-----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, T6543hxGQ78xKsc97dTf7xlSFq0SmcYMUcOQp1n9VLlklT7KJJ0doeRBooSR4ZqI kfmQvgh+71LmcwNvFs/haw== 0000950134-96-005366.txt : 19961016 0000950134-96-005366.hdr.sgml : 19961016 ACCESSION NUMBER: 0000950134-96-005366 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960909 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEFTEL BROADCASTING CORP CENTRAL INDEX KEY: 0000922503 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 990113417 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24516 FILM NUMBER: 96642899 BUSINESS ADDRESS: STREET 1: 6767 WEST TROPICANA AVE CITY: LAS VEGAS STATE: NV ZIP: 89603 BUSINESS PHONE: 7023673322 8-K/A 1 AMENDMENT TO FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) September 9, 1996 HEFTEL BROADCASTING CORPORATION (Exact name of registrant as specified in its charter) Delaware 0-24516 99-0113417 - ---------------------------- ------------------------ ------------------ (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 6767 West Tropicana Avenue, Suite 102 Las Vegas, Nevada 89103 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (702) 367-3322 2 Item 2. Acquisition or Disposition of Assets a. Discontinuance of Network Operations. On September 9, 1996, the Company's Board of Directors approved a plan to discontinue the operations of the radio network owned by the Company's wholly owned subsidiary Spanish Coast-to-Coast, Ltd., a Delaware corporation Cadena Radio Centro ("CRC") effective August 5, 1996. Consequently, the accompanying condensed consolidated statements of operations have been restated to reflect the effects of the discontinued operations of CRC for each of the periods presented. The estimated charge to operations during the quarter ended September 30, 1996 will be approximately $8.1 million, of which $6.5 million relates to non-cash charges resulting from the write-off of goodwill and certain equipment. No income tax expense or benefits will be recognized during fiscal year 1996 due to the Company's availability of net operating loss carryforwards. CRC intends to fulfill its contractual program obligations and is expected to cease operating by December 31, 1996. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1995 Net revenues increased by $6.4 million, or 13.7%, to $53.0 million in the nine months ended June 30, 1996 from $46.6 million in the same period of 1995. Operating expenses increased by $5.8 million, or 15.6%, to $43.1 million in the nine months ended June 30, 1996 from $37.3 million in the same period of 1995. The increases in net revenues and operating expenses over the same period of 1996 are due primarily to the results of operations of additional radio stations acquired during fiscal 1995 and to increases in programming and promotion expenses resulting from programming changes in the Miami market. Interest expense, net of interest income, increased by $4.2 million, or 113.8% to $7.9 million in the nine months ended June 30, 1996 from $3.7 million in the same period of 1995 primarily as a result of increased borrowings over the same period of the prior year. The proceeds of borrowings were used primarily for business acquisitions and certain capital expenditures. The losses from discontinued operations of CRC increased by $1,473,000 to $1,608,000 in the nine months ended June 30, 1996 from $135,000 in the same period of 1995 primarily as a result of continuing softness of network revenue. For the nine months ended June 30, 1996, a net loss of $976,000 was incurred compared to net income of $3.7 million in the same period of 1995. The decrease in net income is due primarily to increases in promotional expenses over prior year amounts resulting from format changes at two of the Company's Miami radio stations and interest expense resulting from increased borrowings. RESULTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1994 During fiscal 1995, the Company completed several radio station acquisitions. Additional stations were acquired in August 1994. Due to the financial effects of these transactions, the results of operations for 1995 reflect the operations of more radio stations than the results of operations for 1994. Consequently, the financial condition and results of operations for the two years ended September 30, 1995 are not entirely comparable. Net revenues increased by $36.8 million, or 134%, to $64.2 million in the year ended September 30, 1995 from $27.4 million in the same period of 1994. Operating expenses increased by $31.0 million, or 150%, to $51.7 million in the year ended September 30, 1995 from $20.7 million in the same period of 1994. These increases were due primarily to the results of operations of additional radio stations acquired in August 1994 and during fiscal 1995. Interest expense, net of interest income, increased by $3.4 million, or 113%, to $6.4 million in the year ended September 30, 1995 from $3.0 million in the same period of 1994 primarily due to increased borrowings resulting from new business acquisitions. Other expenses decreased by $2.6 million, or 83%, to $548,000 during the year ended September 30, 1995 as compared to $3.1 million for the same period in 1994. For the year ended September 30, 1994, the Company incurred a loss of $1.7 million as a result of refinanced debt. In addition, in 1995, the Company incurred $142,000 in costs relating to unconsummated acquisitions compared to $1.1 million in the prior year. 2 3 Effective August 20, 1994, the Company began accounting for its 49% investment in Viva America Media Group, a Florida general partnership ("Viva Media") on a consolidated basis. Accordingly, the results of operations include the accounts of Viva Media from August 20, 1994 through September 30, 1994, and for the entire fiscal year ended September 30, 1995. The losses from discontinued operations of CRC increased by $341,000, or 120%, to $626,000 in the year ended September 30, 1995 as compared to $285,000 in the same period of 1994 due primarily to continued softness of network revenue. Net income increased by $3.2 million to $3.7 million in the year ended September 30, 1995 from $466,000 in the same period of 1994. RESULTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1994 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1993 In August 1994, the Company completed its initial public offering and a private sale of stock resulting in net proceeds to the Company of approximately $45.4 million. The Company also completed several acquisitions in fiscal 1994. Further, the Company borrowed $56.6 million under a new Credit Agreement and repaid all of its existing indebtedness plus indebtedness assumed in connection with certain acquisitions. Due to the financial effects of these transactions, the Company's financial condition and results of operations for the year ended September 30, 1994 are not entirely comparable to the same period of the prior year. Net revenues increased by $6.1 million, or 29%, to $27.4 million in the year ended September 30, 1994 from $21.3 million in the same period of 1993. Operating expenses increased by $3.4 million, or 29%, to $15.3 million in the year ended September 30, 1994 from $11.9 million in the same period of 1993. These increases were due primarily to the results of operations of additional radio stations acquired since August 1994. Interest expense, net of interest income, increased by $686,000, or 30%, to $3.0 million in the year ended September 30, 1994 from $2.3 million in the same period of 1993 primarily as a result of increased borrowings. Other expenses increased by $2.6 million, or 480%, to $3.1 million during the year ended September 30, 1994 as compared to $534,000 for the same period in 1993. For the year ended September 30, 1994, the Company incurred a loss of $1.7 million as a result of the refinanced debt. In addition, in 1994, the Company incurred $1.1 million in costs relating to unconsummated acquisitions compared to $325,000 in the prior year. Effective August 20, 1994, the Company began accounting for its 49% investment in Viva Media on a consolidated basis. Accordingly, the results of operations for the year ended September 30, 1994 include the accounts of Viva Media from August 20, 1994 through September 30, 1994. CRC incurred losses of $285,000 from the date of its acquisition in August 1994, through September 30, 1994. Net income decreased by $2.2 million to $466,000 in the year ended September 30, 1994 from $2.7 million in the same period of 1993. 3 4 Item 7. Financial Statements and Exhibits - ----------------------------------------- b. Financial Statements Report of Independent Auditors........................................ Consolidated Balance Sheets as of September 30, 1995 and 1994......... Restated Consolidated Statements of Income for each of the three years in the period ended September 30, 1995........................ Consolidated Statements of Stockholders' Equity for each of the three years in the period ended September 30, 1995........... Consolidated Statements of Cash Flows for each of the three years in the period ended September 30, 1995.............................. Notes to Consolidated Financial Statements............................ Condensed Consolidated Balance Sheets as of June 30, 1996 and September 30, 1995.............................................. Restated Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended June 30, 1996 and 1995........... Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 1996 and 1995........................................ Notes to Condensed Consolidated Financial Statements.................. Condensed Consolidated Balance Sheets as of March 31, 1996 and September 30, 1995.............................................. Restated Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended March 31, 1996 and 1995........... Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1996 and 1995....................................... Notes to Condensed Consolidated Financial Statements.................. Condensed Consolidated Balance Sheets as of December 31, 1995 and September 30, 1995.............................................. Restated Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 1995 and 1994....................... Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 1995 and 1994............................. Notes to Condensed Consolidated Financial Statements.................. 4 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned hereunto duly authorized. Dated October 11, 1996 HEFTEL BROADCASTING CORPORATION By: /s/ John T. Kendrick ----------------------------------- John T. Kendrick Senior Vice President and Chief Financial Officer 5 6 INDEX TO EXHIBITS Ex-99.1 Financial Statements......................................... Report of Independent Auditors........................................ F-1 Consolidated Balance Sheets as of September 30, 1995 and 1994......... F-2 Restated Consolidated Statements of Income for each of the three years in the period ended September 30, 1995........................ F-4 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended September 30, 1995........... F-5 Consolidated Statements of Cash Flows for each of the three years in the period ended September 30, 1995.............................. F-6 Notes to Consolidated Financial Statements............................ F-7 Condensed Consolidated Balance Sheets as of June 30, 1996 and September 30, 1995.............................................. F-21 Restated Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended June 30, 1996 and 1995........... F-22 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 1996 and 1995........................................ F-23 Notes to Condensed Consolidated Financial Statements.................. F-24 Condensed Consolidated Balance Sheets as of March 31, 1996 and September 30, 1995.............................................. F-27 Restated Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended March 31, 1996 and 1995........... F-28 Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1996 and 1995....................................... F-29 Notes to Condensed Consolidated Financial Statements.................. F-30 Condensed Consolidated Balance Sheets as of December 31, 1995 and September 30, 1995.............................................. F-32 Restated Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 1995 and 1994....................... F-33 Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 1995 and 1994............................. F-34 Notes to Condensed Consolidated Financial Statements.................. F-35 EX-99.1 2 FINANCIAL STATEMENTS 1 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Heftel Broadcasting Corporation We have audited the accompanying consolidated balance sheets of Heftel Broadcasting Corporation as of September 30, 1995 and 1994 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended September 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Heftel Broadcasting Corporation at September 30, 1995 and 1994 and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Los Angeles, California December 14, 1995, except for Note 12, as to which the date is September 9, 1996 F-1 2 HEFTEL BROADCASTING CORPORATION CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 ----------------------------- 1995 1994 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 5,404,310 $ 10,218,911 Accounts receivable, net of allowance of $1,491,877 in 1995 and $942,286 in 1994 15,501,811 13,264,136 Amounts receivable from officers and stockholders 2,357,932 1,771,666 Prepaid expenses and other current assets 2,243,445 2,129,855 ------------- ------------- Total current assets 25,507,498 27,384,568 Property and equipment, at cost: Land 648,690 835,250 Buildings and improvements 4,024,013 3,410,735 Broadcast and other equipment 10,238,010 7,849,222 Furniture and fixtures 2,669,401 1,716,819 ------------- ------------- 17,580,114 13,812,026 Less accumulated depreciation and amortization (5,335,151) (4,774,843) ------------- ------------- 12,244,963 9,037,183 Intangible assets: Broadcast licenses 83,725,706 50,147,706 Cost in excess of fair value of net assets acquired 30,665,219 27,591,890 Other intangible assets 505,000 1,606,000 ------------- ------------- 114,895,925 79,345,596 Less accumulated amortization (5,643,246) (8,817,729) ------------- ------------- 109,252,679 70,527,867 Other non-current assets: Deferred charges, net 3,104,679 3,721,429 Notes receivable from related parties 803,303 1,703,303 Other 724,162 978,469 ------------- ------------- 4,632,144 6,403,201 ------------- ------------- Total assets $ 151,637,284 $ 113,352,819 ============= =============
See accompanying notes. F-2 3 HEFTEL BROADCASTING CORPORATION CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 --------------------------------- 1995 1994 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt and other non-current obligations (Note 5) $ 795,758 $ 786,805 Accounts payable 1,191,625 2,529,087 Accrued expenses (Note 10) 7,714,844 4,826,951 Amounts payable to officers and stockholders 838,241 875,813 ------------- ------------- Total current liabilities 10,540,468 9,018,656 Long-term debt, less current portion (Note 5) 95,936,528 58,472,261 Other non-current obligations, less current portion (Note 5) 1,579,133 1,425,411 Commitments and contingencies (Note 6) Stockholders' equity (Note 8): Series A Preferred Stock, cumulative, $.001 par value, 2,600,000 shares authorized, 335,634 shares issued and outstanding in 1995, 2,295,924 shares in 1994. Liquidation preference of $355,772 in 1995 and $5,111,284 in 1994 336 2,296 Undesignated series preferred stock, $.001 par value, 2,400,000 shares authorized, none issued or outstanding -- -- Class A Common Stock, $.001 par value, 30,000,000 shares authorized, 6,191,799 issued and outstanding in 1995 and 6,031,799 shares in 1994 6,192 6,032 Class B Common Stock, $.001 par value, 7,000,000 shares authorized, 4,679,763 shares issued and outstanding in 1995 and 1994 4,680 4,680 Additional paid-in capital 95,693,269 95,698,105 Accumulated deficit (43,839,535) (44,670,835) Less treasury stock at cost, 810,587 shares in 1995 and 1994 (4,019,735) (4,019,735) Notes receivable from stockholders related to purchase of stock (4,264,052) (2,584,052) ------------- ------------- Net stockholders' equity 43,581,155 44,436,491 ------------- ------------- Total liabilities and stockholders' equity $ 151,637,284 $ 113,352,819 ============= =============
See accompanying notes. F-3 4 HEFTEL BROADCASTING CORPORATION CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED SEPTEMBER 30 ------------------------------------------------ 1995 1994 1993 ----------- ----------- ----------- Revenues: Broadcasting revenues $72,577,882 $31,344,144 $24,118,810 Revenues relating to Mi CASA -- -- 399,245 Less agency commissions (8,418,340) (3,911,414) (3,186,720) ----------- ----------- ----------- Net revenues 64,159,542 27,432,730 21,331,335 Operating expenses: Selling 10,393,242 3,857,446 2,979,475 Programming 10,174,717 3,080,245 2,207,026 Promotion and market research 10,099,402 3,619,097 2,619,746 Engineering 1,842,711 535,609 477,808 General and administrative 11,132,437 4,252,718 2,195,360 Expenses relating to Mi CASA -- -- 1,469,903 Corporate expenses, including $925,000 paid to a related party in 1993 4,720,380 3,453,839 2,529,171 Depreciation and amortization 3,344,419 1,905,864 1,760,088 ----------- ----------- ----------- Total operating expenses 51,707,308 20,704,818 16,238,577 ----------- ----------- ----------- Operating income 12,452,234 6,727,912 5,092,758 Other income (expense): Interest income 217,830 183,060 115,605 Interest expense (6,607,180) (3,180,272) (2,427,108) Net income in equity of joint venture (Note 4) -- 616,390 745,597 Costs relating to unconsummated acquisitions (141,988) (1,099,701) (325,000) Loss on retirement of debt (Note 5) -- (1,737,707) -- Miscellaneous, net (285,568) (307,577) (208,743) ----------- ----------- ----------- (6,816,906) (5,525,807) (2,099,649) ----------- ----------- ----------- Income before minority interest and provision for income taxes 5,635,328 1,202,105 2,993,109 Minority interest (Note 4) (1,166,780) (351,502) -- Provision for income taxes (Note 7) (150,000) (100,000) (272,000) ----------- ----------- ----------- Net income from continuing operations 4,318,548 750,603 2,721,109 Discontinued operations: Loss on discontinued operations of CRC (Note 12) (625,970) (284,709) -- ----------- ----------- ----------- Net income $ 3,692,578 $ 465,894 $ 2,721,109 =========== =========== =========== Net income per common and common equivalent share from continuing operations $ 0.40 $ 0.10 $ 0.55 =========== =========== =========== Net income per common and common equivalent share $ 0.34 $ 0.05 $ 0.55 =========== =========== =========== Weighted average common shares outstanding 10,805,346 5,384,678 4,638,019 =========== =========== ===========
See accompanying notes. F-4 5 HEFTEL BROADCASTING CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 8 AND 9)
COMMON STOCK ADDITIONAL ----------------------- PREFERRED PAID-IN CLASS A CLASS B STOCK CAPITAL ------- ------- ------- ----------- Balance at September 30, 1992 $ -- $ 4,194 $ 2,296 $36,697,744 Preferential dividend relating to acquisition -- -- -- -- 1993 net income -- -- -- -- Notes receivable from stockholders -- -- -- -- ------- ------- ------- ----------- Balance at September 30, 1993 -- 4,194 2,296 36,697,744 Reissuance of treasury stock -- -- -- -- Purchase of treasury stock, at cost -- -- -- -- Common stock issued in connection with: Public offering 3,875 -- -- 33,933,625 Private sale of stock 1,240 -- -- 11,498,760 Conversion of Class B to Class A Common Stock 216 (216) -- -- Acquisitions 701 513 -- 12,281,305 Exercise of warrants -- 189 -- 851,863 Issuance of stock options -- -- -- 434,808 1994 net income -- -- -- -- ------- ------- ------- ----------- Balance at September 30, 1994 6,032 4,680 2,296 95,698,105 Repurchase of preferred stock -- -- (1,960) (1,958,330) Preferred stock dividends -- -- -- -- Common stock issued in connection with exercise of warrants 160 -- -- 1,679,840 Issuance of stock options -- -- -- 273,654 1995 net income -- -- -- -- ------- ------- ------- ----------- Balance at September 30, 1995 $ 6,192 $ 4,680 $ 336 $95,693,269 ======= ======= ======= ===========
NOTES NET RECEIVABLE STOCKHOLDERS' ACCUMULATED TREASURY FROM EQUITY DEFICIT STOCK STOCKHOLDERS (DEFICIENCY) ------------ ----------- ----------- ------------ Balance at September 30, 1992 $(46,722,182) $(1,000,000) $ $(11,017,948) -- Preferential dividend relating to acquisition (1,135,656) -- -- (1,135,656) 1993 net income 2,721,109 -- -- 2,721,109 Notes receivable from stockholders -- -- (732,000) (732,000) ------------ ----------- ----------- ------------ Balance at September 30, 1993 (45,136,729) (1,000,000) (732,000) (10,164,495) Reissuance of treasury stock -- 1,000,000 (1,000,000) -- Purchase of treasury stock, at cost -- (4,019,735) -- (4,019,735) Common stock issued in connection with: Public offering -- -- -- 33,937,500 Private sale of stock -- -- -- 11,500,000 Conversion of Class B to Class A Common Stock -- -- -- -- Acquisitions -- -- -- 12,282,519 Exercise of warrants -- -- (852,052) -- Issuance of stock options -- -- -- 434,808 1994 net income 465,894 -- -- 465,894 ------------ ----------- ----------- ------------ Balance at September 30, 1994 (44,670,835) (4,019,735) (2,584,052) 44,436,491 Repurchase of preferred stock -- -- -- (1,960,290) Preferred stock dividends (2,861,278) -- -- (2,861,278) Common stock issued in connection with exercise of warrants -- -- (1,680,000) -- Issuance of stock options -- -- -- 273,654 1995 net income 3,692,578 -- -- 3,692,578 ------------ ----------- ----------- ------------ Balance at September 30, 1995 $(43,839,535) $(4,019,735) $(4,264,052) $ 43,581,155 ============ =========== =========== ============
