<PAGE>
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 June 30, 1997
------------------------------------
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
33-98434
SULLIVAN BROADCASTING COMPANY, INC.
-----------------------------------
and
---
SULLIVAN BROADCAST HOLDINGS, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
58-1719496
Delaware 04-3289279
------------------------------- -------------------
(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 June 30, 1997, Sullivan Broadcasting Company, Inc. had 520,105 shares of
Common Stock outstanding, all of which is owned by Sullivan Broadcast Holdings,
Inc. Sullivan Broadcasting Company, Inc.'s Common Stock is not publicly traded
and does not have a quantifiable market value.
As of June 30, 1997, Sullivan Broadcast Holdings, Inc. had the following
outstanding shares of common stock: 1,201,577 shares of Class B-1 Common Stock,
6,158,211 shares of Class B-2 Common Stock, and 853,854 shares of Class C Common
Stock. Sullivan Broadcast Holdings, Inc.'s Common Stock is not publicly traded
and does not have a quantifiable market value.
IMPORTANT EXPLANATORY NOTE
This integrated Form 10-Q is filed pursuant to the Securities Exchange
Act of 1934, as amended, for each of Sullivan Broadcast Holdings, Inc., a
Delaware corporation, and its wholly owned subsidiary, Sullivan Broadcasting
Company, Inc., a Delaware corporation. Unless the context requires otherwise,
references to the "Company" refer to both Sullivan Broadcast Holdings, Inc. and
Sullivan Broadcasting Company, Inc. Sullivan Broadcast Holdings, Inc. is a
holding company with minimal separate operations from its operating subsidiary,
Sullivan Broadcasting Company, Inc. Separate financial information has been
provided for each entity, and, where appropriate, separate disclosures.
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (SEE NOTE 1)
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
----------------------------- -----------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- -------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,443 $ 6,469 $ 5,667 $ 5,675
Accounts receivable, net of
allowance for doubtful
accounts of $1,297 and
$1,432 31,686 31,686 27,803 27,803
Current portion of
programming rights 23,360 23,360 16,463 16,463
Current deferred tax asset 3,968 4,535 3,968 4,535
Prepaid expenses and other
current assets 733 733 1,224 1,262
-------- -------- -------- --------
Total current assets 66,190 66,783 55,125 55,738
Property and equipment, net 44,454 44,454 41,978 41,978
Programming rights, net of
current portion 21,319 21,319 15,566 15,566
Deferred loan costs, net of
accumulated amortization of
$793, $1,238, $1,224 and $1,993 12,292 14,016 11,861 13,261
Intangible assets, net 591,085 590,972 575,253 575,140
-------- -------- -------- --------
Total assets $735,340 $737,544 $699,783 $701,683
======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
2
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
----------------------------- -----------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- -------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of program-
ming contracts payable $ 24,281 $ 24,281 $ 18,960 $ 18,961
Current portion of senior
debt 18,583 18,583 20,439 20,439
Current income taxes
payable 2,910 2,865 1,777 1,732
Current interest payable 4,362 4,362 2,100 2,100
Due to related parties 7,080 -- 6,450 --
Accounts payable 1,925 1,925 2,640 2,640
Accrued expenses 3,650 3,771 2,863 2,956
-------- -------- -------- --------
Total current liabilities 62,791 55,787 55,229 48,828
Senior debt, net of current
portion 195,917 195,917 181,799 181,799
Borrowings under revolving
line of credit 56,500 56,500 63,500 63,500
Subordinated debt 125,185 155,326 125,185 155,585
Interest payable -- 4,942 -- 7,614
Programming contracts
payable, net of current
portion 20,392 20,392 14,045 14,045
Deferred taxes and other liabilities 86,705 84,124 82,271 78,171
-------- -------- -------- --------
Total liabilities 547,490 572,988 522,029 549,542
15% Cumulative redeemable
preferred stock, non-voting,
$.001 par value - authorized
10,000,000 shares; 1,150,000
shares issued and outstanding -- 111,483 -- 123,247
-------- -------- -------- --------
Commitments and
contingencies
Shareholders' equity (deficit):
Common stock, $.01 par
value; 800,000 shares
authorized; 520,105
shares issued and
outstanding 5 -- 5 --
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Class B-1 common stock,
$.001 par value; 25,000,000
shares authorized; 1,204,077
and 1,201,577 shares issued
and outstanding at
December 31, 1996 and
March 31, 1997, respectively -- 1 -- 1
Class B-2 common stock,
$.001 par value; 25,000,000
shares authorized; 6,158,211
shares issued and outstanding
at December 31, 1996 and June
30, 1997, respectively -- 6 -- 6
Class C common stock, $.001
par value; 5,000,000 shares
authorized; 896,229 and
853,854 shares issued and
outstanding at December 31,
1996 and June 30, 1997,
respectively -- 1 -- 1
Additional paid-in capital 206,797 76,861 206,797 65,057
Accumulated deficit (18,952) (23,796) (29,048) (36,171)
-------- -------- -------- --------
Total shareholders'
equity 187,850 53,073 177,754 28,894
-------- -------- -------- --------
Total liabilities and
shareholders' equity $735,340 $737,544 $699,783 $701,683
======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
4
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------
1996 1997
--------------------------------------------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
<S> <C> <C> <C> <C>
Revenues (excluding barter) $31,828 $31,828 $36,319 $36,319
Less - commissions (5,330) (5,330) (5,863) (5,863)
------- ------- ------- -------
Net revenues (excluding 26,498 26,498 30,456 30,456
barter)
Barter revenues 4,487 4,487 4,480 4,480
------- ------- ------- -------
Total net revenues 30,985 30,985 34,936 34,936
------- ------- ------- -------
Expenses
Operating expenses 4,134 4,134 4,323 4,323
Selling, general and
administrative 5,582 5,645 6,826 7,258
Amortization of
programming rights 6,587 6,587 7,607 7,607
Depreciation and
amortization 10,483 10,329 11,736 11,736
------- ------- ------- -------
26,786 26,695 30,492 30,924
------- ------- ------- -------
Operating income 4,199 4,290 4,444 4,012
Interest expense, including
amortization of debt discount
and deferred loan costs 8,453 9,922 9,046 10,694
Other expense (income) (12) (12) 48 47
------- ------- ------- -------
Loss before benefit
for income taxes (4,242) (5,620) (4,650) (6,729)
Benefit for income taxes 1,796 1,796 1,123 1,955
------- ------- ------- -------
Net loss $(2,446) $(3,824) $(3,527) $(4,774)
======= ======= ======= =======
<CAPTION>
Six Months Ended June 30,
-----------------------------------------------------------
1996 1997
-----------------------------------------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdngs, Inc. Company, Inc. Holdings, Inc.
