<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of earliest event
reported: June 26, 1996
INFINITY BROADCASTING CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-14702 13-2766282
- --------------------------------------------------------------------------------
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
600 Madison Avenue, New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 750-6400
-------------------------------
(Registrant's telephone number)
<PAGE> 2
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 26, 1996, Infinity Broadcasting Corporation (the "Company") completed
the acquisition of twelve radio stations located in Dallas-Fort Worth, Boston,
Baltimore, Atlanta and Orlando from various subsidiaries of Granum Holdings,
L.P. for a total purchase price of $410 million plus working capital (the
"Granum Acquisition") pursuant to a Stock Purchase Agreement, dated as of March
3, 1996, between the Company and Granum Holdings L.P. The radio stations are
KRBV-FM, KHVN-AM and KOAI-FM in Dallas-Fort Worth, WBOS-FM and WOAZ-FM in
Boston, WCAO-AM and WXYV-FM in Baltimore, WAOK-AM and WVEE-FM in Atlanta and
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (collectively, the "Stations").
Pursuant to the Telecommunications Act of 1996 (the "1996 Telecom Act"), the
Company, as a result of the completion of the Granum Acquisition, is required
to divest one FM station in Dallas in order to comply with the 1996 Telecom
Act.
The purchase price of the Granum Acquisition was funded by bank borrowings
under the Company's Third Amended and Restated Credit Agreement dated as of
June 13, 1996, with a syndicated group of bank lenders.
The Company has entered into an agreement with Cox Broadcasting, Inc. to swap
radio stations in Orlando for Cox's radio stations in Chicago. The Cox
stations in Chicago are WCKG-FM and WYSY-FM. The Infinity stations are
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando, which Infinity acquired in the Granum
Acquisition. In addition, Infinity has agreed to pay Cox $20 million. The
transaction has been structured as a tax- free like-kind exchange. The
consummation of the transaction is subject to certain conditions, including
approval of the Federal Communications Commission.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The information called for by this Item is included on pages F-1 through
F-25 of this filings and is incorporated herein by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma combined statements of operations data for the year
ended December 31, 1995 are presented as if, at the beginning of such period,
the Company had completed (i) the acquisition of the Stations (ii) the
acquisition of radio station KLUV-FM, which acquisition was completed on April
21, 1995 (iii) the acquisition of seven radio stations from various entities
affiliated with Alliance Broadcasting, Inc. (the "Alliance Acquisition"),
which acquisition was completed on January 16, 1996 and previously reported on
the Company's Current Report on Form 8-K (filed on September 27, 1995), as
amended by Form 8-K/A (filed on April 1, 1996), (iv) the acquisition of TDI
Worldwide, Inc. (the "TDI Acquisition"), which acquisition was completed on
March 26, 1996 and previously reported on the Company's
<PAGE> 3
Current Report on Form 8-K (filed on April 10, 1996), as amended by Form 8-K/A
(filed on May 15, 1996), and (v) the disposition of radio station KYCW-FM,
Seattle, Washington (the "KYCW-FM Disposition"), which disposition was
completed on May 22, 1996 (collectively, the "Transactions").
The unaudited pro forma combined statements of operations data for the six
months ended June 30, 1996 is presented as if, at the beginning of such period,
the Company had acquired the Stations, and completed the TDI Acquisition.
In the opinion of management, all adjustments necessary to present fairly
this pro forma information have been made.
The pro forma combined financial statements that follow should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto, which appear in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and with the Financial Statements and Notes thereto
of (i) the operating subsidiaries of Granum Holdings, L.P. appearing elsewhere
in this filing, (ii) Alliance Broadcasting, L.P. filed with the Company's
Current Report on Form 8-K/A (filed on April 1, 1996), and (iii) TDI Worldwide,
Inc. and Subsidiaries filed with the Company's Current Report on Form 8-K (filed
on April 10, 1996), as amended by Form 8-K/A (filed on May 15, 1996). The pro
forma information is not necessarily indicative of the results that would have
been reported had the Transactions actually occurred on the dates specified nor
is it indicative of the Company's future results. The pro forma information
does not take into account the disposition of one FM station in Dallas, which is
required in order to comply with the 1996 Telecom Act.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
2(a) Asset Purchase Agreement, dated as of September 12, 1994, by and between
TK Communications, Inc. and Infinity Broadcasting Corporation of Dallas.
(This exhibit can be found as Exhibit 2(f) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994 (File No.
0-14702) and is incorporated herein by reference.)
2(b) Purchase Agreement, dated as of September 22, 1995, among each of the
entities identified in Schedule 1.0 (a) thereto, Alliance Broadcasting,
L.P., each of the entities identified in Schedule 1.0 (b) thereto,
Infinity Broadcasting Corporation of Los Angeles and the Company. (This
exhibit can be found as Exhibit 2(a) to the Company's Report on Form 8-K
filed on September 27, 1995 (File No. 0- 14702), and is incorporated
herein by reference.)
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
2(c) Stock Purchase Agreement, dated as of February 22, 1996, by and among the
Company, William M. Apfelbaum, each of the other stockholders of TDI
Worldwide, Inc. identified on Schedule 4.2 thereto. (This exhibit can be
found as Exhibit 2(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 (File No. 0-14702) and is
incorporated herein by reference.)
2(d) Stock Purchase Agreement, dated as of March 3, 1996, between the Company
and Granum Holdings L.P. (This exhibit can be found as Exhibit 2(j) to
the Company's Annual Report on Form 10-K for the fiscal year end December
31, 1995 (File No. 0-14702) and is incorporated herein by reference.)
23(a) Consent of Deloitte & Touche LLP
</TABLE>
<PAGE> 5
Signature
Pursuant to the requirements 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.
INFINITY BROADCASTING CORPORATION
By /s/ FARID SULEMAN
-----------------------------
Farid Suleman,
Vice President-Finance
and Chief Financial Officer
Dated: September 5, 1996
<PAGE> 6
Item 7
OPERATING SUBSIDIARIES OF
GRANUM HOLDINGS, L.P.
