| [X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 000-27105
ACME COMMUNICATIONS,
INC.
(Exact name of
registrant as specified in its charter)
| 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 [ ] |
|
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] |
|
As of May 9, 2005, ACME Communications, Inc. had 16,046,763 shares of common stock outstanding. |
| ACME COMMUNICATIONS, INC. FORM 10–Q TABLE OF CONTENTS | ||
|---|---|---|
| Page | ||
| Part I – Financial Information | ||
| Item 1. | Financial Statements | |
| Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004 | 1 | |
| Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and March 31, 2004 | 2 | |
| Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2005 | 3 | |
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and March 31, 2004 | 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 | 10 |
| Item 4. | Controls and Procedures | 11 |
| Part II – Other Information | ||
| Item 1. | Legal Proceedings | 11 |
| Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 11 |
| Item 6. | Exhibits | 11 |
| Signature | 12 | |
| ACME Communications, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except for par value data) |
||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, 2005 |
December 31, 2004 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,678 | $ | 1,679 | ||||
| Restricted cash | 50 | 64 | ||||||
| Accounts receivable, net | 7,849 | 9,174 | ||||||
| Current portion of programming rights | 10,384 | 11,107 | ||||||
| Prepaid expenses and other current assets | 1,193 | 911 | ||||||
| Total current assets | 21,154 | 22,935 | ||||||
| Property and equipment, net | 28,862 | 29,840 | ||||||
| Programming rights, net of current portion | 14,741 | 17,047 | ||||||
| Intangible assets, net | 96,791 | 96,791 | ||||||
| Other assets | 4,685 | 4,549 | ||||||
| Total assets | $ | 166,233 | $ | 171,162 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 6,191 | $ | 6,964 | ||||
| Accrued liabilities | 4,357 | 4,583 | ||||||
| Current portion of programming rights payable | 11,295 | 12,329 | ||||||
| Current portion of obligations under lease | 46 | 45 | ||||||
| Income taxes payable | 95 | 50 | ||||||
| Notes payable under revolving credit facility | 27,558 | -- | ||||||
| Note payable under second-lien term loan | 20,000 | -- | ||||||
| Total current liabilities | 69,542 | 23,971 | ||||||
| Programming rights payable, net of current portion | 14,536 | 16,851 | ||||||
| Obligations under lease, net of current portion | 931 | 943 | ||||||
| Other liabilities | 139 | 167 | ||||||
| Deferred income taxes | 9,710 | 8,900 | ||||||
| Notes payable under revolving credit facility | -- | 24,554 | ||||||
| Note payable under second-lien term loan | -- | 20,000 | ||||||
| Total liabilities | 94,858 | 95,386 | ||||||
| Minority Interest | 800 | 624 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $.01 par value; 10,000,000 shares authorized, no | ||||||||
| shares issued or outstanding | -- | -- | ||||||
| Common stock, $.01 par value; 50,000,000 shares authorized, 16,772,415 shares | ||||||||
| issued and outstanding at March 31, 2005 and December 31, 2004 | 168 | 168 | ||||||
| Additional paid-in capital | 132,038 | 132,038 | ||||||
| Accumulated deficit | (56,631 | ) | (52,054 | ) | ||||
| Less: Treasury stock, at cost; 725,652 shares | (5,000 | ) | (5,000 | ) | ||||
| Total stockholders' equity | 70,575 | 75,152 | ||||||
| Total liabilities and stockholders' equity | $ | 166,233 | $ | 171,162 | ||||
See the notes to the consolidated financial statements
1
| ACME Communications, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended March 31, | ||||||||
| 2005 |
2004 | |||||||
| Net revenues | $ | 11,337 | $ | 11,011 | ||||
| Operating expenses: | ||||||||
| Cost of service: | ||||||||
| Programming, including program amortization | 5,199 | 4,635 | ||||||
| Other costs of service (excluding depreciation and amortization of $1,373 and $1,289 | ||||||||
| for the three months ended March 31, 2005 and 2004, respectively | 1,857 | 1,733 | ||||||
| Selling, general and administrative expenses | 4,654 | 4,702 | ||||||
| Depreciation and amortization | 1,385 | 1,302 | ||||||
| Corporate expenses | 833 | 873 | ||||||
| Operating expenses | 13,928 | 13,245 | ||||||