<S> <C> <C> <C> <C>
Revenues (excluding barter) $ 57,870 $ 57,870 $ 66,716 $ 66,716
Less - commissions (9,659) (9,659) (10,989) (10,989)
------------- -------- -------- --------
Net revenues (excluding 48,211 48,211 55,727 55,727
barter)
Barter revenues 7,033 7,033 8,642 8,642
------------- -------- -------- --------
Total net revenues 55,244 55,244 64,369 64,369
------------- -------- -------- --------
Expenses
Operating expenses 7,899 7,899 8,991 8,991
Selling, general and
administrative 11,126 11,263 13,221 13,765
Amortization of
programming rights 12,016 12,016 14,615 14,615
Depreciation and
amortization 22,071 22,071 23,991 23,991
------------- -------- -------- --------
53,112 53,249 60,818 61,362
------------- -------- -------- --------
Operating income 2,132 1,995 3,551 3,007
Interest expense, including
amortization of debt discount
and deferred loan costs 16,583 19,202 17,914 21,169
Other expense (income) 0 0 9 8
------------- -------- -------- --------
Loss before benefit
for income taxes (14,451) (17,207) (14,372) (18,170)
Benefit for income taxes 5,438 5,438 4,276 5,795
------------- -------- -------- --------
Net loss $ (9,013) $(11,769) $(10,096) $(12,375)
============= ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
5
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Class B-1 Class B-2 Class C
Common Stock Common Stock Common Stock
------------------------ --------------------- ---------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ------------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sullivan Broadcasting
Company, Inc.
Balance at
December 31, 1996 -- -- 520,105 $5 -- --
Net loss -- -- -- -- -- --
---------- ----------- ------------- ------ ------- -----------
Balance at
June 30, 1997 -- -- 520,105 $5 -- --
========== =========== ============= ====== ======= ===========
Sullivan Broadcast
Holdings, Inc.
Balance at
December 31, 1996 1,204,077 $1 6,158,211 $6 896,229 $1
Repurchase of Class
B-1 Common Stock (2,500) -- -- -- -- --
Repurchase of Class
C Common Stock -- -- -- -- (47,375) --
Issuance of Class
Common Stock -- -- -- -- 5,000 --
Accretion of Preferred
Stock -- -- -- -- -- --
Net loss -- -- -- -- -- --
---------- ----------- ------------- ------ ------- -----------
Balance at
June 30, 1997 1,201,577 $1 6,158,211 $6 853,854 $1
========== =========== ============= ====== ======= ===========
<CAPTION>
Additional Total
Paid-in Accumulated Shareholders'
Capital Deficit Equity
--------- ------------- -------------
<S> <C> <C> <C>
Sullivan Broadcasting
Company, Inc.
Balance at
December 31, 1996 $206,797 $ (18,952) $187,850
Net loss -- (10,096) (10,096)
-------- --------- --------
Balance at
June 30, 1997 $206,797 $(29,048) $177,754
======== ========= ========
Sullivan Broadcast
Holdings, Inc.
Balance at
December 31, 1996 $ 76,861 $(23,796) $ 53,073
Repurchase of Class
B-1 Common Stock (25) -- (25)
Repurchase of Class
C Common Stock (27) -- (27)
Issuance of Class
Common Stock 12 -- 12
Accretion of Preferred
Stock (11,764) -- (11,764)
Net loss -- (12,375) (12,375)
-------- --------- --------
Balance at
June 30, 1997 $ 65,057 $(36,171) $ 28,894
======== ========= ========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these financial statements.
6
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------------------------------
1996 1997
----------------------------- -------------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Cash Flows from operating activities:
Net Loss $ (9,013) $ (11,769) $(10,096) $(12,375)
Adjustments to reconcile net loss to
net cash provided by operating
actitivies:
Deferred income taxes (5,302) (5,302) (4,276) (5,795)
Depreciation of property, plant
and equipment 3,621 3,621 4,203 4,203
Amortization of intangible assets 18,450 18,450 19,788 19,788
Amortization of programming rights 5,476 5,476 6,669 6,669
Payments for programming rights (4,269) (4,269) (5,687) (5,687)
Amortization of debt discount and
deferred loan costs 798 1,107 431 1,014
Changes in assets and liabilities:
Decrease in accounts receivable 4,670 4,670 4,139 4,139
Decrease in prepaid expenses
and other assets (1,052) (1,052) (414) (452)
Increase (decrease) in due to related
parties 5,930 (2,847) (630) --
Decrease in income taxes payable (962) (962) (1,133) (1,133)
Increase (decrease) in interest
payable 3,169 5,488 (2,262) 410
Decrease in accounts payable, accrued
expenses and other liabilities (3,600) (5,281) (230) (257)
-------- --------- --------- --------
Net cash provided by operating
activities 17,916 7,330 10,502 10,524
-------- --------- --------- --------
Cash Flow from investing activities:
Decrease in restricted cash 126,916 162,599 -- --
Increase in other assets (17,252) (17,260) -- --
Acquistion of Cascom stock -- -- (4,371) (4,371)
Acquistion of Act III Broadcasting, Inc.
