UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
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 0-16841
OSBORN COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1142367
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization Identification No.)
130 Mason Street, Greenwich, Connecticut 06830
(Address of principal executive offices)(Zip Code)
(203) 629-0905
Registrant's telephone number, including area code
____________________________________________________________
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes X No______
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE LAST FIVE YEARS
Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Section
12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan
confirmed by a court. Yes No______
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding in each of
the issuer's classes of common stock, as of the latest
practicable date.
Outstanding
Class at May 6, 1996
Common stock, $.01 par value 5,409,847
Non-voting common stock, $.01 par value -
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
(1) Consolidated Balance Sheets at March 31, 1996
(unaudited) and December 31, 1995
(2) Consolidated Statements of Operations for the three
months ended March 31, 1996 and 1995 (unaudited)
(3) Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1995 (unaudited)
(4) Consolidated Statement of Changes in Stockholders'
Equity for the three months ended March 31, 1996
(unaudited)
(5) Notes to Unaudited Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
1996 1995
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $1,255,071 $12,994,779
Accounts receivable, less allowance for doubtful
accounts of $505,960 in 1996 and $518,157 in 1995 4,451,689 5,759,562
Inventory 1,073,267 889,942
Prepaid expenses and other current assets 1,575,920 1,525,308
Total current assets 8,355,947 21,169,591
Investment in affiliated companies 524,952 524,084
Property, plant and equipment, at cost, less
accumulated depreciation of $16,117,195 in
1996 and $18,624,021 in 1995 13,889,513 15,358,070
Intangible assets, net of accumulated
amortization of $14,313,410 in 1996 and
$15,238,193 in 1995 35,715,934 40,463,595
Other noncurrent assets 457,926 118,753
Total assets $58,944,272 $77,634,093
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $5,346,457 $4,509,292
Accrued wages and sales commissions 195,195 434,309
Accrued interest payable 205,201 459,114
Accrued income taxes 1,614,893 825,712
Current portion of long-term debt 2,700,000 2,718,000
Total current liabilities 10,061,746 8,946,427
Long-term debt 20,050,000 44,482,000
Deferred income taxes 2,275,711 2,275,711
Other noncurrent liabilities 441,307 432,916
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 5,000,000 shares, none issued
and outstanding - -
Common stock, par value $.01 per share;
authorized 7,425,000 shares, issued and
outstanding shares: 5,287,347 and 5,277,347,
respectively, in 1996; 5,286,347 and 5,276,347,
respectively, in 1995 52,774 52,764
Non-voting common stock, par value $.01 per
share; authorized 75,000 shares, none issued
and outstanding - -
Additional paid-in capital 39,701,591 39,694,601
Accumulated deficit (13,638,857) (18,250,326)
Total stockholders' equity 26,115,508 21,497,039
Total liabilities and stockholders' equity $58,944,272 $77,634,093
See accompanying notes.
</TABLE>
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 1996 and 1995
(Unaudited)
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1996 1995
Net revenues $6,814,656 $7,671,595
Operating expenses:
Selling, technical and program 1,934,269 2,884,893
Direct programmed music and entertainment 2,212,649 1,533,184
General and administrative 1,684,282 1,875,640
Depreciation and amortization 1,210,538 1,456,031
Corporate expenses 456,792 425,615
Total operating expenses 7,498,530 8,175,363
Operating loss (683,874) (503,768)
Other income (expense) (92,682) 1,773,632
Interest expense 635,181 1,413,520
Gain on sale of stations 6,874,434 -
Income (loss) before income taxes 5,462,697 (143,656)
Provision for income taxes 851,228 93,205
Net income (loss) $4,611,469 ($236,861)
Primary earnings per common share:
Net income (loss) per common share $0.83 ($0.04)
Fully diluted earnings per common share:
Net income (loss) per common share $0.82 ($0.04)
Weighted average common shares outstanding:
Primary shares 5,531,540 5,265,773
Fully diluted shares 5,597,471 5,265,773
See accompanying notes.
