance its competitive position in the marketplace and general efficiencies. As a result of these efforts the Company has recorded a restructuring charge of $7.1 million, representing severance and other related costs of $3.8 million and costs associated with consolidating certain real estate facilities totaling approximately $3.3 million. Through June 30, 1997, approximately $0.8 million of these costs have been paid by the Company. The Company anticipates the balance of these restructuring costs to be paid by year end 1999. 5. RECLASSIFICATION Certain amounts in the 1996 consolidated financial statements have been reclassified to conform to the current year presentation. 6. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS The following condensed consolidating financial statements for the three and six months ended June 30, 1997 and 1996 present the financial position, the results of operations and cash flows for the Company (carrying any investments in guarantor and non-guarantor subsidiaries under the equity method), guarantor subsidiaries of the Company and non-guarantor subsidiaries of the Company, and the eliminations necessary to arrive at the information for the Company on a consolidated basis. The guarantor subsidiaries are wholly-owned subsidiaries of the Company and have fully and unconditionally guaranteed the Company's 10 1/2% Senior Subordinated Notes due 2007 (the "Notes") on a joint and several basis. The Company believes that providing the following condensed financial information is of material interest to investors in the Notes and has not presented separate financial statements for each of the guarantor subsidiaries of the Company. The Company has not presented separate financial statements and other disclosures concerning the guarantor subsidiaries of the Company because management has determined that such information is not material to investors. 5
KATZ MEDIA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (000's Omitted, Except Share and Per Share Information) June 30, 1997 ------------------------------------------------------------- The The Non- Company Company Guarantors Guarantors Eliminations Consolidated ------- ---------- ---------- ------------ ------------ Assets Current Assets: Cash and cash equivalents..................... $ -- $ 2,834 $ 8 $ -- $ 2,842 Accounts receivable, net...................... -- 62,298 527 -- 62,825 Deferred costs on purchases of station representation contracts...................... -- 22,015 -- -- 22,015 Prepaid expenses and other current assets..... -- 1,386 -- -- 1,386 --------- ---------- --------- ---------- ---------- Total current assets....................... -- 88,533 535 -- 89,068 --------- ---------- --------- ---------- ---------- Fixed assets, net.............................. -- 15,406 305 -- 15,711 Deferred income taxes.......................... -- 1,057 -- -- 1,057 Deferred costs on purchases of station representation contracts...................... -- 89,084 -- -- 89,084 Equity investment in affiliates................ 130,965 -- -- (130,965) -- Due from affiliate............................. 175,888 -- -- (175,888) -- Intangible assets, net......................... -- 214,562 438 -- 215,000 Other assets, net.............................. 18,667 15,405 251 -- 34,323 --------- ---------- --------- ---------- ---------- Total assets............................... $ 325,520 $ 424,047 $ 1,529 ($306,853) $ 444,243 --------- ---------- --------- ---------- ---------- --------- ---------- --------- ---------- ---------- Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued liabilities......$ 7,663 $ 49,239 $ 1,408 $ -- $ 58,310 Deferred income on sales of station representation contracts.................... -- 12,868 -- -- 12,868 --------- ---------- --------- ---------- ---------- Total current liabilities.................. 7,663 62,107 1,408 -- 71,178 --------- ---------- --------- ---------- ---------- Deferred income on sales of station representation contracts...................... -- 8,255 -- -- 8,255 Deferred income taxes payable.................. 1,568 -- -- -- 1,568 Long-term debt................................. 215,622 -- -- -- 215,622 Due to affiliate............................... -- 175,888 -- (175,888) -- Other liabilities.............................. 25 45,724 1,229 -- 46,978 Stockholders' equity Common stock.................................. -- -- 1 (1) -- Paid-in-capital............................... 128,812 96,610 989 (97,599) 128,812 Carryover basis adjustment.................... (20,047) -- -- -- (20,047) (Accumulated deficit) retained earnings ...... (8,123) 35,463 (2,098) (33,365) (8,123) --------- ---------- --------- ---------- ---------- Total stockholders' equity................. 100,642 132,073 (1,108) (130,965) 100,642 --------- ---------- --------- ---------- ---------- Total liabilities and stockholders' equity. $325,520 $424,047 $ 1,529 ($306,853) $444,243 --------- ---------- --------- ---------- ---------- --------- ---------- --------- ---------- ---------- 6
