SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x] Quarterly report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998
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.)
3102 Oak Lawn Avenue, Suite 215 75219
Dallas, Texas (Zip Code)
(Address of principal executive offices)
(214) 525-7700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 6, 1998
- ----- -----------------------------
Class A Common Stock, $.001 Par Value 35,171,980
Class B Non-Voting Common Stock, $.001 Par Value 14,156,470
HEFTEL BROADCASTING CORPORATION
June 30, 1998
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 2
Condensed Consolidated Statements of Operations for the
Three Months Ended June 30, 1998 and 1997 and the Six Months
Ended June 30, 1998 and 1997 3
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
1998 1997
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 49,684,934 $ 6,553,271
Accounts receivable, net 34,310,894 29,324,324
Prepaid expenses and other current assets 2,193,114 817,456
------------- -------------
Total current assets 86,188,942 36,695,051
Property and equipment, at cost, net 30,116,757 33,299,917
Intangible assets, net 590,224,109 423,529,926
Deferred charges and other assets, net 20,160,049 18,723,785
------------- -------------
Total assets $ 726,689,857 $ 512,248,679
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 31,587,441 $ 25,285,382
Current portion of long-term debt 329,847 440,097
------------- -------------
Total current liabilities 31,917,288 25,725,479
------------- -------------
Long-term obligations, less current portion 1,942,951 14,122,019
------------- -------------
Deferred income taxes 85,341,601 82,441,601
------------- -------------
Stockholders' equity:
Preferred Stock, cumulative, $.001 par value
Authorized 5,000,000 shares; no shares issued
or outstanding - -
Class A Common Stock, $.001 par value
Authorized 50,000,000 shares at June 30, 1998 and
December 31, 1997; issued and outstanding
35,160,497 at June 30, 1998 and 29,978,748 at
December 31, 1997 35,160 29,979
Class B Common Stock, $.001 par value
Authorized 50,000,000 shares at June 30, 1998 and
December 31, 1997; issued and outstanding 14,156,470 14,156 14,156
Additional paid-in capital 664,942,650 459,567,282
Accumulated deficit (57,503,949) (69,651,837)
------------- -------------
Total stockholders' equity 607,488,017 389,959,580
------------- -------------
Total liabilities and stockholders' equity $ 726,689,857 $ 512,248,679
------------- -------------
------------- -------------
See notes to condensed consolidated financial statements.
2
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net revenues $44,392,528 $37,980,889 $75,739,616 $61,010,262
Operating expenses 25,375,655 22,941,668 45,512,179 39,385,474
----------- ----------- ----------- -----------
Operating income before depreciation,
amortization and corporate expenses 19,016,873 15,039,221 30,227,437 21,624,788
Depreciation and amortization 5,152,097 3,961,786 9,490,653 6,880,094
Corporate expenses 1,575,905 1,325,017 2,762,639 2,319,873
----------- ----------- ----------- -----------
Operating income 12,288,871 9,752,418 17,974,145 12,424,821
----------- ----------- ----------- -----------
Other income (expense):
Interest income (expense), net 1,113,313 (784,741) 2,791,475 (2,392,534)
Other, net - (12,602) - (133,907)
----------- ----------- ----------- -----------
1,113,313 (797,343) 2,791,475 (2,526,441)
----------- ----------- ----------- -----------
Income before income tax 13,402,184 8,955,075 20,765,620 9,898,380
Income tax 5,598,714 3,582,028 8,617,732 3,959,350
----------- ----------- ----------- -----------
Net income $ 7,803,470 $ 5,373,047 $12,147,888 $ 5,939,030
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per common share -
basic and diluted $ 0.16 $ 0.12 $ 0.25 $ 0.15
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Basic 49,316,967 44,135,218 48,713,068 39,206,833
Diluted 49,617,324 44,150,810 49,040,084 39,215,296
See notes to condensed consolidated financial statements.