See accompanying notes. F-5 6 HEFTEL BROADCASTING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30 ----------------------------------------------- 1995 1994 1993 ----------- ----------- ---------- OPERATING ACTIVITIES: Net income $ 3,692,578 $ 465,894 $2,721,109 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,587,341 1,947,646 1,760,088 Provision for losses on accounts receivable 1,522,235 855,220 621,744 Income in equity of joint venture -- (616,390) (745,597) Loss on retirement of debt, net of cash paid -- 1,061,207 -- Non-cash interest and stock compensation expense 925,740 434,808 -- Changes in operating assets and liabilities, net of effect from acquisitions: Accounts receivable (3,759,910) (2,505,996) (1,835,963) Prepaid expenses and other current assets (336,176) (555,749) 20,675 Accounts payable (1,737,462) (295,070) (1,068,621) Accrued expenses 2,252,432 199,874 (246,691) Other, net 133,209 (225,420) (339,760) ----------- ----------- ---------- Net cash provided by operating activities 6,279,987 766,024 886,984 INVESTING ACTIVITIES: Purchases of property and equipment (4,011,331) (402,730) (669,723) Purchase of businesses (37,600,000) (6,980,000) -- Capitalized acquisition costs -- -- (305,694) Advances/loans to related parties (623,838) (1,915,230) (1,362,658) Payments received on notes receivable 222,586 199,035 177,710 ----------- ----------- ---------- Net cash used in investing activities (42,012,583) (9,098,925) (2,160,365) FINANCING ACTIVITIES: Proceeds from public and private stock issuances -- 45,437,500 -- Repurchase of Class B Common Stock -- (2,687,735) -- Repurchase of Series A Preferred Stock (1,960,290) -- -- Payment of Series A Preferred Stock Dividends (2,861,278) -- -- Proceeds from borrowings under credit agreement 36,475,000 59,565,733 4,500,000 Advances from officers and stockholders -- -- 815,000 Payment of assumed debt -- (48,669,836) (1,000,000) Payment of costs related to new financing (82,411) (4,301,039) (126,500) Repayment of long-term debt and other non-current obligations (653,026) (32,039,753) (2,089,286) -------- ----------- ---------- Net cash provided by financing activities 30,917,995 17,304,870 2,099,214 ----------- ----------- ---------- Net (decrease) increase in cash and cash equivalents (4,814,601) 8,971,969 825,833 Cash and cash equivalents at beginning of year 10,218,911 1,246,942 421,109 ----------- ----------- ---------- Cash and cash equivalents at end of year $ 5,404,310 $10,218,911 $1,246,942 =========== =========== ========== Supplemental disclosure of cash flow information: Interest paid $ 5,117,883 $ 3,627,863 $1,752,431 =========== =========== ========== Taxes paid $ 78,800 $ 339,282 $ 4,000 =========== =========== ==========
See accompanying notes. F-6 7 HEFTEL BROADCASTING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 AND 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Heftel Broadcasting Corporation (HBC), through its subsidiaries, owns fifteen Spanish language radio stations serving the Los Angeles, Miami, New York City, Dallas/Ft. Worth, Chicago and Las Vegas markets. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Heftel Broadcasting Corporation and subsidiaries (collectively, the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. The Company's fiscal year end is September 30. Cash and Cash Equivalents The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. Accounts Receivable The Company sells broadcast time to a diverse customer base including advertising agencies and other direct customers. The Company performs credit evaluations of its customers and generally does not require collateral. The Company maintains allowances for potential losses and such losses have been within management's expectations. Investment in Joint Venture Until August 19, 1994, the Company's investment in its joint venture was accounted for using the equity method of accounting. In connection with certain agreements entered into between the Company and its joint venture partner, management considered it appropriate to consolidate the accounts of the joint venture and therefore such accounts and results of operations have been consolidated and are included in the accompanying consolidated financial statements effective August 20, 1994 (Note 4). On September 7, 1995, the Company, through a subsidiary, acquired the remaining 51% interest in this joint venture (Note 3). Depreciation and Amortization Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the related assets, which range from 3 to 40 years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease terms or the useful lives of the improvements. Expenditures for repairs and maintenance are charged to expense as incurred. F-7 8 Intangible Assets Intangible assets are stated at cost. Broadcast licenses are amortized over 40 years using the straight-line method. Other intangible assets, including cost in excess of fair value of net assets acquired, are amortized over the expected period of benefit, ranging from 5 to 40 years, using the straight-line method. The carrying value of intangible assets is reviewed if the facts and circumstances suggests that such value may have been impaired. If this review indicates that the carrying value of an intangible asset will not be recoverable, as determined based on the undiscounted cash flows of the Company over the remaining amortization period, the carrying value of the intangible asset is reduced by the estimated shortfall of cash flows. Deferred Acquisition Costs Costs incurred in connection with an acquisition of a business are capitalized as incurred. Upon consummation of the related acquisition, such costs are reclassified and included in the total purchase price of the acquired business. When it becomes apparent that a proposed acquisition will not be consummated, the related acquisition costs are expensed. Income Taxes Effective with fiscal year 1993, the Company began accounting for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative effect of the adoption of FAS 109 was not material. The Company files consolidated federal income and state franchise tax returns which include the accounts of all of its subsidiaries. Revenue Recognition Revenue is recognized as commercials are broadcast. The Company also enters into barter transactions in which advertising time is traded for merchandise or services used principally for promotional and other business purposes. Barter revenue is recorded as commercials are broadcast at the estimated fair value of the merchandise or services received. If merchandise or services are received prior to the broadcast of commercials, recognition of the related revenue is deferred and recognized as the commercials are broadcast. Barter revenues accounted for approximately 7%, 7% and 5% of broadcasting revenues in 1995, 1994 and 1993, respectively. Earnings Per Share Net income per common share is computed by dividing net income by the weighted average number of common and common equivalent shares (if dilutive) outstanding during each year. For purpose of this computation, cumulative preferred stock dividends are deducted from net income whether or not preferred stock dividends have been declared or paid. 2. INITIAL PUBLIC OFFERING AND SALE OF STOCK In August 1994 the Company, through an initial public offering, sold 3,875,000 shares of Class A Common Stock at an initial public offering price of $10.00 per share resulting in net proceeds to the Company of approximately $33,940,000. Concurrent with the completion of the initial public offering, the, Company sold 1,240,181 shares of Class A Common Stock for $11,500,000 to a private investor in a separate F-8 9 transaction which included the acquisition of Cadena Radio Centro (Note 3). The proceeds of the initial public offering were used as follows: a) approximately $18,000,000 to repay existing indebtedness; b) approximately $6,000,000 paid in connection with certain acquisitions; c) approximately $4,900,000 was used to redeem the majority of the Company's outstanding Series A Preferred Stock and pay related cumulative dividends; and d) the balance for working capital. Had the initial public offering, repayment of debt and redemption of preferred stock occurred at the beginning of fiscal 1994, pro forma net income per share would have been $0.18 per share and the weighted average common shares outstanding in fiscal 1994 would have been 7,709,495 shares. This unaudited pro forma information is not necessarily indicative of the results that would have been obtained had these events actually occurred at the beginning of fiscal 1994. 3. BUSINESS ACQUISITIONS During fiscal years 1995 and 1994, the Company acquired several businesses as described further in the following paragraphs. The aggregate purchase price of these acquisitions, including acquisition costs, was approximately $42,021,000 in 1995 and $52,700,000 in 1994 and consisted of the following:
FISCAL YEAR ENDED ------------------------------------ 1995 1994 ------------- ------------- Cash paid $ 37,600,000 $ 6,980,000 Common stock, issued at fair value -- 12,283,000 Long-term debt and liabilities assumed 3,521,000 33,437,000 Cancellation of note receivable 900,000 -- ------------- ------------- Total fair value of acquisitions $ 42,021,000 $ 52,700,000 ============= =============
Each of the business acquisitions made by the Company during fiscal year 1995 and 1994 were accounted for using the purchase method of accounting. Accordingly, the accompanying financial statements include the accounts of the acquired businesses since the respective dates of acquisition. 1995 ACQUISITIONS Dallas/Ft. Worth Radio Stations In December 1994, the Company acquired station KMRT-AM, which serves the Dallas/Ft. Worth market, for approximately $1,500,000. From August 1994 through the date of acquisition, the Company programmed KMRT-AM under a Local Marketing Agreement (LMA). In April 1995, the Company acquired station KICI-FM, which serves the Dallas/Ft. Worth market, in exchange for cancellation of a note for $900,000 payable by the seller to a subsidiary of the Company. From August 1994 through the date of acquisition, the Company programmed KICI-FM under an LMA. In June 1995, the Company acquired the assets of the radio station KCYT-FM (serving the Dallas/Ft. Worth market) for approximately $2,000,000. The acquisition was financed through additional borrowings under the Company's Credit Agreement and the issuance of notes payable to the sellers. From February 1995 through the date of acquisition, the Company programmed KCYT-FM under an LMA. Subsequent to the acquisition, the station call letters were changed to KMRT-FM. F-9 10 In July 1995, the Company acquired the assets of radio station KDZR-FM, which serves the Dallas/Ft. Worth market, for approximately $4,700,000. This acquisition was financed through additional borrowings under the Company's Credit Agreement. From February 1995 through the date of acquisition, the Company programmed KDZR-FM under an LMA. Subsequent to the acquisition, the station call letters were changed to KHCK-FM. In July 1995, the Company acquired the assets of radio station WOPA-AM, which serves the Chicago market, for approximately $4,500,000 plus approximately 45,000 shares of Class A Common Stock with a fair value of approximately $725,000, which have not yet been issued. This acquisition was financed through additional borrowings under the Company's Credit Agreement. Subsequent to the acquisition, the station call letters were changed to WLXX-AM. In August 1995, the Company acquired the assets of radio station KOWA-AM, which serves the Las Vegas market, for approximately $900,000. The acquisition was financed through additional borrowings under the Company's Credit Agreement. Subsequent to the acquisition, the station call letters were changed to KLSQ-AM. On September 7, 1995, the Company acquired the remaining 51% interest in Viva Media America Group (Viva Media), a partnership that owns WAQI-AM and WRTO-FM, which serve the Miami market, for $19,800,000 in cash. The acquisition was financed through additional borrowings under the Company's Credit Agreement. Under the terms of an Amended and Restated Agreement and Plan of Reorganization, and in connection with this transaction, the following contractual arrangements, which are described further in Note 4, were terminated for no additional consideration: (i) a warrant to purchase up to 237,600 shares of Class B Common Stock held by a former officer of the Company and the employment relationship between the Company and that officer and (ii) agreements regarding the management of certain Miami stations. 