net of cash acquired (550,045) (550,045) -- --
Payment for purchase options (2,800) (2,800) -- --
Acquistion of WFXV assets (650) (650) -- --
Capital expenditures (1,129) (1,129) (1,645) (1,645)
-------- --------- --------- --------
Net cash used for investing activities (444,960) (409,285) (6,016) (6,016)
-------- --------- --------- --------
Cash flows from investing activities:
Payment of principal amounts -- -- (12,262) (12,262)
Proceeds from term debt 220,000 220,000 -- --
Proceeds from revolver borrowings, net 22,000 22,000 7,000 7,000
Proceeds from stockholder contribution 201,601 -- -- --
Proceeds from issuance of common stock -- 61,641 -- 12
Repurchase of common stock -- (52) -- (52)
Proceeds from issuance of preferred
stock, net -- 115,000 -- --
Advance buydown of programming rights (4,396) (4,396) -- --
Payment of debt issuance costs (5,572) (5,649) -- --
-------- --------- --------- --------
Net cash provided by (used for)
financing activities 433,633 408,544 (5,262) (5,302)
Net increase (decrease) in cash
and cash equivalents 6,589 6,589 (776) (794)
Cash and cash equivalents, beginnning
of period -- -- 6,443 6,469
-------- --------- --------- --------
Cash and cash equivalents, end of Period $ 6,589 $ 6,589 $ 5,667 $ 5,675
======== ========= ========= ========
</TABLE>
For supplemental disclosures of cash flow information see Note 5 to Consolidated
Financial Statements (unaudited).
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
7
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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. 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 six months ended June 30, 1996 due to the
immateriality of such results in relation to the Company's financial statements
taken as a whole.
The accompanying consolidated financial statements as of and for the six months
ended June 30, 1997 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 the Companys' latest annual reports on Form 10-K for the year ended December
31, 1996 and the Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1997. 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. 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.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
----------- ---------
(in thousands)
<S> <C> <C>
Land $ 1,385 $ 1,386
Broadcasting equipment 39,978 42,243
Buildings and improvements 6,262 6,282
Furniture and other equipment 3,070 3,134
Construction in progress 1,624 960
----------- ---------
52,319 54,005
Less: Accumulated depreciation
and amortization (7,865) (12,027)
----------- ---------
$44,454 $ 41,978
----------- ---------
=========== =========
</TABLE>
8
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
Amortization December 31, June 30,
Period 1996 1997
------------- ------------------------------ -------------------------------
(in thousands)
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Goodwill 40 Years $231,607 $231,494 $233,014 $232,901
Affiliation agreements 10 Years 98,445 98,445 98,445 98,445
Canadian cable rights 10 Years 59,000 59,000 59,000 59,000
Commercial advertising
contracts 15 years 148,986 148,986 150,750 150,750
FCC licenses 15 years 81,297 81,297 81,297 81,297
Other intangible assets 5 - 15 years 11,936 11,936 12,721 12,721
-------- -------- -------- --------
631,271 631,158 635,227 635,114
Less: Accumulated amortization (40,186) (40,186) (59,974) (59,974)
-------- -------- -------- --------
$591,085 $590,972 $575,253 $575,140
======== ======== ======== ========
</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.
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 June 30, 1997, $53,500,000 in
borrowings were outstanding on the acquisition line of credit.
The term loan is payable in varying quarterly installments beginning December
31, 1997 through 2003. The repayments of the term loan are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1997 $ 6,321
1998 20,428
1999 32,086
2000 42,781
2001 43,744
Thereafter 113,378
</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.
9
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
The Senior Credit Facility requires the Company to comply with certain
covenants. A June 30, 1997, 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 give rise to the net deferred tax asset and
liability recorded at June 30, 1997.
At December 31, 1996, Sullivan Broadcasting Company, Inc. and Sullivan
Broadcast Holdings, Inc. had net operating loss carryforwards of
approximately $93,977,000 and $99,700,000, respectively, 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 2003. In addition, at December 31, 1996 Sullivan Broadcasting
Company, Inc. and Sullivan Broadcast Holdings, Inc. had net operating loss
carryforwards of approximately $85,810,000 and $91,533,000, respectively,
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 $12,520,000 and $ 19,745,000 during the periods
ending June 30, 1996 and June 30, 1997.
During the periods ended June 30, 1996 and June 30, 1997, programming rights
increased $2,080,000 and $583,000 respectively, due to the assumption of
cash programming liabilities.
During the periods ended June 30, 1996 and June 30, 1997, the Company paid
approximately $962,000 and $1,134,000 respectively, for state and local
income taxes.
7. COMMITMENTS AND CONTINGENCIES
The Company has executed contracts for programming rights totaling
approximately $18,004,000 and $16,394,000 at December 31, 1996 and June 30,
1997, 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 $96,000 and $189,000 for the periods ending June 30, 1996
and June 30 1997, respectively.
10
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. RELATED PARTY TRANSACTIONS
The Company reimburses ABRY Partners, Inc. ("ABRY"), an entity related
through common ownership, approximately $6,100 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 were paid during the first quarter of 1996 by Sullivan Broadcast
Holdings, Inc.
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"), conducts local
"Kids Expos" and live remote broadcasts, publishes promotional advertising
print supplements and participates in 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 JUNE 30, 1996 (THE "1996 THREE MONTHS") COMPARED TO THREE
MONTHS ENDED JUNE 30, 1997 OF THE COMPANY (THE "1997 THREE MONTHS")
Set forth below are selected consolidated financial data of the Company for
the three months ended June 30, 1996 and June 30, 1997 and the percentage
changes between the periods.