COMBINED BALANCE SHEETS AS OF
DECEMBER 31, 1995 AND 1994 AND THE
RELATED COMBINED STATEMENTS OF
OPERATIONS AND ACCUMULATED DEFICIT
AND OF CASH FLOWS FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 1995 AND
INDEPENDENT AUDITORS' REPORT
F-1
<PAGE> 7
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
COMBINED FINANCIAL STATEMENTS:
Combined Balance Sheets, December 31, 1995 and 1994 2
Combined Statements of Operations and Accumulated Deficit,
Years Ended December 31, 1995, 1994 and 1993 3
Combined Statements of Cash Flows, Years Ended
December 31, 1995, 1994 and 1993 4
Notes to Combined Financial Statements, Years Ended
December 31, 1995, 1994 and 1993 5-15
</TABLE>
F-2
<PAGE> 8
DELOITTE & TOUCHE LLP LETTERHEAD
INDEPENDENT AUDITORS' REPORT
To the Partners of
Granum Holdings, L.P.:
We have audited the accompanying combined balance sheets of the operating
subsidiaries (as defined in Note 1 to the combined financial statements) of
Granum Holdings, L.P. ("the Partnership") as of December 31, 1995 and 1994 and
the related combined statements of operations and accumulated deficit and of
cash flows for each of the three years in the period ended December 31, 1995.
These combined financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
operating subsidiaries of the Partnership at December 31, 1995 and 1994 and the
combined results of operations and cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, the Partnership signed an
agreement to sell its operating subsidiaries, subject to certain conditions and
approvals.
DELOITTE & TOUCHE LLP
April 3, 1996
F-3
<PAGE> 9
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,704,906 $ 8,664,130
Accounts receivable-net of allowance for doubtful
accounts of $689,447 in 1995 and $479,183 in 1994 14,538,322 5,395,611
Receivable from affiliate 291,558 -
Other receivables 155,474 247,948
Deferred tax asset (Note 7) 1,493,872 -
Prepaid and other current assets 1,304,207 250,175
------------ ------------
Total current assets 21,488,339 14,557,864
PROPERTY, BUILDING AND EQUIPMENT-Net (Note 5) 15,091,277 3,792,806
INTANGIBLE ASSETS-Net (Note 6) 165,408,805 24,791,962
DEFERRED FINANCING COSTS-Net of accumulated
amortization of $450,802 in 1995 and $600,666 in 1994 3,818,243 625,772
DEFERRED TAX ASSET (Note 7) 3,023,584 -
OTHER ASSETS 25,867 9,013
------------ ------------
TOTAL ASSETS $208,856,115 $ 43,777,417
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Notes 8 and 9) $ 7,000,000 $ 10,722,855
Interest payable 1,236,745 -
Accounts payable 1,134,641 202,650
Salaries and commissions payable 645,400 437,192
Current tax payable (Note 7) 45,000 -
Payable to affiliate - 14,551
Other accrued liabilities 1,008,240 471,908
------------ ------------
Total current liabilities 11,070,026 11,849,156
------------ ------------
LONG-TERM DEBT (Notes 8 and 9) 93,000,000 11,677,145
DEFERRED TAX LIABILITY (Note 7) 22,962,940 -
OTHER LONG-TERM LIABILITIES 772,900 -
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDER'S EQUITY (Note 11):
Common stock 200 197
Additional paid-in capital 100,450,174 32,866,464
Accumulated deficit (19,400,125) (12,615,545)
------------ ------------
Total stockholder's equity 81,050,249 20,251,116
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $208,856,115 $ 43,777,417
============ ============
</TABLE>
See notes to combined financial statements.
2
F-4
<PAGE> 10
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET REVENUES $ 52,118,326 $ 23,458,658 $ 16,207,038
OPERATING EXPENSES:
Station operating expenses excluding
depreciation and amortization 29,289,294 14,658,744 13,145,103
Fees to related parties (Note 12) 7,000,000 2,000,000 831,393
Depreciation and amortization 19,112,528 5,517,525 5,804,031
Loss on sublease 676,765 -- --
(Gain) loss on barter transactions - net (46,753) (180,234) 36,133
Loss (gain) on sale of fixed assets 58,422 (874,373) 79,755
Other expenses 59,386 82,280 --
------------ ------------ ------------
Operating (loss) income 4,031,316) 2,254,716 (3,689,377)
------------ ------------ ------------
NONOPERATING (EXPENSES) INCOME:
Interest expense (7,945,651) (1,984,753) (1,594,892)
Interest income 160,114 122,222 48,216
------------ ------------ ------------
Nonoperating expenses, net (7,785,537) (1,862,531) (1,546,676)
------------ ------------ ------------
(LOSS) INCOME BEFORE INCOME TAX
BENEFIT AND EXTRAORDINARY ITEMS (11,816,853) 392,185 (5,236,053)
INCOME TAX BENEFIT (Note 7) 5,403,153 -- --
EXTRAORDINARY ITEMS - Net of tax benefit
of $174,500 in 1995 (Note 13) (370,880) -- 252,289
------------ ------------ ------------
NET (LOSS) INCOME (6,784,580) 392,185 (4,983,764)
ACCUMULATED DEFICIT, BEGINNING
OF YEAR (12,615,545) (13,007,730) (8,023,966)
------------ ------------ ------------
ACCUMULATED DEFICIT, END OF YEAR $(19,400,125) $(12,615,545) $(13,007,730)
============ ============ ============
</TABLE>
See notes to combined financial statements.
-3-
F-5
<PAGE> 11
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (6,784,580) $ 392,185 $ (4,983,764)
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization 19,112,528 5,517,525 5,804,031
Deferred income tax benefit (7,918,210) -- --
Loss on sublease 676,765 -- --
Loss (gain) on extinguishment of debt 545,380 -- (252,289)
Amortization of deferred financing costs 517,998 264,731 223,411
Loss (gain) on sale of fixed assets 58,422 (874,373) 79,755
Charges in assets and liabilities excluding effects
from acquisitions:
Increase in deferred financing costs (4,269,045) -- (783,567)
Increase in net accounts receivable and
other receivables (3,265,014) (888,999) (1,534,003)
(Increase) decrease in prepaid and other
current assets (760,658) (82,618) 555,330
Increase (decrease) in accounts payable 871,954 (194,469) 54,085
Increase in interest payable 1,236,745 -- --
(Decrease) increase in other liabilities (618,251) 235,634 467,307
------------- ---------- -------------
Net cash (used in) provided by
operating activities (595,966) 4,369,616 (369,704)
------------- ---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of radio stations-net of cash acquired (147,343,079) -- (18,500,000)
Proceeds from sale of radio station -- 1,500,000 --
Purchase of property, building and equipment (2,152,225) (186,095) (188,429)
Purchase of intangible assets (51,667) (42,923) (567,470)
------------- ----------- ------------
Net cash (used in) provided by
investing activities (149,546,971) 1,270,982 (19,255,899)
------------- ---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 110,000,000 -- 14,500,000
Repayment of long-term debt (32,400,000) (1,425,000) (4,675,000)
Capital contributions 67,583,713 -- 12,266,660
------------- ----------- ------------
Net cash provided by (used in)
financing activities 145,183,713 (1,425,000) 22,091,660
------------- ----------- ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (4,959,224) 4,215,598 2,466,057
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 8,664,130 4,448,532 1,982,475
------------- ----------- ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 3,704,906 $8,664,130 $ 4,448,532
============= ========== ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Operating activities:
Interest paid $ 6,132,908 $1,702,022 $ 1,371,481
============= ========== ============
Income taxes paid $ 2,700,000 $ -- $ --
============= ========== ============
</TABLE>
See notes to combined financial statements.
