UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
[x] Quarterly report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from to
Commission file number 0-24516
HEFTEL BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 99-0113417
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Crescent Court, Suite 1777 75201
Dallas, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 855-8882
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class Outstanding at August 14, 1997
- ----- ------------------------------
Class A Common Stock, $.001 Par Value 14,989,374
Class B Non-Voting Common Stock, $.001 Par
Value 7,078,235
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HEFTEL BROADCASTING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
1997 1996
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 11,866,085 $ 4,787,652
Accounts receivable, net 28,984,808 16,995,571
Other current assets 1,675,411 631,791
------------ -------------
Total current assets 42,526,304 22,415,014
Property and equipment, at cost, net 29,233,283 19,666,285
Intangible assets, net 392,323,991 120,592,334
Other non-current assets 14,822,939 1,051,462
------------ -------------
Total assets $478,906,517 $163,725,095
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 369,373 $ 1,860,237
Accounts payable and accrued expenses 21,494,191 12,125,922
------------ -------------
Total current liabilities 21,863,564 13,986,159
Long-term debt and other obligations, less
current portion 38,453,917 135,504,232
Deferred income taxes 41,345,056 69,000
Stockholders' equity:
Series A Preferred Stock, cumulative,
$.001 par value
Authorized 5,000,000 shares; no shares
issued and outstanding - -
Class A Common Stock, $.001 par value
Authorized 50,000,000 and 30,000,000
shares at June 30, 1997 and December 31,
1996, respectively; issued and outstanding
14,989,374 and 11,547,731 14,990 11,548
Class B Common Stock, $.001 par value
Authorized 50,000,000 and 70,000,000 shares at
June 30, 1997 and December 31, 1996, respectively;
issued and outstanding 7,078,235 in 1997 7,078 -
Additional paid-in capital 459,706,875 102,578,149
Accumulated deficit (82,484,963) (88,423,993)
------------ -------------
Total stockholders' equity 377,243,980 14,165,704
------------ -------------
Total liabilities and stockholders' equity $478,906,517 $163,725,095
------------ -------------
------------ -------------
See notes to condensed consolidated financial statements.
1
HEFTEL BROADCASTING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- --------------------------
1997 1996 1997 1996
------------- ----------- ----------- -----------
Net revenues $37,980,889 $19,900,061 $61,010,262 $35,595,811
Station operating expenses 22,941,668 13,068,986 39,385,474 24,017,087
------------- ----------- ----------- -----------
Station operating income before depreciation,
amortization and corporate expenses 15,039,221 6,831,075 21,624,788 11,578,724
Depreciation and amortization 3,961,786 1,538,765 6,880,094 2,682,251
Corporate expenses 1,325,017 1,335,592 2,319,873 2,780,688
------------- ----------- ----------- -----------
Operating income 9,752,418 3,956,718 12,424,821 6,115,785
Other expense:
Interest expense, net 784,741 3,201,298 2,392,534 5,593,572
Restructuring charges - 923,603 - 923,603
Other expense, net 12,602 194,259 133,907 268,911
------------- ----------- ----------- -----------
797,343 4,319,160 2,526,441 6,786,086
------------- ----------- ----------- -----------
Income (loss) before provision for income taxes 8,955,075 (362,442) 9,898,380 (670,301)
Provision for income taxes 3,582,028 - 3,959,350 -
------------- ----------- ----------- -----------
Income (loss) from continuing operations 5,373,047 (362,442) 5,939,030 (670,301)
Loss on discontinued operations - CRC - 500,326 - 1,164,124
------------- ----------- ----------- -----------
Net income (loss) $ 5,373,047 $ (862,768) $ 5,939,030 $(1,834,425)
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Income (loss) per common and common equivalent share:
Continuing operations $ 0.24 $ (0.04) $ 0.30 $ (0.07)
Discontinued operations - (0.05) - (0.11)
------------- ----------- ----------- -----------
Net income (loss) $ 0.24 $ (0.09) $ 0.30 $ (0.18)
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Weighted average common shares outstanding 22,095,703 10,143,397 19,618,985 10,123,361
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
See notes to condensed consolidated financial statements.