</TABLE>
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1996 and 1995
(Unaudited)
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1996 1995
Cash flows from operating activities:
Net income (loss) $4,611,469 ($236,861)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 1,210,538 1,456,031
Gain on sale of stations (6,874,434) -
Deferred income taxes - 50,000
Non-cash interest expense 57,293 103,983
Distributions from affiliated companies - (1,653,634)
Changes in current assets and current
liabilities:
Decrease in accounts receivable 596,253 646,262
Increase in inventory (183,325) (4,184)
Increase in prepaid expenses and other (50,612) (54,771)
current assets
Increase (decrease) in accounts payable 837,165 (167,227)
and accrued expenses
(Decrease) increase in accrued wages (239,114) 131,973
sales commissions
Decrease in accrued interest payable (253,913) (1,352,083)
Increase in accrued income taxes 789,181 (30,000)
Total adjustments (4,110,968) (873,650)
Net cash provided by (used in) operating 500,501 (1,110,511)
activities
Cash flows from investing activities:
Distributions from affiliated companies - 3,918,186
Payments for business acquisitions (1,269,173) -
Net proceeds from sale of stations 14,068,614 -
Proceeds from note receivable - 1,620,455
Capital expenditures (590,864) (399,696)
Reclassification of other noncurrent assets - 31,749
Expenditures for intangible assets (5,786) (41,486)
Net cash provided by investing 12,202,791 5,129,208
activities
Cash flows from financing activities:
Proceeds from exercise of stock options 7,000 -
Purchase and retirement of treasury stock - (750,203)
Principal payments on long-term debt (24,450,000) -
Net cash used in financing activities (24,443,000) (750,203)
Net (decrease) increase in cash and cash (11,739,708) 3,268,494
equivalents
Cash and cash equivalents at beginning of 12,994,779 6,368,473
period
Cash and cash equivalents at end of period $1,255,071 $9,636,967
Supplemental cash flow information:
Cash paid for interest $831,801 $2,661,620
Cash paid for income taxes $62,047 $73,205
See accompanying notes.
</TABLE>
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the three months ended March 31, 1996
(Unaudited)
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Voting Non-voting Additional
Par Par paid-in Accumulated
Shares value Shares value capital deficit
Balance at December 5,276,347 $52,764 - - $39,694,601 ($18,250,326)
31, 1995
Exercise of stock 1,000 10 - - 6,990 -
options
Net income - - - - - 4,611,469
Balance at March 5,277,347 $52,774 - - $39,701,591 ($13,638,857)
31, 1996
See accompanying notes.
</TABLE>
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
1. Basis of presentation
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) that
are, in the opinion of management, necessary for a fair
presentation of the financial position, results of
operations, and cash flows for the interim periods
presented. Prior year amounts have been reclassified to
conform with the current year's presentation.
2. Acquisitions and dispositions
On March 29, 1996, the Company acquired substantially
all the assets of radio station WHLX-FM, Wheeling, West
Virginia for $0.8 million plus transaction costs. The
Company already owns radio stations WWVA-AM/WOVK-FM in
Wheeling and has agreed to acquire two additional stations
in the market (see Note 3).
On April 1, 1996, the Company acquired substantially
all the assets of radio stations WKII-AM/WEEJ-FM, Port
Charlotte, Florida for $2.85 million plus transaction costs.
In the event that the Company is able to relocate WEEJ-FM's
broadcast antenna to the Company's Pine Island, Florida
tower in order to better serve the Port Charlotte/Ft. Myers
market, additional consideration of $750,000 will be paid.
Pending the closing of the acquisition, the stations were
managed by the Company pursuant to a Local Marketing
Agreement ("LMA") since September 1995. The Company already
owns radio station WOLZ-FM, Ft. Myers and has a 50% non-
voting ownership interest in radio station WDRR-FM, San
Carlos Park/Ft. Myers.