| Operating loss | (2,591 | ) | (2,234 | ) | ||||
| Other income (expenses): | ||||||||
| Interest income | 2 | 2 | ||||||
| Interest expense | (1,250 | ) | (723 | ) | ||||
| Other, net | (30 | ) | (21 | ) | ||||
| Loss before income taxes and minority interest | (3,869 | ) | (2,976 | ) | ||||
| Income tax expense | (890 | ) | (615 | ) | ||||
| Loss before minority interest | (4,759 | ) | (3,591 | ) | ||||
| Minority interest | 182 | 239 | ||||||
| Net loss | $ | (4,577 | ) | $ | (3,352 | ) | ||
| Net loss per share, basic and diluted | $ | (0.29 | ) | $ | (0.20 | ) | ||
| Weighted average basic and diluted common shares outstanding | 16,047 | 16,769 | ||||||
See the notes to the consolidated financial statements
2
| ACME Communications, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Unaudited) (In thousands) | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Common Stock Shares Amount |
Additional Paid-in Capital |
Accumulated Deficit |
Treasury Stock |
Total Stockholders' Equity | |||||||||||||||||||
| Balance at December 31, 2004 | 16,772 | $ | 168 | $ | 132,038 | $ | (52,054 | ) | $ | (5,000 | ) | $ | 75,152 | ||||||||||
| Net loss | -- | -- | -- | (4,577 | ) | -- | (4,577 | ) | |||||||||||||||
| > | |||||||||||||||||||||||
| Balance at March 31, 2005 | 16,772 | $ | 168 | $ | 132,038 | $ | (56,631 | ) | $ | (5,000 | ) | $ | 70,575 | ||||||||||
See the notes to the consolidated financial statements
3
| ACME Communications, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (In thousands, except for per share data) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended March 31, | ||||||||
| 2005 |
2004 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (4,577 | ) | $ | (3,352 | ) | ||
| Adjustments to reconcile loss to net cash used in operating activities: | ||||||||
| Minority interest | (182 | ) | (239 | ) | ||||
| Provision for doubtful accounts receivable | 139 | 158 | ||||||
| Depreciation and amortization | 1,385 | 1,302 | ||||||
| Amortization of program rights | 3,024 | 2,761 | ||||||
| Amortization of debt issuance costs | 226 | 165 | ||||||
| Amortization of deferred compensation | -- | 11 | ||||||
| Deferred taxes | 810 | 565 | ||||||
| Changes in assets and liabilities: | ||||||||
| Decrease in accounts receivables | 1,186 | 364 | ||||||
| Increase in prepaid expenses and other current assets | (282 | ) | (4 | ) | ||||
| Increase in other assets | (126 | ) | (117 | ) | ||||
| Decrease in accounts payable | (773 | ) | (323 | ) | ||||
| Increase (decrease) in accrued liabilities | (226 | ) | 214 | |||||
| Increase (decrease) in taxes payable | 45 | (118 | ) | |||||
| Payments for programming rights | (3,210 | ) | (2,714 | ) | ||||
| Decrease in other liabilities | (28 | ) | (3 | ) | ||||
| Net cash used in operating activities | (2,589 | ) | (1,330 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (407 | ) | (1,422 | ) | ||||
| Purchases of and deposits for station interests | -- | (281 | ) | |||||
| Net cash used in investing activities | (407 | ) | (1,703 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Contributions by minority stockholer | 358 | 230 | ||||||
| Borrowings under revolving credit facility | 3,004 | 3,074 | ||||||
| Payment of financing costs on credit facility | (370 | ) | (294 | ) | ||||
| Cash restricted as escrow deposits and collateral under capital lease facilities | 14 | 156 | ||||||
| Payments on capital lease obligations | (11 | ) | (208 | ) | ||||
| Proceeds from the issuance of common stock | -- | 40 | ||||||
| Net cash provided by financing activities | 2,995 | 2,998 | ||||||
| Decrease in cash | (1 | ) | (35 | ) | ||||
| Cash from discontinued operations | -- | 21 | ||||||
| Net decrease in cash | (1 | ) | (14 | ) | ||||
| Cash at beginning of period | 1,679 | 1,197 | ||||||
| Cash at end of period | $ | 1,678 | $ | 1,183 | ||||
| Cash payments for: | ||||||||
| Interest | $ | 930 | $ | 490 | ||||
| Taxes | $ | 35 | $ | 169 | ||||
| Non-cash transactions: | ||||||||
| Program rights in exchange for program rights payable | $ | (5 | ) | $ | 11 | |||
See the notes to the consolidated financial statements
4
ACME Communications, Inc. was formed on July 23, 1999, in preparation for and in conjunction with an initial public offering of its stock.