2
HEFTEL BROADCASTING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
----------------------------
1997 1996
------------- -----------
Cash flows from operating activities:
Net income (loss) $ 5,939,030 $ (1,834,425)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Provision for bad debts 1,862,196 750,602
Depreciation and amortization 6,880,094 2,823,143
Deferred income taxes 2,328,317 -
Other 710,548 409,463
Changes in operating assets and liabilities (1,147,826) (2,231,754)
------------- -----------
Net cash provided by (used in) operating activities 16,572,359 (82,971)
------------- -----------
Cash flows from investing activities:
Purchases of property and equipment (2,178,596) (2,899,388)
Increase in intangible assets (903,594) -
Increase in non-current assets (10,345,016) -
Payments relating to business acquisitions (1,402,737) (19,425,050)
------------- -----------
Net cash used in investing activities (14,829,943) (22,324,438)
------------- -----------
Cash flows from financing activities:
Borrowings on long-term obligations 56,038,990 28,459,267
Payment of debt issue cost (1,200,000) (5,199,877)
Payment of amounts owed to officers
and stockholders - (559,685)
Repayment of long-term debt (226,643,234) (287,510)
Net proceeds from issuance of common stock 177,085,075
Proceeds from exercise of stock options and warrants 512,782
Other 55,186 (33,563)
------------- -----------
Net cash provided by financing activities 5,336,017 22,891,414
------------- -----------
Net increase in cash and cash equivalents 7,078,433 484,005
Cash and cash equivalents at beginning of period 4,787,652 3,416,396
------------- -----------
Cash and cash equivalents at end of period $ 11,866,085 $ 3,900,401
------------- -----------
------------- -----------
See notes to condensed consolidated financial statements.
3
HEFTEL BROADCASTING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Heftel Broadcasting Corporation and subsidiaries (the "Company") 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
disclosures required by generally accepted accounting principles. 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 and six-month periods ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and notes thereto included in Heftel Broadcasting
Corporation's Annual Report on Form 10-K/A for the fiscal year ended
September 30, 1996.
On February 19, 1997, the Board of Directors of the Company voted to
change the Company's fiscal year from September 30 to December 31. The Form
10-Q for the quarterly period ended December 31, 1996 covers the three-month
transition period.
In 1997, income taxes have been provided for at a rate of 40% of income
before tax. The Company nets its deferred tax assets related to net
operating loss carryovers with its deferred tax liabilities. As the Company
utilizes its net operating loss carryovers, its deferred tax assets are
reduced resulting in increases in the provision for income taxes and the
deferred income tax liability.
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, if any, are deducted from
net income during each period in which preferred stock is outstanding,
whether or not preferred stock dividends have been declared or paid during
these periods.
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share," which supersedes APB Opinion No. 15, "Earnings per
Share," was issued in February 1997. SFAS 128 requires dual presentation of
basic and diluted earnings per share ("EPS") for complex capital structures.
Basic EPS is computed by dividing income (loss) by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution from the exercise or conversion of securities (such as
stock options) into common stock. SFAS 128 is required to be adopted for
year-end 1997; earlier application is not permitted. After adoption, all
prior period EPS data presented shall be restated to conform with SFAS 128.
The Company does not expect that the basic and diluted EPS measured under
SFAS 128 will be materially different from the current presentation of
primary and fully-diluted EPS measured under APB No. 15.
Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," was issued in June 1996. The Company does not expect the
statement to result in any substantive change in its financial statements.
2. ACQUISITIONS AND DISPOSITIONS
In exchange for an initial payment of $10 million made on February 4,
1997, the Company has acquired from Golden West Broadcasters, a California
corporation ("Golden West"), an option to purchase all of the assets used or
held for use in connection with the operation of radio station KSCA-FM, which
serves the Los Angeles market. The option is exercisable upon the death of
4
Gene Autry. The option has an initial term which expires on December 30,
1997, however, the term may be renewed for additional one-year terms provided
the Company pays Golden West an additional $3 million on or before the
expiration date for the one-year option period then in effect. If the sale
of the KSCA-FM assets is not consummated, Golden West is only obligated to
refund to the Company a portion of the option payments under certain
circumstances. If the purchase of the assets is completed, the option
payments will be credited against the purchase price. If the option is
exercised, the purchase price for the KSCA-FM assets will be the greater of
(a) $112.5 million, or (b) the sum of (i) $105 million, plus (ii) an amount
equal to $13,699 per day during the term of the time brokerage agreement for
KSCA-FM to which the Company is a party, which daily amount is subject to
reduction if the Company is unable to broadcast its programming on KSCA-FM
under the agreement. The Company commenced programming KSCA-FM under a time
brokerage agreement on February 5, 1997.