-4-
F-6
<PAGE> 12
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND OPERATIONS
Granum Holdings, L.P. ("the Partnership"), a Delaware limited
partnership, was established on June 13, 1991 for the purpose of
acquiring, establishing and operating radio stations, subject to the
jurisdiction of the Federal Communications Commission (the "FCC"). The
Partnership operates its radio stations through various wholly-owned
corporations, collectively referred to as "the operating subsidiaries" or
"Granum".
On March 4, 1996, the Partnership signed an agreement to sell the
outstanding capital stock of its operating subsidiaries to Infinity
Broadcasting Corporation for $410 million, subject to working capital
adjustments. The sale is expected to close in the third quarter of 1996,
subject to certain conditions and approval by the Federal Communications
Commission. The accompanying combined financial statements include the
operating subsidiaries to be sold under this agreement.
The operating subsidiaries of the Partnership included in the
accompanying combined financial statements and the radio stations of each
at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
SUBSIDIARY RADIO STATION(S)
<S> <C>
GCI Dallas Holding, Inc. and Subsidiaries KOAI (FM)
GCI Texas Holdings, Inc. and Subsidiaries KHVN (AM) and KRBV (FM)
GCI Boston Holdings, Inc. and Subsidiaries WBOS (FM) and WOAZ (FM)
GCI Atlanta Holdings, Inc. and Subsidiaries WAOK (AM) and WVEE (FM)
GCI Baltimore Holdings, Inc. and Subsidiaries WCAO (AM) and WXYV (FM)
GCI Orlando Holdings, Inc. and Subsidiaries WHOO (AM), WHTQ (FM) and WMMO (FM)
</TABLE>
In addition, these combined financial statements include Granum Finance
Partnership ("Granum Finance"), a wholly-owned subsidiary of the
operating subsidiaries of the Partnership.
The impact of material transactions between the entities included in the
combined financial statements has been eliminated.
Revenues from the radio stations are derived from the sale of commercial
air time to advertising agencies and businesses. The percentage of
revenue earned during 1995 in each of the markets in which Granum
operates is as follows:
<TABLE>
<CAPTION>
% OF
MARKET REVENUE
<S> <C>
Atlanta 30
Baltimore 11
Boston 22
Dallas 26
Orlando 11
</TABLE>
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F-7
<PAGE> 13
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - 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. Actual results could differ from
those estimates.
PROPERTY, BUILDING AND EQUIPMENT - Property, building and equipment are
recorded at cost less accumulated depreciation. Depreciation is computed
using the straight-line basis over their estimated useful lives.
Leasehold improvements are amortized over the shorter of their estimated
useful life or the life of the lease. The lives being used to depreciate
each major class of property, building and equipment are as follows:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Land improvements 15
Building, towers and antennas 8-15
Broadcast equipment 8-15
Leasehold impovements 5-7
Furniture and fixtures 5
Other 5
</TABLE>
INTANGIBLE ASSETS - Goodwill is recognized for the excess of the purchase
price of the various radio station acquisitions over the value of the
identifiable net assets and is amortized on a straight-line basis over
twenty-five years. Identifiable intangible assets are being amortized on
a straight-line basis over their respective estimated useful lives as
follows:
<TABLE>
<CAPTION>
YEARS
<S> <C>
FCC broadcasting license 25
Non-compete agreement 3-5
Other intangibles 5
</TABLE>
INCOME TAXES - Each of the operating subsidiaries included in the
accompanying combined financial statements is a taxable entity that
separately files Federal, state and local tax returns, consolidating, at
most, only their respective subsidiaries. In certain state and local
jurisdictions, each operating subsidiary and indirect subsidiary files
separate returns.
The operating subsidiaries account for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 ("SFAS 109"), which
requires an asset and liability method; accordingly, deferred tax assets
and liabilities are recognized for the tax consequences of temporary
differences between the financial reporting and tax bases of existing
assets and liabilities. In addition, deferred tax assets are recognized
for the future tax benefits of net operating losses. A valuation
allowance is established, when necessary, to reduce deferred tax assets
to amounts that are more likely than not to be realized.
Deferred taxes are adjusted to reflect the tax rates at which future
taxable amounts will be settled or realized. The effects of tax rate
changes on future deferred tax liabilities and assets, as well as other
changes in income tax laws, are recognized in net income in the period
such changes are enacted.
-6-
F-8
<PAGE> 14
REVENUE RECOGNITION - Advertising revenue is recognized when
advertisements are aired.
BARTER TRANSACTIONS - Granum barters unsold advertising time for various
products and services. Barter revenue is recognized when commercials are
broadcast and expenses are recorded when goods and services are received
or used.
HEDGING ACTIVITIES - Granum utilizes an interest rate collar to reduce
the risk associated with interest rate fluctuations related to its
long-term borrowings. Amounts to be received or paid under the interest
rate collar are accounted for on an accrual basis and are recognized as
an adjustment to interest expense over the life of the agreement.
CASH AND CASH EQUIVALENTS - For purposes of the combined statements of
cash flows, Granum defines cash equivalents as short-term, highly liquid
investments with an original maturity of 90 days or less.
IMPAIRMENT OF ASSETS - Granum reviews long-lived assets and intangible
assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
amount of the impairment loss is measured as the difference between
expected future cash flows and the carrying amount of the asset.
DEFERRED FINANCING COSTS - Costs incurred with the issuance of debt are
recorded net of accumulated amortization. Amortization is reflected as
interest expense over the term of the related loan. Deferred costs
related to loans that are retired are written off and included in the
extraordinary items in the accompanying combined statements of
operations.
NEW ACCOUNTING PRONOUNCEMENTS - In March 1995, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which must be adopted no later than 1996. The standard will require
Granum to analyze its long-lived assets, including goodwill, for
potential impairment and prescribes the method for measuring impairment.
