-----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, WZ5oCn9eM9w6x0/LsCFYehuxIO6uu9lWIvD/L9phX1nkkQxQXGLLvn2KnllvjhuJ jChusVkvxKqK95ndolsqOQ== 0000950136-96-000312.txt : 19960515 0000950136-96-000312.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950136-96-000312 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 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: 96564054 BUSINESS ADDRESS: STREET 1: 125 WEST 55TH STREET 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 FORM 10-Q 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 March 31, 1996 Commission File Number 0-24214 Katz Media Corporation (Exact name of registrant as specified in its charter) Delaware 13-3563605 (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 [ ] No [X]* 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. *This document is being filed voluntarily. 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 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations..... 6-8 Part II Other Information Item 1 - Legal Proceedings..................................... 8 Signatures..................................................... 9 Financial Data Schedule........................................ 10 1 KATZ MEDIA CORPORATION CONSOLIDATED BALANCE SHEETS (000's Omitted, Except Share and Per Share Information)
MARCH 31, DECEMBER 31, --------- ------------ 1996 1995 ---- ---- (UNAUDITED) (NOTE) ASSETS Current assets: Cash and cash equivalents...................................................... $ 1,314 $ 228 Accounts receivable, net of allowance for doubtful accounts of $1,300......... 58,879 61,345 Deferred costs on purchases of station representation contracts............. 16,367 13,096 Prepaid expenses and other current assets .................................. 725 869 ------------ ---------- TOTAL CURRENT ASSETS.................................................... 77,285 75,538 ============ ========== Fixed assets, net................................................................. 13,954 12,437 Deferred income taxes............................................................. 9,122 9,122 Deferred costs on purchases of station representation contracts................... 50,838 39,602 Intangible assets, net ........................................................... 82,102 82,708 Other assets, net ................................................................ 16,078 17,106 ------------ ---------- TOTAL ASSETS............................................................ $ 249,379 $ 236,513 ============ ========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable and accrued liabilities....................................... $ 47,419 $ 38,049 Deferred income on sales of station representation contracts................... 11,710 10,700 Income taxes payable.......................................................... 3,454 5,242 ------------ ---------- TOTAL CURRENT LIABILITIES............................................... 62,583 53,991 ------------ ---------- Deferred income on sales of station representation contracts...................... 2,546 3,589 Long-term debt.................................................................... 186,790 179,530 Other liabilities, principally deferred rent and representation contracts payable............................................... 32,100 33,263 COMMITMENTS AND CONTINGENCIES..................................................... -- -- STOCKHOLDER'S EQUITY Common stock, $.01 par value, 100 shares authorized issued and outstanding.... -- -- Paid-in-capital................................................................ 9,742 9,742 Carryover basis adjustment..................................................... (14,405) (14,405) Accumulated deficit............................................................ (29,977) (29,197) ------------ ---------- TOTAL STOCKHOLDER'S EQUITY.............................................. (34,640) (33,860) ------------ ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................... $ 249,379 $ 236,513 ============ ==========
Note: The consolidated balance sheet at December 31, 1995 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)
THREE MONTHS ENDED MARCH 31, ------------------------- 1996 1995 ---- ---- (UNAUDITED) (UNAUDITED) OPERATING REVENUES, NET.......................... $ 38,363 $ 39,109 ---------- ---------- OPERATING EXPENSES: Salaries and related costs....................... 23,670 24,111 Selling, general and administrative.............. 9,590 9,445 Depreciation and amortization.................... 1,679 3,746 ---------- ---------- TOTAL OPERATING EXPENSES................... 34,939 37,302 ---------- ---------- OPERATING INCOME........................... 3,424 1,807 ---------- ---------- OTHER EXPENSE (INCOME): Interest expense................................. 5,130 5,112 Interest (income)................................ (29) (39) ---------- ---------- TOTAL OTHER EXPENSE, NET................... 5,101 5,073 ---------- ---------- LOSS BEFORE INCOME TAX BENEFIT................... (1,677) (3,266) Income tax benefit............................... (897) (1,764) ---------- ---------- NET LOSS ................................. ($780) ($1,502) ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 KATZ MEDIA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (000's omitted)
THREE MONTHS ENDED MARCH 31, ------------------------------- 1996 1995 --------- ---------- (UNAUDITED) (UNAUDITED) Cash flows from operating activities: Net loss before adjustments.................................................. ($780) ($1,502) -------- -------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization............................................ 1,679 3,746 Amortization of debt issuance costs...................................... 104 217 Deferred rent............................................................ 435 351 Changes in assets and liabilities: Decrease in accounts receivable......................................... 1,826 4,115 Increase in deferred tax asset.......................................... -- (1,831) Decrease (increase) in other assets..................................... 461 (422) Increase (decrease) in accounts payable and accrued liabilities........ 1,681 (865) (Decrease) in income taxes payable...................................... (1,788) (29) Other, net.............................................................. (172) (884) -------- -------- Total adjustments........................................................ 4,226 4,398 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES................................ 3,446 2,896 -------- -------- Cash flows from investing activities: Capital expenditures....................................................... (2,297) (545) Payments received on sales of station representation contracts............. 4,788 4,305 Payments made on purchases of station representation contracts............. (12,111) (3,916) Investment in cable joint venture.......................................... -- (7,029) -------- -------- NET CASH (USED IN) INVESTING ACTIVITIES......................... (9,620) (7,185) -------- -------- Cash flows from financing activities: Credit facilities borrowing.................................................. 21,000 13,500 Credit facilities repayments................................................. (12,000) (8,000) Repurchase of Notes.......................................................... (1,740) (690) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES............................. 7,260 4,810 -------- -------- Net increase (decrease) in cash and cash equivalents............................ 1,086 521 Cash and cash equivalents, beginning of period................................ 228 109 Cash and cash equivalents, end of period........................................ $ 1,314 $ 630 ======== =========