On May 3, 1996, the Company acquired substantially all
the assets of radio stations KNAX-FM/KRBT-FM, Fresno,
California. Consideration for the acquisition consisted of
$6.0 million plus 120,000 shares of the Company's common
stock and transaction costs. In addition, the seller
received an option to purchase shares of the Company's
common stock at $8.00 per share contingent upon future
increases in operating cash flow by KNAX-FM/KRBT-FM.
Pending the closing of the acquisition, the stations were
managed by the Company since January 1996 pursuant to an
LMA.
On January 31, 1996, the Company sold substantially all
the assets of radio station WWRD-FM, Jacksonville,
Florida/Brunswick, Georgia for $2.5 million, resulting in a
pre-tax gain of $0.8 million. The net cash proceeds were
used principally to repay long-term debt and fund
transaction costs.
On February 2, 1996, the Company sold substantially all
the assets of radio stations WNDR-AM/WNTQ-FM, Syracuse, New
York for $12.5 million, resulting in a pre-tax gain of $6.0
million. Pending the closing of the disposition, the
stations were managed by the purchaser pursuant to an LMA.
The net cash proceeds were used principally to repay long-
term debt and fund transaction costs.
On December 22, 1995, the Company entered into an
option agreement with Allbritton Communications Company for
the sale of television station WJSU-TV, Anniston, Alabama,
and an associated 10-year LMA. In consideration for the
option, the Company received a nonrefundable cash payment of
$10.0 million. The net cash proceeds were used principally
to repay long-term debt. In addition, upon the exercise of
the option and the necessary FCC consent, the Company will
receive an additional cash payment of $2.0 million. If the
necessary approvals to relocate the station's broadcast
transmitter to maximize broadcast coverage of the facility
are received, the Company will receive additional cash
payments of up to $7.0 million.
All of the acquisitions have been accounted for using
the purchase method of accounting. Accordingly, the
purchase price of each acquisition has been allocated to the
assets based upon their fair values at the date of
acquisition. The results of operations of the properties
acquired are included in the Company's consolidated results
of operations from the respective dates of acquisition and
until the date of disposition for properties disposed.
Prior to the grant of the waiver of the FCC's cross-
ownership regulations, the Gadsden acquisition was accounted
for using the equity method of accounting. Accordingly,
prior year financial statements have been reclassified to
reflect the consolidation of the Gadsden radio stations.
3. Pending transactions
In September 1995, the Company agreed to sell
substantially all the assets of radio station WFKS-FM,
Daytona Beach/Palatka, Florida to Renda Broadcasting
Corporation, the purchaser of radio station WWRD-FM (see
Note 2), for $4.0 million. The transaction is expected to
close in the second quarter of 1996. Pending the closing of
the transaction, the stations have been managed by the
purchaser pursuant to an LMA.
In February 1996, the Company entered into an agreement
to sell substantially all the assets of radio station WAYV-
FM, Atlantic City, New Jersey to Equity Communications, L.P.
for $3.1 million, subject to FCC approval. Pending the
closing of the transaction, which is expected in the second
quarter of 1996, the purchaser is managing the stations
pursuant to an LMA.
In February 1996, the Company entered into an agreement
to acquire substantially all the assets of radio stations
WKWK-AM/FM, Wheeling, West Virginia from WKWK Radio, Inc.
for $2.7 million, subject to FCC approval. Pending the
closing of the transaction, which is expected in the second
quarter of 1996, the Company is managing the stations
pursuant to an LMA.
In February 1996, the Company entered into an agreement
to sell substantially all the assets of radio station WFXK-
FM, Raleigh/Tarboro, North Carolina to Pinnacle Broadcasting
Corporation for $5.9 million, subject to FCC approval.
Pending the closing of the transaction, which is expected in
the second quarter of 1996, the purchaser is managing the
station pursuant to an LMA.