Granum has not yet determined the impact of the adoption of this standard
on the combined financial statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which is effective for 1996. The effect of
this pronouncement will not be material to Granum's combined financial
statements.
3. ACQUISITIONS
On June 14, 1994, Granum entered into a stock purchase agreement with
Summit Communications Group, Inc. ("Summit"). The agreement provided for
the purchase of three of Summit's wholly-owned subsidiaries. These
subsidiaries are the parent corporations of radio stations: WVEE (FM) and
WAOK (AM) located in Atlanta, Georgia; WXYV (FM) and WCAO (AM) located in
Baltimore, Maryland; and KRBV (FM), formerly KJMZ (FM), and KHVN (AM)
located in Dallas, Texas.
The purchase price of approximately $133.5 million plus additional
working capital adjustments and expenses were funded by borrowings of
$110.0 million under a $115.0 million credit facility, additional capital
contributed by the partners of the Partnership and cash on hand.
In November 1994, Granum entered into an asset purchase agreement with TK
Communications, Inc. ("TK"). The agreement provided for the purchase of
certain assets of radio stations WHTQ (FM) and WHOO (AM) located in
Orlando, Florida. In connection with this agreement, Granum entered into
a local market agreement ("LMA") with TK for WHTQ (FM) and WHOO (AM). The
LMA is an
-7-
F-9
<PAGE> 15
agreement which provides for radio stations to enter into cooperative
programming arrangements subject to compliance with requirements of the
antitrust laws and the FCC's rules and policies. This LMA became
effective December 1, 1994 and continued until March 31, 1995, at which
time Granum consummated the asset purchase transaction with TK for
approximately $11.5 million. The purchase price for this transaction was
provided in connection with the funding of the aforementioned Summit
acquisition which occurred concurrently with the close of the TK
transaction on March 31, 1995. As a result of the Summit and TK
acquisitions, goodwill of approximately $77.0 million was recorded and is
being amortized over 25 years (see Note 6).
The following pro forma financial information represents the unaudited
pro forma results of operations as if the aforementioned Summit and TK
acquisitions had been completed at the beginning of 1995 and the
beginning of 1994. The pro forma amounts give effect to certain
adjustments, including increased depreciation and amortization and
interest expense for acquisition debt. These pro forma amounts have been
prepared for comparative purposes only and do not purport to be
indicative of the results of operations which would have been achieved
had these acquisitions been completed as of these dates, nor are the
results indicative of Granum's future results of operations.
<TABLE>
<CAPTION>
UNAUDITED
1995 1994
<S> <C> <C>
Revenue $59,000,000 $55,900,000
=========== ===========
Loss before extraordinary items $ 7,600,000 $10,800,000
=========== ===========
Net loss $ 8,000,000 $11,700,000
=========== ===========
</TABLE>
On March 15, 1993, Granum acquired certain assets of WOAZ (FM), formerly
WSSH (FM), a radio station in Lowell, Massachusetts, for $18.5 million.
There was no goodwill recorded as a result of this acquisition.
All of the aforementioned acquisitions have been accounted for under the
purchase method of accounting and, accordingly, the purchase price has
been allocated to the assets acquired and the liabilities assumed based
on their estimated fair values at the dates of acquisition. The operating
results of the acquired radio stations are included in Granum's combined
statements of operations from the dates of their acquisition.
4. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject Granum to concentrations
of credit risk consist principally of accounts receivable. Concentrations
of credit risk with respect to accounts receivable are limited by the
large number of customers comprising Granum's customer base and the
dispersion across the different geographic areas of the country as
described in Note 1.
-8-
F-10
<PAGE> 16
5. PROPERTY, BUILDING AND EQUIPMENT
Property, building and equipment at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land and leasehold improvements $ 4,206,235 $ 2,084,308
Building, towers and antennas 8,335,913 1,421,013
Broadcast equipment 4,077,362 1,772,803
Furniture and fixtures 788,628 316,212
Other 1,927,782 569,949
----------- -----------
19,335,920 6,164,285
Less accumulated depreciation (4,244,643) (2,371,479)
----------- -----------
Property, building and equipment - net $15,091,277 $ 3,792,806
=========== ===========
</TABLE>
Property, building and equipment are pledged as collateral as described
in Note 8.
Depreciation for the years ended December 31, 1995, 1994 and 1993
amounted to $2,110,008, $1,027,971 and $889,469, respectively.
6. INTANGIBLE ASSETS
Intangible assets at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Goodwill $ 80,659,010 $ 2,938,217
FCC broadcasting license 77,291,776 18,881,755
Non-compete agreement 5,886,394 8,386,394
Computer software 138,432 94,801
Other intangibles 26,990,625 7,405,183
------------ -----------
190,966,237 37,706,350
Less accumulated amortization (25,557,432) (12,914,388)
------------ -----------
Intangible assets - net $165,408,805 $24,791,962
============ ===========
</TABLE>
-9-
F-11
<PAGE> 17
7. INCOME TAXES
As described in Note 2, the operating subsidiaries are taxable entities.
The components of the income tax benefit on the combined earnings of
these subsidiaries are:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal:
Current $ 1,849,316 $ -- $ --
Deferred (7,099,295) -- --
State and local taxes:
Current 665,741 -- --
Deferred (818,915) -- --
----------- ----------- -----------
Total tax benefit $(5,403,153) $ -- $ --
=========== =========== ===========
</TABLE>
Reflected in the Federal and state and local deferred benefit for 1995 is
approximately ($3,550,000) and ($250,000), respectively, for the
recognition of the reduction of the beginning of the year valuation
allowance; $750,000 and $100,000, respectively, for the allocation of tax
benefits to reduce goodwill; ($800,000) and $0, respectively, for the
benefit of 1995 operating loss carryforwards and ($3,500,000) and
($670,000), respectively, relating to other temporary differences.
