-----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, R67xfJp6kpaRUIyuyXsuSsn4aaGektw2iyDyPPZpXcHdOGoBOZj/F9WVFF8nDSlQ wdPIPch32bccF+mFtubGwQ== 0000899243-97-000971.txt : 19970515 0000899243-97-000971.hdr.sgml : 19970515 ACCESSION NUMBER: 0000899243-97-000971 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRO NETWORKS INC CENTRAL INDEX KEY: 0001016718 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 760505148 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21575 FILM NUMBER: 97605199 BUSINESS ADDRESS: STREET 1: 2800 POST OAK BLVD STREET 2: STE 4000 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136212800 MAIL ADDRESS: STREET 1: 2700 POST OAK BLVD CITY: HOUSTON STATE: TX ZIP: 77056 10-Q 1 FORM 10-Q United States SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 MARCH 31, 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: 0-21575 -------- METRO NETWORKS, INC. --------------------------------------------------- (Exact Name of Registrant as specified in its charter) DELAWARE 76-0505148 -------- ---------- (State or other jurisdiction (IRS Employer Identification Number) of incorporation) 2800 POST OAK BLVD. SUITE 4000 HOUSTON, TEXAS 77056 ----------------------------------- (Address of Registrant) 713-407-6000 -------------------------- (Registrant's phone number) 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 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___ --- NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK OUTSTANDING AS OF MARCH 31, 1997: 16,550,357 1 METRO NETWORKS, INC. TABLE OF CONTENTS PAGE ---- PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1996 AND MARCH 31, 1997 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1997 5 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1997 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13 II. OTHER INFORMATION ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 15 SIGNATURES 16 2 METRO NETWORKS, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31, ASSETS DECEMBER 31, 1997 1996 (UNAUDITED) ------------- -------------- Current assets: Cash and cash equivalents $ 43,441,293 $ 36,217,339 Accounts receivable, net 23,318,182 23,317,645 Prepaid expenses and other current assets 841,849 1,166,550 Reciprocal receivables 11,397,959 10,750,442 Merchandise and scrip inventory 567,144 788,749 Income tax receivable - 436,410 Reciprocal prepaid expenses and other current assets 440,246 641,961 ------------ ------------ Total current assets 80,006,673 73,319,096 ------------ ------------ Property and equipment: Operating equipment 14,686,692 18,324,975 Transportation equipment 706,554 567,162 Leasehold improvements 1,170,189 1,590,456 ------------ ------------ 16,563,435 20,482,593 Less: accumulated depreciation 5,992,630 6,650,246 ------------ ------------ 10,570,805 13,832,347 Purchased broadcast contracts and other intangibles, net of accumulated amortization of $9,022,969 in 1997 and $6,783,978 in 1996 14,074,242 17,499,333 Other assets 1,160,611 1,730,523 ------------ ------------ Total assets $105,812,331 $106,381,299 ============ ============
See accompanying notes to consolidated financial statements. 3 METRO NETWORKS, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS, CONTINUED
MARCH 31, LIABILITIES DECEMBER 31, 1997 1996 (UNAUDITED) ------------ ------------- Current liabilities: Disbursement float $ 2,055,467 $ 2,458,539 Accounts payable 3,076,333 3,599,871 Accrued payroll liabilities 1,578,677 3,706,200 Other accrued liabilities 6,606,972 3,738,110 Notes payable 518,244 108,252 Note payable to shareholder 3,100,000 3,100,000 Current portion of long-term debt 318,789 865,069 Deferred revenues 430,299 638,057 Income tax payable 897,788 - Current deferred income taxes 61,000 61,000 Reciprocal payables 7,837,337 7,030,827 Accrued reciprocal liabilities 1,520,897 1,748,187 Reciprocal and airtime obligations 2,711,301 2,667,501 ------------ ------------ Total current liabilities 30,713,104 29,721,613 ------------ ------------ Long-term debt 473,356 593,347 Other liabilities 2,696,228 2,681,972 ------------ ------------ Total liabilities 33,882,688 32,996,931 ------------ ------------ STOCKHOLDERS' EQUITY Common stock 16,550 16,550 Preferred stock 2,550 2,550 Additional paid-in capital 72,888,027 72,888,027 Retained (deficit) earnings (977,484) 477,241 ------------ ------------ Total stockholders' equity 71,929,643 73,384,368 ------------ ------------ $105,812,331 $106,381,299 ============ =============
