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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
SPECIAL FINANCIAL REPORT ON
FORM 10-K
(MARK ONE)
[X]* ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
* THIS SPECIAL REPORT CONTAINS ONLY FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1997 IN ACCORDANCE WITH RULE 15d-2.
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 0-27588
ACME INTERMEDIATE HOLDINGS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4833 52-2050589
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
2101 E. FOURTH ST., SUITE 202
SANTA ANA, CA 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 (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 [ ] No [X]
(Registrant has not been subject to such filing requirements for the past
90 days)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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2
INDEX TO FINANCIAL STATEMENTS
PAGE
----
ACME INTERMEDIATE HOLDINGS, LLC
Report of KPMG Peat Marwick LLP................................................................ F-2
Consolidated Balance Sheet as of December 31, 1997............................................. F-3
Consolidated Statement of Operations and Members' Capital for the year then ended.............. F-4
Consolidated Statement of Cash Flows for the year then ended................................... F-5
Notes to Consolidated Financial Statements..................................................... F-6
Financial Statement Schedule I - Condensed Financial Information of ACME Intermediate
Holdings, LLC................................................................................ F-12
3
INDEPENDENT AUDITORS' REPORT
The Members
ACME Intermediate Holdings, LLC:
We have audited the accompanying consolidated balance sheet of ACME Intermediate
Holdings, LLC and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations and members' capital and cash flows for
year then ended. In connection with our audit of the consolidated financial
statements, we have also audited the financial statement schedule. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ACME Intermediate
Holdings, LLC and subsidiaries as of December 31, 1997 and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Los Angeles, California
March 11, 1998,
except as to the third
paragraph of Note 4
which is as of March 13, 1998.
F-2
4
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
ASSETS
1997
----
Current assets:
Cash and cash equivalents ...................................... $ 8,820
Accounts receivable, less allowance for doubtful accounts of $51 677
Due from affiliates ............................................ 54
Current portion of programming rights .......................... 614
Prepaid expenses and other current assets ...................... 3,060
---------
Total current assets ...................................... 13,225
---------
Property and equipment, net ...................................... 7,346
Programming rights, net of current portion ....................... 587
Broadcast licenses, net of accumulated amortization of $761 ...... 36,004
Deposit .......................................................... 143,000
Other assets ..................................................... 19,010
---------
$ 219,172
=========
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable ............................................... $ 3,363
Accrued expenses ............................................... 651
Current portion of programming rights payable .................. 653
Current portion of obligations under lease ..................... 292
---------
Total current liabilities ................................. 4,959
Programming rights payable, net of current portion ............... 1,351
Obligations under lease, net of current portion .................. 443
Senior secured discount notes .................................... 36,863
Senior discount notes ............................................ 130,833
---------
Total liabilities ......................................... 174,449
---------
Members' capital ................................................. 51,357
Accumulated deficit .............................................. (6,634)
---------
Total members' capital .................................... 44,723
---------
$ 219,172
=========
See accompanying notes to financial statements.
F-3
5
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND MEMBERS' CAPITAL
NINE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
1997
----
Broadcast revenues ........................... $ 11,347
--------
Operating expenses:
Programming ................................ 3,608
Selling, general and administrative ........ 7,965
Depreciation and amortization............... 1,215
--------
Total operating expenses ............ 12,788
Operating loss ...................... (1,441)
Interest income ............................ 273
Interest expense ........................... (5,466)
--------
Net loss ............................ (6,634)
Parent's contribution ...................... 47,200
Unit offering, net ......................... 4,155
--------
Members' capital at December 31, 1997 $ 44,721
========
See accompanying notes to financial statements.
