UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2003
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 000-27105
ACME COMMUNICATIONS, INC.
| Delaware (State or other jurisdiction of incorporation or organization) |
33-0866283 (I.R.S. employer identification no.) |
2101 E. Fourth Street, Suite 202 A
Santa Ana, California, 92705
(714) 245-9499
(Address and telephone number of principal executive offices)
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. Yes x No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
As of November 12, 2003, ACME Communications, Inc. had 16,766,834 shares of common stock outstanding.
ACME COMMUNICATIONS, INC.
FORM 10-Q
TABLE OF CONTENTS
| Item | ||||||||
| Number | Page | |||||||
Part I — Financial Information |
||||||||
| Item 1. | Financial Statements |
|||||||
Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002 |
1 | |||||||
Consolidated Statements of Operations for the Three and Nine Months Ended
September 30,
2003 and September 30, 2002 |
2 | |||||||
Consolidated Statements of Stockholders’ Equity for the Nine Months Ended
September 30,
2003 |
3 | |||||||
Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 2003 and
September 30, 2002 |
4 | |||||||
Notes to Consolidated Financial Statements |
5 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition
and Results Of Operations |
8 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
13 | ||||||
| Item 4. | Controls and Procedures |
13 | ||||||
Part II — Other Information |
||||||||
| Item 1. | Legal Proceedings |
13 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K |
14 | ||||||
| Signature | 15 | |||||||
ACME Communications, Inc. and Subsidiaries
Consolidated Balance Sheets
| As of | ||||||||||||
| September 30, | December 31, | |||||||||||
| 2003 | 2002 | |||||||||||
| (Unaudited) | ||||||||||||
| (In thousands) | ||||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 970 | $ | 1,860 | ||||||||
Current portion of restricted cash |
4,605 | 1,233 | ||||||||||
Accounts receivable, net |
7,562 | 10,458 | ||||||||||
Current portion of programming rights |
10,268 | 9,894 | ||||||||||
Prepaid expenses and other current assets |
1,376 | 1,084 | ||||||||||
Assets held for sale |
— | 211,964 | ||||||||||
Total current assets |
24,781 | 236,493 | ||||||||||
Restricted cash, net of current portion |
— | 1,677 | ||||||||||
Property and equipment, net |
29,583 | 30,165 | ||||||||||
Programming rights, net of current portion |
18,515 | 15,102 | ||||||||||
Goodwill, net |
18,476 | 18,476 | ||||||||||
Broadcast licenses, net |
84,447 | 84,394 | ||||||||||
Other assets |
4,428 | 6,969 | ||||||||||
Total assets |
$ | 180,230 | $ | 393,276 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 6,058 | $ | 8,163 | ||||||||
Accrued liabilities |
4,205 | 11,583 | ||||||||||
Current portion of programming rights payable |
10,480 | 9,627 | ||||||||||
Current portion of obligations under lease |
1,727 | 3,710 | ||||||||||
Income taxes payable |
696 | — | ||||||||||
Liabilities included with assets held for sale |
— | 45,810 | ||||||||||
Total current liabilities |
23,166 | 78,893 | ||||||||||
Programming rights payable, net of current portion |
17,911 | 14,814 | ||||||||||
Obligations under lease, net of current portion |
3,898 | 8,441 | ||||||||||
Other liabilities |
82 | 89 | ||||||||||
Deferred income taxes |
7,954 | 5,698 | ||||||||||
Notes payable under revolving credit facility |
23,848 | 18,789 | ||||||||||
10 7/8% senior discount notes |
— | 175,000 | ||||||||||
12% senior secured notes |
— | 69,061 | ||||||||||
Total liabilities |
76,859 | 370,785 | ||||||||||
Stockholders’ equity: |
||||||||||||
Preferred stock, $.01 par value; 10,000,000 shares authorized, no
shares issued and outstanding |
— | — | ||||||||||
Common stock, $.01 par value; 50,000,000 shares authorized,
16,766,834 and 16,750,000 shares issued and outstanding
at September 30, 2003 and December 31, 2002, respectively |
168 | 168 | ||||||||||
Additional paid-in capital |
131,950 | 131,798 | ||||||||||
Accumulated deficit |
(28,747 | ) | (109,475 | ) | ||||||||
Total stockholders’ equity |
103,371 | 22,491 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 180,230 | $ | 393,276 | ||||||||
See the notes to the consolidated financial statements.