See accompanying notes to consolidated financial statements. 4 METRO NETWORKS, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) --------------------------- 1996 1997 ----------- ------------ Advertising revenues $23,030,197 $29,367,827 Broadcasting costs 12,468,213 15,998,600 Marketing expense 5,484,607 6,209,079 General and administrative expense 1,683,220 3,043,332 Depreciation and amortization 1,489,671 2,129,638 ----------- ----------- Total operating costs 21,125,711 27,380,649 ----------- ----------- Income from operations 1,904,486 1,987,178 ----------- ----------- Other (income) expense: Interest income (22,608) (366,412) Interest expense 322,109 22,168 Other (6,691) (16,417) ----------- ----------- Income before income tax 1,611,676 2,347,839 ----------- ----------- Income tax expense 502,948 893,114 ----------- ----------- Net income $ 1,108,728 $ 1,454,725 =========== =========== Net income per share $ - $0.09 =========== =========== Pro forma income data (unaudited): Income as reported before tax $ 1,611,676 Proforma federal and state income tax 572,145 ----------- Proforma net income $ 1,039,534 =========== Pro forma net income per share 0.09 Weighted average shares outstanding 11,900,357 16,730,957 See accompanying notes to consolidated financial statements. 5 METRO NETWORKS, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) ------------------------------------ 1996 1997 ------------------------------------ Cash flows from operating activities: Net earnings $ 1,108,728 $ 1,454,725 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 1,489,671 2,129,638 Loss on dispositions of property and equipment - 170,299 Amortization of discount on note payable 23,526 - Provision for doubtful receivables 48,977 255,237 Deferred federal income tax (180,108) - Decrease (increase) in, net of acquisition of businesses Accounts receivable, net 258,562 147,851 Prepaid expenses and other current assets (56,720) 101,448 Other assets (147,464) (892,463) (Decrease) increase in, net of acquisition of businesses Accounts payable 466,721 523,538 Accrued payroll liabilities 116,563 2,127,523 Other accrued liabilities 425,504 (3,018,862) Deferred revenues 76,338 207,757 Income tax payable 442,948 (1,334,198) Other liabilities (19,261) (198,119) Net reciprocal arrangements (838,083) (1,398,641) ----------- ----------- Net cash provided by operating activities 3,215,902 275,733 ----------- ----------- Cash flows from investing activities: Acquisitions of companies (4,266,886) (4,050,000) Advances on receivables to related parties (149,367) - Proceeds from sale of property and equipment - 40,000 Acquisitions of property and equipment (486,907) (3,149,038) ----------- ----------- Net cash used in investing activities $(4,903,160) $(7,159,038) ----------- -----------
See accompanying notes to consolidated financial statements. 6 METRO NETWORKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) --------------------------- 1996 1997 --------------------------- Cash flows from financing activities: Increase (decrease) in disbursements float $( 230,443) 403,072 Proceeds from long-term debt 3,532,060 - Principal payments on long term debt (281,901) (743,721) Distributions (932,373) - ---------- ----------- Net cash provided by financing activities 2,087,343 (340,649) ---------- ----------- Net (decrease) increase in cash and cash equivalents 400,085 (7,223,954) Cash and cash equivalents at beginning of period 3,049,946 43,441,293 ---------- ----------- Cash and cash equivalents at end of period $3,450,031 $36,217,339 ========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 106,970 $ 299,941 ========== =========== Cash paid during the period for income taxes $ 60,000 $ 851,544 ========== =========== Supplemental noncash investing and financing activities: Property and equipment acquired through reciprocal activities $ 74,626 $ 969,349 ========== ===========
