-----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, RuHAW1CsWY6svNcPfX2/NyYdVtzohkFtCApao8lyqgWcTRCSWN+aFpwvu2kMTh9+ s3PzAv4GpWt9/R4VKg07GA== 0000899243-97-002137.txt : 19971114 0000899243-97-002137.hdr.sgml : 19971114 ACCESSION NUMBER: 0000899243-97-002137 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-21575 FILM NUMBER: 97712628 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 [ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-21575 METRO NETWORKS, INC. (Exact name of registrant as specified in charter) DELAWARE 76-0505148 (State of incorporation) (IRS Employer Identification No.) 2800 POST OAK BLVD., SUITE 4000 HOUSTON, TEXAS 77056-6199 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 407-6000 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, and (2) has been subject to such filing requirements for the past 90 days. x Yes No SHARES OF COMMON STOCK OUTSTANDING AT OCTOBER 31, 1997: 16,554,403 =============================================================================== METRO NETWORKS, INC. INDEX Page Number ------ Part I - Financial Information Item 1. Financial Statements (unaudited) Consolidated Balance Sheets ................................... 2 Unaudited Consolidated Statements of Earnings .................. 3 Unaudited Condensed Consolidated Statements of Cash Flow ....... 4 Unaudited Consolidated Statement of Stockholders' Equity ...... 5 Notes to Consolidated Financial Statements .................... 6 Item 2. Management's Discussion and Analysis of Financial Position and Results of Operations .............. 9 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K ......................... 10 -1- Metro Networks, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (dollars amounts in thousands)
SEPTEMBER 30, DECEMBER 31, 1997 1996 ----------- ------------ ASSETS (unaudited) (audited) CURRENT ASSETS Cash and cash equivalents $27,540 $41,386 Short-term marketable investments 611 - Accounts receivable, net of allowance for doubtful accounts of $859 and $663 28,694 23,318 Reciprocal Receivables 11,918 11,398 Prepaid expenses - 440 Merchandise and scrip inventory 803 567 Other 732 842 -------- -------- Total current assets 70,298 77,951 -------- -------- PROPERTY AND EQUIPMENT Work-in progress 3,377 170 Operating equipment 24,575 14,687 Transportation equipment 779 707 Leasehold improvements 2,108 1,170 -------- -------- 30,839 16,734 Less - accumulated depreciation and amortization 8,653 5,993 -------- -------- 22,186 10,741 -------- -------- PURCHASED BROADCAST CONTRACTS AND OTHER INTANGIBLES, NET OF ACCUMULATED AMORTIZATION OF $10,427 AND $6,783 17,404 14,074 Other Assets 904 991 -------- -------- $110,792 $103,757 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payables $ 4,928 $ 3,076 Notes payable 1,197 3,618 Reciprocal payables and accrued liabilities 10,584 12,069 Accrued liabilities 8,678 9,575 Current portion of long-term debt 343 319 -------- -------- Total current liabilities 25,730 28,657 LONG-TERM DEBT 833 474 OTHER 2,147 2,696 -------- -------- Total liabilities 28,710 31,827 -------- -------- MINORITY INTEREST 27 - COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $.001 par value (authorized 10,000,000 shares) 3 3 Common stock, $.001 par value (authorized 25,000,000 shares) 16 16 Additional paid-in capital 72,981 72,888 Retained earnings (deficit) 9,055 (977) -------- -------- 82,055 71,930 -------- -------- $110,792 $103,757 ======== ========
The accompanying notes are an integral part of these financial statements. -2- Metro Networks, Inc. and Subsidiaries UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands except per share data)