3
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
------------------------------
1998 1997
------------- -------------
Cash flows from operating activities:
Net income $ 12,147,888 $ 5,939,030
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Provision for bad debts 598,963 1,862,196
Depreciation and amortization 9,490,653 6,880,094
Deferred income taxes 2,900,000 2,328,317
Other (9,907) 710,548
Changes in operating assets and liabilities (617,934) (1,147,826)
------------- -------------
Net cash provided by operating activities 24,509,663 16,572,359
------------- -------------
Cash flows from investing activities:
Property and equipment acquisitions (1,887,647) (2,178,596)
Acquisitions of radio stations (170,954,029) (1,402,737)
Additions to intangible assets (107,047) (903,594)
Increase in deferred charges and other assets, net (1,678,513) (10,345,016)
------------- -------------
Net cash used in investing activities (174,627,236) (14,829,943)
------------- -------------
Cash flows from financing activities:
Borrowings on long-term obligations - 56,038,990
Payment of debt issue costs - (1,200,000)
Payments on long-term obligations (12,289,318) (226,643,234)
Proceeds from stock issuances 205,538,554 177,085,075
Other - 55,186
------------- -------------
Net cash provided by financing activities 193,249,236 5,336,017
------------- -------------
Net increase in cash and cash equivalents 43,131,663 7,078,433
Cash and cash equivalents at beginning of period 6,553,271 4,787,652
------------- -------------
Cash and cash equivalents at end of period $ 49,684,934 $ 11,866,085
------------- -------------
------------- -------------
See notes to condensed consolidated financial statements.
4
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
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, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and notes thereto included in Heftel Broadcasting
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
On November 6, 1997, the Board of Directors of the Company authorized a
two-for-one stock split payable in the form of a stock dividend of one share
of common stock for each issued and outstanding share of common stock. The
dividend was paid on December 1, 1997, to all holders of common stock at the
close of business on November 18, 1997. The net income per common share and
other per share information for all periods presented has been restated to
reflect this two-for-one stock split.
In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings Per Share." Basic earnings per common share is based on
net earnings after preferred stock dividend requirements, if any, and the
weighted-average number of Class A and Class B common shares outstanding
during the period. Diluted earnings per common share assumes the exercise or
conversion of securities (such as stock options) into common stock at the
later of the beginning of the period or date of issuance and includes the
add-back of related interest expense and/or dividends, as required. The
adoption of this new accounting standard, which required the restatement of
all presented periods' earnings per share data, did not have a material
impact on previously reported earnings per share.
Effective with fiscal years beginning after December 15, 1997, companies
are required to adopt Statement of Financial Accounting Standards ("SFAS")
No. 130 "Reporting Comprehensive Income." The Statement establishes standards
for the reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. Comprehensive income
includes net income and other comprehensive income, which comprises certain
specific items previously reported directly in stockholders' equity. Other
comprehensive income comprises items such as unrealized gains and losses on
debt and equity securities classified as available-for-sale securities,
minimum pension liability adjustments, and foreign currency translation
adjustments. Since the Company does not currently have any of these other
comprehensive income items, the Company's comprehensive income equals its net
income. Therefore, SFAS No. 130 has no impact on the way the Company reports
or has reported its financial statements.
2. ACQUISITIONS AND DISPOSITIONS
On January 2, 1997, the Company acquired an option to purchase all of
the assets used in connection with the operation of KSCA(FM), Glendale,
California (the "KSCA Option"). In connection with the acquisition of the
KSCA Option, the Company began providing programming to KSCA(FM) under a time
brokerage agreement on February 5, 1997. The KSCA Option, which is
exercisable only upon the death of Gene Autry, the indirect principal
stockholder of the seller, had an initial term which expired on December 31,
1997. The KSCA Option is renewable for additional one-year terms during the
lifetime of Mr. Autry upon payment by the Company of $3.0 million on or
before the then scheduled
5
expiration date of the KSCA Option. On February 4, 1997, the Company made an
initial payment of $10.0 million, as required under the option agreement. On
December 29, 1997, the Company renewed the KSCA Option through December 31,
1998. All such payments will be credited against the purchase price for the
KSCA(FM) assets if the KSCA Option is exercised. If the KSCA Option is not
exercised or renewed, all amounts paid will be charged to expense. The
purchase price for the KSCA(FM) assets is the greater of (a) $112.5 million,
or (b) the sum of (i) $105.0 million, plus (ii) an amount equal to $13,699
per day during the term of the time brokerage agreement. Consummation of the
purchase will be subject to a number of conditions, including approval by the
FCC of the transfer of the FCC licenses.