KATZ MEDIA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (000's Omitted, Except Share and Per Share Information) December 31, 1996 ------------------------------------------------------------- The The Non- Company Company Guarantors Guarantors Eliminations Consolidated ------- ---------- ---------- ------------ ------------ Assets Current Assets: Cash and cash equivalents..................... $ -- $ 3,027 $ -- $ -- $ 3,027 Accounts receivable, net...................... -- 67,859 1,025 -- 68,884 Deferred costs on purchases of station representation contracts...................... -- 21,428 -- -- 21,428 Prepaid expenses and other current assets..... -- 1,293 -- -- 1,293 -------- ---------- ---------- ---------- ----------- Total current assets....................... -- 93,607 1,025 -- 94,632 -------- ---------- ---------- ---------- ----------- Fixed assets, net.............................. -- 15,412 328 -- 15,740 Deferred income taxes.......................... -- -- -- -- -- Deferred costs on purchases of station representation contracts...................... -- 74,399 -- -- 74,399 Equity investment in affiliates................ 131,851 -- -- (131,851) -- Due from affiliate............................. 168,356 -- -- (168,356) -- Intangible assets, net......................... -- 218,370 438 -- 218,808 Other assets, net.............................. 22,783 11,180 158 -- 34,121 -------- ---------- ---------- ---------- ----------- Total assets............................... $322,990 $412,968 $ 1,949 ($300,207) $ 437,700 -------- ---------- ---------- ---------- ----------- -------- ---------- ---------- ---------- ----------- Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued liabilities...... $ 658 $ 42,935 $ 1,854 $ -- $ 45,447 Deferred income on sales of station representation contracts.................... -- 14,548 -- -- 14,548 Income taxes payable.......................... -- 1,811 -- -- 1,811 -------- ---------- ---------- ---------- ----------- Total current liabilities.................. 658 59,294 1,854 -- 61,806 -------- ---------- ---------- ---------- ----------- Deferred income on sales of station representation contracts...................... -- 4,787 -- -- 4,787 Deferred income taxes payable.................. -- 1,568 -- -- 1,568 Long-term debt................................. 217,622 -- -- -- 217,622 Due to affiliate............................... -- 168,356 -- (168,356) -- Other liabilities.............................. -- 46,650 557 -- 47,207 Stockholders' equity Common stock.................................. -- -- 1 (1) -- Paid-in-capital............................... 128,785 96,610 989 (97,599) 128,785 Carryover basis adjustment.................... (20,047) -- -- -- (20,047) (Accumulated deficit) retained earnings ...... (4,028) 35,703 (1,452) (34,251) (4,028) -------- ---------- ---------- ---------- ----------- Total stockholders' equity................. 104,710 132,313 (462) (131,851) 104,710 -------- ---------- ---------- ---------- ----------- Total liabilities and stockholders' equity. $322,990 $ 412,968 $ 1,949 ($300,207) $ 437,700 -------- ---------- ---------- ---------- ----------- -------- ---------- ---------- ---------- ----------- 7
KATZ MEDIA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (000's Omitted, Except Share and Per Share Information) Three Months Ended June 30, 1997 -------------------------------------------------------------- The The Non- Company Company Guarantors Guarantors Eliminations Consolidated ------- ---------- ---------- ------------ ------------ Operating revenues, net........................ $ -- $ 44,984 $ 468 $ -- $ 45,452 ------- --------- ------- --------- --------- Operating expenses: Salaries and related costs.................... -- 24,536 578 -- 25,114 Selling, general and administrative........... -- 9,835 268 -- 10,103 Depreciation and amortization................. -- 329 26 -- 355 Restructuring charge.......................... -- 7,095 -- -- 7,095 ------- --------- ------- --------- --------- Total operating expenses................ -- 41,795 872 -- 42,667 ------- --------- ------- --------- --------- Operating income (loss)................. -- 3,189 (404) -- 2,785 Other expense (income): Interest expense.............................. 5,440 -- -- -- 5,440 Interest (income)............................. (126) -- (9) -- (135) ------- --------- ------- --------- --------- Total other expense, net................ 5,314 -- (9) -- 5,305 ------- --------- ------- --------- --------- (Loss) income before income tax (benefit) provision.......................... (5,314) 3,189 (395) -- (2,520) Income tax (benefit) provision................ (2,340) 3,438 -- -- 1,098 Equity in earnings of affiliates, net of taxes................................. (644) -- -- 644 -- ------- --------- ------- --------- --------- Net (loss) income............................ ($3,618) ($249) ($395) $644 ($3,618) ------- --------- ------- --------- --------- ------- --------- ------- --------- ---------