Three Months Ended Nine Months Ended September 30 September 30 ----------------------- -------------------- 1997 1996 1997 1996 ---------- -------- -------- ------- ADVERTISING REVENUES $34,985 $29,000 $99,063 $79,077 OPERATING COSTS AND EXPENSES Broadcasting 16,430 13,246 48,868 37,419 Marketing 6,408 4,910 19,396 15,012 General and administrative 2,683 2,609 8,343 6,959 Depreciation and amortization 2,403 1,668 6,735 4,604 ------- ------- ------- -------- 27,924 22,433 83,342 63,994 ------- ------- ------- -------- TOTAL OPERATING EARNINGS 7,061 6,567 15,721 15,083 OTHER (INCOME) EXPENSE Interest income (308) (65) (978) (119) Interest expense 39 793 101 1,727 Other (274) (14) (248) (27) ------- ------- ------- -------- (543) 714 (1,125) 1,581 ------- ------- ------- -------- EARNINGS BEFORE STATE AND FEDERAL INCOME TAXES 7,604 5,853 16,846 13,502 STATE AND FEDERAL INCOME TAXES 3,058 488 6,814 1,061 ------- ------- ------- -------- NET EARNINGS $ 4,546 $ 5,365 $10,032 $12,441 ======= ======= ======= ======== EARNINGS PER SHARE $ 0.27 $ - $ 0.60 $ - ======= ======= ======= ======== AVERAGE COMMON SHARES OUTSTANDING 16,768 11,900 16,771 11,985 ======= ======= ======= ======== 1996 PROFORMA NET EARNINGS Earnings before State and Federal income taxes as reported $ 5,853 $13,502 State and Federal income taxes 2,400 5,536 ------- -------- Net earnings $ 3,453 $ 7,966 ======= ======== Earnings per share $ 0.29 $ 0.66 ======= ========
The accompany notes are an integral part of these financial statements. -3- Metro Networks, Inc. and Subsidiaries UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
NINE MONTHS ENDED SEPTEMBER 30 ---------------------------- 1997 1996 -------- -------- OPERATING ACTIVITIES Net earnings $ 10,033 $ 12,441 Adjustments to reconcile net earnings to cash provided by operating activities Depreciation and amortization 6,735 4,604 Deferred Federal income taxes (76) (552) Provision for doubtful accounts 667 683 Loss (gain) on dispositions of property and equipment 208 (21) Loss (gain) on sale of marketable securities (69) Loss (gain) on change in unrealized appreciation on marketable securities (37) Amortization of discount on notes payable - 62 Undistributed minority interest, net of acquisition 8 - Other - (6) -------- -------- 17,469 17,211 Changes in operating assets and liabilities (8,804) (7,732) -------- -------- Cash provided by operating activities 8,665 9,479 -------- -------- INVESTING ACTIVITIES Capital additions (12,382) (4,805) Related party Advances to - (1,323) Payments from - 150 Proceeds from sale of marketable securities 327 - Purchase of marketable securities (832) - Proceeds from sale of property and equipment 86 25 Acquisitions of companies (6,389) (3,865) -------- -------- Cash used for investing activities (19,190) (9,818) -------- -------- FINANCING ACTIVITIES Proceeds from issuance of debt 769 8,931 Debt repayments (855) Long-term debt (1,875) Related party debt (2,308) - Issuance of common stock 93 Cash distributions - (6,713) Other - 758 -------- -------- Cash (used for) provided by financing activities (3,321) 2,121 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,846) 1,782 CASH AND CASH EQUIVALENTS Beginning of period 41,386 3,050 -------- -------- End of period $ 27,540 $ 4,832 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest $ 66 $ 1,413 Cash paid during the period for State and Federal income taxes $ 7,184 $ 1,017 SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES Property and equipment acquired through reciprocal activities $ 1,363 $ 103 Transfer of property - 277
The accompanying notes are an integral part of these financial statements. -4- Metro Networks, Inc. and Subsidiaries UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY For the Nine Months Ended September 30, 1997 (dollar amounts in thousands)
ADDITIONAL PREFERRED COMMON PAID-IN RETAINED DOLLAR AMOUNTS STOCK STOCK CAPITAL EARNINGS TOTAL - -------------- --------- ------ --------- -------- ------- BALANCE, DECEMBER 31, 1996 $ 3 $ 16 $72,888 $ (977) $71,930 Net earnings - - - 10,032 10,032 Issuance of stock under Stock Purchase Plan - - 93 - 93 --------- ------ --------- -------- ------- BALANCE, SEPTEMBER 30, 1997 $ 3 $ 16 $ 72,981 $ 9,055 $82,055 ========= ====== ========= ======== =======
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SHARES ISSUED --------------------------------- PREFERRED COMMON SHARE AMOUNTS STOCK STOCK - ------------- --------- ---------- BALANCE, DECEMBER 31, 1996 2,549,750 16,550,000 Issuance of stock under Stock Purchase Plan - 4,403 --------- ---------- BALANCE, SEPTEMBER 30, 1997 2,549,750 16,554,403 ========= ==========