1994 ACQUISITIONS Cadena Radio Centro In August 1994, the Company acquired Spanish Coast to Coast, Ltd., dba Cadena Radio Centro (CRC) in exchange for 700,938 shares of HBC Class A Common Stock valued at $6,500,000. In connection with this transaction, CRC's parent company purchased 1,240,181 shares of HBC Class A Common Stock for $11,500,000 in cash. CRC is a Los Angeles based Spanish language news broadcasting service which provides news services to Spanish language radio broadcasting companies including HBC subsidiaries. (See Note 12). New York/Miami Radio Stations In August 1994, the Company acquired Radio WADO, Inc. (WADO), Broadcast Investment, Inc. (BII) and SRN Texas, Inc. (STI) for approximately $31,700,000. WADO, BII and STI collectively owned 100% of Spanish Radio Network (SRN), a Florida general partnership, which owned and operated two Spanish language radio stations in Miami (WQBA-AM/FM), and one Spanish language radio station in New York City (WADO-AM). SRN also owned WGLI-AM in Babylon, New York which is currently not operating. The purchase price included the assumption of approximately $25,800,000 in long-term debt, $850,000 in current liabilities, a payment of approximately $3,500,000 in cash and 137,762 shares of HBC Class B Common Stock valued at approximately $1,378,000. The acquisition of these companies are hereafter referred to as the "New York/Miami Radio Stations." F-10 11 Dallas/Ft. Worth Radio Stations In August 1994, the Company acquired Rodriguez Broadcasting, Inc. (RBI) for $1,500,000 in cash. RBI owned two Spanish language radio stations (KICI-AM and KICI-FM) which serves the Dallas/Ft. Worth market. Immediately prior to the closing of this transaction, RBI transferred the license for KICI-FM to Corsicana Communications, Inc. (Corsicana), an entity owned by the former shareholder of RBI, for a $900,000 note receivable and therefore the Company did not purchase this station. However, on August 19, 1994, the Company and Corsicana entered into an LMA to program KICI-FM and obtained an option, exercisable after November 17, 1994, to purchase KICI-FM in exchange for cancellation of the note receivable. The acquisition of KICI-FM was completed in April 1995. Prior to August 19, 1994, RBI had entered into an Asset Purchase Agreement to acquire a license for KMRT-AM, which serves the Dallas/Ft. Worth market, and also entered into an LMA regarding KMRT which permitted RBI to program the station pending its acquisition. On August 19, 1994, RBI assigned its rights under this LMA to a subsidiary of the Company. The acquisition of KMRT-AM was completed in December 1994. On August 19, 1994, HBC also acquired Mark Rodriguez, Jr. Broadcasting, Inc. (MRB) in exchange for 374,885 shares of HBC Class B Common Stock valued at approximately $4,405,000 plus the assumption of approximately $6,500,000 in long-term debt. MRB owned and operated a Spanish language radio station (KESS-AM) in Ft. Worth, Texas. Pro Forma Financial Information The following unaudited pro forma financial information presents the consolidated results of operations as if the above acquisitions had occurred at the beginning of the periods presented, after giving effect to certain adjustments including depreciation and amortization of assets acquired and interest expense on acquisition debt. This pro forma information is presented for comparative purposes only and does not purport to be indicative of what would have occurred had the acquisitions been made as of those dates or results which may occur in the future (in thousands, except per share data).
YEAR ENDED SEPTEMBER 30 1995 1994 ---------- --------- (UNAUDITED) Net broadcasting revenue $ 68,218 $ 63,535 Net income (loss) $ 3,251 $ 722 Net income (loss) per common share $ 0.29 $ 0.08
4. INVESTMENT IN JOINT VENTURE/ACQUISITION OF VIVA MEDIA In October 1989, the Company, through a subsidiary, entered into a joint venture agreement with Mambisa Broadcasting Corporation (Mambisa), wherein the subsidiary acquired a 49% interest in Viva Media, a Florida general partnership which owns radio stations WAQI-AM and WRTO-FM serving the Miami market. The Company recorded its proportionate share of net income (loss) on Viva Media based on its fiscal year end of September 30. In April 1994, the Company entered into an Agreement and Plan of Reorganization with Mambisa to acquire the remaining 51% interest in Viva Media. On August 19, 1994, in connection with the Company and its subsidiaries entering into a new credit agreement with a financial institution, the Company, Mambisa F-11 12 and Viva Media entered into several agreements and transactions which are summarized as follows: a) a subsidiary of the Company entered into an agreement with Viva Media pursuant to which the Company's subsidiary began marketing advertising time for the radio stations owned by Viva Media in exchange for 51% of the profits (as defined) on the advertisements sold for such stations; b) the Company used approximately $16,500,000 of proceeds borrowed under a new credit agreement to repay existing indebtedness owed by Viva Media and in turn, Viva Media guaranteed up to $16,500,000 of the Company's indebtedness to the new lender until such time as Viva Media became a wholly-owned subsidiary of HBC; and c) two of Mambisa's shareholders were elected to Company's board of directors effective August 22, 1994. As a result of the agreements between the Company, Mambisa and Viva Media described above, management considered it appropriate to consolidate the accounts of Viva Media and therefore, such accounts and results of operations have been consolidated and are included in the accompanying consolidated financial statements beginning August 20, 1994. Prior to August 20, 1994, the accounts and results of operations of Viva Media were accounted for using the equity method of accounting. On September 7, 1995, the Company acquired the remaining 51% interest in Viva Media. In connection with this acquisition, the contractual arrangements described in a) and b) in the preceding paragraph were terminated for no additional consideration and two Mambisa shareholders who were also Company officers and directors resigned from their positions. 5. LONG-TERM DEBT AND OTHER NON-CURRENT OBLIGATIONS Long-term debt at September 30 consists of the following:
1995 1994 ----------- ----------- Credit Agreement, variable interest rate (ranging from 8.13% to 9.75% at September 30, 1995), interest payable quarterly, principal payable in varying quarterly installments beginning December 1996 through December 2000 $93,040,733 $56,565,733 Note payable to stockholder, interest at 4.5%, payable in monthly installments of $10,000 through July 1999, remaining unpaid principal and interest due August 1999 1,257,835 1,321,971 12%, noncompete agreements payable to former officers and stockholders in variable monthly installments through May 1996 215,359 437,936 Various notes payable, interest at 10%, payable in varying installments, due 1995 through 2015 2,154,229 894,448 ----------- ----------- 96,668,156 59,220,088 Less current portion (731,628) (747,827) ----------- ----------- $95,936,528 $58,472,261 =========== ===========
Credit Agreement In August 1994, the Company borrowed approximately $56,566,000 under a new credit agreement (Credit Agreement) entered into between the Company, its subsidiaries and a financial institution. The Credit Agreement establishes two credit facilities totalling $100,000,000. The proceeds were used to F-12 13 refinance existing indebtedness, including indebtedness assumed in certain acquisitions, and for working capital. During fiscal 1995, the Company borrowed an additional $36,475,000 under the Credit Agreement. Proceeds of these borrowings were used primarily for business acquisitions, capital expenditures and working capital. Subsequent to September 30, 1995, the Company entered into an agreement with the Lender to amend the Credit Agreement (Note 11). The lender has a security interest in substantially all the assets of the Company and its subsidiaries, including the stock and partnership interests of the Company's subsidiaries. The Credit Agreement restricts the payment of dividends and establishes limitations on, among other things, capital expenditures, borrowings, liens and compensation to management. The Company is also required to maintain certain working capital, debt to equity and other financial ratios. In connection with the August 1994 refinancing, the Company expensed $1,737,707 of unamortized financing cost relating to the refinanced debt. In September 1994, the Company entered into an interest rate cap agreement with a bank which has the effect of ensuring that for $40,000,000 of borrowings outstanding under the Credit Agreement, the base interest rate, as defined, will not exceed 7.25% at any time prior to September 1997. Other Non-current Obligations In connection with radio program promotions, the Company has, from time to time, awarded several $1,000,000 prizes. Such prizes are payable to program prize winners in annual non-interest bearing installments. As of September 30, 1995 and 1994, the long-term portion of the remaining unpaid balance totaled $1,579,133 and $1,425,411, respectively, net of discount of $4,991,737 and $3,814,122, respectively, and is included in other non-current obligations in the accompanying consolidated balance sheets. The imputed interest rates used range from 10% to 12%. Principal maturities of long-term debt and other non-current obligations, net of imputed interest, during the next five years and thereafter are as follows:
OTHER LONG-TERM NON-CURRENT DEBT OBLIGATIONS TOTAL ------------- ------------ ------------- Year ending September 30: 1996 $ 731,628 $ 64,130 $ 795,758 1997 10,597,032 46,901 10,643,933 1998 20,905,404 42,498 20,947,902 1999 21,846,125 27,566 21,873,691 2000 20,796,326 30,837 20,827,163 Thereafter 21,791,641 1,431,331 23,222,972 ------------- ------------ ------------- $ 96,668,156 $ 1,643,263 $ 98,311,419 ============= ============ =============
6. COMMITMENTS AND CONTINGENCIES Leases The Company leases real properties and equipment under operating leases expiring on various dates through 2034. Future minimum payments due under noncancelable operating leases that have initial or remaining terms in excess of one year are as follows: F-13 14
Year ending September 30: 1996 $ 1,267,729 1997 1,244,679 1998 1,242,371 1999 1,226,229 2000 1,179,949 Thereafter 4,886,725 ----------- $11,047,682