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 "Tichenor Merger"). At the time of the Tichenor
Merger, Tichenor owned or programmed 20 radio stations in six of the ten
largest Hispanic markets in the United States. The merger was effected
through the merger of a wholly-owned subsidiary of the Company with and into
Tichenor. In connection with the merger, management of Tichenor assumed
management responsibilities of the Company. Pursuant to the Tichenor Merger,
the former Tichenor shareholders and warrant holders received an aggregate of
11,379,756 shares of Common Stock. At the time of the Tichenor Merger,
Tichenor had outstanding approximately $72.0 million of long-term debt, which
was subsequently refinanced by the Company. In addition, all of Tichenor's
outstanding shares of 14% Senior Redeemable Cumulative Preferred Stock
("Tichenor Senior Preferred") were redeemed for approximately $3.4 million.
The total purchase price, including closing costs, allocated to net assets
acquired, was approximately $181.2 million.
On December 1, 1997, the Company entered into an asset exchange
agreement to exchange WPAT(AM), serving the New York City market, and $115.5
million in cash for the assets of WCAA(FM) (formerly WNWK(FM)), serving the
New York City market (the "WCAA(FM) Acquisition"). The WCAA(FM) Acquisition
closed on May 22, 1998. Immediately after closing, the station's programming
was converted to a Spanish language format.
On March 25, 1998, the Company entered into an asset purchase agreement
to acquire the assets of KLTN(FM) (the "KLTN(FM) Acquisition", formerly
KKPN(FM)) serving the Houston market for $54.0 million. The KLTN(FM)
Acquisition closed on May 29, 1998. Immediately after closing, the station's
programming was converted to a Spanish language format.
The Company entered into an asset purchase agreement on May 26, 1998 to
acquire the assets of KJQY(FM) and KKLQ(FM) serving the San Diego market (the
"San Diego Acquisition") for $65.2 million. Following the consummation of the
San Diego Acquisition, the Company plans to convert the stations' programming
to a Spanish language format. Consummation of the purchase is subject to a
number of conditions.
Pro forma results of operations for the three and six months ended June
30, 1998 and 1997, calculated as though the Tichenor Merger and completed
acquisitions had occurred at the beginning of 1997, is as follows (dollars in
thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- -------
Net revenues $44,991 $39,254 $77,374 $68,140
Operating income 11,771 8,879 16,604 9,613
Net income (loss) 6,619 2,989 8,704 (1,102)
Net income (loss) per common share --
basic and diluted 0.13 0.07 0.18 (0.03)
6
The pro forma results of operations does not purport to represent what
the Company's results of operations actually would have been had the Tichenor
Merger occurred at the date specified, or to project the Company's results of
operations for any future period.
1. LONG-TERM OBLIGATIONS
On January 29, 1998, the Company repaid the outstanding balance of the
$300.0 million revolving credit facility (the "Credit Facility") which was
$12.0 million. Proceeds from the January 1998 secondary public stock offering
(the "January 1998 Offering") were used to retire this obligation.
The Company's ability to borrow 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 subsidiaries. Borrowings under the Credit Facility bear interest at
a rate based on the LIBOR rate plus an applicable margin as determined by the
Company's leverage ratio. The Company has $300.0 million of credit available
and may elect under the terms of the Credit Facility to increase the facility
by $150.0 million. Availability under the Credit Facility decreases quarterly
commencing September 30, 1999 and ending December 31, 2004.