Six Months Ended June 30, 1997 -------------------------------------------------------------- The The Non- Company Company Guarantors Guarantors Eliminations Consolidated ------- ---------- ---------- ------------ ------------ Operating revenues, net........................ $ -- $ 81,780 $ 910 $ -- $ 82,690 -------- --------- ------- --------- --------- Operating expenses: Salaries and related costs.................... -- 47,982 1,044 -- 49,026 Selling, general and administrative........... -- 19,681 468 -- 20,149 Depreciation and amortization................. -- 2,669 53 -- 2,722 Restructuring charge.......................... -- 7,095 -- -- 7,095 -------- --------- ------- --------- --------- Total operating expenses................ -- 77,427 1,565 -- 78,992 -------- --------- ------- --------- --------- Operating income (loss)................. -- 4,353 (655) -- 3,698 Other expense (income): Interest expense.............................. 10,841 -- -- -- 10,841 Interest (income)............................. (218) -- (9) -- (227) -------- --------- ------- --------- --------- Total other expense, net................ 10,623 -- (9) -- 10,614 -------- --------- ------- --------- --------- (Loss) income before income tax (benefit) provision.......................... (10,623) 4,353 (646) -- (6,916) Income tax (benefit) provision................ (4,462) 1,641 -- -- (2,821) Equity in earnings of affiliates, net of taxes................................. 2,066 -- -- (2,066) -- -------- --------- ------- --------- --------- Net (loss) income............................ ($4,095) $ 2,712 ($646) ($2,066) ($4,095) -------- --------- ------- --------- --------- -------- --------- ------- --------- --------- 8
KATZ MEDIA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (000's Omitted, Except Share and Per Share Information) Three Months Ended June 30, 1997 -------------------------------------------------------------- The The Non- Company Company Guarantors Guarantors Eliminations Consolidated ------- ---------- ---------- ------------ ------------ Operating revenues, net........................ $ -- $ 47,554 $ 561 $ -- $ 48,115 ------ -------- ------ -------- -------- Operating expenses: Salaries and related costs.................... -- 25,261 658 -- 25,919 Selling, general and administrative........... -- 9,576 300 -- 9,876 Depreciation and amortization................. -- 2,803 27 -- 2,830 ------ -------- ------ -------- -------- Total operating expenses................ -- 37,640 985 -- 38,625 ------ -------- ------ -------- -------- Operating income........................ -- 9,914 (424) -- 9,490 Other expense (income): Interest expense.............................. 5,105 -- 4 -- 5,109 Interest (income)............................. (23) -- 2 -- (21) ------ -------- ------ -------- -------- Total other expense, net................ 5,082 -- 6 -- 5,088 ------ -------- ------ -------- -------- (Loss) income before income tax (benefit) provision......................... (5,082) 9,914 (430) -- (4,402) Income tax (benefit) provision................ (1,082) 3,894 -- -- 2,812 Equity in earnings of affiliates, net of taxes................................. 5,590 -- -- (5,590) -- ------ -------- ------ -------- -------- Net (loss) income.............................. $1,590 $6,020 ($430) ($5,590) $1,590 ------ -------- ------ -------- -------- ------ -------- ------ -------- --------
Six Months Ended June 30, 1996 ------------------------------------------------------------- The The Non- Company Company Guarantors Guarantors Eliminations Consolidated ------- ---------- ---------- ------------ ------------ Operating revenues, net........................ $ -- $ 84,671 $1,726 $ -- $ 86,397 Operating expenses: Salaries and related costs.................... -- 48,527 1,426 -- 49,953 Selling, general and administrative........... -- 18,828 638 -- 19,466 Depreciation and amortization................. -- 5,787 53 -- 5,840 ------ -------- ------ ------- -------- Total operating expenses................ -- 73,142 2,117 -- 75,259 ------ -------- ------ ------- -------- Operating income........................ -- 11,529 (391) -- 11,138 Other expense (income): Interest expense.............................. 10,130 -- 4 -- 10,134 Interest (income)............................. (50) -- -- -- (50) ------ -------- ------ ------- -------- Total other expense, net................ 10,080 -- 4 -- 10,084 ------ -------- ------ ------- -------- (Loss) income before income tax(benefit) (benefit) provision......................... (10,080) 11,529 (395) -- 1,054 Income tax (benefit) provision................ (4,234) 4,913 -- -- 679 Equity in earnings of affiliates, net of taxes................................. 6,221 -- -- (6,221) -- ------ -------- ------ ------- -------- Net (loss) income.............................. $ 375 $6,616 ($395) ($6,221) $ 375 ------ -------- ------ ------- -------- ------ -------- ------ ------- -------- 9