Management expects that, in the normal course of business, leases that expire will be renewed or replaced by leases on other properties. All real property leases require the payment of property taxes, maintenance, insurance and other incidental expenses. Rent expense for the years ended September 30, 1995, 1994 and 1993 was $1,345,376, $590,210 and $465,210, respectively. Litigation In the ordinary course of business, the Company becomes involved in certain legal claims and litigation. In the opinion of management, based upon consultations with legal counsel, the disposition of litigation pending against the Company will not have a materially adverse effect on its consolidated financial position or results of operations. 7. INCOME TAXES The provision for income taxes for the years ended September 30, 1995, 1994 and 1993 consists of the following:
1995 1994 1993 --------- -------- -------- Current: Federal $100,000 $ 19,000 $ 50,000 State 50,000 12,000 222,000 -------- -------- -------- 150,000 31,000 272,000 Deferred: Federal -- 69,000 -- --------- -------- -------- $150,000 $100,000 $272,000 ========= ======== ========
Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax basis of assets and liabilities and available tax net operating loss carryforwards. Temporary differences and carryforwards at September 30 which give rise to a significant portion of deferred tax assets and liabilities were as follows:
1995 1994 ----------- ----------- Deferred tax assets: Net operating loss carryforward $ 4,685,000 $ 6,191,000 Deferred prizes payable 657,000 492,000 Allowance for doubtful accounts receivable 597,000 249,000 Depreciation and amortization 469,000 312,000 Other accrued liabilities 132,000 -- ----------- ----------- Total deferred tax assets 6,540,000 7,244,000 Valuation allowance (5,700,000) (6,819,000) ----------- ----------- Net deferred tax assets 840,000 425,000 Deferred tax liabilities: Equity in earnings of Joint Venture 810,000 355,000 Other 99,000 139,000 ----------- ----------- Total deferred tax liabilities 909,000 494,000 ----------- ----------- Net deferred tax liability $ (69,000) $ (69,000) =========== ===========
F-14 15 The decrease in the valuation allowance of $1,119,000 from prior year is primarily due to the decrease in net operating loss carryforwards. The reconciliation of income tax computed at the federal statutory tax rate to the Company's effective tax rate for the years ended September 30, 1995, 1994 and 1993 is as follows:
1995 1994 1993 ------------ ----------- ----------- Federal income tax at statutory rate $ 1,345,000 $ 192,000 $ 1,052,000 Benefit of net operating loss carryforwards (1,494,000) (281,000) (765,000) State and local income tax, net of federal tax benefit 33,000 8,000 147,000 Non-deductible and non-taxable items, net 266,000 181,000 (162,000) ------------ ----------- ----------- $ 150,000 $ 100,000 $ 272,000 ============ =========== ===========
As of September 30, 1995, the Company had tax net operating loss carryforwards for federal and state tax purposes of approximately $13,300,000 and $321,000, respectively. The loss carryforwards expire through the year 2008 if not used. 8. STOCKHOLDERS' EQUITY Common Stock In June 1994, the Company's board of directors approved a Restated Certificate of Incorporation of Heftel Broadcasting Corporation (Restated Certificate). Upon filing, the Restated Certificate created two new separate classes of common stock; Class A Common Stock and Class B Common Stock, and authorized the Company to issue 30,000,000 and 7,000,000 shares, respectively, each with a par value of $.001 per share. The rights of these two new classes of common stock are identical except that the Class A shares are entitled to one vote per share and the Class B shares are entitled to ten votes per share on certain matters. All shares of voting common stock outstanding at the effective date of the filing of the Restated Certificate were converted into 1.1 shares of Class B Common Stock. All references in the accompanying consolidated financial statements to number of shares outstanding and related prices, per share amounts and management incentive stock options have been restated to reflect the effects of the Restated Certificate. Treasury Stock In October 1993, the Company sold the 226,695 shares held as treasury stock to an officer of the Company for $4.41 per share (the estimated fair market value at the date of sale) in exchange for a $1,000,000 unsecured interest-bearing promissory note, due October 2003. In December 1993, the Company repurchased 810,587 shares of its common stock from certain stockholders for $4,019,735. The purchase price for 220,000 of these shares is payable in 60 installments of $10,000 beginning in August 1994, and one installment of $1,000,000 on the first day of the month after the month in which the 60th installment is paid. F-15 16 Preferred Stock The Restated Certificate authorizes the Company to issue 5,000,000 shares of $.001 par value Preferred Stock, 2,600,000 of which is designated as Series A Preferred Stock and the remaining 2,400,000 shares are undesignated. The rights of the new Series A Preferred Stock are essentially identical to the rights of the previously existing preferred stock and all shares of preferred stock outstanding at the effective date of the filing of the Restated Certificate were converted into shares of Series A Preferred Stock. Series A Preferred Stock dividends are payable quarterly and have a cumulative annual rate of $.08 per share. As of September 30, 1995, there were no declared but unpaid Series A Preferred Stock dividends. As of September 30, 1995 and 1994, cumulative unpaid dividends totaled $20,138 and 2,815,360, respectively. The Series A Preferred Stock is superior to common stock in liquidation in the amount of $1 per share plus cumulative unpaid dividends and is redeemable at the option of the Company at $1 per share plus cumulative unpaid dividends. In January 1995, the Company used a portion of the proceeds from its initial public offering to redeem and retire 1,960,290 shares of its outstanding Series A Preferred Stock owned by the Company's Chairman and Co-Chief Executive Officer and certain of his children. The redemption price was equal to $1 per share plus cumulative unpaid dividends through the date of redemption of $2,861,278. The dividends paid included $1,142,495 of cumulative dividends relating to Preferred Stock retired in June 1992 for the which the payment of related cumulative dividends had been deferred pursuant to an agreement between the Company and the holder of the retired Preferred Stock. In April 1995, the Company paid approximately $251,000 in cumulative unpaid dividends on its outstanding Series A Preferred Stock held by the daughter of the Company's Chairman and Co-Chief Executive Officer. 9. MANAGEMENT INCENTIVE STOCK OPTIONS In January 1987, the Company granted options to an officer to purchase 43,428 shares of common stock at an exercise price of $2.29 per share. In April 1987, the Company granted options to an officer (also the principal stockholder of the Company) to purchase 806,678 shares of common stock at an exercise price of $1.05 per share. These options vested immediately and expire in April 1997. In February 1992, the Company granted options to purchase 188,925 shares of common stock to an officer of the Company. The exercise price was $4.51 per share (the estimated fair value of the common stock at the date of grant). In August 1994, the officer exercised his option to purchase the 188,925 shares. As payment for the stock subject to the options exercised, the Company received a 7.67% interest bearing promissory note due August 2004. In June 1993, the Company granted options to purchase 39,600 shares of common stock to an officer of the Company. The exercise price is $4.51 per share (the estimated fair value of the common stock at the dates of grant). The option agreement provided for future issuances of options as to additional shares of common stock should the Company achieve certain future financial targets as specified in his option agreement. In January and August 1994, and in January 1995, additional options to purchase 39,600, 79,200 and 39,600 shares, respectively, were granted in accordance with the officer's option agreement. In connection with the options granted to this officer in August 1994 and January 1995, $434,808 and $217,404, respectively, in compensation expense was charged to operations which reflects the difference between the option price and the fair value of the stock subject to such options. In September 1995, the options F-16 17 previously granted to this officer were cancelled (Note 3). In January 1995, the Company granted options to purchase 160,000 shares of common stock to an officer of the Company at an exercise price of $10.50 per share. Subsequently, the officer exercised his option to purchase the 160,000 shares and delivered to the Company an 8.75% interest bearing promissory note due June 2005 as payment for the stock. Stock Option Plan In July 1994, the Company adopted a stock option plan (Stock Option Plan) under which a maximum of 750,000 shares of Class A Common Stock may be issued upon exercise of options granted to directors, officers or other key employees of the Company or its subsidiaries. The Stock Option Plan is administered by the board of directors, or in the discretion of the board of directors, a committee of not less than two directors. The board of directors or this committee determines employees to whom options will be granted, the timing and manner of grant, the exercise price, the number of shares and all terms of options granted. Generally, options granted under the Stock Option Plan vest over a two or three year period. In August 1994 the Company granted options to purchase 5,000 shares each of Class A Common Stock to two directors of the Company and options to purchase 25,000 shares of Class A Common Stock to an officer, all at an exercise price of $10.00 per share, the initial public offering price. Following is a summary of management incentive stock options granted and outstanding for the three years ended September 30, 1995:
NUMBER OPTION PRICE OF SHARES PER SHARE --------- ------------ Options outstanding at September 30, 1992 1,039,031 $1.05-$4.51 Granted 39,600 $4.51 Exercised -- -- Cancelled -- -- --------- ------------ Options outstanding at September 30, 1993 1,078,631 $1.05-$4.51 Granted 153,800 $4.51-$10.00 Exercised (188,925) $4.51 Cancelled -- -- --------- ------------ Options outstanding at September 30, 1994 1,043,506 $1.05-$10.00 Granted 237,100 $4.51-$14.00 Exercised (160,000) $10.50 Cancelled (198,000) $4.51 --------- ------------ Options outstanding at September 30, 1995 922,606 $1.05-$14.00 ========= ============ Options exercisable at September 30, 1995 863,439 =========
F-17 18 10. OTHER FINANCIAL INFORMATION Accrued Expenses
SEPTEMBER 30, 1995 1994 ---------- ---------- Wages, salaries and benefits $2,347,107 $2,351,041 Commissions payable 2,237,857 1,405,039 Interest payable 664,399 80,370 Liabilities assumed in business acquisitions 1,166,813 -- Other 1,298,668 990,501 ---------- ---------- $7,714,844 $4,826,951 ========== ==========
