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
May 9, 1996
----------------------------
(Date of earliest event reported)
SINCLAIR BROADCAST GROUP, INC.
(Exact name of Registrant as specified in its charter)
Maryland 000-26076 52-1494660
(State of incorporation) (Commission File Number) (IRS Employer
Identification Number)
2000 W. 41st Street, Baltimore, Maryland 21211-1420
---------------------------------------------------
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (410) 467-5005
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
In its original filing on Form 8-K, the Company reported as pending the
acquisition of certain assets from (as previously amended) Kansas City TV 62
Limited Partnership ("KSMO"), Cincinnati TV 64 Limited Partnership ("WSTR") and
River City Broadcasting ("RCB"). The Company completed the acquisition of assets
from RCB on May 31, 1996, and entered into an Amended and Restated Asset
Purchase Agreement, a Group I Option and a Columbus Option reflecting certain
amendments, as described in the original filing, to the original agreements. The
Company completed the acquisition of KSMO on July 1, 1996 and completed the
acquisition of WSTR on August 1, 1996.
ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The following financial statements are filed with this report:
*KANSAS CITY TV 62 LIMITED PARTNERSHIP
Balance Sheet as of June 30, 1996
Statements of Operations for the Three and Six Months
Ended June 30, 1995 and June 30, 1996
Statement of Cash Flows for the Six Months Ended
June 30, 1995 and June 30, 1996
Notes to Financial Statements
*CINCINNATI TV 64 LIMITED PARTNERSHIP
Balance Sheet as of June 30, 1996
Statements of Operations for the Three and Six Months
Ended June 30, 1995 and June 30, 1996
Statement of Cash Flows for the Six Months Ended
June 30, 1995 and June 30, 1996
Notes to Financial Statements
Financial statements of businesses acquired (previously filed as
amended herein)
*SUPERIOR COMMUNICATIONS GROUP, INC.
Independent Auditors Report
Consolidated Balance Sheets as of December 31, 1995 and
December 31, 1994
Consolidated Statements of Operations for the Years Ended
December 31, 1995 and December 31, 1994
Consolidated Statements of Stockholder's Equity for the Years
Ended December 31, 1995 and December 31, 1994
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
*PARAMOUNT STATIONS GROUP OF KERVILLE, INC.
Report of Independent Public Accountants
Consolidated Balance sheets as of August 3, 1995 and
December 31, 1994
Consolidated Statements of Operations for the period from
January 1, 1995 through August 3, 1995 and the Year Ended
December 31, 1994
Consolidated Statements of Stockholders' Equity for the
Period from January 1, 1995 through August 3, 1995 and the
Year Ended December 31, 1994
Consolidated Statements of Cash Flows for the Period from
January 1, 1995 through August 3, 1995 and the Year Ended
December 31, 1994
Notes to Consolidated Financial Statements
*KRRT, Inc.
Report of Independent Public Accountants
Balance Sheet as of December 31, 1995
Statement of Operations for the Period from July, 25 1995
through December 31, 1995
Statements of Changes in Stockholders' Equity for the Period
from July 25, 1995 through December 31, 1995
Statements of Cash Flows for the Period from July 25, 1995
through December 31, 1995
Notes to Financial Statements
*RIVER CITY BROADCASTING L.P.
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1994 and
December 31, 1995
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995
Consolidated Statements of Partners' Capital (Deficit) for the
Years Ended December 31, 1993, 1994 and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995
Notes to Consolidated Financial Statements
Supplementary Information-Consolidating Balance Sheet as of
December 31, 1995
Supplementary Information-Consolidating Schedule of Operations
for the Year Ended December 31, 1995
KANSAS CITY TV 62 LIMITED PARTNERSHIP
Report of Independent Accountants
Balance Sheets as of December 31, 1995 and December 31, 1994
Statements of Operations for the Years Ended December 31,
1995 and December 31, 1994
Statements of Cash Flows for the Years Ended December 31, 1995
and December 31, 1994
Statements of Changes is Partners' Capital for the Years Ended
December 31, 1995 and December 31, 1994
Notes to Financial Statements
CINCINNATI TV 64 LIMITED PARTNERSHIP
Report of Independent Accountants
Balance Sheets as of December 31, 1995 and December 31, 1994
Statements of Operations for the Years Ended December 31,
1995 and December 31, 1994
Statements of Changes in Partners' Capital for the Years Ended
December 31, 1995 and December 31, 1994
Statements of Cash Flows for the Years Ended December 31, 1995
and December 31, 1994
Notes to Financial Statements
(b) Pro forma financial information
Pro forma financial statements as of June 30, 1996 and for the six
months ended June 30, 1996 and the year ended December 31, 1995 are
filed with this report.
(c) Exhibits
10.71 Amended and Restated Asset Purchase Agreement dated as of
May 31, 1996 by and between River City Broadcasting, L.P. and Sinclair
Broadcast Group, Inc.*
10.72 Group I Option Agreement dated as of May 31, 1996 by and
among River City Broadcasting, L.P., River City License Partnership
and Sinclair Broadcast Group, Inc.*
10.73 Columbus Option dated as of May 31, 1996 by and among River
City Broadcasting, L.P., River City License Partnership and Sinclair
Broadcast Group, Inc.*
- ----------
* Previously Filed
<PAGE>
Report of Independent Accountants
March 22, 1996
To the Partners of Kansas City TV 62 Limited Partnership
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in partners' capital and of cash flows present fairly, in
all material respects, the financial position of Kansas City TV 62 Limited
Partnership at December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
<PAGE>
Kansas City TV 62 Limited Partnership
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1995 1994
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 590 $ 978
Accounts receivable, less allowance for doubtful accounts
of $236 and $122 in 1995 and in 1994 3,953 3,052
Broadcast rights 3,380 2,864
Prepaid expenses 21 16
----- -----
Total current assets 7,944 6,910
Property and equipment - net 734 1,305
Broadcast rights 3,286 3,305
Goodwill and other intangible assets 3,817 4,027
----- -----
$ 15,781 $ 15,547
====== ======
Liabilities and Partners' Capital
Current liabilities:
Current portion of long-term debt $ 6,998 $ 338
Subordinated note payable to Seller 7,816 -
Accounts payable and accrued expenses 1,578 1,714
Interest payable 733 1,943
Due to related parties - 40
Broadcast rights payable 4,020 3,837
----- -----
Total current liabilities 21,145 7,872
Broadcast rights payable 3,107 3,569
Long-term debt - 9,273
Subordinated note payable to Seller 921 7,730
Partners' capital (9,392) (12,897)
Commitments and contingencies (Note 8) ------ ------
$ 15,781 $ 15,547
======== ========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
Kansas City TV 62 Limited Partnership
Statement of Operations
- -------------------------------------------------------------------------------
Year ended
December 31,
1995 1994
(in thousands)
Revenues - net of agency and national
representative commissions $ 17,484 $ 14,052
Costs and expenses:
Programming, production and engineering 3,347 4,533
Amortization of broadcast rights 4,007 4,581
Sales, promotion and marketing 2,476 2,716
General and administrative 1,898 1,834
Depreciation and amortization 842 805
Interest expense, net 2,039 1,983
Other income (630) -
------------ ------------
Net income (loss) $ 3,505 $ (2,400)
=========== ===========
The accompanying notes are an integral part of
these financial statements.
<PAGE>
Kansas City TV 62 Limited Partnership
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31,
1995 1994
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,505 $ (2,400)
Adjustments to reconcile net income (loss) to net cash
provided (used) for operating activities:
Depreciation 632 595
Amortization of goodwill and other intangible assets 210 210
Amortization of broadcast rights, net of barter 1,206 2,122
Accretion of subordinated debt principal 210 197
Gain on forgiveness of debt (398) -
Increase in accounts receivable (901) (655)
Increase in prepaid expenses (5) (6)
Decrease in accounts payable and accrued expenses 262 (396)
(Decrease) increase in interest payable (413) 1,806
Decrease in due to related parties (40) (236)
Decrease in broadcast rights payable, net of barter (1,982) (1,745)
------------ ------------
Net cash provided (used) for operating activities 2,286 (508)
------------ ------------
Cash flows from investing activities:
Additions to property and equipment (61) (35)
------------ ------------
Cash flows from financing activities:
Repayment of long-term debt (2,613) -
Partner's contribution of capital - 1,400
------------ -----------
Net cash (used) provided by financing activities (2,613) 1,400
------------ ----------
Net (decrease) increase in cash (388) 857
Cash and cash equivalents at beginning of year 978 121
------------ ----------
Cash and cash equivalents at end of year $ 590 $ 978
============ ===========
Supplemental schedule of noncash activities:
Film contracts acquired $ 4,055 $ 2,834
=========== ===========
Film contract liability additions $ 4,055 $ 2,834
=========== ===========
Capitalized subordinated debt interest $ 797 $ 884
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
Kansas City TV 62 Limited Partnership
Statement of Changes in Partners' Capital
For the Years Ended December 31, 1995 and 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
General Limited
Partner Partner Total
(in thousands)
<S> <C> <C> <C>
Balance at December 31, 1993 $ (11,897) - $ (11,897)
Capital contribution 1,400 - 1,400
Net loss for the year ended December 31, 1994 (2,400) - (2,400)
---------- --------- ----------
Balance at December 31, 1994 $ (12,897) $ - $ (12,897)
Net income for the year ended December 31, 1995 3,505 - 3,505
------------- --------- ---------
Balance at December 31, 1995 $ (9,392) $ - $ (9,392)
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
Kansas City TV 62 Limited Partnership
Notes to Financial Statements (in thousands)
- -------------------------------------------------------------------------------
1. Organization
Kansas City TV 62 Limited Partnership (the "Partnership") is a joint
venture of ABRY Communications III, L.P., the general partner, and
Copley Place Capital Group, the limited partner. The Partnership was
organized under the laws of the State of Delaware on April 18, 1990. On
September 21, 1990 the Partnership acquired the business and certain
assets of Kansas City Television, Inc. (the "Seller"). The Partnership
is a television broadcaster serving the Kansas City area through
station KSMO on UHF Channel 62.
2. Summary of Significant Accounting Policies
Allocation of Partnership Results to Partners' Capital Accounts
Net losses of the Partnership are allocated among the capital accounts
of the partners based on their relative partnership interests until the
limited partner's capital has been exhausted. Thereafter, net losses
are allocated solely to the general partner. Net income is allocated in
proportion to previously allocated net losses in reverse chronological
order. Thereafter, net income is allocated to partners based on their
relative partnership interests, as defined in the agreement.
Broadcast Rights
Broadcast rights are stated at the lower of unamortized cost or
estimated net realizable value. Broadcast rights and the related
liabilities are recorded at the contract value when the license period
begins and the right is available for use. Broadcast rights are
amortized using the straight-line method over the number of showings or
license period. The net realizable value of broadcast rights for which
the Partnership is contractually committed is reviewed annually and
revisions to amortization rates or write-downs to net realizable value
may occur. The current portion of broadcast rights represents those
rights available for broadcast which will be amortized in the
succeeding year.
Property and Equipment
Property and equipment are recorded at cost and depreciated over the
estimated useful lives of the assets on a straight-line basis. Major
renewals and betterments are capitalized and ordinary repairs and
maintenance are charged to expense in the period incurred.
Goodwill and Other Intangible Assets
Goodwill aggregating $4,144 is amortized over 40 years using the
straight-line method. Legal and accounting fees associated with the
acquisition of loans, aggregating $555 and organization of the
Partnership, aggregating $59 are capitalized and amortized over the
term of the related debt and five years, respectively. Other intangible
assets, aggregating $119 are amortized over their estimated useful
life. At December 31, 1995 and 1994, accumulated amortization
aggregated $1,060 and $850, respectively.
<PAGE>
Kansas City TV 62 Limited Partnership
Notes to Financial Statements (in thousands)
- -------------------------------------------------------------------------------
Barter Transactions
Revenue from barter transactions is recognized when advertisements are
broadcast and services or merchandise received are charged to expense
when received or used. Revenues arising from barter and trade
transactions aggregated $2,907 and $2,654 in 1995 and 1994,
respectively.
Income Taxes
The financial statements of the Partnership do not include any
provision for federal or state income taxes. All Partnership income,
losses, tax credits and deductions are allocated among the partners.
Each partner is responsible to report its distributed share of
Partnership results in its federal and state income tax returns.
Cash and Cash Equivalents
The Partnership considers all highly liquid investment instruments
purchased with a maturity of three months or less to be cash
equivalents. The Partnership invests its cash in money market funds and
in short-term government securities that are subject to minimal market
and credit risk. At December 31, 1995, the Partnership's cash
equivalents include $544 of money market funds.
Effective January 1, 1994, the Partnership adopted Statement of
Financial Accounting Standards No. 115 (FAS 115), "Accounting for
Certain Investments in Debt and Equity Securities". Under this
standard, the Partnership is required to classify its investments in
debt and equity securities into one or more of the following
categories: held-to-maturity, trading or available for sale. Adoption
of this standard had no impact on the Partnership's financial position
or results of operations at the date of adoption.
Concentration of Credit Risk
Financial instruments which potentially expose the Partnership to a
concentration of credit risk include cash, cash equivalents and
accounts receivable. A significant amount of the Partnership's cash and
cash equivalents are held by one financial institution at December 31,
1995. The Partnership does not believe that such deposits are subject
to any unusual credit risk beyond the normal credit risk associated
with operating its business. The Partnership maintains reserves for
potential credit losses and such losses, in the aggregate, have not
historically exceeded management's expectations.
Risks and Uncertainties
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.
2
<PAGE>
Kansas City TV 62 Limited Partnership
Notes to Financial Statements (in thousands)
- -------------------------------------------------------------------------------
3. Related Party Transactions
Prior to 1995, ABRY Communications III, L.P., provided certain
administrative and support services to the Partnership for which it was
paid a management fee. Management fees charged to operations aggregated
$276 in 1994. No management fees were charged during 1995.
3
<PAGE>
Kansas City TV 62 Limited Partnership
Notes to Financial Statements (in thousands)
- --------------------------------------------------------------------------------
4. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated
useful life December 31,
(years) 1995 1994
<S> <C> <C> <C>
Studio equipment 2-7 $ 1,855 $ 1,824
Transmission equipment 7-8 1,206 1,184
Vehicles, office equipment and
furniture 5-7 396 388
Leasehold improvements 8 297 297
------------ ------------
3,754 3,693
Less - accumulated depreciation and
amortization 3,020 2,388
------------ ------------
$ 734 $ 1,305
============ ============
5. Broadcast Rights
The Partnership purchases the right to broadcast programs through fixed
term license agreements. Broadcast rights consist of the following:
December 31,
1995 1994
Aggregate cost $ 16,564 $14,350
Less - accumulated amortization 9,898 8,181
------------ -----------
6,666 6,169
Less - current portion 3,380 2,864
------------ -----------
$ 3,286 $ 3,305
============ ===========
</TABLE>
4
<PAGE>
Kansas City TV 62 Limited Partnership
Notes to Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Contractual obligations incurred in connection with the acquisition of
broadcast rights are $7,127 including $3,742 of barter obligations.
Future payments in connection with these contractual obligations are as
follows at December 31, 1995:
1996 $ 4,058
1997 1,776
1998 1,064
1999 169
2000 23
Thereafter 37
------------
$ 7,127
==========
The Partnership has estimated the fair value of these contractual
obligations at approximately $6,800 and $6,776 at December 31, 1995 and
1994, respectively, based on future cash flows discounted at the
Partnership's current borrowing rate.
6. Debt
Debt consists of the following:
December 31,
1995 1994
Term loan $ 1,455 $ 2,133
Revolving credit facility 5,543 7,478
---------- --------
6,998 9,611
Less - current portion 6,998 338
--------- --------
$ - $ 9,273
========= ========
The term loan and revolving credit facility (the "revolver") bear
interest, payable monthly, at the base rate, computed by taking the
higher of the Federal Funds rate plus 1% or prime, plus a computed
margin rate which ranges from 1.75% to 2.25%. The Partnership is
charged a fee for the average daily unused portion of the revolver
commitment at a rate of 1/2% per annum, payable quarterly. The
borrowings are secured by substantially all of the Partnership's
assets.
The credit agreement was amended on April 21, 1995. Under the terms of
the amended credit agreement, the principle amount of the term loan is
payable in quarterly installments of varying amounts commencing October
1, 1995. The revolver was increased to $8,500 and will be reduced on a
quarterly basis commencing April 1, 1997, until no credit facility is
available at October 1, 1998.
5
<PAGE>
Kansas City TV 62 Limited Partnership
Notes to Financial Statements (in thousands)
- --------------------------------------------------------------------------------
In addition to the scheduled principal and interest payments, the
lender may be entitled to contingent interest payable upon early
repayment of the term loan, a change in control of the Partnership or
upon the occurrence of certain other events as defined in the
agreement. The amount of contingent interest which will be due is
determined by a formula which considers appreciation in the value of
the Partnership. Based upon management's estimate of appreciation in
the value of the Partnership, no accrual for contingent interest has
been recorded at December 31, 1995 and 1994.
The subordinated note payable to Seller is subordinated to the
Partnership's term loan and revolver borrowings. The principal amount
of the subordinated note payable to Seller is payable in a lump sum on
September 21, 1998. Interest on the outstanding principal accrues at
the rate of 10% and is payable annually. For financial reporting
purposes, however, interest on the note accrues at an implicit rate of
14% per annum, and the note's original stated principal of $8 million
has been discounted to reflect this yield.
In January 1996, a third-party exercised its option to purchase the
station (Note 9). Accordingly, all long-term debt is classified as
current at December 31, 1995. In March 1996, certain subordinated note
holders agreed to extend the term of their notes through October 1999
and forgave interest for the five-year period then ended. Accordingly,
all subordinated debt, excluding the extended portion, is classified as
current at December 31, 1995.
In 1994, certain subordinated note holders forgave $680 of the
subordinated note, $157 of capitalized interest and $62 of accrued
interest. In consideration of the debt forgiveness, the Partnership and
a related party signed a network affiliation agreement with one note
holder and licensed certain programs from the other note holder. Under
the terms of the affiliation agreement, the Partnership and the related
party must broadcast network programming over the three-year term of
the network affiliation agreement. Under the terms of the license
agreement, the related party must broadcast certain programs over the
one-year term of the license agreement. Accordingly, the $899 gain on
the forgiveness of debt and related interest thereon was deferred and
is being amortized over the term of the affiliation and program license
agreements. The Partnership amortized $398 of the gain to income in
1995. The gain on forgiveness of debt is included in other income in
the statement of operations. The deferred gain is included in accounts
payable and accrued expenses at December 31, 1995 and 1994.
Interest payments of $2,301 were made during the year ended December
31, 1995. No interest payments were made during the year ended December
31, 1994.
6
<PAGE>
Kansas City TV 62 Limited Partnership
Notes to Financial Statements (in thousands)
- --------------------------------------------------------------------------------
7. Retirement Savings Plan
The Partnership has adopted a retirement savings plan under Section
401(K) of the Internal Revenue Code. This plan covers substantially all
employees of the Partnership and affiliated partnerships, who meet
minimum age and service requirements, and allows participants to defer
a portion of their annual compensation on a pre-tax basis. Partnership
contributions to the plan may be made at the discretion of the Board of
Directors. No Partnership contributions were authorized for the years
ended December 31, 1995 and 1994.
8. Commitments and Contingencies
Employment Agreements
As a result of the Partnership's execution of the Option Agreement
(Note 9) in 1994, the Partnership and the general partner, ABRY
Communications III, L.P., amended employment agreements which entitled
certain key employees to appreciation rights payable upon either a
change in control of the Partnership or the payment of certain partner
cash distributions. Previously, the employees vested in these rights at
the rate of 20% per year from the date the rights were granted, except
that they vested fully if they were employees of the Partnership at the
time the rights became payable. Amounts due to the employees in
connection with those rights were determined by a formula which
considers appreciation in the value of the Partnership. Under the
amendments, in the event that certain key employees meet certain
employment criteria, such employees will receive a payment in lieu of
the appreciation rights discussed above. An accrual for compensation
related to these rights for $162 was included in accrued expenses at
December 31, 1994. These obligations were satisfied during 1995 and,
accordingly, no accrual has been made related to these agreements at
December 31, 1995.
Broadcast License Agreements
Broadcast rights acquired under license agreements are recorded as an
asset and a corresponding liability at the inception of the license
period. In addition to these broadcast rights payable at December 31,
1995, the Partnership has $1,417 of commitments to acquire broadcast
rights for which the license period has not commenced and, accordingly,
for which no liability has been recorded. Future minimum payments
arising from such commitments outstanding at December 31, 1995, of
which $729 represents barter commitments, are as follows:
1996 $ 133
1997 356
1998 347
1999 187
2000 79
Thereafter 315
----------
$ 1,417
7
<PAGE>
Kansas City TV 62 Limited Partnership
Notes to Financial Statements (in thousands)
- --------------------------------------------------------------------------------
Sports Rights Agreement
The Partnership broadcasts certain baseball games for the Kansas City
Royals Baseball Corporation (the "Royals"). Under the terms of the
broadcast agreement as amended during 1995, the Partnership is
obligated to pay broadcast fees and to provide advertising and
promotions to the Royals through October 1, 1998. In addition, the
Partnership is obligated to pay the Royals 75% of operating profits
less than $500 and 50% of operating profits exceeding $500, related to
such broadcasts. Future minimum annual broadcast fee payments under the
agreement, as amended, are as follows:
1996 $ 1,080
1997 1,080
1998 1,080
-----------
$ 3,240
Broadcast fees are payable quarterly on July 1, October 1, January 1
and April 1 of each year. In the event the Partnership terminates the
agreement before October 1, 1996 or 1997, the Partnership will be
required to pay the Royals a cancellation fee of $500 or $250,
respectively. The payment of all amounts due to the Royals under the
agreement have been guaranteed by the Partnership's general partner and
BVC Communications, III, Inc., the general partner of ABRY
Communications III, L.P. Charges to operations for such broadcast fees
aggregated $1,350 and $2,728 in 1995 and 1994, respectively.
Operating Leases
The Partnership leases its antenna site, studio and other operating
equipment under noncancellable operating lease arrangements expiring
through 2010. Charges to operations for such leases aggregated $154 and
$146 in 1995 and 1994, respectively. Future minimum lease payments
under these leases are as follows at December 31, 1995:
1996 $ 166
1997 160
1998 161
1999 124
2000 123
Thereafter 237
Total minimum lease payments $ 971
===========
During 1995, the antenna site was damaged and the Partnership received
an insurance settlement of $248 for the related business interruption.
The insurance settlement net of amounts relating to the repair of the
antenna, are included in other income in the statement of operations.
8
<PAGE>
Kansas City TV 62 Limited Partnership Notes to Financial Statements (in
thousands)
-----------------------------------------------------------------------
9. Option Agreement
On May 24, 1994, the Partnership entered into an agreement whereby the
Partnership granted a third-party an option to acquire the assets of
the station for an amount equal to the lesser of outstanding debt as of
the exercise date, including accrued interest thereon, or $9,000. The
acquiring entity will assume all other liabilities of the station. In
conjunction with the option agreement, the Partnership entered into an
agreement with the third-party whereby the Partnership would pay the
third-party a consulting fee of $250 per year as long as the option is
outstanding. Charges to operations related to this agreement were $250
in 1995 and $147 in 1994. The third-party exercised this option in
January 1996. Accordingly, all debt of the station is classified as
current at December 31, 1995, excluding debt for which an extension was
granted, in accordance with the Partnership's loan agreements (Note 6).
The transaction is subject to regulatory approval.
10
<PAGE>
Cincinnati TV 64
Limited Partnership
Financial Statements
December 31, 1995
<PAGE>
Report of Independent Accountants
March 22, 1996
To the Partners of Cincinnati TV 64 Limited Partnership
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in partners' capital and of cash flows present fairly, in
all material respects, the financial position of Cincinnati TV 64 Limited
Partnership at December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
<PAGE>
Cincinnati TV 64 Limited Partnership
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1995 1994
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 641 $ 482
Accounts receivable, less allowance for doubtful
accounts of $86 and $64 in 1995 in 1994, respectively 3,091 2,773
Broadcast rights 4,461 3,461
Prepaid expenses 15 21
----------- ----------
Total current assets 8,208 6,737
Property and equipment - net 5,238 5,670
Broadcast rights 4,339 3,061
Goodwill and other intangible assets 1,746 1,823
----------- ----------
$ 19,531 $ 17,291
=========== ==========
Liabilities and Partners' Capital
Current liabilities:
Current portion of long-term debt $ 11,883 $ 700
Subordinated note payable to Seller 7,446 -
Accounts payable and accrued expenses 1,127 1,082
Interest payable 718 650
Broadcast rights payable 5,221 3,957
----------- ----------
Total current liabilities 26,395 6,389
Broadcast rights payable 4,262 3,221
Long-term debt - 14,083
Subordinated note payable to Seller - 7,089
Partners' capital (11,126) (13,491)
Commitments and contingencies (Note 8)
----------- ----------
$ 19,531 $ 17,291
=========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
<PAGE>
Cincinnati TV 64 Limited Partnership
Statement of Operations
- --------------------------------------------------------------------------------
Year ended
December 31,
1995 1994
(in thousands)
Revenues - net of agency and national
representative commissions $ 15,529 $ 13,727
Costs and expenses:
Programming, production and engineering 1,002 954
Amortization of broadcast rights 4,971 5,416
Sales, promotion and marketing 2,394 2,813
General and administrative 1,629 2,059
Depreciation and amortization 662 841
Interest expense, net 2,506 2,375
----------- -----------
Net income (loss) $ 2,365 $ (731)
=========== ===========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
Cincinnati TV 64 Limited Partnership
Statement of Changes in Partners' Capital
For the Years Ended December 31, 1995 and 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
General Limited
Partner Partner Total
(in thousands)
<S> <C> <C> <C>
Balance at December 31, 1993 $ (12,760) $ - $ (12,760)
Net loss for the year ended
December 31, 1994 (731) - (731)
---------- ------- ---------
Balance at December 31, 1994 (13,491) - (13,491)
Net income for the year ended
December 31, 1995 2,365 - 2,365
---------- ------- ---------
Balance at December 31, 1995 $ (11,126) $ - $ (11,126)
========== ======= =========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
<PAGE>
Cincinnati TV 64 Limited Partnership
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31,
1995 1994
(in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 2,365 $ (731)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 585 759
Amortization of goodwill and other intangible assets 77 82
Amortization of broadcast rights, net of barter 1,621 2,294
Loss on disposal of property and equipment 37 -
Accretion of subordinated debt principal 357 312
Deferred interest expense on subordinated note payable - 87
Increase in accounts receivable (318) (516)
(Increase) decrease in prepaid expenses 6 (6)
Increase (decrease) in accounts payable and accrued expenses 45 (80)
Increase in interest payable 68 650
Decrease in due to related parties - (72)
Decrease in broadcast rights payable, net of barter (1,594) (1,676)
---------- ----------
Net cash provided by operating activities 3,249 1,103
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (190) (18)
---------- ----------
Cash flows from financing activities:
Net repayments under revolving credit facility (2,200) (750)
Repayments of long-term debt (700) -
---------- ----------
Net cash used for financing activities (2,900) (750)
---------- ----------
Net increase in cash and cash equivalents 159 335
Cash and cash equivalents at beginning of year 482 147
---------- ----------
Cash and cash equivalents at end of year $ 641 $ 482
========== ==========
Supplemental schedule of noncash activities:
Film contracts acquired/obligations assumed $ 2,961 $ 2,026
========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
<PAGE>
Cincinnati TV 64 Limited Partnership
Notes to Financial Statements (in thousands)
- --------------------------------------------------------------------------------
1. Organization
Cincinnati TV 64 Limited Partnership (the "Partnership") is a joint
venture of ABRY Communications II, L.P., the general partner (Note 3),
and Copley Place Capital Group, the limited partner. The Partnership
was organized under the laws of the State of Delaware on August 1,
1989. The Partnership is a television broadcaster serving the
Cincinnati, Ohio area through station WSTR on UHF Channel 64.
2. Summary of Significant Accounting Policies
Allocation of Partnership Results to Partners' Capital Accounts
Net losses of the Partnership are allocated among the capital accounts
of the partners based on their relative partnership interests until the
limited partner's capital has been exhausted. Thereafter, net losses
are allocated solely to the general partner. Net income is allocated in
proportion to previously allocated net losses in reverse chronological
order. Thereafter, net income is allocated to partners based on their
relative partnership interests, as defined in the agreement.
Broadcast Rights
Broadcast rights are stated at the lower of unamortized cost or
estimated net realizable value. Broadcast rights and the related
liabilities are recorded at the contract value when the license period
begins and the right is available for use. Broadcast rights are
amortized using the straight-line method over the number of showings or
license period. The net realizable value of broadcast rights for which
the Partnership is contractually committed is reviewed annually and
revisions to amortization rates or write-downs to net realizable value
may occur. The current portion of broadcast rights represents those
rights available for broadcast which management estimates will be
amortized in the succeeding year.
Property and Equipment
Property and equipment are recorded at cost and depreciated over the
estimated useful lives of the assets on a straight-line basis. Major
renewals and betterments are capitalized and ordinary repairs and
maintenance are charged to expense in the period incurred.
Goodwill and Other Intangible Assets
Goodwill aggregating $1,991 is amortized over 40 years using the
straight-line method. Legal and accounting fees associated with the
acquisition of loans aggregating $240 are capitalized and amortized
over the term of the related debt. Organization costs aggregating $28
were fully amortized at December 31, 1995. Accumulated amortization
aggregated $485 and $436 at December 31, 1995 and 1994, respectively.
Barter Transactions
Revenue from barter transactions is recognized when advertisements are
broadcast and services or merchandise received are charged to expense
when received or used. Revenues arising from barter and trade
transactions aggregated $3,578 and $3,410 in 1995 and 1994,
respectively.
1
<PAGE>
Cincinnati TV 64 Limited Partnership
Notes to Financial Statements (in thousands)
- -------------------------------------------------------------------------------
Income Taxes
The financial statements of the Partnership do not include any
provision for federal or state income taxes. All Partnership income,
losses, tax credits and deductions are allocated among the partners.
Each partner is responsible to report its distributed share of
Partnership results in its federal and state income tax returns.
Cash and Cash Equivalents
The Partnership considers all highly liquid investment instruments
purchased with a maturity of three months or less to be cash
equivalents. The Partnership invests its excess cash in short-term
government securities that are subject to minimal market and credit
risk. At December 31, 1995 and 1994, the Partnership's cash equivalents
include $500 and $400, respectively, of short-term government
securities. These securities, which are classified as
available-for-sale, are recorded at market value, which approximates
cost.
Effective January 1, 1994, the Partnership adopted Statement of
Financial Accounting Standards No. 115, (FAS 115), "Accounting for
Certain Investments in Debt and Equity Securities". Under this
standard, the Partnership is required to classify its investments in
debt and equity securities into one or more of the following
categories: held-to-maturity, trading or available for sale. Adoption
of this standard had no impact on the Partnership's financial position
or results of operations at the date of adoption.
Concentration of Credit Risk
Financial instruments which potentially expose the Partnership to a
concentration of credit risk include cash, cash equivalents and
accounts receivable. A significant amount of the Partnership's cash and
cash equivalents are held by one financial institution at December 31,
1995. The Partnership does not believe that such deposits are subject
to any unusual credit risk beyond the normal credit risk associated
with operating its business. The Partnership maintains reserves for
potential credit losses and such losses, in the aggregate, have not
historically exceeded management's expectations.
Risks and Uncertainties
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.
3. Related Party Transactions
Prior to 1995, ABRY Communications II, L.P. provided certain
administrative and support services to the Partnership for which it was
paid a management fee. Management fees charged to operations aggregated
$319 in 1994. No management fees were charged to the Partnership during
1995.
2
<PAGE>
Cincinnati TV 64 Limited Partnership
Notes to Financial Statements (in thousands)
- -------------------------------------------------------------------------------
As of January 1995, the station became a network affiliate and licensed
certain programs in conjunction with the forgiveness of the
subordinated debt of a related party by the network and licensor. The
term of the affiliation agreement and the program licenses is three
years and one year, respectively. These financial statements do not
include any amounts relating to such transaction.
4. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated
useful life December 31,
(years) 1995 1994
<S> <C> <C> <C>
Land and improvements - $ 261 $ 261
Buildings 30 1,719 1,719
Transmission tower 30 3,226 3,226
Transmission equipment 7-8 1,832 1,919
Studio equipment 5-7 1,079 1,005
Vehicles, office equipment and furniture 5-7 240 211
--------- ---------
8,357 8,341
Less - accumulated depreciation
and amortization 3,119 2,671
--------- ---------
$ 5,238 $ 5,670
========= =========
</TABLE>
5. Broadcast Rights
The Partnership purchases the right to broadcast programs through fixed
term license agreements. Broadcast rights consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Aggregate cost $ 15,370 $ 14,288
Less - accumulated amortization 6,570 7,766
--------- ---------
8,800 6,522
Less - current portion 4,461 3,461
--------- ---------
$ 4,339 $ 3,061
========= ==========
</TABLE>
3
<PAGE>
Cincinnati TV 64 Limited Partnership
Notes to Financial Statements (in thousands)
- -------------------------------------------------------------------------------
Contractual obligations incurred in connection with the acquisition of
broadcast rights are $9,483 including $3,918 of barter obligations.
Future payments in connection with these contractual obligations are as
follows at December 31, 1995:
1996 $ 5,221
1997 2,502
1998 1,340
1999 381
Thereafter 39
--------
$ 9,483
========
The Partnership has estimated the fair value of these contractual
obligations at approximately $8,591 and $6,478 at December 31, 1995 and
1994, respectively, based on future cash flows discounted at the
Partnership's current borrowing rate.
6. Debt
Long-term debt consists of the following:
December 31,
1995 1994
Term loan $ 6,650 $ 6,850
Revolving credit facility 4,772 6,972
Supplemental loan 461 961
-------- --------
11,883 14,783
Less - current portion 11,883 700
-------- --------
$ - $ 14,083
======== ========
The principal amount of the term loan is payable in 36 monthly
installments of $17 which commenced January 1, 1995 and a final
installment in an amount equal to the then outstanding principal
balance is due January 1, 1998.
The Partnership may borrow up to $8,350 under a revolving credit
facility (the "revolver") through December 31, 1995; thereafter, the
credit facility and related borrowings are reduced on a monthly basis
until no credit facility is available at January 1, 1998.
The term loan, revolver and supplemental loan bear interest, payable
monthly, at the base rate, computed by taking the higher of the Federal
Funds rate plus 1% or Prime (as defined in the agreement), plus 2.5%.
4
<PAGE>
Cincinnati TV 64 Limited Partnership
Notes to Financial Statements (in thousands)
- -------------------------------------------------------------------------------
The Partnership is charged a fee for the available revolving credit
commitment at a rate of 1/2% per annum, payable quarterly. The
borrowings are secured by substantially all of the Partnership's assets
and require the Partnership to comply with certain specified financial
ratios and provisions. At December 31, 1995, all long term debt is
classified as a current liability as a result of a third-party's
decision to exercise the option agreement (Note 9).
At December 31, 1995 and 1994, the current portion of long-term debt
includes principal of $750 and $500, respectively, due by April 1, 1996
and 1995 in accordance with the acceleration provisions of the loan
agreement. The accelerated principal payments were made by the
Partnership in April 1996 and January 1995, respectively.
In addition to the scheduled principal and interest payments, the
lender may be entitled to contingent interest, payable upon early
repayment of the loans, a change in control of the Partnership or upon
the occurrence of certain other events as defined in the agreement. The
amount of contingent interest which will be due is determined by a
formula which considers appreciation in the value of the Partnership.
Based upon management's estimate of appreciation in the value of the
Partnership, no accrual for contingent interest has been recorded at
December 31, 1995 and 1994.
The principal amount of the subordinated note payable to Seller is due
on January 1, 1998. Interest on the outstanding principal accrues at
the rate of 8.5% per annum. Interest accrued and unpaid through
December 31, 1993 is due and payable on January 1, 1998. Interest
accrued after December 31, 1993 is payable annually. For financial
reporting purposes, however, interest on the note accrues at an
implicit rate of 14.5% per annum and the note's original stated
principal of $6 million has been discounted to reflect this yield.
Accordingly, interest accrued through December 31, 1995 and 1994 of
$2,877 and $2,790, respectively, has been added to the discounted
principal amount of the note. In January 1996, a third-party exercised
its option to acquire the assets of the station (Note 9). Accordingly,
the note has been classified as a current liability at December 31,
1995.
Interest paid during the years ended December 31, 1995 and 1994 was
$1,603 and $1,348, respectively.
7. Retirement Savings Plan
The Partnership has adopted a retirement savings plan under Section
401(K) of the Internal Revenue Code. This plan covers substantially all
employees of the Partnership and affiliated partnerships who meet
minimum age and service requirements and allows participants to defer a
portion of their annual compensation on a pre-tax basis. Partnership
contributions to the plan may be made at the discretion of the Board of
Directors. No Partnership contributions were authorized for the years
ended December 31, 1995 and 1994.
5
<PAGE>
Cincinnati TV 64 Limited Partnership
Notes to Financial Statements (in thousands)
- --------------------------------------------------------------------------------
8. Commitments and Contingencies
Employment Agreement
As a result of the Partnership's execution of the Option Agreement
(Note 9) in 1994, the Partnership and the general partner, ABRY
Communications II, L.P., amended an employment agreement which entitled
certain key employees to appreciation rights payable upon either a
change in control of the Partnership or the payment of certain partner
cash distributions. Previously, the employees vested in these rights at
the rate of 20% per year from the date the rights were granted, except
that they vested fully at the time the rights became payable. Amounts
due to the employees in connection with those rights were determined by
a formula which considers appreciation in the value of the Partnership.
Under the amendment, such employees received payments in lieu of the
appreciation rights discussed above. Compensation expense of $862 was
recognized for compensation related to these rights during the year
ended December 31, 1994. An accrual for $700 for compensation related
to these rights which were paid in January 1995, was included in
accrued expenses at December 31, 1994.
Broadcast License Agreements
Broadcast rights acquired under license agreements are recorded as an
asset and a corresponding liability at the inception of the license
period. In addition to these broadcast rights payable at December 31,
1995, the Partnership has $7,769 of commitments to acquire broadcast
rights for which the license period has not commenced and, accordingly,
for which no liability has been recorded. Future minimum payments
arising from such commitments outstanding at December 31, 1995, of
which $4,232 represents barter commitments, are as follows:
1996 $ 903
1997 2,221
1998 1,918
1999 1,517
2000 1,210
---------
$ 7,769
=========
Programming
Under the terms of an agreement executed in September 1995 with a
third-party, the Partnership is committed to make available certain
time periods for broadcasting Cincinnati Reds baseball games during
each of the 1996-1998 major league baseball seasons, in exchange for a
fixed fee per game and other defined compensation. The agreement
expires in December 1998 or the earliest date after April 1, 1996 on
which the third-party no longer has the rights to telecast such
baseball games. In 1995, the Partnership generated revenue of $25
related to this agreement.
6
<PAGE>
Cincinnati TV 64 Limited Partnership
Notes to Financial Statements (in thousands)
- -------------------------------------------------------------------------------
Operating Leases
The Partnership assumed a noncancellable operating lease under which
property at its transmission antenna site is leased through 1998.
Charges to operations for this lease aggregated $68 in 1995 and $71 in
1994. As of December 31, 1995, annual minimum lease payments under the
property lease are $61 through 1997.
9. Option Agreement
On May 24, 1994, the Partnership entered into an agreement whereby the
Partnership granted a third-party an option to acquire the assets of
the station for an amount equal to the lesser of the outstanding debt
as of the exercise date, including accrued interest thereon, or
$11,000. The acquiring entity will assume all other liabilities of the
station. In conjunction with the option agreement, the Partnership
entered into an agreement with the third-party whereby the Partnership
would pay the third-party a consulting fee of $250 per year as long as
the option is outstanding. Charges to operations related to this
agreement were $250 in 1995 and $127 in 1994.
The third-party exercised this option in January 1996. The transaction
is subject to regulatory approval. As a result of the exercise of this
option, all debt of the station is classified as current at December
31, 1995, in accordance with the Partnership's loan agreements (Note
6).
7