On February 14, 1997, the Company completed its acquisition of Tichenor
Media System, Inc. ("Tichenor"), a national radio broadcasting company
engaged in the business of acquiring, developing and programming Spanish
language radio stations. The acquisition was effected through the merger of
a wholly owned subsidiary of the Company with and into Tichenor (the
"Merger"). Under the terms of the Amended and Restated Agreement and Plan of
Merger by and among Clear Channel Communications, Inc. ("Clear Channel") and
Tichenor dated October 10, 1996 (the "Merger Agreement") (which agreement was
assigned to the Company by Clear Channel), Tichenor shareholders received (a)
7.8261 shares of Heftel Class A Common Stock, par value $.001 per share
("Heftel Common Stock"), in exchange for each share of Tichenor Common Stock
and (b) 4.3478 shares of Heftel Common Stock in exchange for each share of
Tichenor Junior Preferred Stock. In addition, the holders of Tichenor 14%
Senior Redeemable Cumulative Preferred Stock ("Tichenor Senior Preferred")
received $1,000 per share plus accrued and unpaid dividends through December
31, 1995 for each share of Tichenor Senior Preferred.
The transaction value of the Merger of approximately $256.5 million is
calculated as the sum of (a) the fair value of the Tichenor stock ($181.1
million), (b) the outstanding Tichenor Senior Preferred ($3.4 million), and
(c) Tichenor's long-term debt ($72.0 million). The fair value of the
Tichenor stock is calculated as the sum of (a) the issuance of 5,689,878
shares of Heftel Common Stock issued in the Merger with an aggregate value of
$180.6 million based on a closing price of $31.75 per share on July 9, 1996
(the day the Merger was announced), and (b) the direct costs related to the
Merger. The direct costs related to the Merger were funded from the working
capital of the Company. The Tichenor Senior Preferred and long-term debt
were retired at the date of the Merger using a portion of the proceeds from
the Company's recently completed secondary public stock offering (the
"Offering") plus borrowings under a new credit agreement.
The Merger was accounted for using the purchase method of accounting.
The purchase price allocation is preliminary and is subject to change upon
final determination of the value of the assets acquired and liabilities
assumed. The preliminary purchase price allocation is as follows:
Current assets $ 15,718,094
Property and equipment 9,082,066
Intangible assets 276,591,189
Other non-current assets 2,428,975
Current liabilities (83,772,585)
Non-current liabilities (38,947,739)
------------
$181,100,000
------------
------------
Intangible assets are comprised primarily of broadcast licenses and
goodwill, which are being amortized over 40 years.
During the second quarter of 1997, the Company completed its federal
income tax return for the tax year ended September 30, 1996. As a result,
the Company has recognized additional net operating losses and revised the
purchase price allocation. Goodwill and deferred income taxes have been
reduced by approximately $14,280,000.
5
Pro forma financial information for the three and six months ended June
30, 1997 and 1996, as though the Merger had occurred at the beginning of 1997
and 1996, is as follows (dollars in thousands, except per share data):
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
---------- ----------- ----------- ---------
Net revenues $ 37,981 $32,169 $65,447 $56,822
Operating income $ 9,752 $ 5,104 $11,775 $ 6,529
Net income (loss) $ 5,343 $(1,087) $ 3,308 $(3,355)
Net loss per common share $ 0.24 $ (0.07) $ 0.16 $ (0.21)
The pro forma financial information does not purport to represent what
the Company's results of operations actually would have been had the Merger
occurred at the dates specified, or to project the Company's results of
operations for any future period.
The Company exercised its option to purchase the assets of KLTO-FM
(formerly KMPQ-FM) in Rosenberg - Richmond (Houston), Texas on March 28,
1997. The Company has operated KLTO-FM under a time brokerage agreement since
1994. The purchase price of $3,080,000 is subject to increase upon certain
conditions. The acquisition has been approved by the Federal Communications
Commission ("FCC") and is expected to close in August 1997.
On May 1, 1997, the Company entered into an agreement to sell
the assets of KINF-AM (the "Station") which is licensed to Denton, Texas.
The sales price is $650,000, which approximates the book value of the assets.
The Station is operating under a Time Brokerage Agreement until the closing
date. The sale has been approved by the FCC and is expected to close in
August 1997.