F-18 19 Allowance for Doubtful Accounts Receivable Balance at October 1, 1992 $ 600,262 Provision charged to costs and expenses 621,744 Amounts charged to reserve (291,352) Other -- ------------- Balance at September 30, 1993 930,654 Provision charged to costs and expenses 855,220 Amounts charged to reserve (1,275,471) Other (arising from business acquisitions) 431,883 ------------- Balance at September 30, 1994 942,286 Provision charged to costs and expenses 1,522,235 Amounts charged to reserve (972,644) Other -- ------------- Balance at September 30, 1995 $ 1,491,877 =============
Supplemental Disclosures of Noncash Transactions Noncash transactions for the year ended September 30 included the following:
1995 1994 ----------- ------------- Reissuance of treasury stock in exchange for note receivabl$ -- $ 1,000,000 Repurchase of common stock in exchange for note payable -- 1,332,000 Issuance of common stock upon exercise of stock options in exchange for note receivable 1,680,000 852,052 ----------- ------------- $ 1,680,000 $ 3,184,052 =========== =============
In addition to the above, in fiscal 1994 the Company issued common stock with a fair value of $12,283,000 and assumed long-term debt and other liabilities totaling $33,437,000 in connection with certain business acquisitions. In fiscal 1995, the Company cancelled a $900,000 note receivable and assumed long-term debt and other liabilities totaling $3,521,000 in connection with certain business acquisitions. 11. SUBSEQUENT EVENTS (UNAUDITED) On November 1, 1995, the Company entered into an agreement to acquire the assets of radio station WPAT-AM, which serves the New York City market for approximately $19,500,000. The acquisition will be financed through additional borrowings under the Company's Credit Agreement. The consummation of this acquisition is subject to approval by the Federal Communications Commission. On December 20, 1995, the Company entered into an agreement with the lender to amend the Credit Agreement. The amended Credit Agreement will increase the total credit facilities to $140,000,000 and defer the commencement of principal payments until December 31, 1996. Other terms of the amended Credit Agreement will remain substantially the same. As a result of this agreement, the principal maturities of long-term debt as of September 30, 1995 have been restated to reflect the maturities provided for under the pending amendment to the Credit Agreement. F-19 20 12. DISCONTINUED OPERATIONS On September 9, 1996, the Company's Board of Directors approved a plan to discontinue the operations of the radio network owned by the Company's wholly-owned subsidiary Spanish Coast-to-Coast, d.b.a. Cadena Radio Centro (CRC) effective August 5, 1996. Consequently, the accompanying consolidated statements of income have been restated to reflect the effects of the discontinued operations of CRC for each of the periods presented. F-20 21 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, SEPTEMBER 30, 1996 1995 ------------- --------------- (UNAUDITED) (NOTE) ASSETS Current assets: Cash $ 3,900,401 $ 5,404,310 Accounts receivable, net 19,090,032 15,501,811 Other current assets 3,842,719 4,601,377 ------------- --------------- Total current assets 26,833,152 25,507,498 Property and equipment, at cost 26,380,785 17,580,114 Less accumulated depreciation and amortization (6,522,096) (5,335,151) ------------- --------------- 19,858,689 12,244,963 Intangible assets 131,395,925 114,895,925 Less accumulated amortization (7,894,640) (5,643,246) ------------- --------------- 123,501,285 109,252,679 Other non-current assets 10,290,177 4,632,144 ============= =============== Total assets $ 180,483,303 $ 151,637,284 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 726,688 $ 795,758 Accounts payable and accrued expenses 8,477,520 8,906,469 Amounts payable to officers and stockholders 641,355 838,241 ------------- --------------- Total current liabilities 9,845,563 10,540,468 Long-term debt and other obligations, less current portion 126,861,265 97,515,661 Stockholders' equity (Notes 2, 5 and 6): Series A Preferred Stock, cumulative, $.001 par value 336 336 Undesignated series preferred stock, $.001 par value -- -- Class A Common Stock, $.001 par value 6,824 6,192 Class B Common Stock, $.001 par value 4,167 4,680 Other stockholders' equity, net 43,765,148 43,569,947 ------------- --------------- Total stockholders' equity 43,776,475 43,581,155 ------------- --------------- Total liabilities and stockholders' equity $ 180,483,303 $ 151,637,284 ============= ===============
See notes to condensed consolidated financial statements. NOTE: The balance sheet at September 30, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. F-21 22 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30, ------------------------------ ---------------------------- 1996 1995 1996 1995 ------------------------------ ---------------------------- (UNAUDITED) (UNAUDITED) Net revenues $19,900,061 $16,629,786 $53,053,497 $46,643,810 Operating expenses 15,943,343 12,314,335 43,096,469 37,271,695 ----------- ----------- ----------- ----------- Operating income 3,956,718 4,315,451 9,957,028 9,372,115 Other expense: Interest expense, net (3,201,298) (1,350,497) (7,935,512) (3,711,745) Other expense, net (including cost relating to unconsummated acquisitions (1,117,862) (140,889) (1,324,579) (361,625) ----------- ----------- ----------- ----------- (4,319,160) (1,491,386) (9,260,091) (4,073,370) ----------- ----------- ----------- ----------- Income (loss) before minority interest and provision for income taxes (362,442) 2,824,065 696,937 5,298,745 Minority interest -- (351,305) -- (1,428,337) Provision for income taxes -- -- (65,000) (53,000) ----------- ----------- ----------- ----------- Net income (loss) from continuing operations (362,442) 2,472,760 631,937 3,817,408 Discontinued operations: (Loss) gain on discontinued operations of CRC (500,326) 689,601 (1,608,167) (135,398) ----------- ----------- ----------- ----------- Net income (loss) $ (862,768) $ 3,162,361 $ (976,230) $ 3,682,010 =========== =========== =========== =========== Net income (loss) per common and common equivalent share from continuing operations $ (0.04) $ 0.22 $ 0.06 $ 0.34 =========== =========== =========== =========== Net income (loss) per common and common equivalent share $ (0.09) $ 0.29 $ (0.10) $ 0.33 =========== =========== =========== =========== Weighted average common shares outstanding 10,143,397 10,969,623 10,326,354 10,898,156 =========== =========== =========== ===========
See notes to condensed consolidated financial statements. F-22 23 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30 ------------------------------ 1996 1995 ------------------------------ (UNAUDITED) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 674,642 $ 3,653,546 INVESTING ACTIVITIES: Purchases of property and equipment (3,825,926) (2,919,443) Payments relating to pending and completed business acquisitions (21,341,051) (5,559,708) ------------- ------------ Net cash used in investing activities (25,166,977) (8,479,151) FINANCING ACTIVITIES: Proceeds from borrowings under credit agreement 28,459,267 15,475,000 Payment of debt issue cost (5,199,877) -- Repayment of long-term debt (681,983) (504,243) Net change in amounts due to/from officers and stockholders (68,200) (552,501) Proceeds from exercise of stock options and warrants 512,782 -- Redemption of Preferred Stock -- (1,960,290) Payment of cumulative Preferred Stock dividends (33,563) (2,861,308) ------------- ------------ Net cash provided by financing activities 22,988,426 9,596,658 ------------- ------------ Net increase / (decrease) in cash (1,503,909) 4,771,053 Cash at beginning of period 5,404,310 10,218,911 ------------- ------------ Cash at end of period $ 3,900,401 $ 14,989,964 ============= ============
See notes to condensed consolidated financial statements. F-23 24 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1996 1. BASIS OF PRESENTATION The accompanying unaudited condensed 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. Operating results for the nine month period ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended September 30, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in Heftel Broadcasting Corporation's Annual Report on Form 10-K for the year ended September 30, 1995. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common and common equivalent shares (if dilutive) outstanding during each period. For purposes of this computation, cumulative preferred stock dividends are deducted from net income (loss) during each period in which preferred stock is outstanding, although preferred stock dividends may not have been actually declared or paid during these periods. 2. STOCKHOLDERS' EQUITY
JUNE 30, SEPTEMBER 30, 1996 1995 ------------ ------------- Stockholders' equity (Notes 5 and 6): Series A Preferred Stock, cumulative, $.001 par value, 2,600,000 shares authorized, 335,634 issued and outstanding at June 30, 1996 and September 30, 1995 Liquidation preference of $342,347 at June 30, 1996 ($355,772 at September 30, 1995) $ 336 $ 336 Undesignated series preferred stock, $.001 par value, 2,400,000 shares authorized, none issued or outstanding -- -- Class A Common Stock, $.001 par value, 30,000,000 shares authorized, 6,823,518 issued and outstanding at June 30, 1996 (6,191,799 at September 30, 1995) 6,824 6,192 Class B Common Stock, $.001 par value, 7,000,000 shares authorized, 4,167,116 issued and outstanding at June 30, 1996 (4,679,763 at September 30, 1995) 4,167 4,680 Additional paid-in capital 96,898,263 95,693,269 Accumulated deficit (44,849,328) (43,839,535) Less treasury stock at cost, 810,587 shares (4,019,735) (4,019,735) Notes receivable from stockholders related to purchase of stock (4,264,052) (4,264,052) ------------ ------------ Net stockholders' equity $ 43,776,475 $ 43,581,155 ============ ============
F-24 25 3. STATION ACQUISITION On March 25, 1996, the Company acquired the assets of radio station WPAT-AM, which serves the New York City market for approximately $19.5 million. The acquisition was financed through additional borrowings under the Company's Credit Agreement. 4. LONG-TERM DEBT On January 10, 1996, the Company borrowed $1.5 million under its Credit Agreement and issued a $1.5 million promissory note in connection with the acquisition of real property in Miami on which an AM transmitting tower is located. On March 13, 1996, the Company completed an Amended and Restated Credit Agreement with its lender resulting in an increase to the total credit facilities from $100 million to $175 million and the commencement of principal payments was deferred until December 31, 1996. Other terms of the amended Credit Agreement remained substantially the same. On March 25, 1996, the Company borrowed an additional $20 million under the Credit Agreement. The proceeds were used to fund the acquisition of the assets of WPAT-AM in New York. Subsequent to June 30, 1996, the Company entered into a credit agreement with a new lender (Note 6). 5. STOCKHOLDERS' EQUITY In December 1995, the Company issued an aggregate of 519,339 stock options to various employees of the Company under its Stock Option Plan. The exercise price ranged from $15.25 to $15.50 per share, the market price at the date of issuance. The options vest over a period ranging from two to three years. On January 2, 1996 the Company issued 44,811 shares of common stock to one of the parties to the acquisition of WLXX-AM in Chicago in accordance with the terms of the purchase agreement. In March and April 1996, the Company's board of directors approved the payment of cumulative dividends through December 31, 1995, and through March 31, 1996, respectively, on the outstanding Series A Preferred Stock. Such dividend payments totaled $26,851 and $6,713, respectively. In April 1996, the Company's board of directors also approved the payment of cumulative dividends from April 1, 1996 through June 30, 1996 on the outstanding Series A Preferred Stock. Such dividend payment totaled $6,713 and was paid in July 1996. Subsequent to June 30, 1996, the Company redeemed all of the Series A Preferred Stock outstanding and paid cumulative dividends through the redemption date (Note 6). 6. SUBSEQUENT EVENTS Change in Control of Company On August 5, 1996, Clear Channel Radio, Inc., a wholly owned subsidiary of Clear Channel Communications, Inc. (Clear Channel), completed a stock purchase and tender offer of the Company's Class A and B Common Stock for $23 per share. The consummation of these transactions, as more fully described below, increases Clear Channel's investment in the Company from a previously owned 21% interest to 62%. Clear Channel is a diversified radio and television broadcasting company. F-25 26 Pursuant to a Stockholder Purchase Agreement dated June 1, 1996 between Clear Channel and Mr. Cecil Heftel, former Chairman and Co-Chief Executive Officer, Mr. Carl Parmer, former President and Co-Chief Executive officer and members of the Heftel family, Clear Channel acquired 160,000 shares of the Company's Class A Common Stock and 3,356,529 shares of the Company's Class B Common Stock on August 5, 1996 (each share of Class B Common Stock converts automatically into one share of Class A Common Stock upon sale). An additional 1,156,017 shares of Class A Common Stock were acquired by Clear Channel upon the exercise of stock options and warrants held by the selling stockholders. Under a separate Tender Offer Agreement dated June 1, 1996 between the Company and Clear Channel, Clear Channel also acquired 231,776 shares of the Company's Class A Common Stock, of which an aggregate of 199,167 shares were tendered by employees of the Company upon the exercise of their stock options on August 5, 1996. Additional shares of Class A Common Stock were tendered to Clear Channel by public shareholders. On September 9, 1996, the Company's Board of Directors approved a plan to discontinue the operations of the radio network owned by the Company's wholly-owned subsidiary Spanish Coast-to-Coast, Ltd., a Delaware corporation doing business as Cadena Radio Centro ("CRC"), effective August 5, 1996. Consequently, the accompanying condensed consolidated statements of operations have been restated to reflect the effects of the discontinued operations of CRC for each of the periods presented. Refinanced Credit Agreement On August 5, 1996, concurrent with the completion of the transactions described above, the Company borrowed $135 million under a Credit Agreement with a new lender which provides a total credit facility of $155 million. The proceeds were used to retire all of the outstanding debt under the Company's existing credit agreement and to pay certain non-compete and employment contract settlements plus certain transaction and other costs relating to the stockholder purchase agreement and tender offer. The terms, covenants and conditions of the new credit agreement are similar to those under the former credit agreement, except that the entire principal balance outstanding plus unpaid interest is due in January 1998. The principal maturities of long-term debt as of June 30, 1996 reflect the terms of the new Credit Agreement. As a result of and in connection with the completion of the transactions described in the preceding paragraphs, the Company estimates it will have certain one-time charges during the quarter ended September 30, 1996 of approximately $45 million, before tax benefits, which are expected to be minimal. Such charges relate primarily to the payment of employment contract settlements with former senior executives, the write-off of unamortized financing costs relating to the retired debt, and transaction and other restructuring costs. Proposed Merger Plan On July 10, 1996, Clear Channel issued a press release announcing its plans to submit to the Company's board of directors a proposal and plan to have the Company acquire Tichenor Media Systems, Inc. Tichenor, is a Dallas-based Spanish language broadcaster with twenty radio stations in six markets. Under the terms of the merger plan, Tichenor shareholders would exchange their capital stock for approximately 5.68 million shares of the Company's Class A Common Stock plus approximately $3.2 million in cash. The completion of this acquisition is subject to approval by the board of directors and shareholders of the Company and Tichenor, and by the Federal Trade Commission and Federal Communications Commission. F-26 27 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, SEPTEMBER 30, 1996 1995 ------------ ------------ (UNAUDITED) (NOTE) ASSETS Current assets: Cash $ 4,292,479 $ 5,404,310 Accounts receivable, net 16,867,458 15,501,811 Other current assets 4,526,729 4,601,377 ------------ ------------ Total current assets 25,686,666 25,507,498 Property and equipment, at cost 25,916,790 17,580,114 Less accumulated depreciation and amortization (6,063,421) (5,335,151) ------------ ------------ 19,853,369 12,244,963 Intangible assets 131,395,925 114,895,925 Less accumulated amortization (6,939,545) (5,643,246) ------------ ------------ 124,456,380 109,252,679 Other non-current assets 10,770,048 4,632,144 ------------ ------------ Total assets $180,766,463 $151,637,284 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 5,809,649 $ 795,758 Accounts payable and accrued expenses 8,178,146 8,906,469 Amounts payable to officers and stockholders 778,770 838,241 ------------ ------------ Total current liabilities 14,766,565 10,540,468 Long-term debt and other obligations, less current portion 121,866,725 97,515,661 Stockholders' equity (Notes 2, 5 and 6): Series A Preferred Stock, cumulative, $.001 par value 336 336 Undesignated series preferred stock, $.001 par value -- -- Class A Common Stock, $.001 par value 6,237 6,192 Class B Common Stock, $.001 par value 4,680 4,680 Other stockholders' equity, net 44,121,920 43,569,947 ------------ ------------ Total stockholders' equity 44,133,173 43,581,155 ------------ ------------ Total liabilities and stockholders' equity $180,766,463 $151,637,284 ============ ============
See notes to condensed consolidated financial statements. NOTE: The balance sheet at September 30, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. F-27 28 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31, ------------------------------ ---------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) Net revenues $15,695,750 $13,208,036 $33,153,436 $30,014,024 Operating expenses 13,536,683 12,187,783 27,153,126 24,957,360 ----------- ----------- ----------- ----------- Operating income 2,159,067 1,020,253 6,000,310 5,056,664 Other expense: Interest expense, net (2,392,274) (1,242,553) (4,734,214) (2,361,248) Other, net (74,652) 10,545 (206,717) (220,736) ----------- ----------- ----------- ----------- (2,466,926) (1,232,008) (4,940,931) (2,581,984) ----------- ----------- ----------- ----------- Income (loss) before minority interest and provision for income taxes (307,859) (211,755) 1,059,379 2,474,680 Minority interest -- (232,925) -- (1,077,032) Provision for income taxes -- 22,000 (65,000) (53,000) ----------- ----------- ----------- ----------- Net income (loss) from continuing operations (307,859) (422,680) 994,379 1,344,648 Discontinued operations: Loss on discontinued operations of CRC (663,798) (426,131) (1,107,841) (824,999) ----------- ----------- ----------- ----------- Net income (loss) $ (971,657) $ (848,811) $ (113,462) $ 519,649 =========== =========== =========== =========== Net income (loss) per common and common equivalent share from continuing operations $(0.03) $(0.04) $ 0.09 $ 0.12 ====== ====== ====== ====== Net income (loss) per common and common equivalent share $(0.10) $(0.08) $(0.01) $0.04 ====== ====== ====== ===== Weighted average common shares outstanding 10,103,324 10,780,171 10,417,833 10,504,405 =========== =========== =========== ===========
See notes to condensed consolidated financial statements. F-28 29 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31 ------------------------------ 1996 1995 ------------------------------ (UNAUDITED) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 811,190 $ 1,230,603 INVESTING ACTIVITIES: Purchases of property and equipment (6,837,426) (1,418,537) Payments relating to pending and completed business acquisitions (17,881,783) (4,256,692) ------------- ----------- Net cash used in investing activities (24,719,209) (5,675,229) FINANCING ACTIVITIES: Proceeds from borrowings under credit agreement 28,459,267 5,000,000 Payment of debt issue cost (5,157,833) -- Repayment of long-term debt (593,562) (287,703) Net change in amounts due to/from officers and stockholders 115,166 (673,094) Redemption of Preferred Stock -- (1,960,290) Payment of cumulative Preferred Stock dividends (26,850) (2,610,045) ------------- ----------- Net cash provided by (used in) financing activities 22,796,188 (531,132) ------------- ----------- Net decrease in cash (1,118,831) (4,975,758) Cash at beginning of period 5,404,310 10,218,911 ------------- ----------- Cash at end of period $ 4,292,479 $ 5,243,153 ============= ===========
See notes to condensed consolidated financial statements. F-29 30 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1996 1. BASIS OF PRESENTATION The accompanying unaudited condensed 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. Operating results for the six month period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ended September 30, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in Heftel Broadcasting Corporation's Annual Report on Form 10-K for the year ended September 30, 1995. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common and common equivalent shares (if dilutive) outstanding during each period. For purposes of this computation, cumulative preferred stock dividends are deducted from net income (loss) during each period in which preferred stock is outstanding, although preferred stock dividends may not have been actually declared or paid during these periods. 2. STOCKHOLDERS' EQUITY
MARCH 31, SEPTEMBER 30, 1996 1995 ------------ ------------ Stockholders' equity (Notes 5 and 6): Series A Preferred Stock, cumulative, $.001 par value, 2,600,000 shares authorized, 335,634 issued and outstanding at March 31, 1996 and September 30, 1995 Liquidation preference of $342,347 at March 31, 1996 ($355,772 at September 30, 1995) $ 336 $ 336 Undesignated series preferred stock, $.001 par value, 2,400,000 shares authorized, none issued or outstanding -- -- Class A Common Stock, $.001 par value, 30,000,000 shares authorized, 6,236,610 issued and outstanding at March 31, 1996 and September 30, 1995 6,237 6,192 Class B Common Stock, $.001 par value, 7,000,000 shares authorized, 4,679,763 issued and outstanding at March 31, 1996 and September 30, 1995 4,680 4,680 Additional paid-in capital 96,385,554 95,693,269 Accumulated deficit (43,979,847) (43,839,535) Less treasury stock at cost, 810,587 shares (4,019,735) (4,019,735) Notes receivable from stockholders related to purchase of stock (4,264,052) (4,264,052) ------------ ------------ Net stockholders' equity $ 44,133,173 $ 43,581,155 ============ ============