11
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------------------
1996 1997 Percentage Change
---------------------------- ----------------------------- -------------------------------
Sullivan Sullivan Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- -------------- ------------- -------------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues (excluding barter) $26,498 $26,498 $30,456 30,456 14.9% 14.9%
Barter revenues 4,487 4,487 4,480 4,480 (0.2) (0.2)
Total net revenues 30,985 30,985 34,936 34,936 12.8 12.8
Operating expenses 4,134 4,134 4,323 4,323 4.6 4.6
Selling, general
and administrative expenses 5,582 5,645 6,826 7,258 22.3 28.6
Depreciation and amortization 17,070 16,916 19,343 19,343 13.3 14.3
Operating income 4,199 4,290 4,444 4,012 5.8 (6.5)
Interest expense 8,453 9,922 9,046 10,694 7.0 7.8
Net loss 2,446 3,824 3,527 4,774 44.2 24.8
Payments for programming rights 2,061 2,061 2,908 2,908 41.1 41.1
Broadcast Cash Flow 15,514 15,514 17,686 17,686 14.0 14.0
</TABLE>
Net revenues (excluding barter) are net of commissions and primarily include
local/Canadian and national spot advertising sales. Net revenues (excluding
barter) increased to $30,456,000 in the 1997 Three Months from $26,498,000 in
the 1996 Three Months, an increase of $3,958,000 or 14.9%. This increase is
primarily due to additional net revenues from the WMSN station acquisition in
July of 1996. Additionally, net revenues were further increased by higher
advertising spot rates which were positively impacted by the improving economy,
resulting in greater advertising spending, along with higher key demographic
ratings from additional Fox programming and other syndicated and first run
programming. Advertising revenues for the 1997 Three Months were comprised of
58.8% from local/Canadian advertising sales and 41.2% from national 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 $20,850,000 in the 1997 Three Months from $17,590,000 in
the 1996 Three Months, an increase of $3,260,000 or 18.5%. The increase was
primarily due to increased ratings as well as strong advertising demand along
with additional revenues from the WMSN station acquisition in July of 1996.
National revenues include gross revenues before commissions from national
advertisers or their representative agencies. National advertisers are
advertisers outside of a station's local market or region. National revenues
increased to $14,596,000 in the 1997 Three Months from $13,819,000 in the 1996
Three Months, an increase of $777,000, or 5.6%. As with local revenues,
national revenues increased primarily due to improved ratings and strong
advertising demand along with additional revenues from the WMSN station
acquisition in July of 1996.
Barter revenues decreased to $4,480,000 in the 1997 Three Months from
$4,487,000 in the 1996 Three Months, a decrease of $7,000, or .2%. This
decrease was primarily due to decreased barter advertising spots as a result of
stronger advertising demand in 1997 compared to 1996.
Operating expenses include engineering, promotion, production and programming
operations. Operating expenses increased to $4,323,000 in the 1997 Three Months
from $4,134,000 in the 1996 Three Months, an increase of $189,000. This
increase was the result of additional expenses associated with the WMSN station
acquistion in July of 1996.
12
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Selling, general and administrative expenses include sales, salaries,
commissions, insurance, supplies and general management salaries. Selling,
general and administrative expenses increased to $6,826,000 and $7,258,000 in
the 1997 Three Months from $5,582,000 and $5,645,000 in the 1996 Three Months,
increases of $1,244,000, and $1,613,000 or 22.3% and 28.6% for Sullivan
Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively.
These increases were primarily the result of higher salary costs associated with
wage and commission increases and an overall headcount increase due to station
acquisitions in the second half of 1996.
Depreciation and amortization includes depreciation of property and
equipment, amortization of programming rights and amortization of intangibles.
Depreciation and amortization increased to $19,343,000 in the 1997 Three Months
from $17,070,000 and $16,916,000 in the 1996 Three Months, increases of
$2,273,000, and $2,427,000 or 13.3% and 14.3% for Sullivan Broadcasting Company,
Inc. and Sullivan Broadcast Holdings, Inc., respectively. These increases were
due to the addition of fixed assets, programming rights and intangible assets in
conjunction with the WMSN and Cascom acquisitions made during 1996 and 1997,
respectively.
Operating income increased to $4,444,000 and decreased to $4,012,000 in the
1997 Three Months from $4,199,000 and $4,290,000 in the 1996 Three Months, an
increase of $245,000, and a decrease of $278,000 or 5.8% and 6.5% for Sullivan
Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively.
The increase in Sullivan Broadcasting Company, Inc. operating income was the
result of stronger revenues while the decrease in Sullivan Broadcast Holdings,
Inc. operating was attributable to slightly higher operating, depreciation,
amortization and selling, gerneral and administrative expenses during this
period.
Interest expense includes interest charged on all outstanding debt and the
amortization of debt issuance costs and debt discount over the life of the
underlying debt. The increases of $593,000 and $772,000 or 7.0% and 7.8% for
the 1997 Three Months as compared to the 1996 Three Months for Sullivan
Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively,
were the result of interest costs incurred on the additional borrowings utilized
to fund the WMSN and Cascom acquisitions, further increased by the compounding
of unpaid interest related to the Sullivan Broadcast Holdings, Inc. debt.
Net loss increased to $3,527,000 and $4,774,000 in the 1997 Three Months from
$2,446,000 and $3,824,000 in the 1996 Three Months, increases of $1,081,000 and
$950,000 for Sullivan Broadcasting Company, Inc. and Sullivan Broadcast
Holdings, Inc., respectively, due to the reasons discussed above.
Payments for programming rights increased to $2,908,000 in the 1997 Three
Months from $2,061,000 in the 1996 Three Months, an increase of $847,000, or
41.1%. This increase was attributable to increased programming requirements
related to the programming of the WUXP LMA and the WMSN station.
Broadcast Cash Flow increased to $17,686,000 in the 1997 Three Months from
$15,514,000 in the 1996 Three Months, an increase of $2,172,000, primarily due
to the aforementioned increases in revenue with a smaller proportional increase
in the aggregate for operating and selling, general and administrative expenses.