3. RECLASSIFICATIONS / DISCONTINUED OPERATIONS
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., dba Cadena Radio Centro ("CRC")
effective August 5, 1996. Consequently, the accompanying condensed
consolidated statements of operations for the three and six-month periods
ended June 30, 1996 reflect the results of CRC as a discontinued operation.
4. LONG-TERM DEBT
On February 12, 1997, the Company repaid borrowings of $142.5 million
outstanding under an existing $155 million credit facility with a portion of
the proceeds from the Offering.
On February 14, 1997, the Company entered into a new $300 million credit
facility (the "Credit Facility"), replacing the existing credit facility.
The Company used advances under the Credit Facility and a portion of the
proceeds from the Offering to retire the outstanding debt and senior
preferred stock of Tichenor assumed on the date of the Merger. At June 30,
1997, the Company had drawn $36 million under the Credit Facility. The
Company's ability to make additional borrowings under the Credit Facility is
subject to compliance with certain financial ratios and other conditions set
forth in the Credit Facility. The Credit Facility is secured by the stock of
the Company's material subsidiaries.
Borrowings under the Credit Facility bear interest at a rate based, at
the option of the Company, on the prime rate or Eurodollar rate, plus an
incremental rate. The interest rate on the borrowings outstanding under the
Credit Facility at June 30, 1997 was approximately 6.06%. Availability under
the Credit Facility reduces quarterly commencing September 30, 1999 and
ending December 31, 2004.
6
5. STOCKHOLDERS' EQUITY
On February 10, 1997, the Company completed the Offering selling
4,830,000 shares of its Class A Common Stock for $36.80 per share, after
underwriters' discount. The net proceeds of the Offering were approximately
$177.1 million.
6. LONG-TERM INCENTIVE PLAN
On May 21, 1997, the stockholders of the Company approved the Heftel
Broadcasting Corporation Long-Term Incentive Plan (the "Incentive Plan").
The types of awards that may be granted under the Incentive Plan include (a)
incentive stock options, (b) non-qualified stock options, (c) stock
appreciation rights, (d) rights to receive a specified amount of cash or
shares of Class A Common Stock and (e) restricted stock. In addition, the
Incentive Plan provides that directors of the Company may elect to receive
some or all of their annual director compensation in the form of shares of
Class A Common Stock. Subject to certain exceptions set forth in the
Incentive Plan, the aggregate number of shares of Class A Common Stock that
may be the subject of awards under the Incentive Plan at one time shall be an
amount equal to (a) five percent of the total number of shares of Class A
Common Stock outstanding from time to time minus (b) the total number of
shares of Class A Common Stock subject to outstanding awards on the date of
calculation under the Incentive Plan and any other stock-based plan for
employees or directors of the Company (other than the Company's Employee
Stock Purchase Plan). The Company has granted incentive and non-qualified
stock options for 370,500 shares of Class A Common Stock to directors and key
employees. The exercise price ranges from $47.00 to $49.38 per share and was
equal to the fair market value of the Class A Common Stock on the date such
options were granted.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The performance of a radio station group is customarily measured by its
ability to generate broadcast cash flow. The two components of broadcast
cash flow are gross revenues (net of agency commissions) and operating
expenses (excluding depreciation and amortization and corporate general and
administrative expense). The primary source of revenues is the sale of
broadcasting time for advertising. The Company's most significant operating
expenses for purposes of the computation of broadcast cash flow are employee
salaries and commissions, programming expenses, engineering, and advertising
and promotion expenses.
Data on broadcast cash flow, although not calculated in accordance with
generally accepted accounting principles, is widely used in the broadcast
industry as a measure of a company's operating performance. Nevertheless,
this measure should not be considered in isolation or as a substitute for
operating income, cash flows from operating activities or any other measure
for determining the Company's operating performance or liquidity that is
calculated in accordance with generally accepted accounting principles.
Broadcast cash flow does not take into account the Company's debt service
requirements and other commitments and, accordingly, broadcast cash flow is
not necessarily indicative of amounts that may be available for dividends,
reinvestment in the Company's business or other discretionary uses.