F-30 31 3. STATION ACQUISITION On March 25, 1996, the Company acquired the assets of radio station WPAT-AM, which serves the New York City market for approximately $19.5 million. The acquisition was financed through additional borrowings under the Company's Credit Agreement. 4. LONG-TERM DEBT On January 10, 1996, the Company borrowed $1.5 million under its Credit Agreement and issued a $1.5 million promissory note in connection with the acquisition of real property in Miami on which an AM transmitting tower is located. On March 13, 1996, the Company completed an Amended and Restated Credit Agreement with its lender resulting in an increase to the total credit facilities from $100 million to $175 million and the commencement of principal payments was deferred until December 31, 1996. Other terms of the amended Credit Agreement remained substantially the same. The principal maturities of long-term debt as of March 31, 1996 and September 30, 1995 reflect the maturities provided for under the Amended and Restated Credit Agreement. On March 25, 1996, the Company borrowed an additional $20 million under the Credit Agreement. The proceeds were used to fund the acquisition of the assets of WPAT-AM in New York. 5. STOCKHOLDERS' EQUITY In December 1995, the Company issued an aggregate of 519,339 stock options to various employees of the Company under its Stock Option Plan. The exercise price ranged from $15.25 to $15.50 per share, the market price at the date of issuance. The options vest over a period ranging from two to three years. On January 2, 1996 the Company issued 44,811 shares of common stock to one of the parties to the acquisition of WLXX-AM in Chicago in accordance with the terms of the purchase agreement. In March 1996, the Company's board of directors approved the payment of cumulative dividends through December 31, 1995 on the outstanding Series A Preferred Stock. Such dividend payment totaled $26,851. 6. SUBSEQUENT EVENTS In April 1996, the Company's board of directors approved the payment of cumulative dividends from January 1, 1996 through March 31, 1996 on the outstanding Series A Preferred Stock. Such dividend payment totaled $6,713. On September 9, 1996, the Company's Board of Directors approved a plan to discontinue the operations of the radio network owned by the Company's wholly-owned subsidiary Spanish Coast-to-Coast, Ltd., a Delaware corporation doing business as Cadena Radio Centro ("CRC"), effective August 5, 1996. Consequently, the accompanying condensed consolidated statements of operations have been restated to reflect the effects of the discontinued operations of CRC for each of the periods presented. F-31 32 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30, 1995 1995 ------------- ------------- (UNAUDITED) (NOTE) ASSETS Current assets: Cash $ 3,416,396 $ 5,404,310 Accounts receivable, net 17,593,044 15,501,811 Other current assets 4,222,817 4,601,377 ------------- ------------- Total current assets 25,232,257 25,507,498 Property and equipment, at cost 18,506,652 17,580,114 Less accumulated depreciation and amortization (5,684,311) (5,335,151) ------------- ------------- 12,822,341 12,244,963 Intangible assets 114,895,925 114,895,925 Less accumulated amortization (6,232,429) (5,643,246) ------------- ------------- 108,663,496 109,252,679 Other non-current assets 6,373,355 4,632,144 ------------- ------------- Total assets $ 153,091,449 $ 151,637,284 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 3,246,355 $ 795,758 Accounts payable and accrued expenses 9,896,912 8,906,469 Amounts payable to officers and stockholders 838,241 838,241 ------------- ------------- Total current liabilities 13,981,508 10,540,468 Long-term debt and other obligations, less current portion 94,670,591 97,515,616 Stockholders' equity (Notes 2, 5 and 6): Series A Preferred Stock, cumulative, $.001 par value 336 336 Undesignated series preferred stock, $.001 par value -- -- Class A Common Stock, $.001 par value 6,192 6,192 Class B Common Stock, $.001 par value 4,680 4,680 Other stockholders' equity 44,428,142 43,569,947 ------------- ------------- Net stockholders' equity 44,439,350 43,581,155 ------------- ------------- Total liabilities and stockholders' equity $ 153,091,449 $ 151,637,284 ============= =============
See notes to condensed consolidated financial statements. NOTE: The balance sheet at September 30, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. F-32 33 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, ---------------------------------- 1995 1994 ---------------------------------- (UNAUDITED) Net revenues $17,457,686 $16,805,988 Operating expenses 13,616,443 12,769,578 ----------- ----------- Operating income 3,841,243 4,036,410 Other income (expense): Interest expense, net (2,350,438) (1,177,693) Other, net (123,567) (171,859) ----------- ----------- (2,474,005) (1,349,552) ----------- ----------- Income before minority interest and provision for income taxes 1,367,238 2,686,858 Minority interest -- (844,107) Provision for income taxes (65,000) (75,000) ----------- ----------- Net income from continuing operations 1,302,238 1,767,751 Loss on discontinued operations of CRC (444,043) (399,291) ----------- ----------- Net income $ 858,195 $ 1,368,460 =========== =========== Net income (loss) per common and common equivalent share from continuing operations $0.12 $0.16 ===== ===== Net income (loss) per common and common equivalent share $ 0.08 $ 0.13 ====== ====== Weighted average common shares outstanding 10,732,342 10,796,079 =========== ===========
See notes to condensed consolidated financial statements. F-33 34 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31 ------------------------------- 1995 1994 ------------------------------- (UNAUDITED) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 757,613 $ (1,467,611) INVESTING ACTIVITIES: Purchases of property and equipment (926,538) (423,867) Payments relating to pending and completed business acquisitions (1,916,001) (1,980,451) ------------ ------------ Net cash used in investing activities (2,842,539) (2,404,318) FINANCING ACTIVITIES: Advances from officers and stockholders 491,485 52,487 Repayment of long-term debt (394,473) (165,939) Repayment of loans from officers and stockholders -- (207,160) ------------ ------------ Net cash provided by (used in) financing activities 97,012 (320,612) ------------ ------------ Net decrease in cash (1,987,914) (4,192,541) Cash at beginning of period 5,404,310 10,218,911 ------------ ------------ Cash at end of period $ 3,416,396 $ 6,026,370 ============ ============
See notes to condensed consolidated financial statements. F-34 35 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) December 31, 1995 1. BASIS OF PRESENTATION The accompanying unaudited condensed 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. Operating results for the three month period ended December 31, 1995 are not necessarily indicative of the results that may be expected for the year ended September 30, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in Heftel Broadcasting Corporation's Annual Report on Form 10-K for the year ended September 30, 1995. Net income per common share is computed by dividing net income by the weighted average number of common and common equivalent shares (if dilutive) outstanding during each period. For purposes of this computation, cumulative preferred stock dividends are deducted from net income during each period in which preferred stock is outstanding, although preferred stock dividends may not have been actually declared or paid during these periods. 2. STOCKHOLDERS' EQUITY
DECEMBER 31, SEPTEMBER 30, 1995 1995 ------------ ------------ Stockholders' equity (Notes 5 and 6): Series A Preferred Stock, cumulative, $.001 par value, 2,600,000 shares authorized, 335,634 issued and outstanding at December 31, 1995 and September 30, 1995 Liquidation preference of $362,485 at December 31, 1995 ($355,772 at September 30, 1995) $ 336 $ 336 Undesignated series preferred stock, $.001 par value, 2,400,000 shares authorized, none issued or outstanding -- -- Class A Common Stock, $.001 par value, 30,000,000 shares authorized, 6,191,799 issued and outstanding at December 31, 1995 and September 30, 1995 6,192 6,192 Class B Common Stock, $.001 par value, 7,000,000 shares authorized, 4,679,763 issued and outstanding at December 31, 1995 and September 30, 1995 4,680 4,680 Additional paid-in capital 95,693,269 95,693,269 Accumulated deficit (42,981,340) (43,839,535) Less treasury stock at cost, 810,587 shares (4,019,735) (4,019,735) Notes receivable from stockholders related to purchase of stock (4,264,052) (4,264,052) ------------ ------------ Net stockholders' equity $ 44,439,350 $ 43,581,155 ============ ============
F-35 36 3. STATION ACQUISITION On November 1, 1995, the Company entered into an agreement to acquire the assets of radio station WPAT-AM, which serves the New York City market for approximately $19,500,000. The acquisition will be financed through additional borrowings under the Company's Credit Agreement. The consummation of this acquisition is subject to approval by the Federal Communications Commission. 4. LONG-TERM DEBT On December 20, 1995, the Company entered into an agreement with its lender to amend the Credit Agreement. The amended Credit Agreement will increase the total credit facilities to $140,000,000 and defer the commencement of principal payments until December 31, 1996. Other terms of the amended Credit Agreement will remain substantially the same. As a result of this agreement, the principal maturities of long-term debt as of December 31, 1995 and September 30, 1995 have been restated to reflect the maturities provided for under the pending amendment to the Credit Agreement. 5. STOCKHOLDERS' EQUITY In December 1995, the Company issued an aggregate of 519,339 stock options to various employees of the Company under its Stock Option Plan. The exercise price ranged from $15.25 to $15.50 per share, the market price at the date of issuance. The options vest over a period ranging from two to three years. 6. SUBSEQUENT EVENTS On January 10, 1996, the Company borrowed $1,500,000 under its Credit Agreement and issued a $1,500,000 promisory note in connection with the acquisition of real property in Miami on which an AM transmitting tower is located. On January 2, 1996 the Company issued 44,811 shares of common stock to one of the parties to the acquisition of WLXX-AM in Chicago in accordance with the terms of the purchase agreement. On September 9, 1996, the Company's Board of Directors approved a plan to discontinue the operations of the radio network owned by the Company's wholly-owned subsidiary Spanish Coast-to-Coast, Ltd., a Delaware corporation doing business as Cadena Radio Centro ("CRC"), effective August 5, 1996. Consequently, the accompanying condensed consolidated statements of operations have been restated to reflect the effects of the discontinued operations of CRC for each of the periods presented. F-36 -----END PRIVACY-ENHANCED MESSAGE-----