Barter expense was $248,000 and $312,000 for the 1997 Three Months and the 1996
Three Months, respectively. Corporate expense was $1,039,000 and $482,000 for
the 1997 Three Months and the 1996 Three Months, respectively. 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.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (THE "1996 SIX MONTHS") COMPARED TO SIX MONTHS
ENDED JUNE 30, 1997 OF THE COMPANY (THE "1997 SIX MONTHS")
Set forth below are selected consolidated financial data of the Company for the
six months ended June 30, 1996 and June 30, 1997 and the percentage changes
between the periods.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------
1996 1997 Percentage Change
----------------------------- ----------------------------- ------------------------------
Sullivan Sullivan Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- -------------- ------------- -------------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues (excluding barter) $48,211 $48,211 $55,727 $55,727 15.6% 15.6%
Barter revenues 7,033 7,033 8,642 8,642 22.9 22.9
Total net revenues 55,244 55,244 64,369 64,369 16.5 16.5
Operating expenses 7,899 7,899 8,991 8,991 13.8 13.8
Selling, general
and administrative expenses 11,126 11,263 13,221 13,765 18.8 22.2
Depreciation and amortization 34,087 34,087 38,606 38,606 3.3 13.3
Operating Income 2,132 1,995 3,551 3,007 66.6 50.7
Interest expense 16,583 19,202 17,914 21,169 8.0 10.2
Net loss 9,013 11,769 10,096 12,375 12.0 5.1
Payments for programming rights 4,269 4,269 5,687 5,687 33.2 33.2
Broadcast Cash Flow 26,540 26,540 30,320 30,320 14.2 14.2
</TABLE>
Net revenues (excluding barter) are net of commissions and primarily include
local/Canadian and national spot advertising sales. Net revenues (excluding
barter) increased to $55,727,000 in the 1997 Six Months from $48,211,000 in the
1996 Six Months, an increase of $7,516,000 or 15.6%. This increase was
primarily due to additional net revenues from the WMSN station acquisition in
July of 1996. Additionally, net revenues were further increased by higher
advertising spot rates which were positively impacted by the improving economy,
resulting in greater advertising spending, along with higher key demographic
ratings from additional Fox programming and other syndicated and first run
programming. Advertising revenues for the 1997 Six Months were comprised of
58.6% from local/Canadian advertising sales and 41.4% from national 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 $38,055,000 in the 1997 Six Months from $31,319,000 in the
1996 Six Months, an increase of $6,736,000, or 21.5%. The increase was
primarily due to increased ratings as well as strong advertising demand along
with additional revenues from the WMSN station acquisition in July of 1996.
National revenues include gross revenues before commissions from national
advertisers or their representative agencies. National advertisers are
advertisers outside of a station's local market or region. National revenues
increased to $26,930,000 in the 1997 Six Months from $25,554,000 in the 1996 Six
Months, an increase of $1,376,000, or 5.4%. As with local revenues, national
revenues increased primarily due to improved ratings and strong advertising
demand along with additional revenues from the WMSN station acquisition in July
of 1996.
Barter revenues increased to $8,642,000 in the 1997 Six Months from
$7,033,000 in the 1996 Six Months, an increase of $1,609,000, or 22.9%. This
increase was primarily due to increase barter revenue relating to the WMSN
station acquisition along with additional barter revenues generated from the
operation of the WUXP LMA and WFXV station for the full 1997 Six Months compared
to only a portion of the 1996 Six Months.
Operating expenses include engineering, promotion, production and programming
operations. Operating expenses increased to $8,991,000 in the 1997 Six Months
from $7,899,000 in the 1996 Six Months, an increase of $1,092,000. This
increase was the result of additional expenses associated with the WMSN station
and operating the WUXP LMA and WFXV station for the full 1997 Six Months
compared to only a portion of the 1996 Six Months.
14
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Selling, general and administrative expenses include sales, salaries,
commissions, insurance, supplies and general management salaries. Selling,
general and administrative expenses increased to $13,221,000 and $13,765,000 in
the 1997 Six Months from $11,126,000 and $11,263,000 in the 1996 Six Months,
increases of $2,095,000, and $2,502,000 or 18.8% and 22.2% for Sullivan
Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively.
These increases were primarily the result of higher salary costs associated with
wage and commission increases and an overall headcount increase due to the WUXP
LMA and station acquisitions in the second half of 1996.
Depreciation and amortization includes depreciation of property and
equipment, amortization of programming rights and amortization of
intangibles. Depreciation and amortization increased to $38,606,000 in the
1997 Six Months from $34,087,000 in the 1996 Six Months, an increase of
$4,519,000 or 13.3%. This increase was due to the addition of fixed
assets, programming rights and intangible assets in conjunction with the
WMSN and Cascom acquisitions made during 1996 and 1997, respectively.
Operating income increased to $3,551,00 and $3,007,000 in the 1997 Six
Months from $2,132,000 and $1,995,000 in the 1996 Six Months, increases of
$1,419,000, and $1,012,000 or 66.6% and 50.7% for Sullivan Broadcasting
Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively. These
increases were the result of stronger revenues offset somewhat by increases
in operating, depreciation, amortization and selling, general and
administrative expenses in the 1997 Six Months from the 1996 Six Months.
Interest expense includes interest charged on all outstanding debt and
the amortization of debt issuance costs and debt discount over the life of
the underlying debt. The increases of $1,331,000 and $1,967,000 or 8.0% and
10.2% for the 1997 Six Months as compared to the 1996 Six Months for
Sullivan Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc.,
respectively, were the result of interest costs incurred on the additional
borrowings utilized to fund the WUXP LMA and the WFXV, WMSN and Cascom
acquisitions, further increased by the compounding of unpaid interest
related to the Sullivan Broadcast Holdings, Inc. debt.