4. Pro forma financial information (unaudited)
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Three months ended
March 31,
1996 1995
Net revenues $6,638,000 $6,131,000
Net loss (1,338,000) (1,527,000)
Net loss per share ($0.25) ($0.28)
</TABLE>
The unaudited pro forma information for the three months
ended March 31, 1996 and 1995 assumes that the Anniston,
Syracuse and Jacksonville/Brunswick dispositions, as
described in Note 2, had occurred on January 1, 1995. The
gains on the sales of stations in 1996 and the distribution
from Northstar Television Group in 1995 are excluded from
the pro forma results. The pro forma information is not
necessarily indicative either of the results of operations
that would have occurred had these transactions been made at
the beginning of the period, or of future results of
operations.
Net assets of properties to be disposed in Anniston,
Daytona Beach, Raleigh/Tarboro and Atlantic City aggregated
$10.4 million at March 31, 1996, consisting of current
assets of $0.1 million, net property, plant and equipment of
$2.3 million, and net intangible assets of $8.0 million.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The performance of a broadcasting company is
customarily measured by its ability to generate operating
cash flow. Operating cash flow is defined as operating
income before depreciation, amortization and corporate
expenses. Although operating cash flow is not a measure of
performance calculated in accordance with Generally Accepted
Accounting Principles ("GAAP"), the Company believes that
operating cash flow is useful to investors because it is
accepted by the radio broadcasting industry as a generally
recognized measure of performance and is used by securities
analysts who report publicly on the performance of
broadcasting companies. Operating cash flow should not be
considered in isolation or as a substitute for net income,
cash flows from operating activities and consolidated income
or cash flow statement data prepared in accordance with
GAAP, or as a measure of the Company's profitability or
liquidity.
Acquisitions and Dispositions
Given the less restrictive regulatory environment following
the passage of the Telecommunications Act of 1996, the
Company intends to own multiple radio stations in certain of
its markets in order to attain a more dominant position in
the respective market. If the Company determines that
opportunities to acquire additional stations in a particular
market are not satisfactory, it may dispose of its existing
stations in such market. The Company also intends to pursue
the acquisition of multiple stations in other markets.
Consistent with its strategy of owning multiple
stations in a market or leaving markets where opportunities
to acquire additional stations are not satisfactory, the
Company has entered into several transactions for the
acquisition or disposition of broadcast properties in 1995
and early 1996.
On March 29, 1996, the Company acquired substantially
all the assets of radio station WHLX-FM, Wheeling, West
Virginia for $0.8 million plus transaction costs. The
Company already owns radio stations WWVA-AM/WOVK-FM in
Wheeling and has agreed to acquire two additional stations
in the market.
On April 1, 1996, the Company acquired substantially
all the assets of radio stations WKII-AM/WEEJ-FM, Port
Charlotte, Florida for $2.85 million plus transaction costs.
In the event that the Company is able to relocate WEEJ-FM's
broadcast antenna to the Company's Pine Island, Florida
tower in order to better serve the Port Charlotte/Ft. Myers
market, additional consideration of $750,000 will be paid.
Pending the closing of the acquisition, the stations were
managed by the Company pursuant to a Local Marketing
Agreement ("LMA") since September 1995. The Company already
owns radio station WOLZ-FM, Ft. Myers and has a 50% non-
voting ownership interest in radio station WDRR-FM, San
Carlos Park/Ft. Myers.
On May 3, 1996, the Company acquired substantially all
the assets of radio stations KNAX-FM/KRBT-FM, Fresno,
California. Consideration for the acquisition consisted of
$6.0 million plus 120,000 shares of the Company's common
stock and transaction costs. In addition, the seller
received an option to purchase shares of the Company's
common stock at $8.00 per share contingent upon future
increases in operating cash flow by KNAX-FM/KRBT-FM.
Pending the closing of the acquisition, the stations were
managed by the Company since January 1996 pursuant to an
LMA.