See accompanying notes to consolidated financial statements. 7 METRO NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The information furnished in this report reflects all adjustments which, in the opinion of management, are necessary for a fair statement of the financial position, results of operations and cash flows as of and for the interim periods. Such adjustments consist of items of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations expected for the full fiscal year or for any other future period. 2. INITIAL PUBLIC OFFERING In October 1996, the Company completed its initial public offering of its common stock (the "Public Offering"). Of the 7,200,000 shares of common stock offered, 3,600,000 shares were sold by the selling shareholder. In addition, the Company's underwriters exercised the underwriters' over- allotment option which resulted in the Company selling an additional 1,050,000 shares. The Company received approximately $67.8 million in cash, net of underwriting discounts and commissions, and other expenses. 3. PRO FORMA EARNINGS PER SHARE Proforma income taxes are set forth herein because certain of the Predecessor companies (as defined below) operated as S corporations or partnerships for federal income tax purposes. Proforma net income reflects income taxes calculated using a C corporation tax status. Weighted average shares outstanding and pro forma net income per share are calculated assuming the shares issued in conjunction with the Reorganization (see note 6) were outstanding for the periods presented. Assuming that the Public Offering shares were outstanding for the periods presented the pro forma net income per share for the three months ended March 31, 1996 would have been $0.06. 8 4. NOTES PAYABLE AND LONG-TERM DEBT Short-term notes payable consist of various notes with an original maturity of less than one year. Long-term debt consists of: December 31, March 31, 1996 1997 ------------ ----------- Various acquisitions notes payable, discounted at 8% due 1997 through 1999 $686,395 $1,360,065 Unsecured note payable to bank at prime (8.25% at December 31, 1996), due 1997 through 2000 105,750 98,351 -------- ---------- 792,145 1,458,416 Less: Current portion 318,789 865,069 -------- ---------- $473,356 $ 593,437 ========= ========== On October 22, 1996, the Company paid off the notes payable related to the $30.0 million revolving agreement and replaced this facility with a reducing revolving credit facility (the "Credit Agreement") which provides for maximum aggregate permitted borrowings of $30.0 million. The new line of credit expires December 31, 2003, and will begin reducing in March 1999. The new line of credit bears interest at a variable rate indexed to the lender's prime rate or LIBOR. The new line of credit has a commitment fee based on the daily average unborrowed balance and is secured by the grant of a lien by the Company and its subsidiary on all of their respective assets and a pledge of the Company's equity interest in its subsidiary in favor of the lender. The new line of credit provides for various restrictions on the Company which would restrict the Company, without first obtaining the lender's consent, from taking certain actions, including but not limited to incurring additional indebtedness, making certain acquisitions or consolidating with any other entity, altering its existing capital structure and paying certain dividends. 5. ACQUISITIONS On January 2, 1997, the Company acquired substantially all of the tangible and intangible assets of Airborne Traffic Network, Inc. ("Airborne"), a Kansas corporation. Airborne operates a network of broadcast affiliates serving the Kansas City, Kansas and Omaha, Nebraska metropolitan areas. As consideration for the asset purchase, the Company paid 9 $1,350,000 at closing and agreed to pay an additional contingent consideration in a final payment based upon net revenue or operating cash flow of Airborne for the 12 month period following the closing date. The final payment, based upon net revenue or operating cash flow as defined in the Asset Purchase Agreement, ranges from zero for net revenue less than $1,200,000 or operating cash flow less than $400,000 up to $150,000 for net revenue greater than or equal to $1,800,000 or operating cash flow greater than or equal to $600,000. On January 3, 1997, the Company acquired substantially all of the tangible and intangible assets and assumed certain liabilities of TWI Networks, Inc., an Ohio corporation ("TWI"). TWI operates a network of broadcast affiliates serving the Cincinnati, Columbus and Dayton, Ohio areas, the Memphis and Nashville, Tennessee areas and the Miami, Florida area. The purchase price of approximately $3.7 million consisted of cash consideration of $2,700,000 and installment notes payable of $1,000,000. The purchase price was allocated to the net assets based upon their estimated fair market values. The excess purchase price of approximately $3.25 million was allocated to the value of purchased broadcast contracts, non-compete agreements and goodwill and is being amortized over a five-year period. 