NEWS-EARNINGS
Paxson Reports Fourth Quarter and Year End 1998 Results
PAX TV Ratings and Advertiser Support Continue to Grow
WEST PALM BEACH, Fla.--(BUSINESS WIRE)--March 10, 1999--Paxson Communications Corporation (AMEX:PAX - news), the largest owner and operator of broadcast television properties in the nation, today reported financial results for the twelve months and quarter ending December 31, 1998.
For the twelve months, total revenues rose 52% to $134.2 million, and operating loss before depreciation, amortization, stock-based compensation, time brokerage and affiliation fees, was ($59.4) million compared with operating income of $20.4 million one year earlier. The increase in both revenues and expenses was due to the launch of PAX TV and the expansion of the Company's television distribution platform. For the twelve months, net loss, which included a $51.6 million pre-tax gain on the sale of television station assets, was ($137.9) million, compared with net income of $188.4 million for the twelve months ending December 31, 1997, which included a $254.7 million after-tax gain on the sale of discontinued operations. For the quarter ended December 31, 1998, total revenues rose 57.4% from $27.2 million to $42.8 million. The operating loss before depreciation, amortization, stock-based compensation, time brokerage and affiliation fees was ($38.6) million compared with operating income of $9.7 million from the same period last year. Net loss for the fourth quarter was ($76.4) million compared with net income of $174.0 million for the fourth quarter of 1997, which included a $185.1 million after-tax gain on the sale of discontinued operations.
Commenting on the fourth quarter results, Paxson Chief Executive Officer, Jeff Sagansky said, ''PAX TV continues to build upon the initial success of last August's network debut. Each month since the launch, the network has delivered improved ratings, broadened advertiser support and increased advertising revenues. Since the release of our third quarter operating results we have delivered on our pledge to minimize non-essential operating costs and re-focus the Company's efforts on operating overhead that only supports our sales, programming and promotional efforts. We have taken steps to monetize non-core operating assets including the announced sale of our Bridgeport, CT television station for $21 million and the completion of the sale of our interest in the Travel Channel cable television network for $55 million. These two sales as well as the sale of other non-strategic television properties and repayment of debt held by the Company should provide us with the needed liquidity to achieve our operating goals for the next twelve months.''
PAX TV Ratings & Demographics
Commenting on the ratings and demographics performance of PAX TV, Mr. Sagansky said, ''PAX TV's coveted 18-49 year old demographic has grown 52% from the network's launch through the first week of February. During our first full week on air, PAX TV received a 0.6 Nielsen Television Index audience rating in weekday primetime. By the first week of February, PAX TV's ratings increased over 66% to a full 1.0 NTI rating during weekday primetime.''
Mr. Sagansky continued, ''The local market ratings demonstrate that PAX TV has become an accepted family friendly alternative in the television viewer's household. In many top 50 markets where PAX TV stations already had well-established relationships with viewers, our weekday prime time ratings growth was even more impressive.''
November Sweeps Week of 2/1/99
Market Rating/Share Rating/Share
--------- ---------------- ------------
New York 1.1/2 1.5/2
Los Angeles 0.8/1 1.1/2
Chicago 1.4/2 1.7/3
Atlanta 1.4/2 2.2/3
Houston 1.4/2 1.8/3
Cleveland 2.0/3 2.4/4
Kansas City 1.9/3 2.0/3
New Orleans 1.7/3 2.3/3
Greensboro 1.7/3 2.3/4
PAX TV Advertising
Commenting on advertiser support of PAX TV, Mr. Sagansky noted, ''Since the launch of PAX TV, the network has received growing support from the advertising community. A significant number of the largest national television advertisers supported PAX TV during its first months of launch. Because we have delivered a growing audience level with solid female demographics, we now expect these advertisers to expand their usage of our family network in their future advertising plans. In fact, PAX TV currently has 54 of the largest network advertisers, up from 35 at the end of 1998. We are confident that we will continue to deliver this same level of value to our new 1999 advertisers, including Coca Cola, Colgate-Palmolive, General Motors, AT&T and Nestles among others.''
Further, Mr. Sagansky noted, ''PAX TV total revenues continue to gain momentum, showing a growth rate of approximately 20% from the fourth quarter of 1998 to the first quarter of 1999. We look forward to achieving our goals for 1999, including increased ratings, greater distribution and positive operating cash flow.''