F-4
6
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
1997
----
Cash flows from operating activities:
Net loss................................................................................ $ (6,634)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization........................................................ 1,215
Amortization of discount on Notes and debt issuance costs............................ 5,121
Changes in assets and liabilities:
Increase in accounts receivable, net............................................... (699)
Increase in programming rights..................................................... (706)
Increase in prepaid expenses and other current assets.............................. (3,090)
Increase in accounts payable....................................................... 3,363
Increase in accrued expenses....................................................... 651
Increase in programming rights payable............................................. 381
--------
Net cash used in operating activities............................................ (398)
--------
Cash flows from investing activities--
Deposit relating to acquisition agreement............................................... (143,000)
Purchase of property and equipment...................................................... (6,077)
Purchase of Tennessee station........................................................... (13,454)
Other................................................................................... (10,470)
--------
Net cash used in investing activities............................................ (173,001)
--------
Cash flows from financing activities:
Contribution from parent................................................................ 28,280
Repayment of capital leases............................................................. (97)
Issuance of Senior Discount Notes....................................................... 127,370
Issuance of Senior Secured Notes........................................................ 35,650
Debt issuance costs..................................................................... (8,984)
--------
Net cash provided by financing activities........................................ 182,219
--------
Net increase (decrease) in cash.................................................. 8,820
Cash at beginning of period............................................................... --
--------
--
Cash at end of period..................................................................... $ 8,820
========
Supplemental disclosures of cash flow information: Cash paid during the period for:
Interest............................................................................. $ 514
Income taxes......................................................................... --
========
Non cash transactions:
Contribution of the net assets of ACME Television of Oregon, LLC from Parent in
exchange for membership units....................................................... $ 23,075
========
See accompanying notes to financial statements.
F-5
7
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES CONSOLIDATED TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
(1) DESCRIPTION OF BUSINESS AND FORMATION
ACME Intermediate Holdings, LLC (the Company) was formed on August 8, 1997. Upon
formation, the Company received a contribution from ACME Television Holdings,
LLC (ACME Parent), of ACME Parent's wholly owned subsidiaries--ACME Television
of Oregon, LLC (ACME Oregon) and ACME Television of Tennessee, LLC (ACME
Tennessee) and certain other net assets. This contribution of $25,455,000
(including cash of $2,380,000), was made in exchange for membership units in the
Company and was treated as a transaction between entities under common control,
similar to a pooling of interests. Accordingly, the transaction was recorded at
historical cost and the Company has reflected the result of operations of the
entities contributed for the period presented. In addition, on September 30,
1997, ACME Parent made an additional contribution of $21,746,000 in exchange for
membership units in the Company.
ACME Television, LLC's subsidiaries (hereinafter referred to in this paragraph
collectively as 'Subsidiary Guarantors') are fully, unconditionally, and jointly
and severally liable for the Company's senior discount notes referred to in note
5. The Subsidiary Guarantors are wholly owned and constitute all of the
Company's direct and indirect subsidiaries. The Company has not included
separate financial statements of the aforementioned subsidiaries because (i) the
Company and ACME Television, LLC are holding companies with no assets or
independent operations other than their investments in their subsidiaries, and
(ii) the separate financial statements and other disclosures concerning such
subsidiaries are not deemed material to investors.
Various agreements to which the Company and/or the Subsidiary Guarantors are
parties restrict the ability of the Subsidiary Guarantors to make distributions
to the Company. The Investment and Loan Agreement (the 'Investment Agreement'),
dated June 17, 1997, as amended, among ACME Parent and the parties thereto and
the Limited Liability Company Agreement (the 'LLC Agreement'), dated June 17,
1997, as amended, among ACME Parent and the parties thereto each contain certain
restrictions on the ability of the Subsidiary Guarantors to declare or pay
dividends to the Company in the absence of the consent of certain parties
thereto. The Indenture governing the Notes prevents the Subsidiary Guarantors
from declaring or paying any dividend or distribution to the Company unless
a default has not occurred and certain financial covenants are satisfied.
The Loan Agreement (as defined) also prohibits distributions from the Subsidiary
Guarantors to the Company except in certain circumstances during which default
has not occurred thereunder.