6. REORGANIZATION From 1978 until the closing of the Public Offering, the business of the Company was operated through Metro Traffic Control, Inc., a Maryland corporation ("MTC"); Metro Networks, Ltd., a Texas limited partnership ("MNL"); Metro Video News, Inc., a Texas corporation ("MVN"); Metro Reciprocal, Inc., a Texas corporation ("MRI") and their subsidiaries (collectively, the "Predecessor Companies"). Until the closing of the Public Offering, all of the equity interests in the Predecessor Companies were owned by David I. Saperstein, the Chairman and Chief Executive Officer of the Company, and certain trusts (the "Trusts") created for the benefit of Mr. Saperstein's children (collectively, the "Saperstein Family"). In May 1996, Metro Networks, Inc. was incorporated in Delaware. Immediately prior to the closing of the Public Offering in October 1996, the Saperstein Family established Metro Networks, Inc. as a holding company and consolidated the issued and outstanding equity interests in the Predecessor Companies, by exchanging such interests for 9,350,607 shares of Metro Networks, Inc.'s common stock and 2,549,750 shares of Metro Networks, Inc.'s Series A Convertible Preferred Stock (the "Reorganization"). 7. CERTAIN TRANSACTIONS Prior to the Public Offering, the Company entered into certain reciprocal arrangements with unrelated third parties as a result of which the Company received goods and services for the benefit of Mr. Saperstein. The reciprocal arrangements obligate the Company to provide commercial airtime, provide other goods and services, and make cash 10 disbursements to such third parties in exchange for the goods and services received by the Company. The dollar values of such arrangements have typically been calculated based upon the Company's estimate of the fair market value of the commercial airtime inventory involved on a basis similar to the others in the broadcast industry. As of March 31, 1997, the Company was obligated to provide approximately $1.5 million of commercial airtime, goods and services and cash under these reciprocal arrangements. Immediately prior to the Public Offering, the Company entered into an agreement with Mr. Saperstein pursuant to which Mr. Saperstein was distributed the goods and services the Company held for Mr. Saperstein's benefit. The Company also distributed to Mr. Saperstein all of its rights to the goods and services that are the subject of existing reciprocal arrangements but which had not yet been delivered to the Company. The value of such goods and services was approximately $4.1 million. Immediately prior to the closing of the Public Offering, the Company entered into a Stock Loan and Pledge Agreement with Mr. Saperstein pursuant to which the Company loaned Mr. Saperstein 2,549,750 shares of common stock (the "Loaned Stock"). The loan is for a term of ten years, although the Company has the right to require the return of the Loaned Stock from Mr. Saperstein prior to that time upon three days notice. As security for the loan, Mr. Saperstein pledged 2,549,750 shares of Series A Convertible Preferred Stock of the Company which, when converted into common stock, will equal the number of shares of Loaned Stock. Mr. Saperstein is obligated to pay the Company an annual fee over the term of the loan of 0.1% of the average fair market value of the Loaned Stock during the five day period immediately following the date of the Stock Loan and Pledge Agreement. One-half of this fee is payable annually, and the remaining one- half of this fee is payable upon the termination of the loan if such termination occurs pursuant to an Event of Default (as defined in the Stock Loan and Pledge Agreement) or at the end of the ten year term of the Stock Loan and Pledge Agreement. The Company will forfeit this portion of the fee if it calls the loan prior to the end of the ten year term. In addition, Mr. Saperstein paid an initial transaction fee of $2,550 to the Company and is obligated to repay to the Company any dividends that are paid by the Company on the Loaned Stock. The Series A Convertible Preferred Stock does not pay any dividends. 