On January 31, 1996, the Company sold substantially all
the assets of radio station WWRD-FM, Jacksonville,
Florida/Brunswick, Georgia for $2.5 million, resulting in a
pre-tax gain of $0.8 million. The net cash proceeds were
used principally to repay long-term debt and fund
transaction costs.
On February 2, 1996, the Company sold substantially all
the assets of radio stations WNDR-AM/WNTQ-FM, Syracuse, New
York for $12.5 million, resulting in a pre-tax gain of $6.0
million. Pending the closing of the disposition, the
stations were managed by the purchaser pursuant to an LMA.
The net cash proceeds were used principally to repay long-
term debt and fund transaction costs.
On December 22, 1995, the Company entered into an
option agreement with Allbritton Communications Company for
the sale of television station WJSU-TV, Anniston, Alabama,
and an associated 10-year LMA. In consideration for the
option, the Company received a nonrefundable cash payment of
$10.0 million. The net cash proceeds were used principally
to repay long-term debt. In addition, upon the exercise of
the option and the necessary FCC consent, the Company will
receive an additional cash payment of $2.0 million. If the
necessary approvals to relocate the station's broadcast
transmitter to maximize broadcast coverage of the facility
are received, the Company will receive additional cash
payments of up to $7.0 million.
All of the acquisitions have been accounted for using
the purchase method of accounting. Accordingly, the
purchase price of each acquisition has been allocated to the
assets based upon their fair values at the date of
acquisition. The results of operations of the properties
acquired are included in the Company's consolidated results
of operations from the respective dates of acquisition and
until the date of disposition for properties disposed.
Prior to the grant of the waiver of the FCC's cross-
ownership regulations, the Gadsden acquisition was accounted
for using the equity method of accounting. Accordingly,
prior year financial statements have been reclassified to
reflect the consolidation of the Gadsden radio stations.
Pending transactions
In September 1995, the Company agreed to sell
substantially all the assets of radio station WFKS-FM,
Daytona Beach/Palatka, Florida to Renda Broadcasting
Corporation, the purchaser of radio station WWRD-FM, for
$4.0 million. The transaction is expected to close in the
second quarter of 1996. Pending the closing of the
transaction, the stations have been managed by the purchaser
pursuant to an LMA.
In February 1996, the Company entered into an agreement
to sell substantially all the assets of radio station WAYV-
FM, Atlantic City, New Jersey to Equity Communications, L.P.
for $3.1 million, subject to FCC approval. Pending the
closing of the transaction, which is expected in the second
quarter of 1996, the purchaser is managing the stations
pursuant to an LMA.
In February 1996, the Company entered into an agreement
to acquire substantially all the assets of radio stations
WKWK-AM/FM, Wheeling, West Virginia from WKWK Radio, Inc.
for $2.7 million, subject to FCC approval. Pending the
closing of the transaction, which is expected in the second
quarter of 1996, the Company is managing the stations
pursuant to an LMA.
In February 1996, the Company entered into an agreement
to sell substantially all the assets of radio station WFXK-
FM, Raleigh/Tarboro, North Carolina to Pinnacle Broadcasting
Corporation for $5.9 million, subject to FCC approval.
Pending the closing of the transaction, which is expected in
the second quarter of 1996, the purchaser is managing the
station pursuant to an LMA.
Results of Operations
Three months ended March 31, 1996 and 1995
Net revenues of $6,815,000 in the first quarter of 1996
represent an 11% decrease from 1995 quarterly net revenues
of $7,672,000. The reduction in net revenues is attributable
to the disposition of the Syracuse, Anniston, and
Jacksonville properties and the Daytona Beach and Atlantic
City LMAs. Total operating expenses decreased 8%, from
$8,175,000 in 1995 to $7,499,000 in 1996. The decrease is
primarily attributable to the disposition of the Syracuse,
Anniston, and Jacksonville properties and the Daytona Beach
and Atlantic City LMAs, partially offset by the increased
level of activity at the programmed music division and
certain start-up costs associated with the acquisition of
radio stations in Ft. Myers/Port Charlotte.