ACME Parent owns, directly and indirectly, 92% of the outstanding members units
of the Company. The Company owns, directly or indirectly, 100% of the
outstanding members units of ACME Television, LLC.
ACME Oregon was formed on March 5, 1997 to acquire Station KWBP, serving the
Portland, Oregon market from Channel 32, Incorporated. Prior to the acquisition
of Station KWBP (June 17, 1997), ACME Oregon operated the station and financed
its losses, effective January 1, 1997 pursuant to a Local Marketing Agreement
with the Channel 32, Incorporated. The acquisition was completed on June 17,
1997 (see note 3). ACME Tennessee was formed on April 17, 1997 to acquire
Station WINT, serving the Knoxville, Tennessee market. This acquisition was
completed on October 7, 1997 (See Note 4).
On July 25, 1997 the Company formed ACME Television Holdings of Missouri, Inc.
(formerly ACME Television Licenses of Missouri, Inc.; "ACME Missouri") for the
purpose of acquiring Station KPLR and on October 31, 1997 adopted limited
liability company agreements for ACME Television of Utah, LLC (ACME Utah) and
ACME Television of New Mexico, LLC (ACME New Mexico) for the purpose of
acquiring the licensee of Stations KZAR and the assets of Station KAUO,
respectively. On December 15, 1997, ACME Utah completed its acquisition of a 49%
interest in Station KZAR (See Note 3). The acquisition of Station KAUO did not
occur on or prior to December 31, 1997. (See Note 4)
F-6
8
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company's
subsidiaries. All significant intercompany transactions have been eliminated.
Revenue Recognition
Revenue from the sale of airtime related to advertising and contracted time is
recognized at the time of broadcast. The Company receives such revenues net of
commissions deducted by the advertising agencies and national sales
representatives.
Cash and Cash Equivalents
For purposes of reporting the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Programming Rights
Programming rights represent costs incurred for the right to broadcast certain
features and syndicated television programs. Programming rights are stated at
the lower of amortized cost or estimated realizable value. The cost of such
programming rights and the corresponding liability are recorded when the initial
program becomes available for broadcast under the contract. Generally,
programming rights are amortized over the life of the contract on a straight
line basis related to the usage of the program. The portion of the cost
estimated to be amortized within one year and after one year are reflected in
the balance sheets as current and noncurrent assets, respectively. The payments
under these contracts that are due within one year and after one year are
similarly classified as current and noncurrent liabilities.
Commitments for programming rights that have been executed, but which have not
been recorded in the accompanying financial statements, as the underlying
programming is not yet available for broadcast, were approximately $7,010,000 as
of December 31, 1997.
Property and Equipment
Property and equipment are stated at cost. The cost of maintenance is expensed.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the respective assets. The principal lives used in
determining depreciation rates of various assets are as follows:
Broadcasting and other equipment..................................... 3-20 years
Furniture and fixtures............................................... 5-7 years
Vehicles............................................................. 5 years
Barter and Trade Transactions
Revenue and expenses associated with barter agreements in which broadcast time
is exchanged for programming rights are recorded at the average rate of the
airtime exchanged. Trade transactions, which represent the exchange of
advertising time for goods or services, are recorded at the estimated fair value
of the products or services received. Barter and trade revenue is recognized
when advertisements are broadcast. Merchandise or services received from airtime
trade sales are charged to expense or capitalized when used or received.
F-7
9
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Carrying Value of Long-Lived Assets
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of.' The carrying value of long-lived assets
(tangible and intangible) is reviewed if the facts and circumstances suggest
that they may be impaired. For purposes of this review, assets are grouped at
the operating company level which is the lowest level for which there are
identifiable cash flows. If this review indicates that an asset's carrying value
will not be recoverable, as determined based on future expected, undiscounted
cash flows, the carrying value is reduced to fair market value.