The corporate statutory tax rate was 34 percent for the three years
presented. A reconciliation of the income tax benefit at the statutory
Federal income tax rate to the income tax benefit recognized in the
accompanying combined statements of operations is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal statutory rate $(4,017,730) $ 133,343 $(1,780,258)
Reduction of beginning
valuation allowance (3,554,448) (570,897) --
Allocation of tax benefits
reducing goodwill 752,944 -- --
State and local income tax
benefit, net of Federal
tax expense (101,095) -- --
Amortization of goodwill 803,984 23,029 23,029
Unrecognized operating
losses 597,540 414,525 1,757,229
Other 115,652 -- --
----------- --------- -----------
Total $(5,403,153) $ -- $ --
=========== ========= ===========
</TABLE>
-10-
F-12
<PAGE> 18
The major components of deferred tax assets and liabilities consist of
the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 8,875,280 $5,418,313
Federal effect of deferred state and 1,226,711 --
local taxes
Allowance for doubtful accounts 276,087 198,744
Other 411,805 146,648
----------- ----------
Subtotal 10,789,883 5,763,705
Valuation allowance 4,321,440 5,448,986
----------- ----------
Total deferred tax assets, net of
valuation allowance 6,468,443 314,719
----------- ----------
Deferred tax liabilities:
Intangible assets 22,552,045 201,742
Fixed assets 2,288,771 112,977
Other 73,111 --
----------- ----------
Deferred tax liability 24,913,927 314,719
----------- ----------
Net deferred tax liability $18,445,484 $ --
=========== ==========
</TABLE>
The net change in the valuation allowance for the years ended December
31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Beginning of year $ 5,448,986 $5,697,519
Decrease (1,127,546) (248,533)
----------- ----------
End of year $ 4,321,440 $5,448,986
=========== ==========
</TABLE>
Approximately $2,000,000 of the valuation allowance as of December 31,
1995 will be allocated to reduce goodwill and other intangibles if the
deferred tax asset to which it relates is subsequently recognized.
Granum has approximately $21,000,000 of net operating loss carryforwards
("NOLs") that expire from 1999 to 2010. Realization of the benefit of
these losses is limited to offsetting the future taxable income of the
respective corporate subsidiary that generated the loss. Also, the
utilization of such NOLs is subject to certain other limitations under
Federal, state and local income tax laws. Therefore, realization is
dependent on generating sufficient taxable income prior to expiration of
the loss carryforwards. Although realization is not assured, management
believes it is more likely than not that all of the deferred tax asset
net of the remaining valuation allowance will be realized. The amount of
the deferred tax asset considered realizable, however, could be reduced
in the near term if estimates of future taxable income during the
carryforward period are reduced.
-11-
F-13
<PAGE> 19
8. LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Term loan $100,000,000 $22,400,000
Less current portion 7,000,000 10,722,855
------------ -----------
$ 93,000,000 $11,677,145
============ ===========
</TABLE>
In March 1995, Granum Finance entered into a new $115 million bank credit
facility (the "Facility") to refinance its existing bank indebtedness and
to provide funds for the Summit and TK acquisitions (see Note 3) as well
as general working capital. The Facility consists of a $15 million
revolving credit facility (the "Revolving Facility") and a $100 million
term facility (the "Term Facility"). The Revolving Facility and the Term
Facility expire on December 31, 2002. There were no amounts outstanding
under the Revolving Facility as of December 31, 1995. The indebtedness of
Granum under the Facility is collateralized by a first lien on
substantially all of its assets.
The Facility bears interest, at the option of Granum, at rate
alternatives of (i) ranging from LIBOR plus 1.00% to LIBOR plus 2.625%
payable at the end of the LIBOR term, or (ii) ranging from the base rate
(as defined in the Facility) to the base rate plus 1.375% payable on a
quarterly basis. Granum will also pay quarterly in arrears, through
December 31, 2002, commitment fees ranging from 0.375% to 0.50% per annum
on the unused portion of the Revolving Facility. The spread over LIBOR
and the base rate, and on the commitment fees, varies depending on
Granum's financial leverage as defined in the Facility.
The Facility requires that Granum enter into an interest rate protection
agreement based on at least 50% of the principal amount of the Term
Facility. In connection therewith, Granum entered into one three-year
interest rate collar agreement with a range of 5.5% to 7.75%, on a $50
million notional amount, thereby mitigating the variability of interest
to be paid under the Facility. Included in interest expense for the year
ended December 31, 1995 is approximately $58,000 of additional interest
related to the amortization of the premium paid for the interest rate
collar.
Granum is exposed to credit loss in the event of nonperformance by the
counterparty to the interest rate collar; however, Granum does not expect
the counterparty to fail to meet its obligation.
The aggregate minimum principal payments for the Facility in each of the
next five fiscal years and thereafter is as follows:
<TABLE>
<CAPTION>
YEAR TOTAL
<S> <C>
1996 $ 7,000,000
1997 9,500,000
1998 10,500,000
1999 14,000,000
2000 17,500,000
Thereafter 41,500,000
------------
Total $100,000,000
============
</TABLE>
-12-
F-14
<PAGE> 20
In addition to scheduled amortization, within one hundred ten days after
the end of each fiscal year, commencing with the fiscal year ending in
1995, the Facility is required to be permanently reduced by 50% of
Granum's excess cash flow, as defined in the Facility, as of the
immediately preceding fiscal year.
The Facility contains certain financial and operational covenants and
other restrictions including limitations on the use of borrowings,
requirements to maintain certain financial ratios and restrictions on the
payment of dividends.
Under the debt outstanding at December 31, 1994, Granum paid interest
based on LIBOR plus 3% or prime plus 2%.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires companies to report the fair value of certain on- and
off-balance sheet assets and liabilities which are defined as financial
instruments.
Considerable judgment is necessarily required in interpreting data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that Granum could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
Assets including cash and cash equivalents and accounts receivable, and
liabilities such as trade payables, are carried at amounts which
approximate fair value. Granum has also estimated that the fair value of
the long-term debt at December 31, 1995 approximates its carrying value.
The fair value of the interest rate collar at December 31, 1995
approximates a $525,000 liability as compared to the carrying amount of a
$197,000 asset. At March 31, 1996, the fair value of the interest rate
collar approximates a $185,000 liability.
Granum estimated the fair value of the long-term debt based on an
estimate of current rates that would be offered to Granum for debt with
the same remaining maturity. The fair value of the interest rate collar
is estimated as the amount to be received or paid to terminate the
contract.
10. COMMITMENTS AND CONTINGENCIES
Granum is obligated under various rental agreements and service
contracts. The aggregate minimum commitments under these agreements are
described below.
-13-
F-15
<PAGE> 21
REAL ESTATE RENTAL AGREEMENTS - Granum rents office space in Boston,
Baltimore, Dallas, Atlanta and Orlando. Future minimum rental payments
under these agreements are as follows:
<TABLE>
<CAPTION>
YEARS AMOUNT
<S> <C>
1996 $1,078,520
1997 1,057,389
1998 1,049,324
1999 750,806
2000 491,562
Thereafter 1,567,713
----------
Total $5,995,314
==========
</TABLE>
EQUIPMENT RENTAL AGREEMENTS AND SERVICE CONTRACTS - Granum is liable for
payments under various equipment rental agreements and service contracts.