KATZ MEDIA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (000's Omitted, Except Share and Per Share Information) Six Months Ended June 30, 1997 -------------------------------------------------------------- The The Non- Company Company Guarantors Guarantors Eliminations Consolidated ------- ---------- ---------- ------------ ------------ Net cash (used in) provided by operating activities.................................... ($3,761) $ 15,360 $ 8 $ -- $ 11,607 -------- ---------- ----- ----- -------- Investing Activities: Capital expenditures.......................... -- (1,842) -- -- (1,842) Payments received on sales of station representation contracts...................... -- 17,363 -- -- 17,363 Payments made on purchases of station representation contracts...................... -- (23,845) -- -- (23,845) -------- ---------- ----- ----- -------- Net cash (used in) investing activities........ -- (8,324) -- -- (8,324) -------- ---------- ----- ----- -------- Financing Activities: Credit facilities borrowings.................. 39,800 -- -- -- 39,800 Credit facilities repayments.................. (41,800) -- -- -- (41,800) (Increase) decrease in due (to) from affiliate..................................... 7,229 (7,229) -- -- -- Purchase of Company common stock.............. (1,468) -- -- -- (1,468) Repurchase of old notes....................... -- -- -- -- -- -------- ---------- ----- ----- -------- Net cash provided by (used in) financing activities.................................... 3,761 (7,229) -- -- (3,468) -------- ---------- ----- ----- -------- Net (decrease) increase in cash................ -- (193) 8 -- (185) Cash and cash equivalents, beginning of period........................................ -- 3,027 -- -- 3,027 -------- ---------- ----- ----- -------- Cash and cash equivalents, end of period....... $ -- $ 2,834 $ 8 $ -- $ 2,842 -------- ---------- ----- ----- -------- -------- ---------- ----- ----- -------- 10
KATZ MEDIA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (000's Omitted, Except Share and Per Share Information) Six Months Ended June 30, 1996 ------------------------------------------------------------- The The Non- Company Company Guarantors Guarantors Eliminations Consolidated ------- ---------- ---------- ------------ ------------ Net cash (used in) provided by operating activities.................................... ($9,642) $ 15,008 ($9) $ -- $ 5,357 ------- ---------- ------- --------- ---------- Investing Activities: Capital expenditures.......................... -- (4,106) -- -- (4,106) Payments received on sales of station representation contracts...................... -- 9,677 -- -- 9,677 Payments made on purchases of station representation contracts...................... -- (21,488) -- -- (21,488) ------- ---------- ------- --------- ---------- Net cash (used in) investing activities........ -- (15,917) -- -- (15,917) ------- ---------- ------- --------- ---------- Financing Activities: Credit facilities borrowings.................. 36,000 -- -- -- 36,000 Credit facilities repayments.................. (21,700) -- -- -- (21,700) Increase (decrease) in due (to) from affiliate..................................... (2,918) 2,918 -- -- -- Repurchase of old notes....................... (1,740) -- -- -- (1,740) ------- ---------- ------- --------- ---------- Net cash provided by financing activities...... 9,642 2,918 -- -- 12,560 ------- ---------- ------- --------- ---------- Net increase in cash........................... -- 2,009 (9) -- 2,000 Cash and cash equivalents, beginning of period........................................ -- 187 41 -- 228 ------- ---------- ------- --------- ---------- Cash and cash equivalents, end of period....... $ -- $ 2,196 $ 32 $ -- $ 2,228 ------- ---------- ------- --------- ---------- ------- ---------- ------- --------- ---------- 11