Net loss increased to $10,096,000 and $12,375,000 in the 1997 Six Months
from $9,013,000 and $11,769,000 in the 1996 Six Months, increases of
$1,083,000 and $606,000 for Sullivan Broadcasting Company, Inc. and Sullivan
Broadcast Holdings, Inc., respectively, due to the reasons discussed above.
Payments for programming rights increased to $5,687,000 in the 1997 Six
Months from $4,269,000 in the 1996 Six Months, an increase of $1,418,000, or
33.2%. This increase was attributable to increased programming requirements
related to the programming of the WMSN station. Programming rights were
further increased as a result of programming the WUXP LMA and WFXV station
for the full 1997 Six Months compared to only a portion of the1996 Six
Months.
Broadcast Cash Flow increased to $30,320,000 in the 1997 Six Months from
$26,540,000 in the 1996 Six Months, an increase of $3,780,000, primarily due to
the aforementioned increases in revenue with a smaller proportional increase in
the aggregate for operating and selling, general and administrative expenses.
Barter expense was $707,000 and $513,000 for the 1997 Six Months and the 1996
Six Months respectively. Corporate expense was $1,785,000 and $1,110,000 for the
1997 Six Months and the 1996 Six Months, respectively. 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.
15
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash provided by
operations. Cash provided by operations during the 1997 Six Months was
$10,489,000 and $10,511,000 compared to $17,916,000 and $7,330,000 for
Sullivan Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc.,
respectively, in the 1996 Six Months. The decrease in Sullivan Broadcasting
Company Inc.'s cash flow and the increase in Sullivan Broadcast Holdings,
Inc.'s cash flow was primarily the result of the timing of cash interest
payments and the non-recurrence of a one-time cash payment associated with
the Acquisition made by Sullivan Broadcast Holdings, Inc. for the benefit of
its wholly owned subsidiary.
Cash provided by operations is after payments for programming rights,
which amounted to $5,687,000 and $4,269,000, respectively, for the 1997 Six
Months and the 1996 Six Months. The Company had program payment commitments
(including contracts not yet recordable as assets) of $37,452,000, which
were payable in installments of $9,246,000 in 1997, $11,166,000 in 1998,
$8,848,000 in 1999, $5,330,000 in 2000, $2,351,000 in 2001 and $511,000
thereafter.
The Company's primary capital requirements have been for capital
expenditures and acquisitions. Capital expenditures totaled $1,645,000 for
the 1997 Six Months compared to $1,129,000 for the 1996 Six Months.
As of June 30, 1997, the Company had outstanding a $202,238,000 senior
debt facility (the "Senior Credit Agreement"), with a $30,000,000 revolving
credit facility (the "Revolving Credit Facility"), of which $10,000,000 was
outstanding at June 30, 1997, and a $75,000,000 acquisition credit facility
(the "Acquisition Credit Facility") (collectively, the "Senior Credit
Facility"), of which $53,500,000 was outstanding at June 30, 1997. 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 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 had
outstanding $125,000,000 of 10-1/4% senior subordinated notes due December
2005, and Sullivan Broadcast Holdings, Inc. had outstanding $35,000,000 of
13-1/4% senior accrual debentures due 2006.
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.
16
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - - ------- --------------------------------
(a) Exhibits
The following exhibits are filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
-------
Number Exhibit
------ -------
10.1 Fourth Supplemental Indenture dated as of January 7, 1997 between
Sullivan Broadcasting Company, Inc. (as successor to A-3) and
State Street Bank and Trust Company as trustee (the "Trustee")
relating to the notes.
10.2 Fourth Amendment to Credit Agreement and Limited Waiver and
Consent dated as of June 26, 1997 by and among Sullivan
Broadcasting Company, Inc. as successor to A-3 Holdings,
Nationsbank of Texas, N.A. and certain other lenders.
10.3 Seventh Supplemental Indenture dated as of January 7, 1997 between
Sullivan Broadcasting Company, Inc. (as successor to A-3) and
State Street Bank and Trust Company as trustee (the "Trustee")
relating to the notes.
(b) No reports on Form 8-K were filed during the period.
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)
August 7, 1997 By: /S/ Patrick Bratton
-----------------------------
Patrick Bratton
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
17
<PAGE>
================================================================================
SULLIVAN BROADCASTING COMPANY, INC.
(as successor to A-3 ACQUISITION, INC.)
As Issuer,
---------
THE SUBSIDIARY GUARANTORS
named herein
AND
STATE STREET BANK AND TRUST COMPANY,
as Trustee
----------
----------------------------------------
FOURTH SUPPLEMENTAL INDENTURE
Dated as of January 7, 1997
----------------------------------------
Supplemental to the Indenture
among
A-3 Acquisition, Inc.,
the Subsidiary Guarantors named therein
and
State Street Bank and Trust Company
dated as of December 21, 1995,
as Supplemented by the
First Supplemental Indenture
dated as of January 5, 1996
the Second Supplemental Indenture
dated as of February 7, 1996
and the Third Supplemental Indenture
dated as of June 30, 1996
================================================================================
<PAGE>
FOURTH SUPPLEMENTAL INDENTURE
FOURTH SUPPLEMENTAL INDENTURE, dated as of January 7, 1997, among SULLIVAN
BROADCASTING COMPANY, INC., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company"), having its principal office at 18
Newbury Street, Boston, Massachusetts 02116, STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company (the "Trustee"), as Trustee under the
Indenture, dated as of December 21, 1995, among A-3 Acquisition, Inc., the
Trustee and the Subsidiary Guarantors named therein (the "Indenture"), and
SULLIVAN BROADCASTING OF BUFFALO, INC., a corporation duly organized and
existing under the laws of the State of Delaware, SULLIVAN BROADCASTING OF
CHARLESTON, INC., a corporation duly organized and existing under the laws of
the State of Delaware, SULLIVAN BROADCASTING OF DAYTON, INC., a corporation duly
organized and existing under the laws of the State of Delaware, SULLIVAN
BROADCASTING OF NASHVILLE, INC., a corporation duly organized and existing under
the laws of the State of Tennessee, SULLIVAN BROADCASTING OF NEVADA, INC., a
corporation duly organized and existing under the laws of the State of Nevada,
SULLIVAN BROADCASTING OF RICHMOND, INC., a corporation duly organized and
existing under the laws of the State of Delaware, SULLIVAN BROADCASTING OF
ROCHESTER, INC., a corporation duly organized and existing under the laws of the
State of Delaware, SULLIVAN BROADCASTING OF TENNESSEE, INC., a corporation duly
organized and existing under the laws of the State of Delaware, SULLIVAN
BROADCASTING OF UTICA, INC., a corporation duly organized and existing under the
laws of the State of Delaware, SULLIVAN BROADCASTING OF WEST VIRGINIA, INC., a
corporation duly organized and existing under the laws of the State of Delaware,
SULLIVAN BROADCASTING MANAGEMENT SERVICES, INC., a corporation duly organized
and existing under the laws of the State of Delaware, and SULLIVAN BROADCASTING
LICENSE CORP., a corporation duly organized and existing under the laws of the
State of Delaware (collectively, the "Subsidiary Guarantors"), each having its
principal office at 18 Newbury Street, Boston, Massachusetts 02116, except for
Sullivan Broadcasting of Nevada, Inc., whose principal office is 1325 Airmotive
Way, Suite 130, Reno, Nevada 89502 and CASCOM INTERNATIONAL, INC., a corporation
duly organized and existing under the laws of the State of Tennessee ("Cascom"].