Future minimum payments under these agreements are as follows:
<TABLE>
<CAPTION>
YEARS AMOUNT
<S> <C>
1996 $1,644,754
1997 830,709
1998 408,584
1999 120,269
2000 89,116
----------
Total $3,093,432
==========
</TABLE>
Certain of the leases described above have escalation clauses and
purchase options.
11. STOCKHOLDER'S EQUITY
Each of the operating companies is wholly owned by the Partnership. The
following reflects the changes in stockholder's equity during the three
years ended December 31, 1995:
<TABLE>
<CAPTION>
TOTAL
SHARES COMMON ADDITIONAL ACCUMULATED STOCKHOLDER'S
OUTSTANDING STOCK PAID-IN CAPITAL DEFICIT EQUITY
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 19,700 $197 $ 20,599,804 $ (8,023,966) $12,576,035
Capital contribution 12,266,660 12,266,660
Net loss (4,983,764) (4,983,764)
------ ---- ------------ ------------ -----------
Balance, December 31, 1993 19,700 197 32,866,464 (13,007,730) 19,858,931
Net income 392,185 392,185
------ ---- ------------ ------------ -----------
Balance, December 31, 1994 19,700 197 32,866,464 (12,615,545) 20,251,116
Capital contribution 300 3 67,583,710 67,583,713
Net loss (6,784,580) (6,784,580)
------ ---- ------------ ------------ -----------
Balance, December 31, 1995 20,000 $200 $100,450,174 $(19,400,125) $81,050,249
====== ==== ============ ============ ===========
</TABLE>
-14-
F-16
<PAGE> 22
The following reflects the common shares authorized and outstanding for
each of the direct operating subsidiaries as of December 31, 1995, as
well as the respective par values:
<TABLE>
<CAPTION>
SHARES SHARES PAR
AUTHORIZED OUTSTANDING VALUE
<S> <C> <C> <C>
GCI Dallas Holdings, Inc. 50,000 9,800 $0.01
GCI Texas Holdings, Inc. 1,000 100 $0.01
GCI Boston Holdings, Inc. 50,000 100 $0.01
GCI Atlanta Holdings, Inc. 1,000 100 $0.01
GCI Baltimore Holdings, Inc. 1,000 100 $0.01
GCI Orlando Holdings, Inc. 50,000 9,800 $0.01
------
20,000
======
</TABLE>
12. RELATED PARTY TRANSACTIONS
In 1995 Granum paid fees of $4,050,000 to an affiliate for certain
management activities. Granum also paid management fees of $2,950,000,
$2,000,000 and $831,393 in 1995, 1994 and 1993, respectively, to an
affiliate for corporate overhead. In addition, in connection with the
acquisitions of Summit and TK in 1995, Granum paid to the Partnership
fees of $2,150,000 which have been capitalized as part of the cost of the
acquisitions.
13. EXTRAORDINARY ITEMS
During March 1995, in connection with the Summit and TK acquisitions,
Granum negotiated a new loan facility (see Note 8) and repaid its then
outstanding borrowings of approximately $22,400,000, resulting in an
extraordinary loss on the extinguishment of debt of $370,880, net of tax
benefit.
During April 1993, Granum entered into a credit agreement in the
aggregate amount of $14,500,000, which provided $10,000,000 for the
purchase of the assets of WSSH (FM). $4,500,000 of the loan was used to
repay, at a discount, notes outstanding in connection with the asset
purchase of WBOS (FM) in March 1992, which resulted in an extraordinary
gain of $500,000 and an additional write-off of deferred debt acquisition
costs amounting to $247,711. The net effect of this transaction was the
recognition of an extraordinary gain of $252,289.
14. EMPLOYEE BENEFIT PLAN
Granum sponsors defined contribution 401(k) savings plans for its
full-time employees. Granum does not match employees' contributions and
does not provide any other retirement benefits to its employees.
******
-15-
F-17
<PAGE> 23
OPERATING SUBSIDIARIES OF
GRANUM HOLDINGS, L.P.
COMBINED BALANCE SHEETS AS OF
MARCH 31, 1996 AND THE RELATED
COMBINED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT AND OF
CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995
F-18
<PAGE> 24
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTERIM COMBINED FINANCIAL STATEMENTS:
Combined Balance Sheet, March 31, 1996 1
Combined Statements of Operations and Accumulated Deficit,
Three Months Ended March 31, 1996 and 1995 2
Combined Statements of Cash Flows, Three Months Ended
March 31, 1996 and 1995 3
Notes to Combined Financial Statements, Three Months Ended
March 31, 1996 and 1995 4-6
</TABLE>
F-19
<PAGE> 25
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
COMBINED BALANCE SHEET - UNAUDITED
MARCH 31, 1996
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,075,796
Accounts receivable - net of allowance for doubtful
accounts of $763,283 11,708,987
Tax receivable 494,905
Receivable from affiliate 296,681
Other receivables 222,620
Deferred tax asset 1,520,506
Prepaid and other current assets 1,353,786
------------
Total current assets 19,673,281
PROPERTY, BUILDING AND EQUIPMENT - Net of accumulated
depreciation of $4,900,662 14,577,449
INTANGIBLE ASSETS - Net of accumulated amortization of
$25,738,421 162,990,405
DEFERRED FINANCING COSTS - Net of accumulated
amortization of $588,511 3,680,532
DEFERRED TAX ASSET 3,312,359
OTHER ASSETS 23,347
------------
TOTAL ASSETS $204,257,373
============
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 7,625,000
Interest payable 1,038,458
Accounts payable 454,637
Salaries and commissions payable 782,741
Current tax payable 188,587
Other accrued liabilities 1,370,371
------------
Total current liabilities 11,459,794
------------
LONG-TERM DEBT 90,625,000
DEFERRED TAX LIABILITY 22,145,377
OTHER LONG-TERM LIABILITIES 899,232
STOCKHOLDER'S EQUITY:
Common stock 200
Additional paid-in capital 100,450,175
Accumulated deficit (21,322,405)
------------
Total stockholder's equity 79,127,970
------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $204,257,373
============
</TABLE>
See notes to combined financial statements.
