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 quarterly period ended September 30, 2004
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 333-110122
LBI MEDIA HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 05-0584918 | |
| (State or other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification No.) |
1845 West Empire Avenue
Burbank, California 91504
(Address of principal executive offices, excluding zip code) (Zip code)
Registrant’s Telephone Number, Including Area Code: (818) 563-5722
Not Applicable
(Former name, former address and former fiscal year, if changed since last report).
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of November 15, 2004, there were approximately 100 shares outstanding of Common Stock, $0.01 par value.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
| Page | ||||
| PART I. |
||||
| Item 1. Unaudited Financial Statements |
3 | |||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 | |||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
39 | |||
| Item 4. Controls and Procedures |
40 | |||
| PART II. |
||||
| Item 1. Legal Proceedings |
41 | |||
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
41 | |||
| Item 3. Defaults upon Senior Securities |
41 | |||
| 41 | ||||
| Item 5. Other Information |
41 | |||
| Item 6. Exhibits |
41 | |||
LBI MEDIA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, 2003 |
September 30, 2004 | |||||
| (Note 1) | (unaudited) | |||||
| Assets |
||||||
| Current assets |
||||||
| Cash and cash equivalents |
$ | 6,670,129 | $ | 2,592,291 | ||
| Short-term investments |
191,650 | 36,120 | ||||
| Accounts receivable (less allowance for doubtful accounts of $965,132 in 2003 and $1,362,078 in 2004) |
13,724,961 | 13,210,362 | ||||
| Current portion of program rights, net |
1,177,325 | 1,287,908 | ||||
| Amounts due from related parties |
334,693 | 561,032 | ||||
| Current portion of employee advances |
57,856 | 79,166 | ||||
| Prepaid expenses and other current assets |
1,092,047 | 803,962 | ||||
| Total current assets |
23,248,661 | 18,570,841 | ||||
| Property and equipment, net |
56,837,070 | 68,251,101 | ||||
| Program rights, excluding current portion |
1,642,887 | 1,104,032 | ||||
| Notes receivable from related parties |
2,518,581 | 2,569,126 | ||||
| Employee advances, excluding current portion |
687,970 | 782,433 | ||||
| Deferred financing costs, net |
6,080,009 | 6,762,159 | ||||
| Broadcast licenses, net |
239,405,098 | 286,073,842 | ||||
| Acquisition costs |
482,455 | — | ||||
| Escrow funds |
1,500,000 | — | ||||
| Other assets |
461,351 | 727,482 | ||||
| Total assets |
$ | 332,864,082 | $ | 384,841,016 | ||
| Liabilities and stockholder’s equity |
||||||
| Current liabilities: |
||||||
| Accounts payable and accrued expenses |
$ | 4,015,770 | $ | 2,839,749 | ||
| Accrued interest |
7,430,702 | 4,090,220 | ||||
| Program rights payable |
69,324 | 33,500 | ||||
| Amounts due to related parties |
189,485 | — | ||||
| Current portion of long-term debt |
163,078 | 116,429 | ||||
| Total current liabilities |
11,868,359 | 7,079,898 | ||||
| Long-term debt, excluding current portion |
281,843,787 | 328,923,632 | ||||
| Deferred compensation |
8,506,000 | 11,088,000 | ||||
| Deferred state income taxes |
236,078 | 342,354 | ||||
| Other liabilities |
218,163 | 282,667 | ||||
| Commitments and contingencies |
||||||
| Stockholder’s equity: |
||||||
| Common stock, $0.01 par value: |
||||||
| Authorized shares—1,000 Issued and outstanding shares—100 |
1 | 1 | ||||
| Additional paid-in capital |
22,657,667 | 22,657,667 | ||||
| Retained earnings |
7,470,797 | 14,464,961 | ||||
| Accumulated other comprehensive income |
63,230 | 1,836 | ||||
| Total stockholder’s equity |
30,191,695 | 37,124,465 | ||||
| Total liabilities and stockholder’s equity |
$ | 332,864,082 | $ | 384,841,016 | ||
See accompanying notes.
3
LBI MEDIA HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2003 |
2004 |
2003 |
2004 |
|||||||||||||
| Revenues |
$ | 26,210,203 | $ | 27,812,226 | $ | 70,801,373 | $ | 78,394,886 | ||||||||
| Less agency commissions |
(3,377,969 | ) | (3,595,409 | ) | (8,899,580 | ) | (10,035,173 | ) | ||||||||
| Net revenues |
22,832,234 | 24,216,817 | 61,901,793 | 68,359,713 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Program and technical, exclusive of noncash employee compensation of $96,000 and $393,000 for the three months ended September 30, 2003 and 2004, respectively, and $330,000 and $590,000 for the nine months ended September 30, 2003 and 2004, respectively, and depreciation shown below |
3,147,165 | 4,488,775 | 9,413,140 | 11,994,765 | ||||||||||||
| Promotional, exclusive of depreciation shown below |
534,901 | 508,321 | 1,204,973 | 1,319,491 | ||||||||||||
| Selling, general and administrative, exclusive of noncash employee compensation of $334,000 and $1,303,000 for the three months ended September 30, 2003 and 2004, respectively, and $1,127,000 and $1,992,000 for the nine months ended September 30, 2003 and 2004, respectively, and depreciation shown below |
6,535,250 | 7,272,453 | 18,698,346 | 21,007,972 | ||||||||||||
| Noncash employee compensation |
430,000 | 1,696,000 | 1,457,000 | 2,582,000 | ||||||||||||
| Depreciation |
906,258 | 1,390,593 | 2,565,232 | 3,829,816 | ||||||||||||
| Total operating expenses |
11,553,574 | 15,356,142 | 33,338,691 | 40,734,044 | ||||||||||||
| Operating income |
11,278,660 | 8,860,675 | 28,563,102 | 27,625,669 | ||||||||||||
| Interest expense |
(5,338,104 | ) | (6,660,383 | ) | (15,410,323 | ) | (19,205,138 | ) | ||||||||
| Interest and other income |
18,604 | 20,226 | 72,966 | 110,815 | ||||||||||||
| (Loss) gain on sale of property and equipment |
— | — | (4,000 | ) | 2,354 | |||||||||||
| Income before income taxes |
5,959,160 | 2,220,518 | 13,221,745 | 8,533,700 | ||||||||||||
| Provision for income taxes |
(20,000 | ) | (88,690 | ) | (60,000 | ) | (212,559 | ) | ||||||||
| Net income |
$ | 5,939,160 | $ | 2,131,828 | $ | 13,161,745 | $ | 8,321,141 | ||||||||
See accompanying notes.
4
LBI MEDIA HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, |
||||||||
| 2003 |
2004 |
|||||||
| Operating activities |
||||||||
| Net income |
$ | 13,161,745 | $ | 8,321,141 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
2,565,232 | 3,829,816 | ||||||
| Amortization of deferred financing costs |
407,380 | 642,921 | ||||||
| Accretion on senior discount notes |
— | 3,414,021 | ||||||
| Noncash employee compensation |
1,457,000 | 2,582,000 | ||||||
| Gain on sale of investments |
— | (47,614 | ) | |||||
| Loss (gain) on sale of property and equipment |
4,000 | (2,354 | ) | |||||
| Provision for doubtful accounts |
900,240 | 716,579 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(4,340,056 | ) | (201,980 | ) | ||||
| Program rights |
(17,884 | ) | 428,272 | |||||
| Amounts due from related parties |
8,209 | (226,339 | ) | |||||
| Prepaid expenses and other current assets |
475,887 | 288,085 | ||||||
| Employee advances |
(100,501 | ) | (115,773 | ) | ||||
| Accounts payable and accrued expenses |
757,176 | (1,176,021 | ) | |||||
| Accrued interest |
(4,225,860 | ) | (3,340,482 | ) | ||||
| Program rights payable |
(16,000 | ) | (35,824 | ) | ||||
| Amounts due to related parties |
72,780 | (189,485 | ) | |||||
| Deferred state income tax payable |
49,600 | 106,276 | ||||||
| Other assets and liabilities |
(555,804 | ) | (252,172 | ) | ||||
| Net cash provided by operating activities |
10,603,144 | 14,741,067 | ||||||
| Investing activities |
||||||||
| Purchase of property and equipment |
(6,854,703 | ) | (8,300,393 | ) | ||||
| Acquisition of radio and television station property and equipment |
(1,075,417 | ) | (7,081,100 | ) | ||||
| Acquisition costs |
(379,870 | ) | — | |||||
| Acquisition of broadcast licenses |
(38,094,771 | ) | (44,686,289 | ) | ||||
| Amounts deposited in escrow for the acquisition of broadcast licenses |
(1,500,000 | ) | — | |||||
| Repayment of note receivable from related party |
4,432 | — | ||||||
| Proceeds from sale of property and equipment |
12,500 | 140,000 | ||||||
| Proceeds from sale of investment |
— | 141,750 | ||||||
| Net cash used in investing activities |
(47,887,829 | ) | (59,786,032 | ) | ||||
| Financing activities |
||||||||
| Proceeds from issuance of long-term debt and bank borrowings, net of financing costs |
45,150,344 | 59,944,462 | ||||||
| Payments on long-term debt and bank borrowings |
(8,661,602 | ) | (17,650,358 | ) | ||||
| Distributions to Parent |
(331,573 | ) | (1,326,977 | ) | ||||
| Net cash provided by financing activities |
36,157,169 | 40,967,127 | ||||||
| Net decrease in cash and cash equivalents |
(1,127,516 | ) | (4,077,838 | ) | ||||
| Cash and cash equivalents at beginning of period |
1,396,636 | 6,670,129 | ||||||
| Cash and cash equivalents at end of period |
$ | 269,120 | $ | 2,592,291 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Cash paid during the period for: |
||||||||
| Interest |
$ | 8,911,193 | $ | 18,427,129 | ||||
| Income taxes |
$ | — | $ | 12,800 | ||||
See accompanying notes.
5
LBI MEDIA HOLDINGS, INC.
NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
| 1. | Description of Business and Basis of Presentation |
LBI Media Holdings, Inc. was incorporated in Delaware on June 23, 2003, and is a qualified subchapter S subsidiary of LBI Holdings I, Inc. (the “Parent”). Pursuant to an Assignment and Exchange Agreement dated September 29, 2003 between the Parent and LBI Media Holdings, Inc., the Parent assigned to LBI Media Holdings, Inc. all of its right, title and interest in 100 shares of common stock of LBI Media, Inc. (LBI Media) (constituting all of the outstanding shares of LBI Media) in exchange for 100 shares of common stock of LBI Media Holdings, Inc. Thus, upon consummation of the exchange, LBI Media became a wholly owned subsidiary of LBI Media Holdings, Inc. (LBI Media Holdings).
As the above transaction was between entities under common control, it was accounted for at historical cost. LBI Media Holdings’ financial statements and financial information presented for prior periods include the historical activity of LBI Media.
LBI Media Holdings is not engaged in any business operations and has not acquired any assets or incurred any liabilit