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 February 1997 secondary public stock offering (the
"February 1997 Offering"). On February 14, 1997, the Company entered into the
new Credit Facility, replacing the existing credit facility. The Company used
advances under the Credit Facility and a portion of the proceeds from the
February 1997 Offering to retire the outstanding debt and senior preferred
stock of Tichenor assumed on the date of the Tichenor Merger.
2. STOCKHOLDERS' EQUITY
On January 22, 1998, the Company completed the January 1998 Offering
selling 5,175,000 shares of Class A Common Stock in an underwritten public
offering for a total of approximately $205.5 million in proceeds. The Company
completed the February 1997 Offering on February 10, 1997, selling 4,830,000
(pre-split) shares of its Class A Common Stock in an underwritten public
offering for a total of approximately $176.4 million in proceeds.
3. 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 1,018,084 shares of Class A Common Stock to directors and
key employees. The exercise prices range from $16.44 to $43.94 per share and
were equal to the fair market value of the Class A Common Stock on the dates
such options were granted.
7
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 net revenues (gross revenues net of agency commissions) and
operating expenses (excluding depreciation, 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, advertising and
promotion expenses. The Company strives to control these expenses by working
closely with local station management. The Company's revenues vary throughout
the year. As is typical in the radio broadcasting industry, the Company's
first calendar quarter generally produces the lowest revenues. The second and
third quarters generally produce the highest revenues.
Broadcast cash flow is not calculated in accordance with generally
accepted accounting principles. 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, 1998 TO THREE AND SIX
MONTHS ENDED JUNE 30, 1997
The results of operations for the three and six months ended June 30,
1998 are not comparable to results of operations for the same periods in 1997
primarily due to (a) the Tichenor Merger which closed February 14, 1997, and
(b) the start-up of radio stations KSCA(FM) in Los Angeles on February 5,
1997, WCAA(FM) in New York on May 22, 1998 and KLTN(FM) in Houston on May 29,
1998.
Net revenues increased by $6.4 million or 16.9% to $44.4 million in the
three months ended June 30, 1998 from $38.0 million in the same quarter of
1997. Net revenues for the six months ended June 30, 1998 increased by $14.7
million, or 24.1% to $75.7 million, compared to $61.0 million for the same
period in 1997. Net revenues increased for the three and six months ended
June 30, 1998 compared to the same periods in 1997 primarily because of the
Tichenor Merger, the operation of KSCA(FM) during all of the six months ended
June 30, 1998, compared to a portion of the same periods in 1997 and revenue
growth of start-up stations other than KSCA(FM). Had the Tichenor Merger and
WCAA(FM) acquisition occurred on January 1, 1997, net revenues for the three
and six months ended June 30, 1998 would have increased 14.6% and 13.6%,
respectively.
Operating expenses increased by $2.4 million, or 10.6% to $25.4 million
for the three months ended June 30, 1998 from $22.9 million for the same
period of 1997. Operating expenses for the six months ended June 30, 1998
increased by $6.1 million, or 15.6%, to $45.5 million, compared to $39.4
million for the six months ended June 30, 1997. Operating expenses increased
primarily due to the Tichenor Merger and the start-up of WCAA(FM) in New York
and KLTN(FM) in Houston. Bad debt expense (included in operating expenses)
decreased $1.3 million or 67.8% to $0.6 million for the six months ended June
30, 1998 from $1.9 million for the same period of 1997. The decrease in bad
debt expense in 1998 is due to the allowance for doubtful accounts needing a
smaller increase compared to the same period in 1997. Had the Tichenor Merger
occurred on January 1, 1997, operating expenses would have increased 9.4% and
3.8%, to $33.2 million and $60.8 million for the three and six months ended
June 30, 1998, respectively, on a pro forma basis compared to the same period
of 1997.