Operating cash flow (operating income before
depreciation, amortization and corporate expenses) decreased
29%, to $983,000 in 1996 from $1,378,000 in 1995. The
decrease is primarily attributable to the disposition of the
Syracuse and Anniston properties and the Atlantic City LMA.
EBITDA (earnings before interest, taxes, depreciation and
amortization) of $527,000 in the first quarter of 1996
decreased 45%, from $952,000 in 1995.
Operating loss of $684,000 in 1996 compares to $504,000
in 1995. Other income in 1995 includes a distribution of
$1,572,000 from Northstar Television Group relating to the
sale of its television stations. Interest expense decreased
$778,000, or 55%, to $635,000 in 1996 from $1,414,000 in
1995, primarily attributable to the repayment of debt and
lower cost of capital related to the August 1995 debt
refinancing. Interest expense in 1996 includes $57,000 of
non-cash interest relating to deferred financing cost and
debt discount amortization.
Results include pre-tax gains on the sales of the
assets of the Syracuse and Jacksonville radio stations
totalling $6,874,000. Net income of $4,611,000 in 1996, or
$0.82 per share on a fully diluted basis, compares to net
loss of $237,000, or $0.04 per share, in 1995.
Liquidity and Capital Resources
Cash flows from operating activities
In 1996, net cash provided by operating activities was
$501,000, compared to net cash used by operating activities
of $1,111,000 in 1995 (see Results of Operations). The
difference is primarily attributable to the amount and
timing of interest payments.
Cash flows from investing activities
The Company made payments of $1,269,000 relating to the
acquisition of radio stations and received net proceeds of
$14,069,000 for the sales of radio stations in the first
quarter of 1996 (see Acquisitions and dispositions).
The Company received distribution payments in the first
quarter of 1995 from Fairmont Communications Corporation and
Northstar Television Group totalling $3,918,000, of which
$2,265,000 related to income accrued in 1994 (see Results of
Operations). The note receivable of $1,620,000 relating to
the 1988 disposition of the Toledo, Ohio radio station and
Muzak franchise was received in the first quarter of 1995.
In addition to debt service requirements, the Company's
remaining liquidity demands will be for capital expenditures
and to meet working capital needs. The Company made
capital expenditures of $591,000 and $400,000 in the first
three months of 1996 and 1995, respectively, which are
primarily attributable to equipment installations related to
its programmed music franchises and improvements to
technical facilities of certain of the stations.
For the remainder of 1996, capital expenditures made by
the Company will be a function of the number of
installations by the programmed music franchises, as well as
routine expenditures for the Company's broadcasting
properties. In addition, the Company is in the process of
relocating the newly-acquired FM radio station in Port
Charlotte to its studios in Ft. Myers, and anticipates
relocating the radio station acquisitions in Wheeling to its
owned facility in that market. For those acquisitions, as
well as the Fresno radio stations, the Company expects to
make additional capital expenditures as necessary.
Cash flows from financing activities
The Company made net principal payments of long-term debt
totalling $24,450,000 in the first quarter of 1996,
primarily with the proceeds from the Anniston, Syracuse and
Jacksonville dispositions.
In January 1995, the Company repurchased and
subsequently retired 107,059 unregistered shares of its
common stock which were held by an institution for $642,000.
Also in January 1995, the Company paid $107,000 for the
common shares repurchased in December 1994.
Long-term debt
Long-term debt to total capitalization decreased between
December 31, 1995 and March 31, 1996 from 69% to 47%. The
repayments of senior bank debt associated with the Anniston
and Syracuse transactions permanently reduced the Company's
revolving credit facility from $46.0 million to $26.0
million. In addition, the Company has an acquisition
facility of $10.0 million at March 31, 1996.
Working capital
At March 31, 1996, cash and cash equivalents totalled
$1,255,000, compared to $12,995,000 at December 31, 1995.