Income Taxes
The Company is a limited liability company, therefore, no income taxes have been
provided for its operations. Any liability or benefit from the income or loss is
the responsibility of the individual members.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. These
estimates include the allowance for doubtful accounts net realizable value of
programming rights and the evaluation of intangible assets. Actual results could
differ from those estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of accounts receivable and cash. The Company
believes that concentrations of credit risk with respect to accounts receivable,
which are unsecured, are limited due to the Company's ongoing relationship with
its clients. The Company provides its estimate of uncollectible accounts. The
Company has not experienced significant losses relating to accounts receivable.
Certain Compensation Arrangements
ACME Parent has issued Management Carry Units to members of management. These
units entitle holders to certain distribution rights upon achievement of certain
returns by non-management investors and are subject to forfeiture or repurchase
by ACME Parent in the event of termination of each individual's employment by
ACME Parent under certain specified circumstances. The Company has determined
the value of these at the issuance date to be immaterial. These Management Carry
Units will be accounted for as a variable plan resulting in an expense when it
is probable that any such distributions will be made. Any such expense relating
to the Management Carry Units issued by ACME Parent will be recorded by the
Company. As of December 31, 1997, there were 100 Management Carry Units
outstanding and no expense recorded.
(3) ACQUISITION
On June 17, 1997, ACME Parent acquired substantially all of the assets and
assumed certain liabilities of Channel 32, Incorporated, relating to the
operations of Station KWBP, in exchange for $18,675,000 in cash and $4,400,000
of membership units in ACME Parent. The acquisition was accounted for using the
purchase method. The excess of the purchase price plus the fair value of net
liabilities assumed of approximately $23,478,000, has been recorded as broadcast
licenses and is being amortized over a period of 20 years. In addition, the
results of station KWBP were recorded by the Company beginning January 1, 1997
pursuant to a Local Marketing Agreement whereby ACME Oregon effectively operated
the station and funded the station's losses during the period from January 1,
1997 to June 17, 1997 (the acquisition date).
F-8
10
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(3) ACQUISITION--(CONTINUED)
On October 7, 1997, the Company acquired Crossville Limited Partnership, the
owner of Station WINT, in exchange for $13,200,000 in cash. Subsequent to the
acquisition, the Company changed the call letters of the station to WBXX. The
acquisition was accounted for using the purchase method. The excess of the
purchase price over the fair value of net assets acquired of approximately
$13,287,000, has been recorded as broadcast licenses and is being amortized over
a period of 20 years.
The unaudited pro forma financial information set forth below reflects the net
revenue and net loss assuming the KWBP and WBXX transactions had occurred on
January 1, 1997. No pro forma adjustment has been made for the WBXX transaction
because WBXX did not begin broadcasting or significant operations until
subsequent to the acquisition date. This unaudited pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the acquisition occurred on January 1, 1997.
YEAR ENDED DECEMBER 31,
1997
----
Net Revenues................................................... $11,347,000
Net Loss....................................................... $(7,150,000)
During 1997, ACME Parent entered into and contributed to the Company the right
to: (i) acquire 49% of the licensee of Station KZAR in exchange for member units
in ACME Parent valued at $6 million, (ii) pay $3 million for an option to
acquire the remaining 51% interest in the licensee of Station KZAR for $5
million, exercisable immediately after the station commences on-air operations,
which is expected to occur in the second quarter of 1998.
On December 15, 1997, the Company acquired the 49% interest in the licensee of
Station KZAR, paid $3 million to acquire the option and loaned the sellers $4
million. In the event the Company exercises the option to acquire the remaining
51%, the $4 million loan will be applied against the remaining purchase price.
In addition, the Company considers the $3 million paid to acquire the option as
part of the purchase price. Accordingly, at December 31, 1997, the amount paid
to acquire the option and the loan have been included in other non-current
assets.
On January 22, 1998, ACME Parent issued $6 million of its member units to the
sellers of the 49% interests in the license of Station KZAR in connection with
the above transaction. ACME Parent contributed this investment to the Company
in exchange for membership units in the Company.