-1-
F-20
<PAGE> 26
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
NET REVENUES $ 12,944,656 $ 5,058,859
OPERATING EXPENSES:
Station operating expenses excluding
depreciation and amortization 9,054,427 3,986,754
Depreciation and amortization 3,293,229 1,146,926
Fees to related parties 1,231,857 5,050,000
Other expenses 11,051 (93,831)
------------ ------------
Operating loss (645,908) (5,030,990)
------------ ------------
NONOPERATING (EXPENSES) INCOME:
Interest expense (2,068,024) (613,627)
Interest income 17,926 57,770
------------ ------------
Nonoperating expenses, net (2,068,098) (555,857)
------------ ------------
LOSS BEFORE INCOME TAX
BENEFIT AND EXTRAORDINARY ITEM (2,714,006) (5,586,847)
INCOME TAX BENEFIT 791,726 --
EXTRAORDINARY ITEMS -- (545,380)
------------ ------------
NET LOSS (1,922,280) (6,132,227)
ACCUMULATED DEFICIT, BEGINNING
OF PERIOD (19,400,125) (12,615,544)
------------ ------------
ACCUMULATED DEFICIT, END OF PERIOD $(21,322,405) $(18,747,771)
============ ============
</TABLE>
See notes to combined financial statements.
-2-
F-21
<PAGE> 27
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
COMBINED STATEMENTS OF CASH FLOWS - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,922,280) $ (6,132,227)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 3,293,229 1,146,926
Deferred income tax benefit (938,878) --
Loss on extinguishment of debt -- 545,380
Amortization of deferred financing costs 137,709 67,196
Charges in assets and liabilities excluding effects
from acquisitions:
Increase in deferred financing costs -- (3,735,694)
Decrease in net accounts receivable and
other receivables 2,762,189 1,512,463
Increase in prepaid and other current assets (352,646) (535,914)
(Decrease) increase in accounts payable (680,004) 132,946
Increase in other liabilities 107,637 204,244
----------- -------------
Net cash provided by (used in)
operating activities 2,406,956 (6,794,680)
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of radio stations - net of cash acquired -- (145,788,461)
Purchase of property and equipment (286,066) (219,283)
----------- -------------
Net cash used in investing activities (286,066) (146,007,744)
----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- 110,000,000
Repayment of long-term debt (1,750,000) (22,400,000)
Capital contributions -- 63,583,713
----------- -------------
Net cash (used in) provided by
financing activities (1,750,000) 151,183,713
----------- -------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 370,890 (1,618,711)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,704,906 8,664,130
----------- -------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,075,796 $ 7,045,419
=========== =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Operating activities:
Interest paid $ 2,124,686 $ 546,431
=========== =============
Income taxes paid $ 374,000 $ 2,163
=========== =============
</TABLE>
See notes to combined financial statements.
-3-
F-22
<PAGE> 28
OPERATING SUBSIDIARIES OF GRANUM HOLDINGS, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Granum Holdings, L.P. (the "Partnership"), a Delaware limited
partnership, was established on June 13, 1991 for the purpose of
acquiring, establishing and operating radio stations, subject to the
jurisdiction of the Federal Communications Commission (the "FCC"). The
Partnership operates its radio stations through various wholly-owned
corporations, collectively referred to as "the operating subsidiaries" or
"Granum."
On March 4, 1996, the Partnership signed an agreement to sell the
outstanding capital stock of its operating subsidiaries to Infinity
Broadcasting Corporation for $410 million, subject to working capital
adjustments and certain conditions and approvals. The accompanying
combined financial statements include the operating subsidiaries to be
sold under this agreement.
The operating subsidiaries of the Partnership included in the
accompanying combined financial statements and the radio stations of each
at March 31, 1996 are as follows:
<TABLE>
<CAPTION>
SUBSIDIARY RADIO STATION(S)
<S> <C>
GCI Dallas Holdings, Inc. and Subsidiaries KOAI (FM)
GCI Texas Holdings, Inc. and Subsidiaries KHVN (AM) and KRBV (FM)
GCI Boston Holdings, Inc. and Subsidiaries WBOS (FM) and WOAZ (FM)
GCI Atlanta Holdings, Inc. and Subsidiaries WAOK (AM) and WVEE (FM)
GCI Baltimore Holdings, Inc. and Subsidiaries WCAO (AM) and WXYV (FM)
GCI Orlando Holdings, Inc. and Subsidiaries WHOO (AM), WHTQ (FM) and WMMO (FM)
</TABLE>
In addition, these combined financial statements include Granum Finance
Partnership ("Granum Finance"), a wholly-owned subsidiary of the
operating subsidiaries of the Partnership.
The impact of material transactions between the entities included in the
combined financial statements has been eliminated.
Effective January 1, 1996 Granum adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," and SFAS No. 123, "Accounting for
Stock-Based Compensation." The impact of the adoption of these standards
on the combined financial statements was not material.
The accompanying unaudited interim combined financial statements have
been prepared by the Partnership in accordance with generally accepted
accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results for the
interim periods. All such adjustments are of a normal, recurring nature.
-4-
F-23
<PAGE> 29
Due to the seasonality of the broadcasting business, operating results
for the three months ended March 31, 1996 and 1995 are not necessarily
indicative of the results that may be expected for a full year.
2. ACQUISITIONS
On June 14, 1994, Granum entered into a stock purchase agreement with
Summit Communications Group, Inc. ("Summit"). The agreement provided for
the purchase of three of Summit's wholly-owned subsidiaries. These
subsidiaries are the parent corporations of radio stations: WVEE (FM) and
WAOK (AM) located in Atlanta, Georgia; WXYV (FM) and WCAO (AM) located in
Baltimore, Maryland; and KRBV (FM), formerly KJMZ (FM), and KHVN (AM)
located in Dallas, Texas.
The purchase price of approximately $133.5 million plus additional
working capital adjustments and expenses were funded by borrowings of
$110.0 million under a $115.0 million credit facility, additional capital
contributed by the partners of the Partnership and cash on hand.
In November 1994, Granum entered into an asset purchase agreement with TK
Communications, Inc. ("TK"). The agreement provided for the purchase of
certain assets of radio stations WHTQ (FM) and WHOO (AM) located in
Orlando, Florida. In connection with this agreement, Granum entered into
a local market agreement ("LMA") with TK for WHTQ (FM) and WHOO (AM). The
LMA is an agreement which provides for radio stations to enter into
cooperative programming arrangements subject to compliance with
requirements of the antitrust laws and the FCC's rules and policies. This
LMA became effective December 1, 1994 and continued until March 31, 1995,
at which time Granum consummated the asset purchase transaction with TK
for approximately $11.5 million. The purchase price for this transaction
was provided in connection with the funding of the aforementioned Summit
acquisition which occurred concurrently with the close of the TK
transaction on March 31, 1995. As a result of the Summit and TK
acquisitions, goodwill of approximately $77.0 million was recorded and is
being amortized over 25 years.