PAX TV Distribution
Since the beginning of the year, the Company has continued to increase PAX TV's national television household reach through the construction of eight new television stations and new station affiliation agreements, as well as additional cable and satellite distribution agreements. Among the important accomplishments, PAX TV now affiliates with 49 broadcast television stations it does not own or operate, up from 37 since our third quarter report. The Company also arranged for carriage of PAX TV programming on approximately 14.9 million cable and satellite households, primarily in areas not served by a PAX TV broadcast television station. This represents a 3.9 million household increase since our third quarter report. A.C. Nielsen reports that PAX TV currently reaches approximately 74% of US television households. Upon completion of pending transactions, the PAX TV Network will include 114 broadcast television stations, consisting of 72 stations which are owned and operated by the Company, or in which the Company has an economic interest, and 42 non-owned or operated PAX TV affiliates. The stations and PAX TV affiliates which the Company will own, operate or have an economic interest in will reach 19 of the top 20 markets and 40 of the top 50 markets.
A complete listing of stations and markets served and programs aired can be found by visiting the company's web-site at paxtv.com. Paxson Communications owns and operates the nation's seventh and newest broadcast network.
For additional information about Paxson Communications, visit the Company's web site at paxtv.com.
This press release contains ''forward-looking statements,'' within the meaning of federal securities laws, that involve risks and uncertainties. All statements herein, other than those consisting solely of historical facts, that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as business strategy, measures to implement strategy, competitive strengths, goals, references to future success and other events may be forward-looking statements. Statements herein are based on certain assumptions and analysis made by the Company in light of its experience and its perception of historical trends, current conditions and potential future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results, events and developments will conform with the Company's expectations is subject to a number of risks and uncertainties and important factors that could cause actual results, events and developments to differ materially from those referenced in, contemplated by or underlying any forward-looking statements herein, including, among others, the continued development and viability of the Company's television operations, the Company's ability to manage its growth, the Company's high level of indebtedness, restrictions imposed on the Company by the terms of its indebtedness and preferred stock, the impact of government regulations, industry and economic conditions, competition, changes in operating expenses, industry and economic conditions and other factors, many of which are beyond the control of the Company. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized.
PAXSON COMMUNICATIONS CORPORATION
Consolidated Balance Sheets
($ in thousands except per share data) December 31,
1998 1997 Assets Current assets:
Cash and cash equivalents $ 49,440 $ 82,641
Restricted cash and
short-term investments 18,096 17,000
Accounts receivable, less
allowance for doubtful accounts
of $3,953 and $912, respectively 21,391 4,814
Program rights 81,867 -
Prepaid expenses and other
current assets 2,947 2,766
Total current assets 173,741 107,221
Cash held by qualified intermediary - 418,950 Property and equipment, net 178,975 105,897 Intangible assets, net 827,973 205,400 Program rights, net 214,331 - Investments in broadcast properties 74,683 72,762 Investment in cable network 42,531 58,974 Other assets, net 30,552 87,909
Total assets $ 1,542,786 $ 1,057,113
Liabilities, Mandatorily
Redeemable Preferred Stock and
Common Stockholders' Equity
Current liabilities:
Accounts payable and
accrued liabilities $ 25,738 $ 11,305
Accrued interest 8,391 8,476
Obligations for cable
distribution rights 50,914 -
Obligations for program rights 84,820 -
Income taxes payable 1,542 -
Current portion of long-term debt 529 496
Total current liabilities 171,934 20,277
Deferred income taxes 58,109 95,747 Deferred gain - 12,100 Obligations for program rights,
net of current portion 154,800 -
Obligations for cable distribution
rights, net of current portion 15,400 -
Long-term debt 145,164 122,299 Senior subordinated notes, net 228,305 227,959
Mandatorily redeemable
preferred stock 521,401 210,987
Commitments and contingencies
(Note 19) - -
Class A common stock, $0.001
par value; one vote per share;
150,000,000 shares authorized,
52,608,765 and 50,701,600 shares
issued and outstanding 53 51
Class B common stock, $0.001 par
value; ten votes per share;
35,000,000 shares authorized
and 8,311,639 shares issued
and outstanding 8 8
Class A and B common stock warrants 1,582 2,316 Stock subscription notes receivable (2,813) (2,813) Additional paid-in capital 318,935 285,796 Deferred option plan compensation (16,728) (2,205) (Accumulated deficit) retained
earnings (53,364) 84,591
Total liabilities, mandatorily
redeemable preferred stock and
common stockholders' equity $ 1,542,786 $ 1,057,113
The Notes to Consolidated Financial Statements as found in the Company's Form 10-K are an integral part of the consolidated financial statements.
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Operations
($ in thousands except per share data) For the Years Ended December 31, 1998 1997 1996
Advertising revenues $ 134,196 $ 88,421 $ 62,333
Expenses:
Operating 58,139 13,993 7,619
Selling, general and
administrative 135,467 44,288 35,177
Time brokerage and
affiliation fees 15,699 16,961 3,568
Stock-based compensation 10,413 3,370 6,976
Compensation associated
with Paxson Radio
asset sales - 9,700 -
Depreciation and amortization 50,009 22,044 12,888
269,727 110,356 66,228
Operating loss (135,531) (21,935) (3,895)
Other income (expense):
Interest expense (41,906) (37,728) (31,526)
Interest income 14,992 9,495 6,742
Other expenses, net (2,744) (5,722) (1,757)
Gain on sale of
television stations 51,603 - -
Equity in loss of
unconsolidated investment (13,273) (2,493) -
Loss from continuing
operations before
income tax benefit (126,859) (58,383) (30,436)
Income tax benefit 37,389 21,879 -
Loss from continuing
operations (89,470) (36,504) (30,436)
Discontinued operations:
(Loss) income from
discontinued operations,
net of applicable
income taxes - (3,555) 4,217
Gain on disposal of
discontinued operations,
net of applicable
income taxes 1,182 254,748 -
1,182 251,193 4,217
Net (loss) income (88,288) 214,689 (26,219) Dividends and accretion
on redeemable preferred
stock and common stock
warrants (49,667) (26,277) (21,908)
Net (loss) income
attributable to
common stock $ (137,955) $ 188,412 $ (48,127)
Basic and diluted (loss)
earnings per share:
Loss from continuing
operations $ (2.31) $ (1.17) $ (1.20)
Discontinued operations 0.02 4.67 0.10
Net (loss) income $ (2.29) $ 3.50 $ (1.10)
Weighted average shares
outstanding 60,360,384 53,808,472 43,836,526
The Notes to Consolidated Financial Statements as found in the Company's Form 10-K are an integral part of the consolidated financial statements.
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Cash Flows
($ in thousands except per share data)
For the Years Ended December 31,
1998 1997 1996
Cash flows from operating
activities:
Net (loss) income $ (88,288) $ 214,689 $ (26,219)
Adjustments to reconcile
net (loss) income to net
cash used in operating
activities:
Depreciation and
amortization 50,009 35,511 25,975
Stock-based compensation 10,413 6,456 7,919
Program rights amortization 31,422 704 1,382
Payments for cable
distribution rights (19,905) - -
Program rights payments
and deposits (62,076) (37,485) (1,425)
Provision for doubtful
accounts 4,214 2,011 1,288
Deferred income tax benefit (42,143) (21,879) -
Loss on sale or disposal
of assets 3,852 3,794 182
Gain on sale of television
stations (51,603) - -
Equity in loss of
unconsolidated investment 13,273 2,493 -
Gain on disposal of
discontinued operations,
net (1,182) (254,748) -
Changes in assets and
liabilities:
Increase in restricted
cash and short-term
investments (1,096) (17,000) -
(Increase) decrease in
accounts receivable (20,791) 5,173 (13,422)
Increase in prepaid
expenses and other
current assets (188) (1,632) (1,742)
Decrease (increase) in
other assets 2,050 (5,353) (1,887)
Increase (decrease) in
accounts payable and
accrued liabilities 20,002 (10,591) 5,646
(Decrease) increase in
accrued interest (85) 1,816 (248)
Increase in current
income taxes payable 1,542 - -
Net cash used in
operating activities (150,580) (76,041) (2,551)
Cash flows from investing
activities:
Acquisitions of
broadcasting properties (591,368) (253,805) (186,662)
Increase in investments
in broadcast properties (15,659) (8,026) (32,105)
Decrease (increase) in
deposits on broadcast
properties 29,399 (26,917) (3,282)
Decrease in cash held
by qualified intermediary 418,950 (418,950) -
Purchases of property
and equipment (82,922) (44,474) (36,709)
Distribution received
from (made to)
unconsolidated investment 3,170 (5,342) -
Proceeds from sales of
discontinued operations 1,000 721,978 -
Proceeds from sales of
broadcast properties 68,944 13,764 228
Net cash used in
investing activities (168,486) (21,772) (258,530)
Cash flows from financing
activities:
Proceeds from issuance
of redeemable preferred
stock, net 261,706 - 143,197
Proceeds from issuance
of common stock, net - - 154,800
Proceeds from issuance
of long-term debt 23,411 120,000 17,700
Repayments of long-term debt (513) (1,270) (28,230)
Payment of loan origination
costs - - (2,986)
Redemption of Senior and
Series B preferred stock - - (28,456)
Proceeds from exercise of
common stock options, net 1,261 915 493
Increase in stock
subscription notes receivable - (940) (1,873)
Repayment of stock
subscription notes
receivable - - 116
Net cash provided by
financing activities 285,865 118,705 254,761
(Decrease) increase in
cash and cash equivalents (33,201) 20,892 (6,320)
Cash and cash equivalents,
beginning of year 82,641 61,749 68,069
Cash and cash equivalents,
end of year $ 49,440 $ 82,641 $ 61,749
The Notes to Consolidated Financial Statements as found in the Company's Form 10-K are an integral part of the consolidated financial statements.
Paxson Communications Corporation
Consolidated Statements of Cash Flows (continued)
($ in thousands except per share data)
For the Years Ended December 31,
1998 1997 1996
Supplemental disclosures
of cash flow information:
Cash paid for interest $ 38,849 $ 33,896 $ 28,342
Cash paid for income taxes $ 2,239 $ 975 $ -
Non-cash operating,
investing and financing
activities:
Accretion of discount on
senior subordinated notes $ 346 $ 304 $ 280
Issuance of common stock
in connection with
acquisitions $ 5,250 $ 66,125 $ 1,535
Note payable incurred
for WYPX acquisition $ - $ - $ 1,650
Dividends accrued on
redeemable preferred
stock $ 47,399 $ 24,943 $ 12,273
Discount accretion on
redeemable securities $ 2,268 $ 1,334 $ 9,635
Sale of broadcast
property for note
receivable $ - $ 15,000 $ -
The Notes to Consolidated Financial Statements as found in the Company's Form 10-K are an integral part of the consolidated financial statements.
PAXSON COMMUNICATIONS CORPORATION
Quarterly Results of Operations (Unaudited)
For the 1998 Quarters Ended
(in thousands except share and per share data) Dec. 31 Sept. 30 June 30 March 31
Total revenue $ 42,753 $ 29,402 $ 30,376 $ 31,665 Expenses, excluding
depreciation,
amortization and
stock based
compensation 84,557 63,182 33,888 27,678
Depreciation and
amortization 21,553 10,098 10,408 7,950
Stock based compensation 2,424 2,902 4,780 307
Operating loss $(65,781) $ (46,780) $ (18,700) $ (4,270)
Income (loss) from
continuing operations $(60,766) $ (36,571) $ 5,225 $ 2,642
Discontinued operations 1,182 - - -
Net income (loss) $(59,584) $ (36,571) $ 5,225 $ 2,642
Net loss attributable
to common stock $(76,383) $ (53,011) $ (4,121) $ (4,440)
Basic and diluted
earnings per share:
Income (loss) from
continuing operations $ (1.28) $ (0.87) $ (0.07) $ (0.07)
Discontinued operations $ 0.02 $ - $ - $ -
Net loss $ (1.26) $ (0.87) $ (0.07) $ (0.07)
Weighted average common
shares outstanding 60,844,515 60,740,230 59,921,236 59,588,768
PAXSON COMMUNICATIONS CORPORATION
Quarterly Results of Operations (Unaudited)
For the 1997 Quarters Ended
(in thousands except share and per share data) Dec. 31 Sept. 30 June 30 March 31
Total revenue $ 27,168 $ 23,779 $ 18,537 $ 18,937 Expenses, excluding
depreciation,
amortization,
compensation
associated with
Paxson Radio asset
sales and stock
based compensation 26,114 20,365 14,170 14,593
Compensation associated
with Paxson Radio
asset sales 9,700 - - -
Depreciation and
amortization 7,256 5,854 4,854 4,080
Stock based compensation 1,216 722 718 714
Operating loss $ (17,118) $ (3,162) $ (1,205) $ (450)
Loss from continuing
operations $ (4,180) $ (14,810) $ (9,791) $(7,723)
Discontinued operations 185,067 14,553 52,309 (736)
Net income (loss) $ 180,887 $ (257) $ 42,518 $(8,459)
Net income (loss)
attributable to
common stock $ 174,033 $ (6,983) $ 36,093 $(14,731)
Basic and diluted
earnings per share:
Loss from continuing
operations $ (0.19) $ (0.38) $ (0.33) $ (0.28)
Discontinued
operations $ 3.14 $ 0.26 $ 1.04 $ (0.02)
Net income (loss) $ 2.95 $ (0.12) $ 0.71 $ (0.30)
Weighted average common
shares outstanding 58,980,015 56,835,119 50,495,490 48,777,893
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