The accompanying notes are an integral part of these consolidated financial statements. 4 KATZ MEDIA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 (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, Inc. (the "Company"), operating results for the three month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the consolidated 1995 financial statements and footnotes thereto included in the Company's Form 10-K filed April 5, 1996 (File No. 33-51130). 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. 5 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 that involve risks and uncertainties, including those associated with the effect of national and regional economic conditions, 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 cable systems. During the first quarter of 1996 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: 64.7% for television; 29.2% for radio; and 6.1% for cable and international (on a 100% owned basis). Gross billings during the first quarter of 1996 decreased .4% for television and increased 13.3% for radio and 11.2% for cable and international (on a 100% owned basis). The composition of gross billings by broadcast media during the first quarter of 1995 aggregated 67.8% for television, 26.6% for radio, and 5.6% for cable and international (on a 100% owned basis). Results of Operations - Three Months Ended March 31, 1996 Net operating revenues for the first quarter of 1996 totaled $38.4 million, a decrease of approximately $.7 million, or approximately 1.9%, compared to net operating revenues of $39.1 million for the first quarter of 1995. This decrease reflects (i) the anticipated slower 1996 first quarter pacings as compared to those achieved during the 1995 first quarter as well as (ii) the 1995 transfer of United Television, Inc. stations ($1.5 million of commissions in the 1995 first quarter) to a new representation firm in which the company will receive a profit distribution rather than report revenues and associated expenses. On a "constant station" basis (deleting stations acquired or lost after March 31, 1995), operating expenses remained relatively flat during the 1996 quarter as compared to the 1995 quarter. 6 Operating expenses, excluding depreciation and amortization, decreased by approximately $300,000 to $33.3 million for the first quarter of 1996 from $33.6 million for the first quarter of 1995. As a result of cost and budgeting controls implemented by the Company in 1995, salaries and related expenses decreased $441,000 over the first quarter of 1995 while selling, general and administrative expenses increased by $145,000 during the same period. These expenses, as a percentage of net operating revenues, increased from 86% in the first quarter of 1995 to 87% in the first quarter of 1996 primarily as a result of the slightly lower operating revenue figures described above. Depreciation and amortization overall decreased by $2.1 million, or 55.2%, for the first quarter of 1996 compared to the first quarter of 1995, primarily due to the result of longer initial terms of acquired contracts which determines the period for contract amortization and to a more limited extent on amortization of income on contracts sold in late 1995. Operating income for the first quarter of 1996 increased by $1.6 million compared to the first quarter of 1995 as a result of the operating components discussed above. Interest expense, net, remained constant at $5.1 million for the first quarter of 1996 and 1995. Loss before income tax (benefit) totaled $1.7 million for the first quarter of 1996, compared to $3.3 million for the first quarter of 1995. This result was primarily due to the components listed above. The difference between the effective tax rate of 53.5% compared to the U.S. statutory rate of 35% is primarily attributable to goodwill amortization, other nondeductible expenses and state income taxes. EBITDA for the first quarter of 1996 decreased $.3 million or 5.6% to $5.6 million as compared to $5.9 million for the first quarter of 1995. This decrease is primarily attributable to the stronger revenue pacing in the first quarter of 1995 as compared to the first quarter 1996 discussed above. The EBITDA margin decreased from 15.1% in the first quarter of 1995 to 14.5% in the first quarter of 1996. Liquidity and Capital Resources The Company's working capital requirements have been primarily provided by operations. 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 Credit Agreement and that these sources are sufficient to meet the Company's working capital requirements. 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. Cash provided by operating activities in 1996 as compared to 1995 increased $550,000. This increase in cash provided by operating activities is primarily due to improved net operating results in the first quarter of 1996 compared to the first quarter of 1995. Net cash used in investing activities during 1996 aggregated $9.6 million, an increase of $2.4 million compared to net cash used in investing activities during 1995 of $7.2 million. This increase in cash used in investing activities was mainly a result of the $7.0 million investment in the Cable Joint Venture which occured in the first quarter of 1995, offset by the net increase of purchases of station representation contracts of $7.7 million and capital expenditures over the first quarter of 1995 of $1.8 million. 7 Overall cash flows from financing activities provided $7.3 million during 1996 versus $4.8 million during 1995. The increase in cash provided by financing activities is primarily due to increased borrowings under the Credit Agreement to satisfy current working capital requirements partially offset by $1.7 million spent in the first quarter of 1996 to repurchase a portion of the 12 3/4% Senior Subordinated Notes due 2002. The Company has approximately $5.9 million available on its revolving credit facility as of March 31, 1996. 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. 8 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: May 13, 1996 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 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 MAR-31-1996 1,314 0 58,879 1,300 0 77,285 13,954 1,679 249,379 62,583 0 0 0 0 (34,640) 249,379 38,363 38,363 34,939 34,939 (29) 0 5,130 (1,677) (897) (780) 0 0 0 (780) 0 0
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