Operating income before corporate expenses, depreciation and
amortization ("broadcast cash flow") for the three and six months ended June
30, 1998 increased 26.5% and 39.8% to $19.0 million and $30.2 million,
respectively, compared to $15.0 million and $21.6 million, respectively, for
the three and six
8
months ended June 30, 1997. Had the Tichenor Merger occurred on January 1,
1997, broadcast cash flow would have increased 24.5% and 32.5%, to $19.3
million and $30.9 million, respectively, on a pro forma basis for the three
and six months ended June 30, 1998, compared to the same periods of 1997.
Corporate expenses increased by $0.3 million, or 18.9%, to $1.6 million
for the three months ended June 30, 1998 compared to the same period of 1997.
Corporate expenses for the six months ended June 30, 1998 increased by $0.4
million, or 19.1%, to $2.8 million, compared to the same period of 1997. The
increase was primarily due to higher staffing costs of the Company after the
Tichenor Merger. Depreciation and amortization for the quarter ended June 30,
1998 increased 30.0% to $5.2 million compared to $4.0 million for the same
period in 1997. Depreciation and amortization for the six months ended June
30, 1998 increased 37.9% to $9.5 million compared to $6.9 million for the
same period of 1997. The increase in both periods is due to radio station
acquisitions, capital expenditures and the additional depreciation and
amortization associated with the Tichenor Merger included in all of the six
months ended June 30, 1998, compared to a portion of the same period in 1997.
Interest expense, net decreased from $0.8 and $2.4 million for the three
and six months ended June 30, 1997, respectively, to $1.1 and $2.4 million of
interest income, net for the three and six months ended June 30, 1998. The
reduction in interest expense was the result of the repayment of debt funded
from the January 1998 Offering. Interest income increased due to a $193.5
million increase in invested cash from the January 1998 Offering.
Federal and state income taxes are being provided at an effective rate
of 41.5% in 1998 and 40% in 1997. The increase in the effective tax rate in
1998 is due to goodwill amortization which is not deductible for tax purposes.
For the three months ended June 30, 1998, the Company's net income
totaled $7.8 million ($0.16 per common share) compared to $5.4 million ($0.12
per common share) in the same period of 1997. For the six months ended June
30, 1997, the Company's net income totaled $12.1 million compared to $5.9
million in the same period of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June
30, 1998 was $23.5 million as compared to $16.6 million for the same period
of 1997. Capital expenditures totaled $1.9 million and $2.2 million for the
six months ended June 30, 1998 and 1997, respectively. The Company repaid on
January 29, 1998, the entire balance of $12.0 million outstanding under the
Credit Facility. For the six months ended June 30, 1998, the Company repaid
$0.3 million of other Company indebtedness. On February 12, 1997, the entire
balance of $142.5 million outstanding under the Company's prior credit
agreement was repaid with the proceeds from the February 1997 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 portion of the remaining proceeds from the February 1997
Offering to repay approximately $72.0 million of Tichenor related debt and to
redeem the Tichenor Senior Preferred assumed in connection with the Tichenor
Merger.
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 radio station acquisitions and capital expenditures. The Company
believes it will have sufficient cash on hand and cash provided by
operations, borrowings under the Credit Facility, and proceeds from
securities offerings to finance its operations and satisfy its debt service
requirements. The Company regularly reviews potential acquisitions. The
Company intends to finance acquisitions primarily through proceeds from
securities offerings, additional borrowings under the Credit Facility and/or
from cash provided by operations.
9
ACCOUNTING PRONOUNCEMENTS
Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities," was issued by the American Institute of Certified
Public Accountants in April 1998. This SOP provides guidance on the financial
reporting of start-up and organizational costs. It requires start-up
activities and organization costs to be expensed as incurred. The Company
presently expenses start-up and organization costs as incurred.
YEAR 2000
The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable year.
Programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations.
The Company has been replacing its software as part of its long-term
technological plans. The new software being implemented functions properly
with respect to dates in the year 2000 and thereafter. Implementation of the
new software is not expected by the Company to materially effect future
financial results. The Company is relying on vendors' assurances that their
systems will function properly with respect to dates in the year 2000 and
thereafter.