RECITAL OF THE TRUSTEE
WHEREAS, the Company, the Subsidiary Guarantors and the Trustee are parties
to that certain Indenture, dated as of December 21, 1995, pertaining to
$125,000,000 principal amount of the Company's 10 1/4% Senior Subordinated Notes
due 2005 (including the related guarantees, the "Securities"), as supplemented
by the First Supplemental Indenture dated as of January 5, 1966, the Second
Supplemental Indenture dated as of February 7, 1996 and the Third Supplemental
Indenture dated as of June 30, 1996.
<PAGE>
RECITALS OF THE COMPANY, THE SUBSIDIARY GUARANTORS AND CASCOM
WHEREAS, Cascom is a newly formed, wholly-owned subsidiary of the Company;
WHEREAS, the Company, the Subsidiary Guarantors and Cascom desire, pursuant
to Section 9.01 of the Indenture, to execute this Supplemental Indenture in
order to comply with Section 4.15 of the Indenture; and
WHEREAS, the Company, the Subsidiary Guarantors and Cascom have duly
authorized the execution and delivery of this Supplemental Indenture in order
for Cascom to assume all the obligations of a Subsidiary Guarantor under the
Securities and the Indenture.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree for the equal and proportionate benefit
of all Holders of the Securities, as follows:
Section 1. Cascom hereby assumes all the obligations of a Subsidiary
Guarantor, under the Securities and the Indenture; and Cascom may exercise every
right and power of a Successor Guarantor under the Indenture with the same
effect as if Cascom had been named as a Subsidiary Guarantor therein.
Section 2. Any notice or communication by the Trustee to Cascom shall be
addressed as follows:
Cascom International, Inc.
18 Newbury Street
Boston, Massachusetts 02116
Attn: President
Section 3. From and after the date hereof, the Indenture, as supplemented
by this Supplemental Indenture, shall be read, taken and construed as one and
the same instrument with respect to the Securities.
Section 4. This Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instruments.
* * * * * * *
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year above written.
SULLIVAN BROADCASTING COMPANY, INC.
SULLIVAN BROADCASTING OF TENNESSEE, INC.,
as Guarantor
SULLIVAN BROADCASTING OF BUFFALO, INC.,
as Guarantor
SULLIVAN BROADCASTING OF CHARLESTON, INC.,
as Guarantor
SULLIVAN BROADCASTING OF DAYTON, INC.,
as Guarantor
SULLIVAN BROADCASTING OF NASHVILLE, INC.,
as Guarantor
SULLIVAN BROADCASTING OF NEVADA, INC.,
as Guarantor
SULLIVAN BROADCASTING OF RICHMOND, INC.,
as Guarantor
SULLIVAN BROADCASTING OF ROCHESTER, INC.,
as Guarantor
SULLIVAN BROADCASTING OF UTICA, INC.,
as Guarantor
SULLIVAN BROADCASTING OF WEST VIRGINIA, INC.,
as Guarantor
SULLIVAN BROADCASTING MANAGEMENT SERVICES, INC.,
as Guarantor
SULLIVAN BROADCASTING LICENSE CORP.,
as Guarantor
By: /s/
----------------------------------------
Title: President
CASCOM INTERNATIONAL, INC., as Guarantor
By: /s/
-----------------------------------------
Title: Chief Executive Officer
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Fourth Amendment"), dated
----------------
as of June 26, 1997, is entered into by and among Sullivan Broadcasting Company,
Inc. ("SBC"), a Delaware corporation formerly known as Act III Broadcasting,
---
Inc. and successor by merger to A-3 Acquisition, Inc., Sullivan Broadcast
Holdings, Inc., a Delaware corporation formerly known as A-3 Holdings, Inc. (the
"Parent") and NationsBank of Texas, N.A., as Administrative Agent for the
------
Lenders, on behalf of the Lenders, 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"), the
---------------
Parent, 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, the Parent, the Administrative Agent and the other
Lenders desire to amend the Credit Agreement to reduce the Applicable Margins
thereunder as hereinafter set forth.
E. Section 12.1 of the Credit Agreement authorizes the Administrative
------------
Agent to enter into written amendments to the Credit Agreement with the written
consent of the Lenders.