On December 27, 2002, the Company announced that it had entered into transactions to sell its stations KPLR-TV serving the St. Louis marketplace, and KWBP-TV serving the Portland, Oregon marketplace, to subsidiaries of the Tribune Company. The transaction was completed on March 21, 2003. There was no income or loss from these discontinued operations for the three months ended March 31, 2005 or March 31, 2004. In accordance with U.S. generally accepted accounting principles, the statement of cash flows reflect the results of these stations as discontinued operations for both periods presented.
The accompanying consolidated financial statements are presented for ACME Communications, Inc. (“ACME” or the “Company”) and its wholly-owned subsidiaries. Segment information is not presented since all of the Company’s revenues are attributed to a single reportable segment.
The Company adopted the provisions of FASB Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities”, effective January 1, 2004. On that same date, the Company’s joint venture with Emmis Communications (“Emmis”) to produce The Daily Buzz, a weekday morning three-hour television news show, became effective. Under the agreement, the Company made an initial contribution of property and equipment with an agreed fair value and book value of $750,000 and Emmis is required to contribute the next $750,000 in capital equipment purchased by the venture. At March 31, 2005, Emmis had contributed approximately $639,000 in capital equipment purchases. Until and unless Emmis completes this equalizing contribution, under FIN 46R, the Company is deemed the primary beneficiary of the venture and accordingly, has consolidated the venture into its financial statements. The creditors of the venture have no recourse against the Company or Emmis. In accordance with FIN 46R, Emmis’ share of the net production costs which were funded through capital contributions to the venture during the three months ended March 31, 2005 and March 31, 2004 of $182,000 and $239,000, respectively, have been reflected as minority interest in the accompanying consolidated statement of operations.
The consolidated financial statements for the periods presented include the consolidated accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated for all periods presented.
ACME Communications is a holding company with no independent operations other than through its wholly-owned subsidiary, ACME Television. ACME Television, through its wholly-owned subsidiaries, owns and operates the following ten commercially licensed, full-power, broadcast television stations located throughout the United States, including KWBR in Roswell, New Mexico, which is a satellite station of KWBQ:
| Station |
Channel |
Marketplace |
Market Rank(1) |
Network Affiliation |
|---|---|---|---|---|
| KUWB | 30 | Salt Lake City, Utah | 36 | WB |
| KWBQ/KWBR | 19/21 | Albuquerque-Santa Fe, New Mexico | 47 | WB |
| KASY | 50 | Albuquerque-Santa Fe, New Mexico | 47 | UPN |
| WBDT | 26 | Dayton, Ohio | 56 | WB |
| WBXX | 20 | Knoxville, Tennessee | 59 | WB |
| WTVK | 46 | Ft. Myers-Naples, Florida | 68 | WB |
| WIWB | 14 | Green Bay-Appleton, Wisconsin | 69 | WB |
| WBUI | 23 | Champaign-Springfield-Decatur, Illinois | 82 | WB |
| WBUW | 57 | Madison, Wisconsin | 85 | WB |
| (1) | based on television households per Nielsen Market Research for the 2004 / 2005 season. |
5
The Company also owns the right to acquire for $3.0 million a construction permit to build a new WB Network affiliate in Lexington, KY. The acquisition of the Lexington construction permit is dependent on the Federal Communications Commission approving the underlying applications. In April 2005, the Company acquired and concurrently sold a construction permit to build a WB affiliate in Flint, MI for a resulting net gain of approximately $1.2 million.