COMPARISON OF THREE AND SIX MONTHS ENDED JUNE 30, 1997 TO THREE AND SIX
MONTHS ENDED JUNE 30, 1996
The results of operations for the three and six months ended June
30, 1997 are not comparable to results of operations for the same periods in
1996 primarily due to i) the Merger with Tichenor which closed February 14,
1997, ii) the start-up of new Spanish language radio stations in Los Angeles
on February 5, 1997, San Francisco on August 16, 1996, and Houston on June
21, 1996, and iii) the discontinuation of the radio network, CRC, effective
August 5, 1996. Management's discussion and analysis of results of
7
operations for the three and six months ended June 30, 1997, as compared to
the comparable periods in 1996, has been presented on a pro forma basis that
includes the results of operations of Tichenor for the three and six months
ended June 30, 1996 as though the Merger had occurred on January 1, 1996.
The three and six months ended June 30, 1996 pro forma results of operations
are not necessarily indicative of what would have occurred had the Merger
taken place on January 1, 1996. A start-up station involves converting an
English formatted station to a Spanish language format, resulting in a
substantial turnover in audience listening and advertisers. As a result, the
pro forma operating performance of start-up stations acquired or operated by
the Company do not include the results of operations prior to the acquisition.
The following table sets forth selected data from the operating results
of the Company for the three months and six months ended June 30, 1997 and
1996 on a historical and pro forma basis (in thousands):
For the Quarter Ended June 30,
----------------------------------------------------------------------
Historical Pro Forma
---------------------------------- --------------------------------
1997 1996 % Change 1997 1996 % Change
------- ------- ---------- ------- ------- --------
Net Revenues $37,981 $19,900 90.9% $37,981 $32,169 18.1%
Station Operating Expenses $22,942 $13,069 75.5% $22,942 $21,163 8.4%
Broadcast Cash Flow $15,039 $ 6,831 120.2% $15,039 $11,006 36.6%
For the Six Months Ended June 30,
----------------------------------------------------------------------
Historical Pro Forma
---------------------------------- --------------------------------
1997(1) 1996 % Change 1997(1) 1996 % Change
------- ------- ---------- ------- ------- --------
Net Revenues $61,010 $35,596 71.4% $65,447 $56,822 15.2%
Station Operating Expenses $39,385 $24,017 64.0% $42,805 $39,136 9.4%
Broadcast Cash Flow $21,625 $11,579 86.8% $22,642 $17,686 28.0%
(1) The Merger closed on February 14, 1997. As a result, the historical
results exclude results of operations of Tichenor from January 1, 1997
through February 13, 1997.
Net revenues increased by $18.1 million or 90.9% to $38.0 million in the
three months ended June 30, 1997 from $19.9 million in the same quarter of
1996. Net revenues for the six months ended June 30, 1997 increased by $25.4
million, or 71.4% to $61.0 million, compared to $35.6 million for the six
months ended June 30, 1996.
Net revenues increased primarily because of the Merger, the operation of
start-up stations during all or part of the three and six months ended June
30, 1997, compared to the same periods in 1996, and same station revenue
growth for the three and six months ended June 30, 1997 compared to the same
periods in 1996. Had the Merger occurred on January 1, 1996, net revenues
for the three and six months ended June 30, 1997 would have increased 18.1%
and 15.2% respectively, compared to the same periods in 1996. Excluding
barter revenues, net revenues would have increased 22.1% and 19.9%
respectively, compared to the same periods in 1996. New management changed
the Company's barter policy, resulting in a 43% and 47.5% reduction in barter
revenue for the three and six months ended June 30, 1997, compared to the
same periods in 1996.
8
Station operating expenses increased by $9.9 million or 75.5% to $22.9
million in the three months ended June 30, 1997 from $13.1 million in the
same period of 1996. Station operating expenses for the six months ended
June 30, 1997 increased by $15.4 million, or 64.0% to $39.4 million, compared
to $24.0 million for the six months ended June 30, 1996. Station operating
expenses increased due to the Merger, start-up stations, and higher bad debt
and promotional expenses. Had the Merger occurred on January 1, 1996,
station operating expenses would have increased 8.4% and 9.4%, to $22.9
million and $42.8 million for the three and six months ended June 30, 1997
respectively, compared to the same periods of 1996.
As a result, operating income before corporate expenses and depreciation
and amortization for the three and six months ended June 30, 1997 increased
120.2% and 86.8% to $15.0 million and $21.6 million, respectively, compared
to $6.8 million and $11.6 million, respectively, for the three and six months
ended June 30, 1996. Had the Merger occurred on January 1, 1996, operating
income before corporate expenses and depreciation and amortization would have
increased 36.6% and 28.0%, to $15.0 million and $22.6 million respectively,
for the three and six months ended June 30, 1997, compared to the same
periods of 1996.