8. INCOME TAXES Prior to the Reorganization, MNL owned corporations which were taxed under the C corporation provisions of the Internal Revenue Code. Taxes related to income from the entities taxed under the C corporation provisions are reported under the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Subsequent to the Reorganization all of the operations will be included in the consolidated tax return of the Company. Accordingly at the time of Reorganization the Company recorded an increase in the deferred tax liability of $66,000, which represented the tax basis differential between 11 financial and tax assets and liabities associated with the S corporations and partnerships included in the reorganization. As of October 1996, the Company and the controlling shareholder entered into an agreement pursuant to which the controlling shareholder may seek reimbursement from the Company for any income tax obligation attributable to any period prior to the Reorganization. Alternatively, in the event that the status of any of MVN, MRI or MTC as a subchapter S corporation is not respected, the Company may seek reimbursement from the controlling shareholder, but only to the extent that the controlling shareholder receives a tax refund attributable to amounts he previously included in income in his capacity as a shareholder of such corporations. In October 1996, the Company distributed to the controlling shareholder a note for $3,100,000. This note relates to estimated tax amounts owed by the controlling shareholder as a result of his ownership interest in S corporations and partnerships for the period January 1, 1996 to the date of the Reorganization. The note does not bear interest and is due on demand, but in all events no later than December 31, 1997. 9. STOCK OPTIONS The Company's Board of Directors has adopted the 1996 Incentive Stock Option Plan (the "1996 Plan") for the Company's officers and employees. The Board of Directors has discretionary authority, subject to certain restrictions, to administer the 1996 Plan, including but not limited to determining the individuals to whom, the times at which, and the exercise price for which options will be granted. The total number of shares reserved for issuance under the 1996 Plan is 1,000,000, of which approximately 584,000 have been issued. The exercise price of options granted under the 1996 Plan may not be less than 100% of the fair market value (or not less than 110% of the fair market value as to any individual who, at the time the option is granted, owned more than 10% of the total combined voting power of all classes of stock of the Company) of the common stock on the date such option was granted. Options granted under the 1996 Plan typically become vested and exercisable for up to 33 1/3% of the total optioned shares upon the first anniversary of the grant of the option and for an additional 33 1/3% of the total optioned shares upon each succeeding anniversary until the option is fully exercisable at the end of the third year. Generally, the unexercised portion of any option automatically terminates upon the earlier of (i) termination of the optionee's employment with the Company, (ii) the expiration of 90 days from the date the optionee's employment with the Company terminates for any reason other than cause, death, or disability (iii) the expiration of one year after the optionee's death or (iv) the expiration of the option. Upon the sale, merger or liquidation of the Company, outstanding options may be exercised immediately prior to the consummation of such a transaction, whether or not vested as of such date of consummation. In addition, 40,000 options were granted to non-employee members of the Board of Directors. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a summary of the Company's statement of operations for the periods indicated: THREE MONTHS ENDED MARCH 31, ---------------------------- (IN MILLIONS, EXCEPT PER SHARE DATA) 1996 1997 % CHANGE ------ ----- -------- Advertising Revenues $23.0 $29.4 27.5% Broadcast Costs 12.5 16.0 28.3% Marketing Expense 5.5 6.2 13.2% General & Administrative Expense 1.7 3.0 80.7% Depreciation & Amortization 1.5 2.1 43.0% EBITDA 3.4 4.1 21.1% Net Income* 1.0 1.5 39.9% EPS* 0.06 0.09 39.9% *1996 Net Income and EPS have been adjusted on a pro forma basis to reflect C corporation tax status. Weighted average shares oustanding are calculated assuming the shares issued in conjunction with the October 1996 IPO were outstanding for the periods presented. THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 Revenues increased by $6.4 million, or approximately 27.5% to $29.4 million for the three months ended March 31, 1997 (the "March 1997 Period") from $23.0 million for the three months ended March 31, 1996 (the "March 1996 Period") primarily due to increased sales of commercial airtime inventory. Revenues from reciprocal arrangements were $1.8 million in the March 1997 Period, a