(4) SUBSEQUENT AND PENDING ACQUISITIONS
On July 29, 1997, ACME Parent entered into and subsequently contributed to ACME
Missouri a stock purchase agreement to acquire Koplar Communications, Inc.
(KCI). On September 30, 1997, ACME Missouri placed $143 million into an escrow
account, classified as a deposit on the accompanying Consolidated Balance Sheet,
in connection with this acquisition, entered into a long-term LMA with Station
KPLR and filed requisite applications with the FCC for the transfer of the
Station's license to ACME Missouri.
Pursuant to the LMA entered into on September 30, 1997 relating to Station KPLR,
the Company retained all revenues generated by the station, bore substantially
all operating expenses of the stations and was obligated to pay an LMA fee.
These revenues and expenses for the period October 1 through December 31, 1997
are included in the Company's operating results. However, since the Company did
not acquire KCI until after December 31, 1997, the assets and liabilities of KCI
are included in the Company's consolidated balance sheet at December 31, 1997.
On March 13, 1998, the acquisition of KCI was consummated and the LMA was
terminated.
In connection with the acquisition of KCI, ACME Missouri entered into a
management agreement with Edward J. Koplar (the 'Management Agreement'),
providing for an annual fee of $1 million over an initial term of three years
(which is deemed to have commenced on October 1, 1997). Mr. Koplar has the right
to voluntarily terminate his services thereunder at any time and be paid any
remaining consulting fees that would be payable for the remaining term of the
agreement at the effective date of such termination. The Company does not intend
to renew the Management Agreement and has no right to require Mr. Koplar to
provide services pursuant thereto in exchange for the compensation payable
thereunder. Accordingly, the Company intends to treat the $3 million payable
pursuant to the Management Agreement as additional purchase price in connection
with the acquisition, allocate such amount to broadcast licenses, and amortize
such amount over a 20-year period.
On August 22, 1997, ACME New Mexico entered into an agreement with affiliates
of the sellers of station KZAR to acquire 100% of the interests in the
construction permit for Station KAUO for a consideration of $10,000. This
agreement was consummated on January 22, 1998.
F-9
11
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(5) SENIOR DISCOUNT NOTES
On September 30, 1997, the Company issued Senior Discount Notes (Television
Notes) with a face value of $175 million and received $127,370,000 in gross
proceeds from such issuance. These Television Notes provide for semi-annual cash
interest payments at an annual rate of 10.875% beginning in the fourth year with
the first interest payment due on March 31, 2001. The Television Notes are
subordinated to the Company's bank revolver (see Note 7) and to the Company's
capital equipment finance facilities. The Television Notes mature on September
30, 2004 and may not be prepaid without penalty.
The Television Notes contain certain covenants and restrictions including
restrictions on future indebtedness and limitations on investments, and
transactions with affiliates. The Company was in compliance with all such
convenants and restrictions at December 31, 1997.
Costs associated with the issuance of these notes, including the underwriters
fees and related professional fees are included in long-term other assets and
will be amortized over the term of the Television Notes.
(6) UNIT OFFERING
On September 30, 1997, the Company issued 71,634 Units (the Unit Offering)
consisting of 71,634 membership units (representing 8% of the Company's
outstanding membership equity) and $71,634,000 (par value at maturity) in 12%
Senior Secured Discount Notes (Intermediate Notes). Cash interest on the
Intermediate Notes is payable semi-annually in arrears, commencing with the
six-month period ending March 31, 2003 and the notes mature on September 30,
2005. The net proceeds from the Unit Offering, after the deduction of
underwriter fees and other related offering costs, were $38.3 million and were
received by the Company on September 30, 1997. The Company has allocated
approximately $3.5 million of such net proceeds to the membership units, $35.6
million to the discounted note payable and $1.5 million to prepaid financing
costs--the latter which is being amortized over the eight year term of the
notes. The Intermediate Notes contain certain convenants and restrictions
including restrictions on future indebtedness and restricted payments, as
defined, and limitations on liens, investments, transactions with affiliates and
certain assets sales. The Company was in compliance with all such convenants and
restrictions at December 31, 1997.