KATZ MEDIA CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General - ------- The following discussion is based upon and should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, included elsewhere herein. The net operating revenues of the Company are derived from commissions on the sale of national spot advertising air time for radio and television clients. Commission rates are negotiated and set forth in the client's individual representation contracts. The key to the Company's success is the maintenance of its current representation contracts with client stations and the acquisition of new representation contracts. The primary operating expenses of the Company are employee salaries, rents, commission-related payments to employees, data processing expenses, and depreciation and amortization. The Company's financial results have been impacted by three significant factors: (i) trends in advertising expenditures, (ii) buyouts of station representation contracts, and (iii) acquisitions of representation firms. The effect of these factors on the Company's financial condition and results of operations have varied from period to period. This quarterly report on Form 10-Q, contains forward looking statements, which represent the Company's expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of national and regional economic conditions, the levels of advertising on the Company's stations, the ability of the Company to obtain new clients and retain existing clients, changes in ownership of client stations and client stations of the Company's competitors, other developments at clients of the Company, the ability of the Company to realize cost reductions from its cost containment efforts, and developments from recent changes in the regulatory environment for its clients. Business - -------- The Company operates as a single segment business and is the only full service media representation firm in the United States serving all types of broadcast media, with leading market shares in the representation of radio and television stations and through NCC (a 50% owned joint venture) cable systems. During the second quarter of 1997, the Company's percentage composition of gross billings (representing the aggregate dollar amount of advertising placed on client stations or systems) by broadcast media was as follows: 55.5% for television; 37.4% for radio; and 7.1% for cable (on a 100% owned basis), interactive/Internet and international. Gross billings during the second quarter of 1997 as compared with the second quarter of 1996 decreased 11.2% for television and increased 16.4% for radio and 19.7% for cable (on a 100% owned basis), internet/Interactive and international. The composition of gross billings by broadcast media during the second quarter of 1996 aggregated 62.1% for television, 31.9% for radio, and 6.0% for cable (on a 100% owned basis), interactive/Internet and international. Results of Operations - Three Months Ended June 30, 1997 - -------------------------------------------------------- Net operating revenues for the second quarter of 1997 totaled $45.5 million, a decrease of approximately $2.6 million, or approximately 5.4%, compared with net operating revenues of $48.1 million for the second quarter of 1996. This decrease primarily reflects the 1996 consolidation of station ownerships, which led to net client losses and declines in gross billings in television, offset in part by net client gains and increases in gross billings in radio. Operating expenses, excluding depreciation and amortization, increased approximately $6.5 million, or 18.2%, from $35.8 million in the second quarter of 1996 to $42.3 million in the second quarter of 1997. Salaries and related costs decreased by approximately $0.8 million as compared to the second quarter of 1996, primarily attributable to decreased sales compensation resulting from decreased operating revenue. Selling, general and administrative expenses 12 increased by approximately $0.2 million as compared with the second quarter of 1996. During the second quarter, the Company completed a review of its operations including real estate requirements in an effort to promote the effectiveness of its operations, enhance its competitive position in the marketplace and promote general efficiencies. The Company has recorded a charge of $7.1 million, of which $3.8 million relates to severance and other related costs and $3.3 million relates to planned facility consolidations. Operating expenses, excluding depreciation and amortization and the restructuring charge, as a percentage of net operating revenues, increased from 74% in the second quarter of 1996 to 77% in the second quarter of 1997. Depreciation and amortization overall decreased by $2.5 million, or 87.5%, for the second quarter of 1997 compared with the second quarter of 1996, primarily due to the effect of increased amortization of income on contracts sold over amortization on acquired contracts. Operating income for the second quarter of 1997 decreased by $6.7 million compared with the second quarter of 1996, reflecting primarily the restructuring charge discussed above. Interest