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims and lawsuits, which are
generally incidental to its business. The Company is vigorously contesting
all such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on June 4,
1998 in Dallas, Texas
10
(b) The stockholders of the Company voted to elect five members to
the Board of Directors as follows:
VOTES
DIRECTORS FOR AGAINST ABSTENTIONS
--------- --- ------- -----------
McHenry T. Tichenor, Jr. 27,411,138 0 174,513
McHenry T. Tichenor 27,406,248 0 179,403
Robert W. Hughes 27,436,438 0 149,213
James M. Raines 27,435,738 0 149,913
Ernesto Cruz 26,521,638 0 1,064,013
The stockholders of the Company also voted to amend the Company's
Second Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of Class A Common Stock of the Company from 50
million shares to 100 million shares as follows:
FOR AGAINST ABSTENTIONS
--- ------- -----------
27,232,041 351,819 1,791
The stockholders of the Company also voted to ratify the appointment
of KPMG Peat Marwick LLP as independent auditors for the fiscal year ending
December 31, 1998 as follows:
BROKER
FOR AGAINST ABSTENTIONS NON-VOTES
--- ------- ----------- ---------
27,581,484 1,050 3,117 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description of Exhibit
------- ----------------------
3.1 Second Amended and Restated Certificate of
Incorporation of the Registrant dated February 14, 1997
(incorporated by reference to Exhibit 3.1 to the
Registrant's Form 8-K filed March 3, 1997)
3.2 Amended and Restated Bylaws of the Registrant
(incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1, as amended
Reg. No. 33-78370)
4.1 Credit Agreement among the Registrant and its
subsidiaries, The Chase Manhattan Bank, as administrative
agent, and certain other lenders, dated February 14, 1997
without Exhibits (Schedules omitted) (incorporated by
reference to Exhibit 10.5 to the Registrant's Form 8-K
filed on March 3, 1997)
10.1 Assets Purchase Agreement, dated May 26, 1998, by and
between Citicasters Co. and Heftel Broadcasting
Corporation, HBC San Diego, Inc. and HBC San Diego
License Corporation
27 Financial Data Schedule
11
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated July 31, 1998
disclosing the acquisition of radio stations WCAA(FM) (formerly
WNWK(FM)) and KLTN(FM) (formerly KKPN(FM)).
The Company filed a report on Form 8-K/A dated July 31,
1998 which included the balance sheet of MultiCultural Radio
Broadcasting, Inc. ("MultiCultural") as of December 31, 1997 and
the related statements of income, stockholder's equity, and cash
flows for the year then ended, with an Independent Auditors'
Report dated February 26, 1998. MultiCultural operated radio
station WCAA(FM) (formerly WNWK(FM)). Unaudited financial
statements of MultiCultural included were (a) balance sheet as of
March 31, 1998, (b) a statement of stockholder's equity for the
three months ended March 31, 1998 and (c) statements of income
and cash flows for the three months ended March 31, 1998 and 1997.
Also included were unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1997 and
the three months ended March 31, 1998 along with an unaudited pro
forma condensed consolidated balance sheet as of March 31, 1998.
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: August 6, 1998
12
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
3.1 Second Amended and Restated Certificate of Incorporation of the
Registrant dated February 14, 1997 (incorporated by reference to
Exhibit 3.1 to the Registrant's Form 8-K filed March 3, 1997)
3.2 Amended and Restated Bylaws of the Registrant (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement
on Form S-1, as amended Reg. No. 33-78370)
4.1 Credit Agreement among the Registrant and its subsidiaries, The
Chase Manhattan Bank, as administrative agent, and certain other
lenders, dated February 14, 1997 without Exhibits (Schedules
omitted) (incorporated by reference to Exhibit 10.5 to the
Registrant's Form 8-K filed on March 3, 1997)
10.1 Assets Purchase Agreement, dated May 26, 1998, by and between
Citicasters Co. and Heftel Broadcasting Corporation, HBC San Diego,
Inc. and HBC San Diego License Corporation
27 Financial Data Schedule
13