(7) BANK REVOLVER
On August 15, 1997, the Company entered into a $22.5 million revolving credit
facility (the Loan Agreement) with Canadian Imperial Bank Corporation (CIBC), of
which $3.5 million was drawn and outstanding as of September 30, 1997. Under the
terms of the Loan Agreement, advances bear interest at either the alternative
base rate or the adjusted LIBOR rate, as defined in the Loan Agreement. On
December 2, 1997, the Loan Agreement was amended to provide the Company with an
increased credit line to $40 million, more favorable interest rates and a
lengthened term. There was no outstanding balance due under the Loan Agreement
as of December 31, 1997.
The Loan Agreement contains certain covenants and restrictions including
restrictions on future indebtedness and limitations on investments, and
transactions with affiliates. The Company was in compliance with all such
covenants and restrictions at December 31, 1997.
Costs associated with the procurring of bank credit facilities, including loan
fees and related professional fees, are included in long-term other assets and
will be amortized over the term of the Loan Agreement.
F-10
12
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(8) COMMITMENTS AND CONTINGENCIES
Obligations under Leases
The Company is obligated under noncancelable operating leases for office space
and its transmission site. Future minimum lease payments as of December 31, 1997
under noncancelable operating leases with initial or remaining terms of one year
or more are as follows:
Year ending December 31:
1998............................................................ $ 532,000
1999............................................................ $ 536,000
2000............................................................ $ 523,000
2001............................................................ $ 502,000
2002............................................................ $ 523,000
2003 & Thereafter.............................................. $3,999,000
Programming Rights Payable
Maturities on the Company's programming rights payables (including commitments
not recognized in the accompanying financial statements due to the lack of
current availability for broadcast) for each of the next five years are as
follows:
Year ending December 31:
1998........................................................... $1,803,000
1999........................................................... $1,840,000
2000........................................................... $2,233,000
2001........................................................... $1,721,000
2002........................................................... $ 970,000
2003 & Thereafter.............................................. $ 91,000
Legal Proceedings
The Company is party to routine claims and suits brought against it in the
ordinary course of business. In the opinion of management, the outcome of such
routine claims will not have a material adverse effect on the Company's
business, financial condition, results of operations or liquidity.
(9) SUBSEQUENT EVENTS
-----------------
On March 2, 1998, the Company entered into an asset purchase agreement to
acquire WTVK-Channel 46 serving the Ft. Myers/Naples, Florida marketplace for
$13 million in cash and 2,500 membership units in ACME Parent. Concurrently,
the Company entered into an LMA agreement with WTVK wherein the Company,
effective March 3, 1998, will retain all revenues generated by the station,
bear all operating expenses of the station and have the right to program the
station (subject to WTVK's ultimate authority for programming) and the
station's existing programming commitments. The LMA will terminate upon the
consummation of the asset purchase transaction, which is subject to the
receipt of regulatory approvals.
The Company has an agreement in principle with Paxson Communications Corporation
("Paxson") to exchange the Company's FCC licenses and transmission facilities
for Station KUWB for the FCC licenses and transmission facilities for Station
KUPX (formerly KOOG) - Channel 30, also serving the Salt Lake City, Utah
marketplace. The consummation of this transaction is subject to regulatory
approvals and to the commencement of on-air operations on KUWB, which is
expected to occur during the second quarter of 1998. Paxson and the Company will
enter into reciprocal Time Brokerage Agreements (TBA) which provide each party
the right to program the other's to be exchanged station, and to retain all
revenue derived therefrom and to pay all operating expenses incurred therewith,
effective with the commencement of Station KUWB's on-air operations. These TBA's
will terminate upon completion of the station exchange.