expense, net, increased overall by $0.2 million for the second quarter of 1997 as compared with the second quarter of 1996, primarily due to increased borrowings and $0.1 million of increased amortization of debt issuance costs associated with the Company's December 1996 refinancing. Loss before income tax provision totaled $2.5 million for the second quarter of 1997, compared with income of $4.4 million for the second quarter of 1996. This was primarily due to the components listed above. The difference between the effective tax rate of (43.6%) compared with the U.S. statutory rate of 35% is primarily attributable to goodwill amortization, other nondeductible expenses and state income taxes. Due to the unusual and non-recurring nature of the restructuring charge, its full income tax effect is reflected in the second quarter effective tax rate. Results of Operations - Six Months Ended June 30, 1997 - ------------------------------------------------------ Net operating revenues for the six months ended June 30, 1997 totaled $82.7 million, a decrease of approximately $3.7 million, or approximately 4.3%, compared with net operating revenues of $86.4 million for the six months ended June 30, 1996. This decrease primarily reflects the 1996 consolidation of station ownerships, which led to net client losses and declines in gross billings in television, offset in part by net client gains and increases in gross billings in radio. Operating expenses, excluding depreciation and amortization, increased approximately $6.9 million, or 9.9%, from $69.4 million in the six months ended 13 June 30, 1996 to $76.3 million for the six months ended June 30,1997. Salaries and related costs decreased by approximately $0.9 million as compared to the comparable 1996 period, primarily attributable to decreased sales compensation, resulting from decreased operating revenue. Selling, general and administrative expenses increased by approximately $0.7 million as compared with the comparable 1996 period, primarily due to increased information technology costs. In the second quarter of 1997, the Company recorded a charge of $7.1 million, of which $3.8 million relates to severance and other related costs and $3.3 million relates to planned facility consolidations. Operating expenses, excluding depreciation and amortization and the restructuring charge, as a percentage of net operating revenues, increased from 80% in the six months ended June 30, 1996 to 84% in the comparable period of 1997. Depreciation and amortization overall decreased by $3.1 million, or 53.4%, from the comparable 1996 period, primarily due to the effect of increased amortization of income on contracts sold over amortization on acquired contracts. Operating income for the six months ended June 30, 1997 decreased by $7.4 million compared with the comparable 1996 period, reflecting primarily the restructuring charge discussed above. Interest expense, net, increased overall by $0.5 million during the six months ended June 30, 1997 as compared with the comparable 1996 period, primarily due to increased borrowings and $0.3 million of increased amortization of debt issuance costs associated with the Company's December 1996 refinancing. Loss before income tax benefit totaled $6.9 million for the six months ended June 30, 1997, compared with income of $1.1 million for the comparable 1996 period. This was primarily due to the components listed above. The difference between the effective tax rate of 40.8% compared with the U.S. statutory rate of 35% is primarily attributable to goodwill amortization, other nondeductible expenses and state income taxes. Due to the unusual and non-recurring nature of the restructuring charge, its full income tax effect is reflected in the effective tax rate of 41.6% for the six months ended June 30, 1997. Liquidity and Capital Resources - ------------------------------- Cash provided by operating activities during the first six months of 1997 as compared with the first six months of 1996 increased $6.3 million. This increase in cash provided by operating activities is primarily due to improvements in the collection of accounts receivable and increases in accounts payable and accrued liabilities offset by decreases in other liabilities. Net cash used in investing activities during the first six months of 1997 aggregated $8.3 million, a decrease of $7.6 million compared with $15.9 million during the first six months of 1996. This decrease in cash used in investing activities results primarily from net decreases of $5.3 million of cash used for net purchases of station representation contracts and $2.3 million of reduced capital expenditures. Overall cash used in financing activities during the first six months of 1997 aggregated $3.5 million compared with net cash provided by financing activities in the first six months of 1996 totalling $12.6 million. The change in cash used in financing activities is primarily attributable to net credit facilities repayments of $2.0 million during the first six months of 1997 compared with net borrowings of $14.3 million during the first six months of 1996. In addition, during the six months ended June 30, 1997, the Company purchased 191,500 shares of its common stock for $1.5 million. 14 The following table reconciles operating income to EBITDA for the three and six months periods ended June 30, 1997 and 1996:
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1997 1996 1997 1996 ---- ---- ---- ---- Operating income........................................ $ 2,785 $9,490 $ 3,698 $11,138 Depreciation and amortization........................... 355 2,830 2,722 5,840 Non-cash rent expense................................... 246 355 558 790 Non-cash 401K contribution.............................. 423 -- 786 -- Stock option compensation charge........................ 55 229 55 593 Restructuring charge.................................... 7,095 -- 7,095 -- Other non-cash charges.................................. -- (51) -- -- ------- ------- ------- ------- EBITDA.................................................. $10,959 $12,853 $14,914 $18,361 ------- ------- ------- ------- ------- ------- ------- -------
EBITDA for the second quarter of 1997 decreased approximately $1.9 million, or 14.7%, to $11.0 million as compared with $12.9 million for the second quarter of 1996. This decrease is primarily attributable to lower operating revenues and relatively flat cash operating expenses, described above. The EBITDA margin for the quarter decreased from 26.7% in the second quarter of 1996 to 24.1% in the second quarter of 1997. 15 EBITDA for the first six months of 1997 decreased approximately $3.5 million, or 19.0%, to $14.9 million as compared with $18.4 million for the first six months of 1996. This decrease is primarily attributable to lower operating revenues and relatively flat cash operating expenses as described above. The EBITDA margin decreased from 21.3% in the first six months of 1996 to 18.0% in the first six months of 1997. The Company continuously seeks opportunities to acquire additional representation contracts on attractive terms, and at the same time looks to maintain its current client roster. In addition, the recent changes in ownership of broadcast properties have fueled changes in client engagements among independent media representation firms. These changes and the Company's ability to acquire and maintain representation contracts can cause fluctuations in the Company's revenues and cash flows from period to period. The Company's working capital requirements have been primarily provided by operations and borrowings under its credit facilities. It is expected that the Company's primary sources of financing for its future business activities will continue to be from operations plus borrowings under the Company's Credit Agreement. On July 14, 1997, KMG entered into a Merger Agreement providing for the merger of KMG with a jointly owned subsidiary of Chancellor Broadcasting Company and Evergreen Media Corporation. Upon purchase of the shares in the tender offer, a change of control will occur which will result in the lenders' ability under the Company's Credit Agreement to accelerate the outstanding loans and also trigger a requirement on the part of the Company to offer to repurchase its 10 1/2% Senior Subordinated Notes due 2007. As part of the Merger Agreement, Chancellor Broadcasting Company and Evergreen Media Corporation have agreed to make available to KMG funds to refinance the Company's indebtedness, if required. PART II Other Information ----------------- Item 1 - Legal Proceedings The Company, from time to time, is involved in litigation brought by former employees and other litigation incidental to the conduct of its business. The Company is not a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on the Company. There are no reportable items under Part II, Items 2-6. 16 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. Dated: August 12, 1997 KATZ MEDIA CORPORATION By: /S/ THOMAS F. OLSON By: /S/ RICHARD E. VENDIG --------------------------- ---------------------------- Thomas F. Olson Richard E. Vendig President and Senior Vice President Chief Executive Officer and Director Chief Financial & Administrative Officer, Treasurer 17 EX-27 2 FINANCIAL DATA SCHEDULE RE KATZ MEDIA CORPORATION
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 2,842 0 62,825 1,300 0 89,068 31,244 (15,533) 444,243 71,178 0 0 0 0 100,642 444,243 82,690 82,690 69,175 69,175 (227) 0 10,841 (6,916) (2,821) (4,095) 0 0 0 (4,095) 0 0
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