decrease of $1.5 million from $3.3 million in the March 1996 Period. As a percentage of total revenues, revenues from reciprocal arrangements decreased to 6.1% in the March 1997 Period from 14.3% in the March 1996 Period. Broadcasting costs increased by $3.5 million, or approximately 28.3%, to $16.0 million in the March 1997 Period from $12.5 million in the March 1996 Period. As a percentage of revenues, broadcasting costs increased modestly to 54.5% for the March 1997 Period from 54.1% for the March 1996 Period. The Company's continued development of its Expanded Radio Services, Metro TV Services, and acquisitions of Airborne, TWI and several new market start-up operations significantly contributed to the increase. Excluding these costs, broadcasting costs would have increased by 8.0% to $13.5 million in the March 1997 Period from $12.5 million in the March 1996 Period. Broadcasting costs attributable to reciprocal arrangements decreased from approximately $2.0 million in the March 1996 Period to $0.9 million in the March 1997 Period. 13 Marketing expense increased by $0.7 million, to $6.2 million in the March 1997 Period from $5.5 million in the March 1996 Period. This increase resulted from increased sales commissions associated with the increased revenues generated in the March 1997 Period. Marketing expense as a percentage of revenues decreased to 21.1% in the March 1997 Period as compared to 23.8% in the March 1996 Period due to the relatively fixed nature of certain of the Company's marketing costs. Marketing expense related to reciprocal arrangements decreased by approximately $0.5 million from $0.8 million in the March 1996 Period to $0.3 million in the March 1997 Period. General and administrative expense increased by $1.3 million, to $3.0 million in the March 1997 Period from $1.7 million in the March 1996 Period. This increase was primarily due to increased salaries and related overhead associated with the Company's continued growth. General and administrative expenses associated with reciprocal arrangements increased by approximately $0.1 million from $0.2 million in the March 1996 Period to $0.3 million in the March 1997 Period. EBITDA increased by approximately $0.7 million to $4.1 million in the March 1997 Period from $3.4 million in the March 1996 Period. The improvement represented an increase of 21.1%. The increase in EBITDA was primarily attributable to the Company's continued revenue growth. EBITDA as a percentage of revenue was 14.0% in the March 1997 Period. As a result of the factors discussed above, net income increased to $1.5 million in the March 1997 Period from $1.0 million (adjusted on a pro forma basis to reflect C corporation tax status) in the March 1996 Period, or approximately 39.9%. Earnings per share increased to $0.09 in the March 1997 Period. During the March 1997 Period cash and cash equivalents decreased $7.2 million from $43.4 million to $36.2 million. Cash provided by operating activities decreased from $3.2 million in the March 1996 Period to $0.3 million due primarily to the decrease in other accrued liabilities. Cash used in investing activities increased to $7.2 million from $4.9 million in the March 1996 Period due to increased acquisitions of property and equipment. Cash provided by financing activities decreased to $(0.3) million in the March 1997 Period from $2.1 million due to the absence of long term debt borrowing. The maximum aggregate permitted borrowings under the Credit Agreement is $30.0 million. As of March 31, 1997, the Company had no debt outstanding under the Credit Agreement. The Company intends to retain all of its earnings to finance the development and expansion of its business and therefore does not intend to pay any cash dividends on the common stock for the forseeable future. The Credit Agreement restricts the payment of cash dividends. 14 OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 27.1 Financial Data Schedule 15 SIGNATURE 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. METRO NETWORKS, INC. DATED: 5-14-97 BY: /S/ CURTIS H. COLEMAN ---------------- --------------------------------- CURTIS H. COLEMAN SENIOR VICE PRESIDENT- CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER AND DULY AUTHORIZED OFFICER) 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 36,217 0 34,068 0 789 73,319 20,483 6,650 106,381 29,722 0 0 3 17 73,365 106,381 29,368 29,368 22,208 27,381 (383) 0 22 2,348 893 1,455 0 0 0 1,455 0.09 0.09
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