- ---------------- The accompanying notes are an integral part of these financial statements. -5- 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 Metro Networks, Inc. ("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. Certain reclassifications have been made to prior year amounts to conform to current year presentation. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's December 31, 1996 Annual Report on Form 10K. 2. PRO FORMA EARNINGS PER SHARE Proforma income taxes are set forth herein because certain predecessor companies operated as S corporations or partnerships for federal income tax purposes. Proforma net income reflects income taxes calculated using a C corporation tax status. Assuming that the public offering shares were outstanding for the periods presented, the pro forma net income per share for the three months and nine months ended September 30, 1996 would have been $0.21 and $0.47, respectively. 3. 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 -6- asset purchase, the Company paid $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 $3,700,000 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 $3,250,000 was allocated to the value of purchased broadcast contracts, non-compete agreements and goodwill and is being amortized over a five-year period. On June 27, 1997, the Company acquired 80% (800 shares) of the common stock of Washington News Network, Inc. ("WNN"), a Washington, D.C. corporation. WNN provides video news feeds via satellite to approximately 85 broadcast affiliates across the country. The purchase price of $400,000 consisted of cash consideration of $100,000 and installment notes payable of $300,000. Beginning on March 31, 1998, the Company will have an option to purchase the remaining 200 shares of the common stock of WNN. The option may be exercised at any time from March 31, 1998 through March 31, 2000. On August 1, 1997, the Company acquired substantially all of the tangible and intangible assets and assumed certain liabilities of Valley Watch Broadcasting, a California corporation ("VWB"). VWB operates a network of broadcast affiliates serving the Fresno, California area. The purchase price consists of $10,000 cash and two additional contingent payments based upon future operating cash flow. On September 19, 1997, the Company acquired substantially all of the tangible and intangible assets and assumed certain liabilities of Freecom, Inc. ("FRE"), a Pennsylvania corporation. FRE operates a network of broadcast affiliates serving the Harrisburg, PA, Wilkes-Barre, PA, Allentown, PA, Albany, NY and Wilmington, DE metropolitan areas. The purchase price of approximately $2,250,000 was allocated to the net assets based upon their estimated fair market value. The excess purchase price of approximately $1,900,000 was allocated to the value of purchased broadcast contracts and non-compete agreements and is being amortized over a five- year period. -7- 4. RELATED PARTY 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 the controlling shareholder. The reciprocal arrangements obligate the Company to provide commercial airtime, provide other goods and services, and make cash 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 others in the broadcast industry. As of September 30, 1997, the Company was obligated to provide approximately $800,000 of commercial airtime, goods and services and cash under these reciprocal arrangements. In 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 Metro Video News, Inc. ("MVN"), Metro Reciprocal, Inc. ("MRI") or Metro Traffic Control, Inc. ("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 prior to the public offering. The note does not bear interest and is due on demand, but in all events no later than December 31, 1997. The balance outstanding at September 30, 1997 was $792,000. This balance was subsequently paid in the month of October 1997. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 RESULTS OF OPERATIONS Revenues increased by $6.0 million to $35.0 million, or 20.6% in the third quarter and $20.0 million to $99.1 million, or 25.3%, for the first nine months of 1997. The increase in revenue is primarily due to increased sales of commercial airtime inventory. Revenues from reciprocal agreements were $1.5 million and $4.2 million in the third quarter and first nine months of 1997, compared to $2.9 million and $7.7 million for the same periods of last year. As a percentage of total revenues, revenues from reciprocal agreements decreased to 4.2% of total revenues in the third quarter and first nine months of 1997 compared to 10.1% and 9.7% for the same periods of last year. Earnings per share for the three and nine months ended September 30, 1997 were $0.27 and $0.60, respectively. Total Operating Costs (broadcasting and marketing costs) increased by $4.7 million to $22.8 million, or 25.8% and $15.8 million to $68.3 million, or 30.2%, respectively, in the third quarter and first nine months of 1997 when compared to the same periods last year. As a percentage of revenues, total operating costs were 65.3% and 68.9% in the third quarter and first nine months of 1997, compared to 62.6% and 66.3% for the same periods of last year. The increase in costs are primarily due to the following: the Company's continued development of it's Expanded Radio Services and Metro Television Services during the year; new market start-up operations; acquisitions of Airborne Traffic Network, Inc., Traffic Watch Networks, Inc., Washington News Network, Inc., Valley Watch Broadcasting, Inc. and Freecom, Inc.; and increased marketing expenses resulting from sales commissions associated with increased revenues. General and administrative expenses increased by $0.1 million to $2.7 million, or 2.8% and $1.4 million to $8.3 million, or 19.9%, respectively, in the third quarter and first nine months of 1997 when compared to the same periods last year. As a percentage of revenues, general and administrative expenses decreased to 7.7% and 8.4%, respectively, in the third quarter and first nine months of 1997, compared to 9.0% and 8.8% for the same periods last year. Earnings before interest expense, taxes, depreciation and amortization (EBITDA) increased by $1.5 million to $9.7 million in the third quarter compared to $8.2 million in the third quarter of 1996. For the nine months ended September 30, 1997, EBITDA increased by approximately $3.0 million to $22.7 million, compared to $19.7 million for the same period last year. The increase in EBITDA was primarily attributable to continued revenue growth. EBITDA as a percentage of revenue was 27.8% and 22.9% for the third quarter and nine months ended September 30, 1997, respectively. -9- The Company recorded third-quarter 1997 net income of $4.5 million, compared to $3.5 million (adjusted on a proforma basis to reflect C Corporation tax status) in the third quarter of 1996, or an increase of 31.7%. For the nine months ended September 30, 1997, net income was $10.0 million compared to $8.0 million (adjusted on a proforma basis to reflect C Corporation tax status) for the first nine months of 1996, or an increase of approximately 25.9%. FINANCIAL CONDITION Cash and cash equivalents decreased $13.9 million from $41.4 million to $27.5 million for the nine months ended September 30, 1997. Cash provided by operating activities decreased $0.8 million from $9.5 million to $8.7 million for the nine month period, primarily due to changes in operating assets and liabilities. Cash used for investing activities increased by $9.4 million to $19.2 million for the nine month period, due to increased acquisitions of property and equipment and acquisitions of companies. Cash used and provided by financing activities decreased by $5.4 million for the nine month period as a result of the Company using internally generated cash flow rather than borrowed funds. The maximum aggregate permitted borrowings under the Credit Agreement is $30.0 million. As of September 30, 1997 the Company had no debt outstanding under the Credit Agreement. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 27.1 Financial Data Schedule -10- 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. -------------------- (Registrant) Dated: November 10, 1997 By: /s/ TIMOTHY D. MCMILLIN _______________________________ Timothy D. McMillin Senior Vice President Chief Financial Officer (Principal Financial and accounting Officer and Duly Authorized Officer) -11- EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 27,540 611 40,612 0 803 70,298 30,839 8,653 110,792 25,730 0 0 3 16 82,036 110,792 99,063 99,063 68,264 83,342 (1,226) 0 101 16,846 6,814 10,032 0 0 0 10,032 0.60 0.60
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