<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 11, 1996
- --------------------------------------------------------------------------------
Saga Communications, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-11588 38-3042953
- --------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
73 Kercheval Avenue, Grosse Pointe Farms, Michigan 48236
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(313) 886-7070
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
----------------------------------
(a) Financial Statements of Business Acquired
-----------------------------------------
WNAX (a division of
Roy H. Park Broadcasting of the Midwest, Inc.):
----------------------------------------------
Report of Independent Auditors
Balance Sheet at December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Division Control for the year ended December 31,
1995
Statement of Cash Flows for the year ended December 31, 1995
Notes to Financial Statements
Unaudited Condensed Balance Sheet at March 31, 1996
Unaudited Condensed Statement of Income for the three
month periods ended March 31, 1996 and 1995
Unaudited Condensed Statement of Cash Flows for the three
month periods ended March 31, 1996 and 1995
Notes to Unaudited Financial Statements
Ocean Coast Properties:
-----------------------
Report of Independent Auditors
Balance Sheets at December 31, 1995 and December 25, 1994
Statements of Earnings and Retained Earnings for the years
ended December 31, 1995 and December 25, 1994
Statement of Cash Flows for the years ended December 31, 1995
and December 25, 1994
Notes to Financial Statements
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED).
----------------------------------------------
Unaudited Condensed Balance Sheet at March 31, 1996
Unaudited Condensed Statement of Income for the three
month periods ended March 31, 1996 and 1995
Unaudited Condensed Statement of Cash Flows for the three
month periods ended March 31, 1996 and 1995
Notes to Unaudited Financial Statements
(b) Pro Forma Financial Statements
------------------------------
Pro Forma Combined Condensed Financial Statements (Unaudited):
--------------------------------------------------------------
Unaudited Pro Forma Combined Condensed Balance Sheet at March
31, 1996
Unaudited Pro Forma Combined Condensed Statement of Operations
For the year ended December 31, 1995 and the three month
period ended March 31, 1996
Notes to Pro Forma Combined Condensed Financial Statements
(Unaudited)
(c) Exhibits
--------
See exhibit index annexed hereto.
3
<PAGE> 4
Exhibit Index
-------------
Item 601
Exhibit
Table
Reference Exhibit Title
--------- -------------
(23)(a) Consent of Ernst & Young LLP
(23)(b) Consent of Baker Newman & Noyes LLC
- --------------------------------------------------------------------------------
4
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SAGA COMMUNICATIONS, INC.
Registrant
By:/s/ Norman L. McKee
-----------------------------------
Norman L. McKee
Senior Vice President, Chief Financial
Officer and Treasurer
Dated: August 13, 1996
5
<PAGE> 6
Financial Statements
WNAX, A Division of Roy H.
Park Brodcasting of the Midwest,
Inc.
Period beginning January 1, 1995 and
ending May 10, 1995
and
Period beginning May 11, 1995 and
ending December 31, 1995
with Report of Independent Auditors
[LOGO] ERNST & YOUNG LLP
<PAGE> 7
Report of Independent Auditors
The Board of Directors and Stockholders
Saga Communications, Inc.
We have audited the accompanying balance sheet of WNAX (a division of Roy H.
Park Broadcasting of the Midwest, Inc.) as of December 31, 1995, and the related
statements of operations, division control, and cash flows for the period
beginning May 11, 1995 and ending December 31, 1995 and for the period beginning
January 1, 1995 and ending May 10, 1995 of WNAX (a division of Roy H. Park
Broadcasting of the Midwest, Inc. (predecessor company)). These financial
statements are the responsibility of WNAX's management. Our responsibility is to
express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of WNAX (a division of Roy H.
Park Broadcasting of the Midwest, Inc.) at December 31, 1995, and the results
of its operations and its cash flows for the period beginning May 11, 1995 and
ending December 31, 1995 in conformity with generally accepted accounting
principles and the results of operations and cash flows of WNAX (a division of
Roy H. Park Broadcasting of the Midwest, Inc. (predecessor company)) for the
period beginning January 1, 1995 and ending May 10, 1995 in conformity with
generally accepted accounting principles.
Detroit, Michigan
June 7, 1996
/s/ Ernst & Young LLP
<PAGE> 8
<TABLE>
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Balance Sheet
December 31, 1995
<S> <C>
ASSETS
Current assets:
Cash $ 26,873
Accounts receivable, less allowance for doubtful
accounts of $1,077 290,119
Prepaid expenses and other assets 28,584
Barter transactions 21,390
Income tax receivable 30,829
-----------
Total current assets 397,795
Property and equipment:
Land 130,000
Buildings and land improvements 542,362
Broadcast equipment 425,339
Towers and antennae 326,100
Transmitters 61,200
Furniture and fixtures 197,648
Vehicles 69,100
Construction in progress 1,962
-----------
1,753,711
Less accumulated depreciation (103,484)
-----------
Net property and equipment 1,650,227
Intangible assets:
Identifiable, principally broadcast licenses, net of
accumulated amortization of $125,470 6,251,678
Excess of cost over fair value of assets acquired,
net of accumulated amortization of $43,790 2,677,924
-----------
Net intangible assets 8,929,602
-----------
Total assets $10,977,624
===========
</TABLE>
2
<PAGE> 9
<TABLE>
<S> <C>
LIABILITIES AND DIVISION CONTROL
Current liabilities:
Accounts payable $ 8,798
Accrued expenses:
Interest 387,632
Payroll and payroll related 20,345
Property taxes 21,600
Other 2,245
Intercompany payable, Park Broadcasting, Inc. 85,417
Barter transactions 319,275
-----------
Total current liabilities 845,312
Noncurrent liabilities:
Debt allocated from Park Acquisition Company 8,527,629
Deferred income taxes 2,438,964
-----------
Total noncurrent liabilities 10,966,593
Division control (834,281)
-----------
Total liabilities and division control $10,977,624
===========
</TABLE>
See accompanying notes.
3
<PAGE> 10
<TABLE>
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Statements of Operations
<CAPTION>
TWELVE MONTHS
ENDED
DECEMBER 31, 1995
JANUARY 1, 1995- MAY 11, 1995 - (MEMORANDUM
MAY 10, 1995 DECEMBER 31, 1995 ONLY)
-----------------------------------------------------------------
(PREDECESSOR)
<S> <C> <C> <C>
Net operating revenue $1,070,280 $1,629,575 $2,699,855
Operating expenses:
Programming and technical 281,228 559,407 840,635
Selling 116,836 232,338 349,174
General and administrative 200,370 392,288 592,658
Depreciation 49,415 103,484 152,899
Amortization 3,886 169,258 173,144
-----------------------------------------------------------------
Total operating expenses 651,735 1,456,775 2,108,510
Operating profit 418,545 172,800 591,345
Other income and expenses:
Interest expense - (807,866) (807,866)
Other income 749 3,678 4,427
Loss on sale of assets - (1,620) (1,620)
-----------------------------------------------------------------
Loss before income tax 419,294 (633,008) (213,714)
Income tax provision (benefit) 146,126 (207,524) (61,398)
-----------------------------------------------------------------
Net loss $ 273,168 $ (425,484) $ (152,316)
=================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 11
<TABLE>
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Statements of Division Control
<S> <C>
Balance, December 31, 1994 $ 2,851,242
Net income 273,168
-----------
Balance, May 10, 1995 3,124,410
Purchase of predecessor company (3,124,410)
Net loss (425,484)
Dividend to Park Broadcasting, Inc. (Note 1) (408,797)
-----------
Balance, December 31, 1995 $ (834,281)
===========
</TABLE>
See accompanying notes.
5
<PAGE> 12
<TABLE>
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Statements of Cash Flows
<CAPTION>
TWELVE MONTHS
ENDED
DECEMBER 31, 1995
JANUARY 1, 1995- MAY 11, 1995 - (MEMORANDUM
MAY 10, 1995 DECEMBER 31, 1995 ONLY)
----------------------------------------------------------------
PREDECESSOR
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 273,168 $(425,484) $(152,316)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 53,301 272,742 326,043
Barter revenues, net of barter expenses (110,902) (110,902)
Loss on sale of assets (1,620) (1,620)
Increase (decrease) in deferred taxes 3,029 (2,719) 310
Changes in assets and liabilities:
(Increase) decrease in receivables and
prepaids (88,373) 129,991 41,618
Increase (decrease) in accounts
payable and accrued expenses (28,382) 241,409 213,027
--------------------------------------------------------------
Total adjustments (60,425) 528,901 468,476
--------------------------------------------------------------
Net cash provided by operating activities 212,743 103,417 316,160
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment, net (85,504) (25,367) (110,871)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from parent company transfers (176,703) (78,264) (254,967)
--------------------------------------------------------------
Net decrease in cash (49,464) (214) (49,678)
Cash, beginning of period 76,551 27,087 76,551
--------------------------------------------------------------
Cash, end of period $ 27,087 $ 26,873 $ 26,873
==============================================================
</TABLE>
See accompanying notes.
6
<PAGE> 13
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Notes to Financial Statements
December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
WNAX is an AM and FM radio station which broadcasts from Yankton, South Dakota.
The station serves the South Dakota, Nebraska, Iowa, Minnesota, and North Dakota
markets.
OWNERSHIP AND BASIS OF PRESENTATION
WNAX is a division of Roy H. Park Broadcasting of the Midwest, Inc. which
is a subsidiary of Park Broadcasting, Inc. (Park) and is not a separate legal
entity. The intercompany account contains all activity with Park, and since May
11, 1995, bears interest at approximately 5-6%. Park Broadcasting, Inc. is a
subsidiary of Park Communications, Inc.
On May 11, 1995, Park Communications, Inc., formerly a public company, was
acquired by Park Acquisition Company through a 100% stock purchase, and became a
private company. Park Broadcasting, Inc. maintained control of WNAX after the
acquisition.
The acquisition by Park Acquisition Company resulted in a change in control of
WNAX and Park Acquisition has elected to allocate the purchase price to the
operations of the entities acquired, including WNAX. The accompanying financial
statements include the operations of WNAX from the date of purchase (May 11,
1995) through December 31, 1995, as well as the predecessor's operations from
January 1, 1995 through May 10, 1995. The combined operations and cash flows for
the twelve month period ended December 31, 1995, are shown in the financial
statements for presentation purposes only and are not intended to represent the
results of operations or cash flows in accordance with generally accepted
accounting principles.
7
<PAGE> 14
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The purchase accounting adjustment allocated to WNAX based on the estimated fair
value of assets and liabilities was as follows:
Property and equipment $ 459,389
Intangible assets 8,811,650
Intercompany account (1,611,561)
Allocated debt (8,527,629)
Deferred taxes (2,256,259)
Retained earnings 3,124,410
The debt allocation was based on the net assets of WNAX with interest at 13.5%,
10.5% payable semiannually, with the remainder due when the debt was retired.
The original term of the debt was 20 years with no principal due until the third
year. The debt was secured by the net assets of WNAX and was eliminated in 1996
increasing the intercompany account payable.
In 1995, WNAX paid management fees of $132,000 to Park.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is provided using the
straight-line method over three to forty years.
INTANGIBLE ASSETS
Intangibles are being amortized over twenty-three to forty years on a
straight-line basis.
8
<PAGE> 15
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BARTER TRANSACTIONS
WNAX trades air time for goods and services used principally for promotional,
sales and other business activities. An asset and a liability is recorded at the
fair market value of goods or services received. Barter revenue is recorded when
commercials are broadcast, and barter expense is recorded when goods or services
are received or used. In 1995, Park transferred a barter liability to WNAX for
which no goods or services were received by WNAX. The barter transfer has been
recorded as a dividend to the parent company in the amount of $408,797. Barter
revenue and expense for the year ended December 31, 1995 was as follows:
Barter revenue $187,751
Barter expense 66,015
REVENUE RECOGNITION POLICY
Revenue is recognized as commercials are broadcast.
INCOME TAXES
WNAX is included in the consolidated tax returns of Park. Tax expense has been
allocated to WNAX based on their own results of operations. These financial
statements reflect a provision for income taxes on a stand-alone basis at
statutory rates. The effective rate differs from the statutory rate primarily
due to non-deductible amortization. The related current income tax liability is
settled through the intercompany account and does not represent a cash
transaction. The major component of the deferred tax liability is the financial
reporting and tax basis differences for property and equipment and identifiable
intangibles.
2. CONCENTRATION OF CREDIT RISK
WNAX sells advertising to local and national companies throughout the United
States. WNAX performs ongoing credit evaluations of its customers and generally
does not require collateral. WNAX maintains an allowance for doubtful accounts
at a level which management believes is sufficient to cover potential credit
losses.
9
<PAGE> 16
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Notes to Financial Statements
3. COMMITMENTS
WNAX leases certain land, buildings, and equipment under noncancellable
operating leases. Rent expense for the year ended December 31, 1995 was $7,770.
Minimum annual rental commitments under noncancellable operating leases consist
of the following:
1996 $ 7,380
1997 1,200
1998 1,200
1999 1,200
2000 1,200
Thereafter 105,000
--------
$117,180
========
4. SUBSEQUENT EVENTS (UNAUDITED)
On June 11, 1996, the WNAX AM and FM broadcast licenses and property and
equipment were sold for $7,000,000 cash to Saga Communications, Inc. The
carrying value of assets sold amounted to $10,500,000 resulting in a $2,300,000
loss to Park net of Federal income tax benefit of $1,200,000.
10
<PAGE> 17
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
<TABLE>
Condensed Balance Sheet
March 31, 1996
(dollars in thousands)
Unaudited
ASSETS
<S> <C>
Current assets:
Cash and temporary investments $ 26
Accounts receivable, net 480
Prepaid expenses 24
Other current assets 91
-------
Total current assets 621
Property and equipment 1,846
Less accumulated depreciation (153)
-------
Net property and equipment 1,693
Intangible assets:
Excess of cost over fair value of
assets acquired, net 2,661
Identifiable, principally
broadcast license, net 6,200
-------
Net intangible assets: 8,861
-------
Total assets $11,175
=======
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 18
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
<TABLE>
Condensed Balance Sheet
March 31, 1996
(dollars in thousands)
Unaudited
LIABILITIES AND DIVISION CONTROL
<S> <C>
Current liabilities
Accounts payable $ 38
Accrued expenses:
Interest 675
Other 62
Barter transactions 263
-------
Total current liabilities 1,038
Non-current liabilities
Deferred income taxes 2,439
Debt allocated from Park Acquisition Company 8,527
Division control (829)
-------
Total liabilities and division control $11,175
=======
</TABLE>
See notes to unaudited condensed financial statements.
2
<PAGE> 19
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
<TABLE>
Condensed Statements of Income
(dollars in thousands)
Unaudited
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------
1996 1995
-----------
<S> <C> <C>
Net operating revenue $911 $823
Operating expenses:
Programming and technical 229 189
Selling 106 91
Station general and administrative 154 151
Depreciation and amortization 118 37
-----------
607 468
-----------
Operating profit 304 355
Other expenses:
Interest expense 288 -
-----------
Income before income tax 16 355
Income tax provision 11 122
-----------
Net income $ 5 $233
===========
</TABLE>
See notes to unaudited condensed financial statements.
3
<PAGE> 20
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
<TABLE>
Condensed Statements of Cash Flows
(dollars in thousands)
Unaudited
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 5 $ 233
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 118 37
Barter revenue, net of barter expense (70) (5)
Increase in deferred taxes 12 (211)
Change in assets and liabilities:
Increase in receivables and prepaids (186) (144)
Increase in accounts payable and accrued
expenses 334 370
---------------
Total adjustments 208 47
---------------
Net cash provided by operating activities $ 213 $ 280
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (92) (78)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments to parent company (122) (251)
---------------
Net decrease in cash and temporary
investments (1) (49)
Cash and temporary investments,
beginning of period 27 77
---------------
Cash and temporary investments, end
of period $ 26 $ 28
===============
</TABLE>
See notes to unaudited condensed financial statements.
4
<PAGE> 21
WNAX (a division of Roy H. Park Broadcasting of the Midwest, Inc.)
Notes to Condensed Financial Statements
Unaudited
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for annual financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the audited financial
statements and footnotes thereto of WNAX (a division of Roy H. Park Broadcasting
of the Midwest, Inc. contained elsewhere herein.
2 SUBSEQUENT EVENT
On June 11, 1996, substantially all of the assets of WNAX AM/FM were acquired by
Saga Communications, Inc. for approximately $7,000,000.
5
<PAGE> 22
[LOGO]
BAKER NEWMAN & NOYES
LIMITED LIABILITY COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Ocean Coast Properties
We have audited the accompanying balance sheets of Ocean Coast Properties as of
December 31, 1995 and December 25, 1994, and the related statements of earnings
and retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly in
all material respects, the financial position of Ocean Coast Properties at
December 31, 1995 and December 25, 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Baker Newman & Noyes
February 1, 1996 Limited Liability Company
1
ONE HUNDRED MIDDLE STREET, P.O. BOX 507, PORTLAND, MAINE 04112
* 207-774-5871 * 207-774-1793
<PAGE> 23
<TABLE>
OCEAN COAST PROPERTIES
BALANCE SHEETS
December 31, 1995 and December 25, 1994
ASSETS
------
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash $ 33,295 $ 72,408
Accounts receivable, less allowance for doubtful accounts of
$42,007 in 1995 and $35,279 in 1994 (note 5) 485,301 450,323
Prepaid expenses 13,099 13,725
---------- ----------
Total current assets 531,695 536,456
Property and equipment:
Building 410,370 410,370
Transmitting equipment 283,096 256,803
Studio and technical equipment 127,588 125,165
Other equipment 199,365 197,219
Leasehold improvements 4,128 4,128
Vehicles 63,990 50,748
---------- ----------
1,088,537 1,044,433
Less accumulated depreciation and amortization 690,357 681,913
---------- ----------
Net property and equipment 398,180 362,520
Intangible assets 108,665 108,665
---------- ----------
$1,038,540 $1,007,641
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE> 24
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $ 59,304 $ 31,482
Accrued payroll 34,706 21,375
Other accrued liabilities 13,633 19,023
---------- ----------
Total current liabilities 107,643 71,880
Commitments (note 3)
Stockholders' equity:
Common stock, $100 par value. Authorized 2,000 shares;
issued and outstanding 1,600 shares 160,000 160,000
Paid-in capital 50,000 50,000
Retained earnings 720,897 725,761
---------- ----------
Total stockholders' equity 930,897 935,761
---------- ----------
$1,038,540 $1,007,641
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE> 25
<TABLE>
OCEAN COAST PROPERTIES
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Years Ended December 31, 1995 and December 25, 1994
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Operating revenue (note 5):
Broadcasting, net of commissions (note 4) $ 2,985,081 $ 2,911,345
Other 100,136 105,940
----------- -----------
3,085,217 3,017,285
Operating expenses:
Technical 15,585 14,801
Programming 476,394 440,048
Selling 852,450 830,844
General and administrative 730,527 711,812
----------- -----------
2,074,956 1,997,505
----------- -----------
Operating income 1,010,261 1,019,780
Other income (expense):
Gain on sale of vehicle 7,650 -
Interest income 3,038 5,958
Interest expense (113) -
----------- -----------
10,575 5,958
----------- -----------
Net earnings 1,020,836 1,025,738
Retained earnings, beginning of year 725,761 717,023
Dividends paid (1,025,700) (1,017,000)
----------- -----------
Retained earnings, end of year $ 720,897 $ 725,761
=========== ===========
Earnings per common share $ 638.02 $ 641.09
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 26
<TABLE>
OCEAN COAST PROPERTIES
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 and December 25, 1994
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,020,836 $ 1,025,738
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation 37,454 41,101
Gain on sale of vehicle (7,650) --
Provision for doubtful accounts 19,035 18,254
Changes in operating assets and liabilities:
Increase in accounts receivable (54,013) (75,318)
Decrease in prepaid expenses 626 146
Increase in accounts payable and accrued expenses 35,763 89
----------- -----------
Net cash provided by operating activities 1,052,051 1,010,010
Cash flows from investing activities:
Proceeds from sale of vehicle 7,650 --
Purchase of property and equipment (73,114) (24,862)
----------- -----------
Net cash used in investing activities (65,464) (24,862)
Cash flows from financing activities:
Dividends paid (1,025,700) (1,017,000)
----------- -----------
Net cash used by financing activities (1,025,700) (1,017,000)
----------- -----------
Net decrease in cash (39,113) (31,852)
Cash at beginning of year 72,408 104,260
----------- -----------
Cash at end of year $ 33,295 $ 72,408
=========== ===========
</TABLE>
Supplemental Disclosure of Cash Flows
- -------------------------------------
Cash paid for interest during the years ended December 31, 1995 and December 25,
1994 was $113 and $-0-, respectively.
See accompanying notes.
5
<PAGE> 27
OCEAN COAST PROPERTIES
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and December 25, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Operations
----------
The Company operates an AM and FM radio station in Portland, Maine. The
Company operates on a 52/53 week year, ending on the last Sunday in
December. 1995 had 53 weeks. Substantially all revenue is generated through
sales of advertising time to customers in Southern Maine.
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.
Advertising Costs
-----------------
Advertising costs are expensed as incurred.
Property and Equipment
----------------------
Property and equipment is stated at cost. Depreciation is provided over the
estimated lives of the assets using the straight-line method. Repair and
maintenance costs are expensed as incurred.
Intangible Assets
-----------------
Intangible assets represent the excess of cost over the underlying value of
the net operating assets of the radio station acquired by the Company prior
to October 17, 1970, the effective date of Accounting Principles Board
Opinion No. 17. These intangible assets are not being amortized since, in
the opinion of management, there has been no reduction in their value.
Income Taxes
------------
The Company has elected S-corporation status under the provisions of the
Internal Revenue Code. As an S-corporation, the income or loss is included
in the tax returns of the stockholders and, accordingly, the Company has
not provided for federal or state income taxes.
Earnings Per Common Share
-------------------------
Earnings per common share is computed based on the weighted average number
of common shares outstanding during the year.
6
<PAGE> 28
OCEAN COAST PROPERTIES
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and December 25, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
Statement of Cash Flow
----------------------
For purposes of the statement of cash flows, cash includes cash in bank and
money market accounts.
Fair Values of Financial Instruments
------------------------------------
In 1995, the Company adopted Statement of Financial Accounting Standards
No. 107 Disclosures About Fair Values of Financial Instruments which
requires disclosures about the fair values of financial instruments whether
or not these items are recognized on the balance sheet. The fair value is
defined as the amount at which an instrument could be exchanged in a
transaction between willing parties; financial instruments, in general, are
items which can be converted into, or settled with, cash.
Due to the short-term nature of the Company's financial instruments, the
carrying value of cash, accounts receivable, accounts payable, accrued
payroll, and other accrued liabilities approximates their fair value.
2. NOTES PAYABLE
-------------
The Company maintains an unsecured line of credit agreement. The Company
may borrow up to $400,000. The note, which bears interest at prime, is due
on demand and expires April 30, 1996. The Company had no outstanding
balance on December 31, 1995 or December 25, 1994.
3. COMMITMENTS
-----------
The Company rents space for transmitting facilities under a five year lease
which expires in December 1997. The lease calls for future minimum rentals
of $22,800 yearly for 1994 through 1997. The lease contains four additional
renewal options of five years each.
Rental expense was approximately $22,800 for 1995 and 1994.
4. NONMONETARY TRANSACTIONS
------------------------
The Company trades unsold advertising time in exchange for goods and
services. For the most part, the amount of revenue recorded is based upon
the fair market value of the goods or services received. Revenue is
recognized when the advertising is aired and expenses are recorded when the
goods or services are received. Differences are recorded as receivables or
payables. During the years ended December 31, 1995 and December 25, 1994,
earned revenue through trade sales was $77,798 and $83,208, respectively.
7
<PAGE> 29
OCEAN COAST PROPERTIES
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and December 25, 1994
5. CONCENTRATIONS OF CREDIT RISK
-----------------------------
Concentrations of credit risk for the Company pertains mainly to operating
revenue and accounts receivable. At December 31, 1995 and December 25,
1994, the following industries comprise the major concentrations of
revenue.
% of
Industry Operating Revenue
-------- -----------------
1995 1994
---- ----
Auto dealers and rentals 16% 21%
Department stores 13% 10%
At December 31, 1995 and December 25, 1994, the following industries
comprise the major concentration of accounts receivable:
% of
Industry Accounts Receivable
-------- -------------------
1995 1994
---- ----
Auto dealers and rentals 8.6% 12.6%
Department stores 19.3% 10.9%
8
<PAGE> 30
Ocean Coast Properties
<TABLE>
Condensed Balance Sheet
March 31, 1996
(dollars in thousands)
Unaudited
ASSETS
<S> <C>
Current assets:
Cash and temporary investments $ 17
Accounts receivable, net 370
Prepaid expenses 22
------
Total current assets 409
Property and equipment 1,120
Less accumulated depreciation (701)
------
Net property and equipment 419
Intangible assets 109
------
Total assets $ 937
======
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 31
Ocean Coast Properties
<TABLE>
Condensed Balance Sheet
March 31, 1996
(dollars in thousands)
Unaudited
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities
Accounts payable $ 22
Accrued payroll 22
Other accrued expenses 47
Notes payable 40
----
Total current liabilities 131
Stockholders' equity:
Common stock 160
Paid-in capital 50
Retained earnings 596
----
Total stockholders' equity 806
----
Total liabilities and stockholders' equity $937
====
</TABLE>
See notes to unaudited condensed financial statements.
2
<PAGE> 32
Ocean Coast Properties
<TABLE>
Condensed Statements of Income
(dollars in thousands)
Unaudited
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
------------
1996 1995
------------
<S> <C> <C>
Net operating revenue $535 $494
Operating expenses:
Programming and technical 120 117
Selling 113 106
Station general and administrative 135 133
Corporate general and administrative 36 36
Depreciation and amortization 10 10
-----------
414 402
-----------
Operating profit 121 92
Other expenses:
Interest expense - -
-----------
Net income $121 $ 92
===========
</TABLE>
See notes to unaudited condensed financial statements.
3
<PAGE> 33
Ocean Coast Properties
<TABLE>
Condensed Statements of Cash Flows
(dollars in thousands)
Unaudited
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 121 $ 92
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 10 10
Change in assets and liabilities:
Decrease in receivables and prepaids 107 53
Increase (decrease) in accounts payable
and accrued expenses (17) 19
-------------
Total adjustments 100 82
-------------
Net cash provided by operating activities $ 221 $ 174
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (31) (7)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank borrowings 40 25
Dividends paid (246) (251)
-------------
Net cash used in financing activities (206) (226)
Net decrease in cash and temporary
investments (16) (59)
Cash and temporary investments,
beginning of period 33 72
-------------
Cash and temporary investments, end
of period $ 17 $ 13
=============
</TABLE>
See notes to unaudited condensed financial statements.
4
<PAGE> 34
Ocean Coast Properties
Notes to Condensed Financial Statements
Unaudited
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for annual financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the audited financial
statements and footnotes thereto of Ocean Coast Properties contained elsewhere
herein.
2. INCOME TAXES
The Company has elected S-corporation status under the provisions of the
Internal Revenue Code. As an S-corporation, the income or loss is included in
the tax returns of the stockholders and, accordingly, the Company has not
provided for federal or state income taxes.
3. SUBSEQUENT EVENT
On June 18, 1996, substantially all of the assets of Ocean Coast Properties were
acquired by Saga Communications, Inc. for approximately $10,000,000.
5
<PAGE> 35
Saga Communications, Inc., WNAX and WPOR
<TABLE>
Pro Forma Combined Condensed Balance Sheet
March 31, 1996
(dollars in thousands)
Unaudited
<CAPTION>
SAGA
COMMUNICATIONS, WNAX WPOR PRO FORMA PRO FORMA
INC. ADJUSTMENTS COMBINED
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $ 2,468 $ 26 $ 17 $ (43) (1) $ 2,468
Accounts receivable, net 7,550 480 370 (850) (1) 7,550
Prepaid expenses 833 24 22 (46) (1) 833
Other current assets 1,008 91 - (67) (1) 1,032
Lease receivable 650 - - 650
----------------------------------------------------------------------
Total current assets 12,509 621 409 (1,006) 12,533
Property and equipment 57,000 1,846 1,120 1,537 (2) 61,503
Less accumulated depreciation (30,914) (153) (701) 854 (2) (30,914)
----------------------------------------------------------------------
Net property and equipment 26,086 1,693 419 2,391 30,589
Other assets:
Excess of cost over fair value of
assets acquired, net 20,540 2,661 109 (2,770) (1) 20,540
Broadcast licenses, net 8,750 6,200 - 6,313 (2) 21,263
Other intangibles, net 4,852 - - 283 (2) 5,135
----------------------------------------------------------------------
Total other assets 34,142 8,861 109 3,826 46,938
----------------------------------------------------------------------
$ 72,737 $11,175 $ 937 $ 5,211 $ 90,060
======================================================================
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
<PAGE> 36
Saga Communications, Inc., WNAX and WPOR
<TABLE>
Pro Forma Combined Condensed Balance Sheet
March 31, 1996
(dollars in thousands)
Unaudited
<CAPTION>
SAGA
COMMUNICATIONS, WNAX WPOR PRO FORMA PRO FORMA
INC. ADJUSTMENTS COMBINED
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 590 $ 38 $ 22 $ (60) (1) $ 590
Other current liabilities 3,592 1,000 69 (746) (1) 3,915
Current portion of long-term debt 6,449 - 40 (40) (1) 6,449
--------------------------------------------------------------------
Total current liabilities 10,631 1,038 131 (846) 10,954
Deferred income taxes 2,699 2,439 - (2,439) (1) 2,699
Long-term debt 29,605 8,527 - 8,473 (3) 46,605
Broadcast program rights 624 - - 624
STOCKHOLDERS' EQUITY:
Common stock 80 - 160 (160) (1) 80
Additional paid-in capital 35,637 - 50 (50) (1) 35,637
Note receivable from principal
stockholder (756) - - (756)
Accumulated deficit (5,783) (829) 596 233 (1) (5,783)
--------------------------------------------------------------------
Total stockholders' equity 29,178 (829 806 23 29,178
--------------------------------------------------------------------
$72,737 $11,175 $937 $ 5,211 $90,060
====================================================================
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
<PAGE> 37
Saga Communications, Inc., WNAX and WPOR
<TABLE>
Pro Forma Combined Condensed Statement of Income
For The Three Months Ended March 31, 1996
(in thousands except per share data)
Unaudited
<CAPTION>
SAGA
COMMUNICATIONS, WNAX WPOR PRO FORMA PRO FORMA
INC. ADJUSTMENTS COMBINED
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net operating revenue $10,955 $911 $535 $12,401
Operating expenses:
Programming and technical 2,872 229 120 3,221
Selling 3,094 106 113 3,313
Station general and administrative 1,897 154 135 $( 34)(7) 2,152
Corporate general and administrative 748 - 36 (36)(7) 748
Depreciation and amortization 1,269 118 10 188 (4) 1,585
--------------------------------------------------------------------
9,880 607 414 118 11,019
--------------------------------------------------------------------
Operating profit 1,075 304 121 (118) 1,382
Other expenses:
Interest expense 733 288 - 20 (5) 1,041
Loss on the sale of assets 3 - - 3
--------------------------------------------------------------------
Income before income tax 339 16 121 (138) 338
Income tax provision 145 11 - (11)(6) 145
--------------------------------------------------------------------
Net income $ 194 $ 5 $121 $(127) $ 193
====================================================================
Net earnings per common and equivalent share
(primary and fully diluted) $ .02 $ .02
======= =======
Shares used in computing earnings per
share 8,153 8,153
======= =======
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
<PAGE> 38
Saga Communications, Inc., WNAX and WPOR
<TABLE>
Pro Forma Combined Condensed Statement of Income
For The Year Ended December 31, 1995
(in thousands except per share data)
Unaudited
<CAPTION>
SAGA
COMMUNICATIONS, WNAX WPOR PRO FORMA PRO FORMA
INC. ADJUSTMENTS COMBINED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net operating revenue $49,699 $2,704 $3,085 $55,488
Operating expenses:
Programming and technical 11,114 841 492 $ (13)(7) 12,434
Selling 14,255 349 852 (1)(7) 15,455
Station general and administrative 7,067 593 693 (299)(7) 8,054
Corporate general and administrative 2,816 - - 2,816
Depreciation and amortization 6,551 326 37 898 (4) 7,812
-------------------------------------------------------------------
41,803 2,109 2,074 585 46,571
-------------------------------------------------------------------
Operating profit 7,896 595 1,011 (585) 8,917
Other expenses:
Interest expense 3,319 808 (3) 424 (5) 4,548
(Gain) loss on the sale of assets (221) 1 (7) (227)
-------------------------------------------------------------------
Income before income tax 4,798 (214) 1,021 (1,009) 4,596
Income tax provision (benefit) 2,120 (61) - (28)(6) 2,031
-------------------------------------------------------------------
Net income (loss) $ 2,678 $ (153) $1,021 $(981) $ 2,565
===================================================================
Net earnings per common and equivalent share
(primary and fully diluted) $ .33 $ .32
======= =======
Shares used in computing earnings per
share 8,121 8,121
======= =======
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
<PAGE> 39
Saga Communications, Inc.
Notes to Pro Forma Combined Condensed Financial Statements
Unaudited
1. BASIS OF PRESENTATION
The unaudited Pro Forma Combined Condensed Statement of Income for the year
ended December 31, 1995 and the three months ended March 31, 1996 reflect the
acquisitions of WNAX AM/FM and WPOR AM/FM by Saga Communications, Inc. (Saga)
as if they had occurred at the beginning of the period presented. The unaudited
Pro Forma Combined Condensed Balance Sheet at March 31, 1996 reflects the
acquisitions of WNAX AM/FM and WPOR AM/FM by Saga as if they had occurred on
that date.
2. PRO FORMA FINANCIAL STATEMENTS
The pro forma information for the year ended December 31, 1995 and the three
months ended March 31, 1996 is based on historical financial statements of Saga,
WNAX and WPOR after giving effect to the transactions and the adjustments
described in Note 3. The pro forma financial statements may not be indicative of
the results that actually would have occurred if the transactions had occurred
on the dates assumed and do not project Saga's financial position or results of
operations at any future date or period then ended. The pro forma financial
statements should be read in conjunction with the financial statements and
related notes of WNAX (a division of Roy H. Park Broadcasting of the Midwest,
Inc.) and Ocean Coast Properties (WPOR) contained elsewhere herein and the
financial statements and related notes of Saga included in Saga's Annual Report
on Form 10-K for the year ended December 31, 1995.
3. PRO FORMA ADJUSTMENTS
The accompanying pro forma combined condensed financial statements include
adjustments to increase or (decrease) the pro forma combined condensed balance
sheet, as follows:
1. Elimination of excluded assets, liabilities, common stock,
additional paid in capital and retained earnings (accumulated
deficit) from historical WNAX and WPOR financial statements. Other
current assets reflects a net addition due to reclassification of
deferred barter to conform with Saga's presentation. Other current
liabilities reflects a net addition due to the inclusion of legal
and other start up fees.
2. Fair value adjustment of $17,299,000 to acquired property,
equipment, broadcast license and other intangibles (primarily
start up costs).
3. Proceeds from the draws on the term loan facility.
<PAGE> 40
Saga Communications, Inc.
Notes to Pro Forma Combined Condensed Financial Statements
Unaudited
3. PRO FORMA ADJUSTMENTS (CONTINUED)
4. Additional depreciation and amortization to reflect the fair value
of acquired property, equipment and intangible assets. Property
and equipment is depreciated over periods ranging from 5 to 31
years; intangible assets are amortized over periods ranging from 5
to 40 years.
5. Incremental interest on the $17 million draw on the term loan
facility at 7.25%.
6. Estimated Federal and State income tax effect of combined
historical operations of WNAX, WPOR and pro forma adjustments.
7. Reclassification of depreciation to conform with Saga's
presentation and elimination of directors fees and corporate
management fee from historical WPOR and WNAX financial statements.
<PAGE> 1
EXHIBIT (23)(a)
CONSENT OF ERNST & YOUNG LLP
----------------------------
We consent to the incorporation by reference in the Registration Statements
(Form S-8) effective March 12, 1993 and May 25, 1994 pertaining to the Saga
Communications, Inc. 1992 Stock Option Plan and in the related Prospectus of our
report dated June 7, 1996, with respect to the financial statements of WNAX, (a
division of Roy H. Park Broadcasting of the Midwest, Inc.) for the year ended
December 31, 1995 included in this Current Report on Form 8-K/A.
Detroit, Michigan /S/ Ernst & Young LLP
August 12, 1996
<PAGE> 1
EXHIBIT (23)(b)
CONSENT OF BAKER NEWMAN & NOYES LLC
-----------------------------------
The Board of Directors and Stockholders
Ocean Coast Properties:
We consent to the inclusion of our report dated February 1, 1996, with respect
to the balance sheets of Ocean Coast Properties as of December 31, 1995 and
December 25, 1994, and the related statements of earnings and retained earnings,
and cash flows for the years then ended, which report appears in the Form 8-K/A
of Saga Communications, Inc. dated August 13, 1996. We also consent to the
incorporation by reference in the Registration Statements (Form S-8) effective
March 12, 1993 and May 25, 1994 pertaining to the Saga Communications, Inc. 1992
Stock Option Plan and in the related Prospectus of our report dated February 1,
1996, with respect to the balance sheets of Ocean Coast Properties as of
December 31, 1995 and December 25, 1994, and the related statements of earnings
and retained earnings, and cash flows for the years then ended.
Portland, Maine /S/ Baker Newman & Noyes
August 12, 1996 Limited Liability Company