All of the aforementioned acquisitions have been accounted for under the
purchase method of accounting and, accordingly, the purchase price has
been allocated to the assets acquired and the liabilities assumed based
on their estimated fair values at the March 31, 1995 date of acquisition.
The operating results of the acquired radio stations are included in
Granum's combined statements of operations from the date of their
acquisition.
3. INCOME TAXES
At the end of each interim period presented, Granum makes its best
estimate of the effective tax rates expected to be applicable for the
full fiscal year. The rates so determined were used in providing income
taxes on a year-to-date basis.
The effective tax rates reflect the effect of state and local taxes,
amortization of goodwill and the unrecognized benefit of operating losses
of certain operating subsidiaries.
4. STOCKHOLDER'S EQUITY
Each of the operating subsidiaries is either directly or indirectly
wholly owned by the Partnership.
-5-
F-24
<PAGE> 30
The following reflects the common shares authorized and outstanding for
each of the direct operating subsidiaries as of March 31, 1996, as well
as the respective par values:
<TABLE>
<CAPTION>
SHARES SHARES PAR
AUTHORIZED OUTSTANDING VALUE
<S> <C> <C> <C>
GCI Dallas Holdings, Inc. 50,000 9,800 $0.01
GCI Texas Holdings, Inc. 1,000 100 0.01
GCI Boston Holdings, Inc. 50,000 100 0.01
GCI Atlanta Holdings, Inc. 1,000 100 0.01
GCI Baltimore Holdings, Inc. 1,000 100 0.01
GCI Orlando Holdings, Inc. 50,000 9,800 0.01
------
20,000
======
</TABLE>
5. EXTRAORDINARY ITEM
During March 1995, in connection with the Summit and TK acquisitions,
Granum negotiated a new loan facility and repaid its then outstanding
borrowings of approximately $22,400,000, resulting in an extraordinary
loss on the extinguishment of debt of $545,380.
******
-6-
F-25
<PAGE> 31
INFINITY BROADCASTING CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
COMPANY
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS COMBINED
---------- ----------- ---------
<S> <C> <C> <C>
Total revenues 372,429 379,196 (1) 751,625
Less agency commissions 46,723 48,150 (1) 94,873
--------------------------------------
Net revenues 325,706 331,046 656,752
Operating expenses
excluding depreciation and amortization 167,285 252,155 (1) 419,440
--------------------------------------
Operating income
excluding depreciation and amortization 158,421 78,891 237,312
Depreciation and amortization 50,482 38,332 (2) 88,814
Corporate general and administrative expenses 6,135 6,135
--------------------------------------
Operating income(loss) 101,804 40,559 142,363
Interest expense (44,385) (60,965)(3) (105,350)
Interest income 387 387
Other expense (1,715) (1,715)
Income taxes (1,588) 1,940 (4) 352
--------------------------------------
Net earnings (loss) 54,503 (18,466) 36,037
======================================
Net earnings per share $0.53 $0.34
Weighted average shares 102,903 2,370 (5) 105,273
</TABLE>
(1) To reflect the historical operating results of KLUV-FM, TDI, Alliance
and Granum from January 1, 1995 through year end or the dates of their
respective acquisition if sooner.
(2) The pro forma depreciation and amortization expense is based on a
preliminary allocation of the purchase price of KLUV-FM, Alliance, TDI and
Granum based on the following: (i) FCC license, franchise costs and related
intangibles of approximately $477 million generally over a period of 40 years;
(ii) goodwill, of approximately $534 million over a period of 40 years and (iii)
property and equipment of approximately $24 million over a period of 5 years.
(3) To reflect additional interest expense on bank borrowings, at an interest
rate of approximately 7% to finance the acquisitions of KLUV-FM, Alliance, TDI
and Granum.
(4) To reflect the change in deferred tax liability relating to the difference
in book and tax bases for TDI and Granum on fixed and intangible assets.
(5) To give effect to the issuance of 2.4 million shares in the TDI acqisition.
<PAGE> 32
INFINITY BROADCASTING CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
COMPANY
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS COMBINED
---------- ------------ ---------
<S> <C> <C> <C>
Total revenue 296,872 88,659 (1) 385,531
Less agency commissions 35,708 11,197 (1) 46,905
------------------------------------------
Net revenues 261,164 77,462 338,626
Operating expenses excluding
depreciation and amortization 165,154 62,419 (1) 227,573
------------------------------------------
Operating income excluding
depreciation and amortization 96,010 15,043 111,053
Depreciation and amortization 35,532 9,011 (2) 44,543
Corporate general and
administrative expenses 4,048 4,048
------------------------------------------
Operating income 56,430 6,032 62,462
Interest expense (24,889) (17,155)(3) (42,044)
Interest income 380 380
Income taxes (1,345) 970 (4) (375)
------------------------------------------
Net earnings 30,576 (10,153) 20,423
==========================================
Net earnings per share $0.27 $0.18
Weighted average shares 114,987 114,987
</TABLE>
(1) Reflects the historical operating results for TDI and Granum from
January 1, 1996 through the dates of their respective acquisitions.
(2) The pro forma depreciation and amortization expense is based on a
preliminary allocation of the purchase price of TDI and Granum
based on the following: (i) FCC license, franchise costs and related
intangibles of approximately $229 million over a period of 40
years; (ii) goodwill of approximately $534 million over a period of
40 years and (iii) property and equipment of approximately $20
million over a period of five years.
(3) To reflect additional interest expense on bank borrowings, at an
interest rate of approximately 6.6% to finance the acquisitions of TDI
and Granum.
(4) To reflect the change in deferred tax liability relating to the
difference in book and tax bases for TDI and Granum on fixed and
intagible assets.
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Infinity Broadcasting Corporation on Form S-3 (File No. 33-61081) and Form S-8
(File Nos. 33-45977, 33-55477, 33-55577, 33-56938) of our report dated April 3,
1996, on our audits of the combined financial statements of the operating
subsidiaries of Granum Holdings, L.P. as of December 31, 1995 and 1994, and for
each of the three years in the period ended December 31, 1995, which report is
included in this Form 8-K/A of Infinity Broadcasting Corporation.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
New York, New York
September 5, 1996