F-11
13
ACME INTERMEDIATE HOLDINGS, LLC (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
(DOLLARS IN THOUSANDS)
DECEMBER 31,
1997
----
Assets:
Investment in and advances to subsidiaries ............................................. $79,992
Prepaid financing costs ................................................................ 1,592
-------
Total assets ........................................................................ $81,584
=======
Liabilities:
Senior Secured Discount Notes ...................................................... 36,863
-------
Total liabilities .................................................................. 36,863
-------
Members' Capital:
Members' capital ...................................................................... 51,355
Accumulated deficit ................................................................... (6,634)
--------
Total members' capital ............................................................. 44,721
-------
Total liabilities and members' capital ............................................. $81,584
=======
See accompanying notes to condensed financial statements.
F-12
14
ACME INTERMEDIATE HOLDINGS, LLC (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997
1997
----
Revenues................................................................................. $ --
Operating expenses....................................................................... --
-------
Operating income.................................................................. --
Interest expense......................................................................... (1,216)
Equity in net loss of subsidiaries....................................................... (5,418)
-------
Net loss.......................................................................... $(6,634)
========
See accompanying notes to condensed financial statements.
F-13
15
ACME INTERMEDIATE HOLDINGS, LLC (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997
1997
----
Net loss................................................................................ $(6,634)
Adjustment to reconcile net loss to net cash used in operating activities:
Equity in net loss of subsidiaries.................................................... 5,418
Accretion of senior-secured discount notes............................................ 1,213
-------
Net cash used in operating activities.............................................. (3)
-------
Cash flows from investing activity:
Investment in and advances to affiliates.............................................. (62,335)
-------
Cash flows from financing activities:
Equity contributions.................................................................. 28,280
Increase in prepaid financing costs................................................... (1,592)
Issuance of Senior Secured Discount Notes............................................. 35,650
-------
Net cash provided from financing activities........................................ 62,338
-------
Net increase in cash............................................................. 0
Cash at beginning of period...................................................... 0
-------
Cash at end of period............................................................ $0
=======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest....................................................................... 0
Income taxes................................................................... 0
Noncash transactions:
Contributions of the net assets of ACME Television of Oregon, LLC from Parent
in exchange for membership units............................................... $23,075
-------
See accompanying notes to condensed financial statements.
F-14
16
ACME INTERMEDIATE HOLDINGS, LLC
NOTES TO CONDENSED FINANCIAL INFORMATION
(1) BASIS OF PRESENTATION
Pursuant to the rules and regulations of the Securities and Exchange Commission,
the Condensed Financial Statements of the Registrant do not include all of the
information and notes normally included with financial statements prepared in
accordance with generally accepted accounting principles. It is therefore
suggested that these Condensed Financial Statements be read in conjunction with
the Consolidated Financial Statements and Notes thereto included elsewhere in
this filing.
(2) CASH DIVIDENDS
There have been no cash dividends declared by the Company.
(3) LONG-TERM DEBT
There are no cash interest payments due on the Company's Senior Secured Discount
Notes until March 31, 2003.
F-15
17
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
ACME INTERMEDIATE HOLDINGS, LLC
By: /s/ THOMAS ALLEN
----------------------------------
Thomas Allen
Executive Vice President, Chief
Financial officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K (containing only financial statements for the period
in question in accordance with Rule 15d-2) has been signed by the following
persons on behalf of the registrant in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman of the Board and Chief April 10, 1998
- ----------------------------------------------------- Executive Officer
Jamie Kellner
* President, Chief Operating April 10, 1998
- ----------------------------------------------------- Officer, Secretary and Director
Douglas Gealy
/s/ THOMAS ALLEN Executive Vice President, Chief April 10, 1998
- ----------------------------------------------------- Financial Officer and Director
Thomas Allen
By: /s/ THOMAS ALLEN
--------------------------------
Thomas Allen
Attorney-in-Fact
18
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule