SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________________
Commission file number 33-98436
SULLIVAN BROADCASTING COMPANY, INC.
- - - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1719496
--------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
18 Newbury Street, Boston, MA 02116
- - - ------------------------------------ ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (617) 369-7755
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
--- ---
As of September 30, 1996, the Company had 520,105 shares of Common Stock
outstanding. The Company's Common Stock is not publicly traded and does not
have a quantifiable market value.
Page 1 of 18 pages
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (SEE NOTE 1)
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
The Company
Predecessor ---------------------------------------
December 31, 1995 December 31, 1995 September 30, 1996
----------------- ----------------- ------------------
(unaudited)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,584 $ -- $ 8,046
Restricted cash -- 126,916 --
Due from related party -- 390 --
Accounts receivable, net of
allowance for doubtful
accounts of $983 and
$1,472 28,943 -- 21,537
Current portion of
programming rights 8,943 -- 21,829
Current deferred tax asset -- -- 8,223
Prepaid expenses and other
current assets 213 -- 1,154
-------- -------- --------
Total current assets 41,683 127,306 60,789
Property and equipment, net 20,399 -- 45,830
Programming rights, net of
current portion 10,852 -- 27,182
Deferred loan costs, net of
accumulated amortization of
$2,219, $21 and $1,218 3,769 7,439 11,703
Deferred tax asset 7,326 236 --
Other assets and intangible
assets, net 50,797 -- 600,185
-------- -------- --------
Total assets $134,826 $134,981 $745,689
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (cont.)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
The Company
Predecessor ---------------------------------------
December 31, 1995 December 31, 1995 September 30, 1996
----------------- ----------------- ------------------
(unaudited)
<S> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of program-
ming contracts payable $ 12,788 $ -- $ 22,110
Current portion of senior
debt 24,078 -- 15,252
Current income taxes
payable 1,961 4 1,795
Interest payable 515 356 7,367
Due to related parties -- 2,184 7,630
Accounts payable 1,482 -- 2,332
Accrued expenses 4,239 3,289 2,913
-------- -------- --------
Total current liabilities 45,063 5,833 59,399
Senior debt, net of current
portion 38,898 -- 204,748
Borrowings under revolving
line of credit -- -- 51,500
Subordinated debt 100,000 125,000 125,185
Programming contracts
payable, net of current
portion 12,542 -- 25,009
Deferred tax liability
and other liabilities 450 -- 90,269
-------- -------- --------
Total liabilities 196,953 130,833 556,110
-------- -------- --------
Preferred stock(Predecessor) 26,386 -- --
-------- -------- --------
Commitments and contingencies
Shareholders' equity (deficit):
Common stock (Predecessor) 16 -- --
Common stock, $.01 par
value; 800,000 shares
authorized; 520,105
shares issued and
outstanding -- 5 5
Additional paid-in capital 3,767 5,196 206,797
Accumulated deficit (92,296) (1,053) (17,223)
-------- -------- --------
Total shareholders'
equity (deficit) (88,513) 4,148 189,579
-------- -------- --------
Total liabilities and
shareholders' equity
(deficit) $134,826 $134,981 $745,689
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30,
Predecessor Company Predecessor Company
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues (excluding barter) $25,457 $ 29,643 $ 74,786 $ 87,513
Less - commissions (4,492) (4,929) (13,198) (14,588)
------- -------- -------- --------
Net revenues (excluding barter) 20,965 24,714 61,588 72,925
Barter revenues 1,689 3,765 5,199 10,798
------- -------- -------- --------
Total net revenues 22,654 28,479 66,787 83,723
------- -------- -------- --------
Expenses
Operating expenses 2,954 3,875 7,980 11,774
Selling, general and administrative 5,361 5,266 16,131 16,392
Amortization of programming rights 3,992 7,004 12,415 19,020
Depreciation and amortization 2,670 14,266 8,807 36,337
------- -------- -------- --------
14,977 30,411 45,333 83,523
------- -------- -------- --------
Operating income (loss) 7,677 (1,932) 21,454 200
Interest expense, including
amortization of deferred
loan costs 4,445 9,505 13,415 26,088
Other expenses (income) 205 100 233 100
------- -------- -------- --------
Income (loss) before
income taxes 3,027 (11,537) 7,806 (25,988)
Income tax (expense) benefit (345) 4,380 (799) 9,818
------- -------- -------- --------
Net income (loss) $ 2,682 $ (7,157) $ 7,007 $(16,170)
======= ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited-dollars in thousands)
<TABLE>
<CAPTION>
Class B-2 Additional Total
Common stock paid-in Accumulated shareholders'
Shares Amount capital deficit equity
------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 (Company) 520,105 $ 5 $ 5,196 $ (1,053) $ 4,148
Additional investment by shareholder - - 201,601 - 201,601
Net loss (Unaudited) - - - (16,170) (16,170)
------- ------ -------- -------- --------
Balance at September 30, 1996 520,105 $ 5 $206,797 $(17,223) $189,579
======= ====== ======== ======== ========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral
part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited-dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
Predecessor Company
1995 1996
----------- -------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) $ 7,007 $ (16,170)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Deferred income taxes - (9,818)
Depreciation of property, plant
and equipment 2,154 5,612
Amortization of intangible assets 6,654 30,725
Amortization of programming rights
(excluding barter) 7,438 8,861
Payments for programming rights (6,731) (6,583)
Amortization of deferred loan costs 666 1,197
Loss on disposal of fixed assets 19 -
Changes in assets and liabilities:
Decrease in accounts receivable 6,619 7,442
Decrease (increase) in prepaid expenses
and other assets 75 (1,118)
Increase in intangible assets (7,419) -
Increase in due to related parties - 5,966
Increase (decrease) in income taxes payable 134 (962)
Increase in interest payable - 7,028
Increase (decrease) in accounts payable
and other accrued liabilities 2,674 (5,010)
-------- ---------
Net cash provided by operating activities 19,290 27,170
-------- ---------
Cash flows from investing activities:
Decrease in restricted cash - 126,916
Acquisition of Act III Broadcasting, Inc.,
net of cash acquired - (550,045)
Payment for purchase options - (2,800)
Acquisition of WFXV assets - (650)
Acquistion of WMSN - (26,500)
Acquistion of WUXP - (26,950)
Capital expenditures (4,918) (2,228)
-------- ---------
Net cash used for investing activities (4,918) (482,257)
-------- ---------
Cash flows from financing activities:
Payment of principal amounts (13,235) -
Proceeds from term debt - 220,000
Proceeds from revolver borrowings - 51,500
Proceeds from stockholder contribution - 201,601
Advance buydown of programming rights - (4,396)
Payment of debt issuance costs - (5,572)
-------- ---------
Net cash (used) provided by financing activities (13,235) 463,133
Net increase in cash and cash equivalents 1,137 8,046
Cash and cash equivalents, beginning of period 3,295 -
-------- ---------
Cash and cash equivalents, end of period $ 4,432 $ 8,046
======== =========
</TABLE>
For supplemental disclosures of cash flow information see Note 5 to
Consolidated Financial Statements.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On January 4, 1996, all of the outstanding capital stock of Act III
Broadcasting, Inc. ("Act III" or the "Predecessor") was purchased by and Act
III was merged with and into A-3 Acquisition, Inc. ("A-3"), with Act III
surviving such merger (the "Acquisition"). Act III then changed its name to
Sullivan Broadcasting Company, Inc. (together with its subsidiaries, the
"Company"). The Acquisition was accounted for by the purchase method of
accounting. The results of operations of Act III for the period from
January 1, 1996 through January 4, 1996 have been included in the results of
operations of the Company for the nine months ended September 30, 1996 due
to the immateriality of such results in relation to the Company's financial
statements taken as a whole. Such results are as follows:
<TABLE>
<S> <C>
Net revenues $832,000
Operating expenses 178,000
Selling, general &
administrative expenses 219,000
Operating income 435,000
</TABLE>
The accompanying consolidated financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations. However, the Company believes that the
disclosures herein are adequate and that the information presented is not
misleading. It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto
included in A-3's latest annual report on Form 10-K for the year ended
December 31, 1995 and the Company's quarterly report on Form 10-Q for the
quarters ended March 31, 1996 and June 30, 1996. The information furnished
reflects all adjustments (consisting only of normal, recurring adjustments)
which are, in the opinion of management, necessary to make a fair statement
of the results for the interim period. Certain amounts recorded in
connection with accounting for the Acquisition are subject to adjustment
based upon the final valuation of certain assets and liabilities acquired.
Such adjustments are not expected to be material to the consolidated
financial statements. The results for these interim periods are not
necessarily indicative of results to be expected for the full fiscal year,
due to seasonal factors, among others.
For comparative purposes, the December 31, 1995 balance sheet of both Act
III and A-3 have been included. In addition, the results of operations and
of cash flows for the nine months ended September 30, 1995 for Act III have
also been presented. A-3 was not incorporated until June 1995 and did not
have any operations for a comparable nine month period ended September 30,
1995.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
------------ -------------
<S> <C> <C>
Land $ 1,771,000 $ 1,366,000
Broadcasting equipment 32,335,000 38,816,000
Buildings and improvements 8,006,000 5,750,000
Furniture and other equipment 4,144,000 2,979,000
Construction in progress 1,457,000 2,531,000
------------ -----------
47,713,000 51,442,000
Less: Accumulated depreciation
and amortization (27,314,000) (5,612,000)
------------ -----------
$ 20,399,000 $45,830,000
============ ===========
</TABLE>
3. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
Amortization December 31, September 30,
Period 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Goodwill 40 Years $ 25,919,000 $222,122,000
Affiliation agreements 10 Years 18,260,000 98,447,000
Non-competition
agreements 5 - 10 Years 20,875,000 --
Canadian cable rights 10 Years 22,826,000 59,000,000
Commercial advertising
contracts 15 years -- 139,273,000
FCC licenses 15 years -- 81,264,000
Other intangible assets 5 - 15 Years 21,931,000 30,584,000
------------ ------------
109,811,000 630,690,000
Less: Accumulated amortization (59,157,000) (30,725,000)
------------ ------------
$ 50,654,000 $599,965,000
============ ============
</TABLE>
4. LONG TERM DEBT
On January 4, 1996, concurrent with the Acquisition, the Company borrowed
$220,000,000 under a term loan and $4,000,000 under a revolving credit
facility to finance the Acquisition. Both the term loan and the revolving
credit facility bear interest at LIBOR plus an applicable margin determined
quarterly based upon the Company's leverage ratio for the preceding quarter.
The revolving credit facility provides for borrowings up to $30,000,000 for
working capital purposes, and is due on December 31, 2003 or upon repayment
of the term loan. At September 30, 1996, there were $25,000,000 in
borrowings outstanding on the revolving line of credit.
The term loan is payable in varying quarterly installments beginning
December 31, 1996 through 2003. The future repayments of the term loan are
as follows:
<TABLE>
<C> <C>
1996 $ 5,500,000
1997 13,002,000
1998 21,010,000
1999 33,000,000
2000 44,000,000
Thereafter 103,488,000
</TABLE>
In addition, certain mandatory prepayments of the term loan are required if
the Company achieves certain financial results at the end of the fiscal
year. No such mandatory prepayments are payable at September 30, 1996.
In January 1996, the Company entered into various interest rate protection
agreements based upon LIBOR rates and a notional value equal to the
anticipated outstanding term debt levels through the year 2000.
In connection with the term loan and the revolving credit facility, the
Company also has a $75,000,000 line of credit available for future
acquisitions (collectively, the "Senior Credit Facility"). At September 30,
1996, there were $26,500,000 in borrowings outstanding on the acquisition
line of credit.
The Senior Credit Facility requires the Company to comply with certain
covenants. At September 30, 1996, the Company was in compliance with all
covenants.
5. INCOME TAXES
The provisions for taxes for the interim periods were based on projections
of total year pre-tax income.
As discussed in Note 1, the Acquisition was accounted for by the purchase
method of accounting which requires that all assets acquired and liabilities
assumed be recorded at their fair value. For tax purposes, the assets
acquired and liabilities assumed retain their historical basis resulting in
a basis differential. The resulting basis differential and acquired net
operating loss carryforwards together with changes in deferred tax assets
and liabilities for the period and net operating losses generated during the
period give rise to the net deferred tax asset and liability recorded at
September 30, 1996.
At the date of the Acquisition, the Company had net operating loss
carryforwards of approximately $94,344,000 for federal income tax purposes,
available to reduce future taxable income. To the extent not used, federal
net operating loss carryforwards expire in varying amounts beginning in
2002. In addition, the Company had net operating loss carryforwards of
approximately $79,189,000 for state and local income tax purposes in various
jurisdictions.
An entity that undergoes a "change in ownership" pursuant to Section 382 of
the Internal Revenue Code is subject to limitations on the amount of its net
operating loss carryforwards which may be used in the future. The
Acquisition resulted in a change in ownership pursuant to Section 382.
Management has estimated that the limitation on the net operating loss
carryforwards will not have a material adverse impact on the Company's
consolidated financial position or results of operation.
6. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company paid interest of $9,075,000 and $17,863,000 during the periods
ended September 30, 1995 and September 30, 1996, respectively.
During the periods ended September 30, 1995 and September 30, 1996,
programming rights increased $12,820,000 and $11,715,000 respectively, due
to the assumption of programming liabilities.
During the periods ended September 30, 1995 and September 30, 1996, the
Company paid approximately $685,000 and $1,209,000 respectively, for state
and local income taxes.
7. COMMITMENTS AND CONTINGENCIES
The Company has executed contracts for programming rights totaling
approximately $21,905,000 and $15,589,000 at December 31, 1995 and September
30, 1996, respectively, for which the broadcast period has not begun.
Accordingly, the asset and related liability are not recorded at such dates.
The Company has operating lease agreements for land, office space, office
equipment and other property which expire on various dates through 2005.
Rental expense was $503,000 and $289,000 for the periods ending September
30, 1995 and September 30, 1996, respectively.
The Company has no postretirement or postemployment benefit plans.
8. RELATED PARTY TRANSACTIONS
The Company reimburses ABRY Partners, Inc. ("ABRY"), an entity related
through common ownership, approximately $5,000 per month, representing the
Company's allocated share of rent paid by ABRY under its lease and other
general expenses including utilities, property insurance and supplies. In
addition, the Company has a management agreement with ABRY whereby the
Company pays ABRY a management fee of $250,000 annually. Such amounts have
been included in "Selling, general and administrative" expenses in the
Company's consolidated statements of operations. In addition, certain
liabilities assumed in the Acquisition were paid during the first quarter by
the Company's parent, Sullivan Broadcast Holdings, Inc.
9. SIGNIFICANT EVENTS
On February 7, 1996, the Company executed an asset purchase agreement to
acquire certain assets of Mohawk Valley Broadcasting, Inc. and Acme T.V.
Corporation, the owners/operators of two television stations in Utica, NY.
The total purchase price of this acquisition was $400,000. In addition, the
Company paid $2,600,000 for the option to purchase the remaining assets of
the stations upon FCC approval. The Company concurrently executed a Time
Brokerage Agreement to operate the stations pending FCC approval of the
acquisition. On June 24, 1996 the acquisition of the remaining assets was
consumated subsequent to the receipt of FCC approval and the payment of
$250,000.
On February 22, 1996, the Company executed a Time Brokerage Agreement with
Central Tennessee Broadcasting Corporation pursuant to which the Company
programs WXMT-TV in Nashville, TN. In conjunction with this agreement, the
Company also paid $200,000 for an option to purchase certain assets of
Central Tennessee Broadcasting Corporation, with an option to buy the
station should applicable FCC regulations allow dual ownership in a single
market. In July 1996, the acquisition of these certain assets was completed
for $26,950,000.
On February 28, 1996, the Company executed a definitive purchase agreement
to acquire all the assets of Channel 47 Limited Partnership in Madison, WI
for a total purchase price of $26,500,000, pending FCC approval. Subsequent
to FCC approval, this transaction was consummated on July 1, 1996.
10. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data are based upon
the historical results of operations of Act III for the nine month period
ended September 30, 1995 adjusted to give effect to the Acquisition as if it
had occurred on January 1, 1995:
<TABLE>
<S> <C>
Net revenue $67,606
Net loss 22,805
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company's revenues are derived principally from local and national
advertisers. Additional revenues are derived from commercial production and
rental of broadcast towers. Increased ratings and strong advertiser demand
have contributed to the Company's successful revenue growth. Also, the
Company has developed sales marketing programs, implemented to enhance the
image of the Company's television stations (the "Stations"), including local
"Kids Expos" and live remote broadcasts, promotional advertising print
supplements and joint marketing events with local businesses and radio stations.
The Company's operating revenues are generally highest in the fourth
quarter of each year. This seasonality is primarily attributable to
increased expenditures by advertisers in anticipation of holiday retail
spending and an increase in viewership during the Fall/Winter season.
Accordingly, accounts receivable balances as of the end of each of the first
three calendar quarters are generally substantially less than the balances
as of the end of the year. Each of the Company's Stations generates positive
Broadcast Cash Flow, defined as operating income plus depreciation,
amortization, barter expenses and corporate expenses less payments for
programming rights and barter revenue.
The Company's principal costs of operations are employee salaries and
commissions, programming, production, promotion and other expenses (such as
maintenance, supplies, insurance, rent and utilities). The Company has
historically experienced net losses primarily as a result of non-cash
charges attributable to amortization of intangibles that were recorded at
the time of the purchase of the Stations. The Company's amortization of
programming rights has historically exceeded the Company's payments for
programming rights due to the write-up of programming assets which occurred
upon the respective acquisitions of the Stations. This historic trend will
continue with the write-up of such assets in conjunction with the January 4,
1996 Acquisition. In addition, the Company has paid in advance of scheduled
programming liabilities certain excess programming rights acquired as a
result of the aforementioned Acquisition.
Results of Operations
Three Months Ended September 30, 1995 of Act III (the "1995 Three Months")
Compared to Three Months Ended September 30, 1996 of the Company (the "1996
Three Months")
Set forth below are selected consolidated financial data for the three
months ended September 30, 1995 of Act III and September 30, 1996 of the
Company and the percentage changes between the periods.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
Predecessor Company
1995 1996 Percentage
(in thousands) Change
---------------------- ----------
<S> <C> <C> <C>
Net revenues (excluding barter) $20,965 $24,714 17.9%
Barter revenues 1,689 3,765 122.9
Total net revenues 22,654 28,479 25.7
Operating expenses 2,954 3,875 31.2
Selling, general
and administrative expenses 5,361 5,266 (1.8)
Depreciation and amortization 6,662 21,270 219.3
Operating income (loss) 7,677 (1,932) (125.2)
Interest expense 4,445 9,505 113.8
Net income (loss) 2,682 (7,157) (366.9)
Payments for programming rights 2,070 2,314 11.8
Broadcast Cash Flow 10,648 13,984 31.3
</TABLE>
Net revenues (excluding barter) are net of commissions and primarily
include local and national/Canadian spot advertising sales. Net revenues
(excluding barter) increased to $24,714,000 in the 1996 Three Months from
$20,965,000 in the 1995 Three Months, an increase of $3,749,000 or 17.9%.
This increase is due to reduced national sales representative commission
rates which commenced concurrent with the Acquisition and increasing
advertising spot rates. Advertising revenues for the 1996 Three Months were
comprised of 48.3% from local advertising sales and 51.7% from national/
Canadian advertising sales.
Local revenues include gross revenues before commissions from local or
regional advertisers or their representative agencies. Local and regional
areas encompass a station's designated market area and its outlying areas.
Local revenues increased to $14,129,000 in the 1996 Three Months from
$10,852,000 in the 1995 Three Months, an increase of $3,277,000, or 30.2%.
The increase was primarily due to increased ratings as well as strong
advertising demand.
National/Canadian revenues include gross revenues before commissions
from national and Canadian advertisers or their representative agencies.
National advertisers are advertisers outside of a station's local market or
region. National/Canadian revenues increased to $15,117,000 in the 1996
Three Months from $14,206,000 in the 1995 Three Months, an increase of
$911,000, or 6.4%. As with local revenues, national/Canadian revenues
increased primarily due to improved ratings and strong advertising demand.
Barter revenues increased to $3,765,000 in the 1996 Three Months
from 1,689,000 in the 1995 Three Months, an increase of $2,076,000, or
122.9%. This increase was primarily due to the increase in the value of
barter programming rights related to the purchase accounting and resulting
increase in the revenue recognized therefrom.
Operating expenses include engineering, promotion, production,
programming operations and trade expenses. Operating expenses increased to
$3,875,000 in the 1996 Three Months from $2,954,000 in the 1995 Three
Months, an increase of $921,000. The increase is due to the WXLV
affiliation switch from Fox Broadcasting Company to the American
Broadcasting Company, Inc. in September 1995, as the Company is now
producing local news at WXLV, which increased operating expenses by $437,000
during the 1996 Three Months. Additionally, due to the acquisitions made
during the period and the execution of the Time Brokerage Agreement in
February 1996, operating expenses were further increased as compared to the
1995 Three Months.
Selling, general and administrative expenses include sales, salaries,
commissions, insurance, supplies and general management salaries. Selling,
general and administrative expenses decreased to $5,266,000 in the 1996
Three Months from $5,361,000 in the 1995 Three Months, a decrease of
$95,000, or 1.8%. This decrease is the result of reduced corporate
overhead, offset somewhat by higher salary costs due to an overall headcount
increase.
Depreciation and amortization includes depreciation of property and
equipment, amortization of programming rights and amortization of
intangibles. Depreciation and amortization increased to $21,270,000 in the
1996 Three Months from $6,662,000 in the 1995 Three Months, an increase of
$14,608,000, or 219.3%, due to the increase in value of all fixed assets,
programming rights and intangible assets in conjunction with the
Acquisition, and other acquisitions made during the period.
Operating income decreased to a loss of $1,932,000 in the 1996 Three
Months compared to income of $7,677,000 in the 1995 Three Months, a decrease
of $9,609,000, due to the reasons discussed above.
Interest expense includes interest charged on all outstanding debt and
the amortization of debt issuance costs over the life of the underlying
debt. The $5,060,000 increase for the 1996 Three Months as compared to the
1995 Three Months is the result of interest costs incurred on the debt
utilized to fund the Acquisition and additional borrowings to fund other
acquisitions made during the period.
Net income decreased to a net loss of $7,157,000 in the 1996 Three
Months compared to net income of $2,682,000 in the 1995 Three Months, a
decrease of $9,839,000, due to the reasons discussed above.
Payments for programming rights increased to $2,314,000 in the 1996
Three Months from $2,070,000 in the 1995 Three Months, an increase of
$244,000, or 11.8%. This increase is attributable to the acquisition of
certain stations in 1996, offset somewhat by a reduction in the amount of
programming required to be paid by the Company due to the buydown of certain
excess programming liabilities in conjunction with the Acquisition,
increased Fox and United Paramount network programming, and an overall
decrease in the cost per program due to the competitive pricing of
programming.
Broadcast Cash Flow increased to $13,984,000 in the 1996 Three Months
from $10,648,000 in the 1995 Three Months, an increase of $3,336,000,
primarily due to the aforementioned increases in revenue with a smaller
proportional increase in operating, selling, general and administrative
expenses in the aggregate. The Company believes that Broadcast Cash Flow is
important in measuring the Company's financial results and its ability to pay
principal and interest on its debt because broadcasting companies traditionally
have large amounts of non-cash expense attributable to amortization of
programming rights and other intangibles. Broadcast Cash Flow does not
purport to represent cash provided by operating activities as reflected in
the Company's consolidated financial statements, is not a measure of
financial performance under generally accepted accounting principles, and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
Nine Months Ended September 30, 1995 of Act III (the "1995 Nine Months")
Compared to Nine Months Ended September 30, 1996 of the Company (the "1996
Nine Months")
Set forth below are selected consolidated financial data for the nine months
ended September 30, 1995 of Act III and September 30, 1996 of the Company
and the percentage changes between the periods.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
Predecessor Company
1995 1996 Percentage
(in thousands) Change
---------------------- ----------
<S> <C> <C> <C>
Net revenues (excluding barter) $61,588 $ 72,925 18.4%
Barter revenues 5,199 10,798 107.7
Total net revenues 66,787 83,723 25.4
Operating expenses 7,980 11,774 47.5
Selling, general
and administrative expenses 16,131 16,392 1.6
Depreciation and amortization 21,222 55,357 160.8
Operating income 21,454 200 (99.1)
Interest expense 13,415 26,088 94.5
Net income (loss) 7,007 (16,170) (330.8)
Payments for programming rights 6,731 6,583 (2.2)
Broadcast Cash Flow 30,953 40,524 30.9
</TABLE>
Net revenues (excluding barter) are net of commissions and primarily
include local and national/Canadian spot advertising sales. Net revenues
(excluding barter) increased to $72,925,000 in the 1996 Nine Months from
$61,588,000 in the 1995 Nine Months, an increase of $11,337,000 or 18.4%.
This increase is due to reduced national sales representative commission
rates which commenced concurrent with the Acquisition and increasing
advertising spot rates. Advertising revenues for the 1996 Nine Months were
comprised of 47.6% from local advertising sales and 52.4% from
national/Canadian advertising sales.
Local revenues include gross revenues before commissions from local or
regional advertisers or their representative agencies. Local and regional
areas encompass a station's designated market area and its outlying areas.
Local revenues increased to $41,021,000 in the 1996 Nine Months from
$32,045,000 in the 1995 Nine Months, an increase of $8,976,000, or 28.0%.
The increase was primarily due to increased ratings as well as strong
advertising demand.
National/Canadian revenues include gross revenues before commissions
from national and Canadian advertisers or their representative agencies.
National advertisers are advertisers outside of a station's local market or
region. National/Canadian revenues increased to $45,098,000 in the 1996
Nine Months from $41,312,000 in the 1995 Nine Months, an increase of
$3,786,000 or 9.2%. As with local revenues, national/Canadian revenues
increased primarily due to improved ratings and strong advertising demand.
Barter revenues increased to $10,798,000 in the 1996 Nine Months from
$5,199,000 in the 1995 Nine Months, an increase of $5,599,000, or 107.7%.
This increase was primarily due to the increase in the value of barter
programming rights related to the application of purchase accounting and
resulting increase in the revenue recognized therefrom.
Operating expenses include engineering, promotion, production,
programming operations and barter expenses. Operating expenses increased to
$11,774,000 in the 1996 Nine Months from $7,980,000 in the 1995 Nine Months,
an increase of $3,794,000. The increase is due to the WXLV affiliation
switch from Fox Broadcasting Company to the American Broadcasting Company,
Inc. in September 1995, as the Company is now producing local news at WXLV,
which increased operating expenses by $1,339,000 during the 1996 Nine
Months. Additionally, due to the acquisitions made during the period and
the execution of the Time Brokerage Agreement in February 1996,
operating expenses were further increased as compared to the 1995 Nine
Months.
Selling, general and administrative expenses include sales, salaries,
commissions, insurance, supplies and general management salaries. Selling,
general and administrative expenses increased to $16,392,000 in the 1996
Nine Months from $16,131,000 in the 1995 Nine Months, an increase of
$261,000, or 1.6%. This increase is the result of higher salary costs due
to an overall headcount increase, offset somewhat by reduced corporate
overhead.
Depreciation and amortization includes depreciation of property and
equipment, amortization of programming rights and amortization of
intangibles. Depreciation and amortization increased to $55,357,000 in the
1996 Nine Months from $21,222,000 in the 1995 Nine Months, an increase of
$34,135,000, or 160.8%, due to the increase in value of all fixed assets,
programming rights and intangible assets in conjunction with the
Acquisition, and other acquisitions made during the period.
Operating income decreased to $200,000 in the 1996 Nine Months from
$21,454,000 in the 1995 Nine Months, a decrease of $21,254,000, due to the
reasons discussed above.
Interest expense includes interest charged on all outstanding debt and
the amortization of debt issuance costs over the life of the underlying
debt. The $12,673,000 increase for the 1996 Nine Months as compared to the
1995 Nine Months is the result of interest costs incurred on the debt
utilized to fund the Acquisition and additional borrowings to fund other
acquisitions made during the period.
Net income decreased to a net loss of $16,170,000 in the 1996 Nine
Months compared to net income of $7,007,000 in the 1995 Nine Months, a
decrease of $23,177,000, due to the reasons discussed above.
Payments for programming rights decreased to $6,583,000 in the 1996
Nine Months from $6,731,000 in the 1995 Nine Months, a decrease of $148,000
or 2.2%. This decrease is attributable to a reduction in the amount of
programming required to be paid by the Company due to the buydown of certain
excess programming liabilities in conjunction with the Acquisition,
increased Fox and United Paramount network programming, and an overall
decrease in the cost per program due to the competitive pricing of
programming.
Broadcast Cash Flow increased to $40,524,000 in the 1996 Nine Months
from $30,953,000 in the 1995 Nine Months, an increase of $9,571,000,
primarily due to the aforementioned increases in revenue with a smaller
proportional increase in operating, selling, general and administrative
expenses in the aggregate. The Company believes that Broadcast Cash Flow is
important in measuring the Company's financial results and its ability to pay
principal and interest on its debt because broadcasting companies traditionally
have large amounts of non-cash expense attributable to amortization of
programming rights and other intangibles. Broadcast Cash Flow does not
purport to represent cash provided by operating activities as reflected in
the Company's consolidated financial statements, is not a measure of
financial performance under generally accepted accounting principles, and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
Liquidity and Capital Resources
The Company's primary source of liquidity is cash provided by
operations. Cash provided by operations during the 1996 Nine Months was
$27,170,000 compared to $19,290,000 in the 1995 Nine Months. The increase
in the Company's cash flow is attributable primarily due to the Company's
improved operating results, with revenue increases proportionally higher
than cash expense increases.
Cash provided by operations is after payments for programming rights,
which amounted to $6,583,000 and $6,731,000, respectively, for the 1996 Nine
Months and the 1995 Nine Months. The Company has program payment
commitments (including contracts not yet recordable as assets and excluding
barter contracts) of $44,262,000, which are payable in installments of
$5,182,000 in 1996, $12,305,000 in 1997, $10,747,000 in 1998, $8,596,000 in
1999, $5,044,000 in 2000 and $2,388,000 thereafter.
The Company's primary capital requirements have been for capital
expenditures and acquisitions. Capital expenditures totaled $2,228,000 for
the 1996 Nine Months compared to $4,918,000 for the 1995 Nine Months. The
larger expenditures in 1995 includes the construction of a news facility at
WXLV.
As of September 30, 1996, the Company had outstanding a $220,000,000
senior debt facility (the "Senior Credit Agreement"), with a $30,000,000
revolving credit facility (the "Revolving Credit Facility"), of which
$25,000,000 was outstanding, and a $75,000,000 acquisition credit facility
(the "Acquisition Credit Facility") (collectively, the "Senior Credit
Facility"), of which $26,500,000 was outstanding at September 30, 1996. The
interest rate on all borrowings under the Senior Credit Agreement vary
depending upon either LIBOR or Prime rates, as selected by the Company, with
a margin ranging between 0.0% and 1.5% for Prime borrowings and 1.25% and
2.75% for LIBOR borrowings added based upon the Company's leverage ratio for
the past quarter. The Company has entered into various interest rate
protection agreements based upon LIBOR rates and a notional amount equal to
the full value of the senior debt facility to protect against significant
fluctuations in interest rates through 2000. The Company also has
outstanding $125,000,000 of 10-1/4% senior subordinated notes due December
2005.
The Company believes that it will be able to meet its required
principal payments in the future through funds generated from its
operations. If the funds generated from the Company's operations are
insufficient to meet its required principal payments, the Company will
explore other financing alternatives.
The indenture to the senior subordinated notes and the Senior Credit
Facility of the Company contain covenants which, among other restrictions,
require the maintenance of certain financial ratios (including cash flow
ratios), restrict asset purchases and the encumbrances of existing assets,
require lender approval for proposed acquisitions, and limit the incurrence
of additional indebtedness and the payment of dividends.
Based upon current operations, the Company anticipates the cash flow
from operations combined with the cash on hand will be adequate to meet its
requirements for current and foreseeable levels of operation. There can,
however, be no assurance that future developments or economic trends will
not adversely affect the Company's operations.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
(a) Exhibits
The following exhibits are filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
Number Exhibit
- - - ------- -------
10.1 Second Amendment to Credit Agreement and Limited Waiver and Consent
dated as of July 10, 1996 by and among Sullivan Broadcasting
Company, Inc. as successor to A-3 Holdings, Nations Bank of Texas,
N.A. nd certain other lenders.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SULLIVAN BROADCASTING COMPANY, INC.
(Registrant)
Novenber 14, 1996 By: /S/ Patrick Bratton
---------------------------------
Patrick Bratton
Vice President - Finance
(Principal Financial and
Chief Accounting Officer)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment"),
dated as of July 10, 1996, is entered into by and among Sullivan
Broadcasting Company, Inc., a Delaware corporation formerly known as Act III
Broadcasting, Inc. and successor by merger to A-3 Acquisition, Inc. ("SBC"),
Sullivan Broadcast Holdings, Inc., a Delaware corporation formerly known as
A-3 Holdings, Inc., the Lenders parties hereto, and NationsBank of Texas,
N.A., as Administrative Agent for the Lenders and as a Lender, with
reference to the hereinafter described Credit Agreement. Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed to
them in such Credit Agreement.
RECITALS
A. A-3 Acquisition, Inc., a Delaware corporation ("A-3 Acquisition"),
A-3 Holdings, Inc., a Delaware corporation, the Administrative Agent, the
other members of the Agent Group and the Lenders entered into that certain
Credit Agreement, dated January 4, 1996 (as amended, modified, restated,
supplemented, renewed, extended, rearranged or substituted from time to
time, the "Credit Agreement").
B. Pursuant to the Credit Agreement, the Lenders made Loans to A-3
Acquisition to enable it to consummate the Act III Acquisition.
C. SBC and A-3 Acquisition have merged and SBC is the surviving
corporation of such merger. Pursuant to an Assumption Agreement, dated
January 4, 1996, SBC has expressly assumed and ratified all of the
obligations of A-3 Acquisition under the Credit Agreement and the other Loan
Documents to which A-3 Acquisition is a party and the due and punctual
performance and observance of all the obligations to be performed and
provisions to be observed by A-3 Acquisition under the Credit Agreement and
such other Loan Documents. Pursuant to such merger and such Assumption
Agreement, SBC is now the "Borrower" under the Credit Agreement.
D. The Borrower has caused its Wholly Owned Subsidiary, Sullivan
Broadcasting of Nashville, Inc. ("SBN"), to enter into a time brokerage
agreement with Central Tennessee Broadcasting Corporation ("CTBC"), pursuant
to which SBN is providing programming for, and selling advertising on,
broadcast television station WXMT-TV, Nashville, Tennessee ("WXMT-TV").
Such transaction was part of a restatement and restructuring of the
Nashville Acquisition referred to in the Credit Agreement, as evidenced by
the Amended and Restated Option Agreement referred to in Paragraph E below.
In connection with the consummation of the transactions contemplated by such
Amended and Restated Option Agreement, the Borrower will cause to be formed
a new indirect subsidiary of the Borrower, Sullivan Broadcasting of
Tennessee, Inc., a Delaware corporation ("SBT").
E. Pursuant to that certain Amended and Restated Option Agreement,
dated as of February 22, 1996 (the "Amended and Restated Option Agreement"),
by and among ABRY Broadcast Partners II, L.P., CTBC, M.T. Communications,
Inc., Michael P. Thompson, the Parent and the Borrower (which subsequently
assigned certain of its rights thereunder to Mission Broadcasting I, Inc.,
a Delaware corporation ("Mission I")), Mission I intends to acquire from
CTBC all of CTBC's right, title and interest in and to certain assets
relating to WXMT-TV, including, without limitation, all FCC Licenses (such
transaction is referred to herein as the "Mission I Nashville Acquisition").
As contemplated by the Amended and Restated Option Agreement, the Borrower
desires to cause (i) SBN or SBT to enter into a new time brokerage agreement
with Mission I immediately upon consummation of the Mission I Nashville
Acquisition, pursuant to which SBN or SBT will provide programming for, and
sell advertising on, WXMT-TV (such transaction is referred to herein as the
"SBN-Mission I Nashville LMA Transaction") and, immediately thereafter,
(ii) SBT to merge with CTBC, with SBT continuing as the surviving
corporation.
F. The Borrower has previously entered into a time brokerage agreement
with Guilford Telecasters, Inc.("GTI"), pursuant to which the Borrower is
providing programming for, and selling advertising on, television broadcast
station WGGT-TV, Winston-Salem, North Carolina ("WGGT-TV").
G. Mission Broadcasting II, Inc., a Delaware corporation ("Mission
II"), as the assignee of the Borrower, is a party to that certain Option
Agreement, dated as of June 30, 1995, originally entered into by and between
GTI and Robert A. Finkelstein (who assigned his rights thereunder to the
Borrower). Pursuant to such Option Agreement, Mission II intends to acquire
from GTI all assets used or useful in the operation of WGGT-TV, including,
without limitation, all FCC Licenses (such transaction is referred to herein
as the "Mission II Winston-Salem Acquisition"). The Borrower desires to
enter into, or cause a Subsidiary of the Borrower to enter into, a new time
brokerage agreement with Mission II, pursuant to which the Borrower or such
Subsidiary will provide programming for, and sell advertising on, WGGT-TV
(such transaction is referred to herein as the "SBC-Mission II Winston-Salem
LMA Transaction").
H. NationsBank of Texas, N.A., individually and not as a Lender under
the Credit Agreement (in such capacity, "NationsBank"), has agreed, subject
to certain terms and conditions, to make (i) a term loan in the amount of up
to $3,200,000 to Mission I (the "Mission I Loan") in order to enable it to
consummate the Mission I Nashville Acquisition and (ii) a term loan in the
amount of up to $1,000,000 to Mission II (the "Mission II Loan") in order to
enable it to consummate the Mission II Winston-Salem Acquisition. As
conditions to making the Mission I Loan and Mission II Loan, NationsBank has
required, among other things, (i) that the Borrower execute and deliver
Guaranty Agreements (the "Mission Guaranty Agreements") guarantying all
obligations of Mission I and Mission II under or in connection with the
Mission I Loan and Mission II Loan, respectively, (ii) that the Majority
Lenders consent to the Borrower's execution and delivery of such Guaranty
Agreements and (iii) that the Majority Lenders acknowledge and agree that
the Borrower's obligations under such Guaranty Agreements shall be part of
the Obligations under the Credit Agreement and, as such, shall be secured by
all collateral now or hereafter securing such Obligations.
I. The Borrower, the Parent and the Majority Lenders entered into that
certain First Amendment to Credit Agreement and Limited Waiver and Consent
dated as of May 24, 1996, (i) consenting to the Borrower's execution and
delivery of the Mission Guaranty Agreements and waiving the applicable
Credit Agreement provision prohibiting the same, (ii) amending the Credit
Agreement to provide that the Borrower's obligations under the Mission
Guaranty Agreements shall be part of the Obligations under the Credit
Agreement and (iii) amending the Credit Agreement in certain other respects
as described therein.
J. The Borrower, the Parent and the Lenders parties hereto wish to
enter into this Second Amendment in order to further amend the Credit
Agreement (i) to provide that a default by the Borrower in the payment or
performance of any of the "Guaranty Obligations" under and as that term is
defined in each of the Mission Guaranty Agreements shall, in each case,
constitute an Event of Default under the Credit Agreement and (ii) to revise
Annex 1 to the Credit Agreement to update the Lender information set forth
therein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
Section 1. AMENDMENTS TO CREDIT AGREEMENT
Subject to the terms and conditions set forth herein, and in reliance
upon the representations and warranties of the Borrower and the Parent
herein contained, the Borrower, the Parent and the Lenders parties hereto,
who constitute not less than the Majority Lenders, hereby amend the Credit
Agreement as follows:
(a) Default under Mission Guaranty Agreements Added as Event of
Default. Section 9(e) of the Credit Agreement is hereby amended by
inserting the following immediately prior to the word "provided" in the
eighteenth line thereof:
or (iv) the Borrower shall default in the payment or performance of
any of the "Guaranty Obligations" under and as that term is defined in
each of the Mission Guaranty Agreements;
(b) Annex 1 Updated. Annex 1 to the Credit Agreement is hereby
deleted in its entirety and replaced with the Annex 1 attached hereto and
incorporated herein by this reference, which replacement Annex 1 sets forth
revised and updated information with respect to the Lenders.
Section 2. REPRESENTATIONS AND WARRANTIES
The Borrower and the Parent hereby represent and warrant to the
Administrative Agent and the Lenders that the following statements are true
and correct in all material respects on and as of the date hereof:
(a) Incorporation of Credit Agreement Representations and Warranties.
The representations and warranties contained in Section 5 of the Credit
Agreement are true and correct in all material respects on and as of the
date hereof, both before and after giving effect to this Second Amendment.
(b) Absence of Default. Both before and after giving effect to this
Second Amendment, no event has occurred or will occur that constitutes a
Default under the Credit Agreement.
(c) Enforceability. This Second Amendment constitutes a legal,
valid, and binding obligation of the Borrower and the Parent, enforceable in
accordance with the terms hereof.
Section 3. MISCELLANEOUS
(a) Ratification and Confirmation of Loan Documents. Except as
specifically amended hereby, the Credit Agreement and other Loan Documents
remain in full force and effect and are hereby ratified and confirmed by the
Borrower and the Parent, and the execution and delivery of this Second
Amendment shall not, except as expressly provided herein, operate as an
amendment or waiver of any right, power or remedy of the Administrative
Agent, the Lenders or the Managing Agents under the Credit Agreement or
operate as an approval of the terms and conditions of any agreement of the
Borrower or any Subsidiary.
(b) Fees and Expenses. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Administrative Agent in connection with
the preparation, reproduction, execution, and delivery of this Second
Amendment, including, without limitation, the reasonable fees and out-of-
pocket expenses of counsel for the Administrative Agent.
(c) Headings. Section and subsection headings in this Second
Amendment are included herein for convenience of reference only and shall
not constitute a part of this Second Amendment for any other purpose or be
given any substantive effect.
(d) APPLICABLE LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
(e) Counterparts. This Second Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
an original, but all such counterparts together shall constitute but one and
the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature
pages are physically attached to the same document.
(f) FINAL AGREEMENT. THIS SECOND AMENDMENT, TOGETHER WITH THE CREDIT
AGREEMENT AND OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Remainder of Page Intentionally Left Blank; Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
SULLIVAN BROADCASTING COMPANY, INC.
By: /s/ ROYCE G. YUDKOFF
Name: Royce G. Yudkoff
Title: Vice President
SULLIVAN BROADCAST HOLDINGS, INC.
By: /s/ ROYCE G. YUDKOFF
Name: Royce G. Yudkoff
Title: Vice President
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent and as a Lender
By: /s/ GREGORY MEADOR
Name: Gregory I. Meador
Title: Vice President
BANKERS TRUST COMPANY,
as a Lender
By: /s/ GINA S. THOMPSON
Name: Gina S. Thompson
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By: /s/ M S Denomme
Name: M. S. Denomme
Title: VP
CHEMICAL BANK,
as a Lender
By: /s/ JUDITH E. SMITH
Name: Judith E. Smith
Title: VP
HELLER FINANCIAL, INC.,
as a Lender
By: /s/ JOANN L. HOLMAN
Name: Joann L. Holman
Title: Assistant Vice President
NEW YORK LIFE INSURANCE COMPANY,
as a Lender
By: /s/ ADAM G. CLEMENS
Name: Adam G. Clemens
Title: Investment Vice President
BANK OF AMERICA ILLINOIS,
as a Lender
By: /s/ CARL F. SALAS
Name: Carl F. Salas
Title: Vice President
BANK OF MONTREAL, CHICAGO BRANCH,
as a Lender
By: /s/ ALLEGRA B. GRIFFITHS
Name: Allegra B. Griffiths
Title: Director
BANQUE FRANCAISE DU COMMERCE EXTERIEUR,
as a Lender
By: /s/ WILLIAM C. MAIER
Name: William C. Maier
Title: VP-Group Manager
By: /s/ BJC
Name: Brian J. Cumberland
Title: Assistant Treasurer
BANQUE PARIBAS,
as a Lender
By: /s/ ERROL R. ANTZIS
Name: Errol R. Antzis
Title: Group Vice President
CIBC INC.,
as a Lender
By: /s/ P.G. SMITH
Name: Peter G. Smith
Title: Managing Director, CIBC Wood
Gundy Securities Corp., as
agent.
CORESTATES BANK, N.A.,
as a Lender
By: /s/ EDWARD L. BUTTRELL
Name: Edward L. Buttrell
Title: Vice President
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC., as a Lender
By: /s/ ANTHONY R. CLEMENTE
Name: Anthony R. Clemente
Title: Authorized Signatory
THE NIPPON CREDIT BANK, LTD., LOS
ANGELES AGENCY, as a Lender
By: /s/ BERNARDO E. CORREA-HENSCHKE
Name: Bernardo E. Correa-Henschke
Title: Vice President & Senior
Manager
FLEET NATIONAL BANK,
formerly known as Shawmut Bank
Connecticut, N.A.,
as a Lender
By: /s/ LYNNE S. RANDALL
Name: Lynne S. Randall
Title: Vice President
SOCIETE GENERALE,
as a Lender
By: /s/ JOHN SADIK-KHAN
Name: John Sadik-Kahn
Title: Vice President
THE TRAVELERS INSURANCE COMPANY,
as a Lender
By: /s/ JORDAN M. STITZER
Name: Jordan M. Stitzer
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.,
successor by merger to Union Bank,
as a Lender
By: /s/ B. ADAM TROUT
Name: B. Adam Trout
Title: Asst. Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST, as a Lender
By: /s/ BRENDAN DAY
Name:
Title:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY, as a Lender
By: /s/ JOHN E. SCHLIFSKE
Name: John E. Schlifske
Title: Vice President
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION, as a Lender
By: /s/ ADAM G. CLEMENS
Name: Adam G. Clemens
Title: Investment Vice President
AERIES FINANCE LTD.,
as a Lender
By:
Name:
Title
SENIOR DEBT PORTFOLIO,
By: Boston Management and Research,
as Investment Advisor
By: /s/ JEFFREY S. GARNER
Name: Jeffrey S. Garner
Title: Vice President
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V., as a Lender
By: Chancellor Senior Secured Management
Inc., as Portfolio Advisor
By: /s/ GREGORY L. SMITH
Name: Gregory L. Smith
Title: Vice President
NATIONSBANK, N.A. (CAROLINAS),
as a Lender
By: /s/ GREG MEADOR
Name: Greg Meador
Title: Vice President
BANK OF AMERICA NT & SA,
as a Lender
By: /s/ CARL F. SALAS
Name: Carl F. Salas
Title: Vice President
INDOSUEZ CAPITAL FUNDING II, LIMITED,
as a Lender
by Indosuez Capital as Portfolio Advisor
By: /s/ FRANCOIS BERTHELOT
Name: Francois Berthelot
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,046
<SECURITIES> 0
<RECEIVABLES> 23,009
<ALLOWANCES> 1,472
<INVENTORY> 0
<CURRENT-ASSETS> 60,789
<PP&E> 51,442
<DEPRECIATION> 5,612
<TOTAL-ASSETS> 745,689
<CURRENT-LIABILITIES> 59,399
<BONDS> 125,185
0
0
<COMMON> 5
<OTHER-SE> 189,574
<TOTAL-LIABILITY-AND-EQUITY> 745,689
<SALES> 87,513
<TOTAL-REVENUES> 98,311
<CGS> 0
<TOTAL-COSTS> 98,111
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,088
<INCOME-PRETAX> (25,988)
<INCOME-TAX> 9,818
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,170)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