Working capital decreased from $12,223,000 to a working
capital deficit of $1,706,000 during the period, primarily
due to the repayment of long-term debt.
The current portion of long-term debt includes $2.7
million of debt, net of unamortized debt discount of
$700,000, associated with the Atlantic City radio station.
The Atlantic City debt is secured by the capital stock and
assets of Atlantic City, and is otherwise non-recourse to
the Company or its other assets. In February 1996, the
Company entered into an agreement to sell substantially all
the assets of the Atlantic City radio station (see Pending
transactions). The Atlantic City debt will be repaid with
the proceeds from the sale.
The Company believes that cash flows from operations and
existing funds will be sufficient to meet the Company's
current cash requirements for the foreseeable future. It is
not possible to ascertain the effect on the Company's
liquidity that would result from potential future
acquisitions, dispositions or debt repayments. The Company
expects to evaluate all viable forms of financing when
examining potential future acquisitions or its capital
structure. This could take the form of, among other things,
additional sales of stock or notes, bank and/or
institutional borrowings, or seller financing, as well as
internally generated funds.
Management Agreements
The Company currently owns 25% of the stock of Fairmont
Communications Corporation ("Fairmont"). Fairmont is
currently managed by the Company pursuant to a management
agreement, for which the Company receives a modest
management fee plus reimbursement of out-of-pocket expenses
and allocated overhead costs. All of Fairmont's stations
were sold by the second quarter of 1994. The Company will
continue to manage Fairmont pursuant to the management
agreement which expires upon the liquidation of Fairmont,
which is expected to occur in 1996.
The Company held a 32% interest in Northstar Television
Group, Inc. ("Northstar") and managed Northstar's four
television stations pursuant to a management agreement in
return for reimbursement of out-of-pocket expenses and
allocated overhead costs. In 1994, Northstar's creditors
and equity investors reached an agreement with respect to
restructuring Northstar's highly leveraged capital structure
pursuant to which, among other things, the Company received
a portion of accrued and unpaid management fees and retains
an economic interest. The Company's management agreement
with Northstar terminated following the restructuring. In
January 1995, three of Northstar's four television stations
were sold and the Company received a distribution of
approximately $1.6 million (see Results of Operations).
Osborn Healthcare
The Company's credit agreements allow for additional
investment in Osborn Healthcare by the Company of up to $2.0
million, of which approximately $500,000 has been invested.
Osborn Healthcare continues to experience marginal operating
cash flow losses. Consistent with the Company's previously
stated intention to evaluate options to increase shareholder
value, management is in the process of assessing the
strategic direction of the healthcare cable operations and
changes, if any, that can be made to enhance its
profitability. This assessment includes a review of
existing technology and products, as well as the need for
additional investment. At March 31, 1996, Osborn
Healthcare's assets consist primarily of net goodwill of
$1.1 million and net property, plant and equipment of $0.2
million.
Seasonality
For broadcasting properties, the first quarter is expected
to reflect the lowest revenues and net income of the year,
while the fourth quarter has historically had the highest
revenues and net income. This is due in part to increases
in retail advertising in the fall in preparation for the
holiday season, with a subsequent reduction of business
after the holidays.
The Company's entertainment properties are expected to
reflect the lowest revenues and net income of the year in
the first quarter due to the planned scheduling of the most
popular performers during the peak spring, summer and fall
seasons. Also, the Company's country music festival,
Jamboree in the Hills, takes place in the third quarter.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities
Holders
Not applicable
Item 5. Other information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Form 8-K filed on February 16, 1996.
<PAGE>
SIGNATURES
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.
OSBORN COMMUNICATIONS CORPORATION
(Registrant)
Date: May 9, 1996 /s/ Frank D. Osborn
(Signature)
Frank D. Osborn
President and Chief Executive
Officer
Date: May 9, 1996 /s/ Thomas S. Douglas
(Signature)
Thomas S. Douglas
Principal Financial Officer
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