Corporate expenses for the quarter ended June 30, 1997 declined slightly
from $1.34 million to $1.33 million for the same quarter of the prior year.
Corporate expenses for the six months ended June 30, 1997 decreased 16.6% to
$2.3 million compared to $2.8 million for the same period in 1996. The
decrease was due to overall lower staffing costs of the newly merged company
compared to corporate expenses in the second quarter of 1996 offset in part
by additional legal and audit expenses. During the second quarter of 1997,
the Company's Las Vegas corporate headquarters was substantially shut down
and consolidated into the new headquarters located in Dallas, Texas.
Depreciation and amortization for the quarter ended June 30, 1997 increased
157.5% to $4.0 million compared to $1.5 million for the same period in 1996.
Depreciation and amortization for the six months ended June 30, 1997
increased 156.5% to $6.9 million compared to $2.7 million for the same period
of 1996. The increase in both periods is due to completed station
acquisitions and capital expenditures completed in prior periods, and the
additional amortization of intangible assets associated with the Merger.
Interest expense, net of interest income, for the quarter ended June 30,
1997 decreased 75.5% to $0.8 million from $3.2 million in the same period of
1996. Interest expense, net of interest income, for the six months ended
June 30, 1997 decreased 57.2% to $2.4 million from $5.6 million in the same
period of 1996. The reduction in interest expense was primarily the result
of lower borrowing rates, a substantial repayment of debt in February 1997,
associated with the application of approximately $177 million of proceeds
from the Offering towards existing Company debt, and the repayment of $10
million of debt from cash flow from operations during the first six months of
1997.
For the three months ended June 30, 1997, the Company's net income
totaled $5.4 million compared to a net loss of $0.9 million in the same
period of 1996. For the six months ended June 30, 1997, the Company's net
income totaled $5.9 million compared to a net loss of $1.8 million in the
same period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June
30, 1997 was $16.6 million as compared to a decrease of $0.1 million for the
same period of 1996. Capital expenditures totaled $2.2 million and $2.9
million for the six months ended June 30, 1997 and 1996, respectively.
Capital expenditures are financed primarily from cash generated from
operations. Acquisitions are financed primarily with long-term borrowings.
On February 12, 1997, the entire balance outstanding under the Company's
existing credit agreement of $142.5 million was repaid with the proceeds from
the Offering. On February 14, 1997, the Company entered into the Credit
Facility. Also on February 14, 1997, the Company borrowed $46.0 million
under the Credit Facility and used a substantial portion of the remaining
proceeds from the Offering to repay approximately $72.0 million of Tichenor
related debt and the Tichenor Senior Preferred assumed in connection with the
Merger. During the second quarter, the Company repaid $10.0 million under
9
the Credit Facility and $1.6 million of other Company indebtedness.
Available cash on hand plus cash flow provided by operations was
sufficient to fund the Company's operations, meet its debt obligations, and
to fund capital expenditures. The Company believes it will have sufficient
cash on hand, cash provided by operations and borrowing capacity to finance
its operations and satisfy its debt service requirements. The Company
regularly reviews potential acquisitions. The Company intends to finance
acquisitions primarily through additional borrowings under the Credit
Facility and/or from cash provided by operations.
FORWARD LOOKING STATEMENTS
Certain statements contained in this report are not based on historical
facts, but are forward looking statements that are based on numerous
assumptions made as of the date of this report. When used in the preceding
and following discussions, the words "believes," "intends," "expects,"
"anticipates" and similar expressions are intended to identify forward
looking statements. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
expressed in any of the forward looking statements. Such risks and
uncertainties include, but are not limited to, industrywide market factors
and regulatory developments affecting the Company's operations, acquisitions
and dispositions of broadcast properties described elsewhere herein, the
financial performance of start-up stations, and efforts by the new management
to integrate its operating philosophies and practices at the station level.
This report should be read in conjunction with the Company's Annual Report on
Form 10-K. The Company disclaims any obligation to update the forward
looking statements in this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Heftel Broadcasting Corporation
---------------------------------------
(Registrant)
/s/ Jeffrey T. Hinson
---------------------------------------
Jeffrey T. Hinson
Senior Vice President/
Chief Financial Officer
Dated: December 12, 1997
10
INDEX
Exhibit
No. Description of Exhibit
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27 Financial Data Schedule
11