1
ACME Communications, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
Net revenues |
$ | 10,778 | $ | 9,017 | $ | 32,302 | $ | 25,744 | |||||||||||
Operating expenses: |
|||||||||||||||||||
Station operating expenses |
10,789 | 9,154 | 32,449 | 26,749 | |||||||||||||||
Depreciation and amortization |
1,196 | 999 | 3,388 | 2,964 | |||||||||||||||
Corporate expenses |
794 | 884 | 2,733 | 2,810 | |||||||||||||||
Equity-based compensation |
11 | 66 | 35 | 200 | |||||||||||||||
Operating loss |
(2,012 | ) | (2,086 | ) | (6,303 | ) | (6,979 | ) | |||||||||||
Other income (expenses): |
|||||||||||||||||||
Interest income |
29 | 27 | 323 | 106 | |||||||||||||||
Interest expense |
(1,404 | ) | (7,723 | ) | (12,284 | ) | (22,886 | ) | |||||||||||
Loss on early extinguishment of debt |
(1,124 | ) | — | (11,050 | ) | — | |||||||||||||
Other expense, net |
(59 | ) | (101 | ) | (99 | ) | (189 | ) | |||||||||||
Loss from continuing operations before income taxes |
(4,570 | ) | (9,883 | ) | (29,413 | ) | (29,948 | ) | |||||||||||
Income tax benefit (expense), continuing operations |
(731 | ) | 2,294 | (1,514 | ) | (24,986 | ) | ||||||||||||
Loss from continuing operations |
(5,301 | ) | (7,589 | ) | (30,927 | ) | (54,934 | ) | |||||||||||
Income (loss) from discontinued operations
(including gain on disposal), net of tax |
(3 | ) | 2,169 | 111,655 | 6,194 | ||||||||||||||
Net income (loss) |
(5,304 | ) | (5,420 | ) | 80,728 | (48,740 | ) | ||||||||||||
Income (loss) per share, basic and diluted: |
|||||||||||||||||||
Continuing operations |
$ | (0.32 | ) | $ | (0.45 | ) | $ | (1.85 | ) | $ | (3.28 | ) | |||||||
Discontinued operations |
(0.00 | ) | 0.13 | 6.67 | 0.37 | ||||||||||||||
Net income (loss) per share |
$ | (0.32 | ) | $ | (0.32 | ) | $ | 4.82 | $ | (2.91 | ) | ||||||||
Basic and diluted common shares outstanding |
16,766,834 | 16,750,000 | 16,756,637 | 16,750,000 | |||||||||||||||
See the notes to the consolidated financial statements.
2
ACME Communications, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands)
| Additional | Total | ||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | |||||||||||||||||
Balance at December 31, 2002 |
16,750 | 168 | 131,798 | (109,475 | ) | 22,491 | |||||||||||||||
Exercise of stock options |
17 | — | 117 | — | 117 | ||||||||||||||||
Equity-based compensation |
— | — | 35 | — | 35 | ||||||||||||||||
Net income |
— | — | — | 80,728 | 80,728 | ||||||||||||||||
Balance at September 30, 2003 (unaudited) |
16,767 | $ | 168 | $ | 131,950 | $ | (28,747 | ) | $ | 103,371 | |||||||||||
See the notes to the consolidated financial statements.
3
ACME Communications, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2003 | 2002 | |||||||||||
| (In thousands) | ||||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss from continuing operations |
$ | (30,927 | ) | $ | (54,934 | ) | ||||||
Adjustments to reconcile net loss to net cash
used in operating activities: |
||||||||||||
Depreciation and amortization |
3,388 | 2,964 | ||||||||||
Amortization of program rights |
8,177 | 6,605 | ||||||||||
Amortization of debt issuance costs |
1,028 | 1,578 | ||||||||||
Amortization of discount on 12% senior secured notes |
376 | 6,442 | ||||||||||
Loss on early extinguishment of debt |
11,050 | — | ||||||||||
Equity-based compensation |
35 | 200 | ||||||||||
Deferred taxes |
2,256 | 24,797 | ||||||||||
Gain on disposal of assets |
(25 | ) | (1 | ) | ||||||||
Changes in assets and liabilities: |
||||||||||||
(Increase) decrease in accounts receivables, net |
142 | (971 | ) | |||||||||
Increase in prepaid expenses and other current assets |
(292 | ) | (811 | ) | ||||||||
Increase in other assets |
(77 | ) | (76 | ) | ||||||||
Increase (decrease) in accounts payable |
(500 | ) | 11 | |||||||||
Decrease in accrued liabilities |
(7,083 | ) | (4,204 | ) | ||||||||
Decrease in current taxes payable |
(740 | ) | — | |||||||||
Payments for programming rights |
(7,984 | ) | (6,844 | ) | ||||||||
(Increase) decrease in other liabilities |
(35 | ) | 39 | |||||||||
Net cash used in operating activities |
(21,211 | ) | (25,205 | ) | ||||||||
Cash flows from investing activities: |
||||||||||||
Purchase of property and equipment |
(3,049 | ) | (6,788 | ) | ||||||||
Purchases of and deposits for station interests |
(53 | ) | (290 | ) | ||||||||
Purchase of minority interest in automobile website |
— | (871 | ) | |||||||||
Net cash used in investing activities |
(3,102 | ) | (7,949 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Increase in revolving credit facility |
32,375 | 14,600 | ||||||||||
Payments on revolving credit facility |
(27,316 | ) | — | |||||||||
Payment of financing costs on credit facility |
(1,022 | ) | (1,221 | ) | ||||||||
Redemption of 10 7/8% and 12% notes |
(246,635 | ) | — | |||||||||
Cash expenses associated with the redemption of notes |
(6,240 | ) | — | |||||||||
Cash restricted as collateral under capital lease facilities |
(1,695 | ) | (1,154 | ) | ||||||||
Proceeds from capital lease facilities |
268 | 1,905 | ||||||||||
Payments on capital lease obligations |
(6,290 | ) | (2,906 | ) | ||||||||
Proceeds from the issuance of common stock |
116 | — | ||||||||||
Net cash provided by (used in) financing activities |
(256,439 | ) | 11,224 | |||||||||
Decrease in cash |
(280,752 | ) | (21,930 | ) | ||||||||
Cash from discontinued operations |
279,862 | 7,225 | ||||||||||
Net decrease in cash |
(890 | ) | (14,705 | ) | ||||||||
Cash at beginning of period |
1,860 | 17,275 | ||||||||||
Cash at end of period |
$ | 970 | $ | 2,570 | ||||||||
Cash payments for: |
||||||||||||
Interest |
$ | 17,960 | $ | 19,995 | ||||||||
Taxes |
$ | 1,016 | $ | 187 | ||||||||