F. The Administrative Agent has obtained the prior written consent of all
of the Lenders to the reduction of the Applicable Margins under the Credit
Agreement, as evidenced by that certain letter from the Administrative Agent to
the Lenders, dated June 2, 1997, agreed and consented to by each of the Lenders
(the "Consent Letter")
--------------
<PAGE>
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 Administrative Agent, on behalf of
the Lenders as authorized by the Consent Letter, hereby amend the Credit
Agreement as follows:
(a) AMENDMENT TO DEFINITION OF APPLICABLE MARGIN. The definition of
"Applicable Margin" set forth in Section 1.1 of the Credit Agreement is amended
-----------
by deleting the chart set forth therein and replacing in lieu thereof the
following chart:
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------
APPLICABLE MARGIN
- - - -------------------------------------------------------------------------------
STATUS EURODOLLAR LOANS ABR LOANS
- - - -------------------------------------------------------------------------------
<S> <C> <C>
Level I 0.500% 0.000%
Level II 0.750% 0.000%
Level III 0.875% 0.000%
Level IV 1.125% 0.000%
Level V 1.375% 0.250%
Level VI 1.625% 0.500%
Level VII 1.875% 0.750%
- - - -------------------------------------------------------------------------------
</TABLE>
(b) AMENDMENT TO DEFINITION OF LEVEL. The definition of "Level" set forth
in Section 1.1 of the Credit Agreement is amended by deleting the chart set
-----------
forth therein and replacing in lieu thereof the following chart:
LEVEL LEVERAGE RATIO
----- --------------
I Less than or equal to 3.50 to 1.00
II Less than or equal to 4.00 to 1.00 but
greater than 3.50 to 1.00
III Less than or equal to 4.50 to 1.00 but
greater than 4.00 to 1.00
2
<PAGE>
IV Less than or equal to 5.00 to 1.00 but
greater than 4.50 to 1.00
V Less than or equal to 5.50 to 1.00 but
greater than 5.00 to 1.00
VI Less than or equal to 6.00 to 1.00 but
greater than 5.50 to 1.00
VII Greater than 6.00 to 1.00
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Borrower and the Parent hereby represent and warrant to the
Administrative Agent and the Lenders as follows:
(a) AUTHORITY. The execution, delivery and performance of this Fourth
Amendment has been authorized by all requisite corporate action on the part of
the Borrower and the Parent.
(b) ENFORCEABILITY. This Fourth 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 Fourth 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) HEADINGS. Section and subsection headings in this Fourth Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Fourth Amendment for any other purpose or be given any substantive
effect.
(c) APPLICABLE LAW. THIS FOURTH 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.
3
<PAGE>
(d) COUNTERPARTS. This Fourth 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.
(e) FINAL AGREEMENT. THIS FOURTH 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]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth 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/ Patrick Bratton
-------------------------------
Name: Patrick Bratton
Title: Chief Financial Officer
SULLIVAN BROADCAST HOLDINGS, INC.
By: /s/ Patrick Bratton
-------------------------------
Name: Patrick Bratton
Title: Chief Financial Officer
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent
and on behalf of the Lenders
By: /s/ Gregory I. Meador
------------------------------
Name: Gregory I. Meador
Title: Vice President
5
<PAGE>
ACKNOWLEDGMENT
The undersigned hereby consent to this Fourth Amendment, and agree
that the execution and delivery of the Fourth Amendment shall in no way release,
diminish, impair, reduce, or otherwise affect the respective obligations and
liabilities of each of the undersigned under the Guaranty Agreement, dated
January 4, 1996, executed or joined in by each of the undersigned in favor of
Lenders, the Administrative Agent and the other members of the Agent Group, or
under any other Loan Documents to which any of the undersigned are parties, and
such Guaranty Agreement and other Loan Documents shall continue in full force
and effect. This consent and agreement shall be binding upon the undersigned
and their respective successors and assigns, and shall inure to the benefit of
the Lenders, the Administrative Agent, the other members of the Agent Group and
their respective successors and assigns.
IN WITNESS WHEREOF, each of the undersigned has caused this
Acknowledgment to be duly executed and delivered by a proper and duly authorized
officer as of the day and year first above written.
SULLIVAN BROADCASTING OF NEVADA, INC.
SULLIVAN BROADCASTING OF DAYTON, INC.
SULLIVAN BROADCASTING OF CHARLESTON, INC.
SULLIVAN BROADCASTING OF ROCHESTER, INC.
SULLIVAN BROADCASTING OF NASHVILLE, INC.
SULLIVAN BROADCASTING OF RICHMOND, INC.
SULLIVAN BROADCASTING OF WEST VIRGINIA, INC.
SULLIVAN BROADCASTING OF BUFFALO, INC.
SULLIVAN BROADCASTING LICENSE CORP.
SULLIVAN BROADCASTING MANAGEMENT SERVICES, INC.
SULLIVAN BROADCASTING OF UTICA, INC.
SULLIVAN BROADCASTING OF TENNESSEE, INC.
By: /s/ Patrick Bratton
----------------------------------
Name: Patrick Bratton
Title: Chief Financial Officer of each of the
above-named corporations
6
<PAGE>
================================================================================
SULLIVAN BROADCASTING COMPANY, INC.
(formerly known as ACT III BROADCASTING, INC.)
As Issuer,
---------
STATE STREET BANK AND TRUST COMPANY,
(as successor to
THE FIRST NATIONAL BANK OF BOSTON),
as Trustee,
----------
AND
THE GUARANTORS NAMED HEREIN
(formerly known as the Guarantors named therein)
As Guarantors
-------------
----------------------------------------
SEVENTH SUPPLEMENTAL INDENTURE
Dated as of January 7, 1997
----------------------------------------
Supplemental to the Indenture
among
Act III Broadcasting, Inc.,
State Street Bank and Trust Company
and the Guarantors named therein
Dated as of December 15, 1993,
as Supplemented by the
First Supplemental Indenture
dated as of November 10, 1994,
the Second Supplemental
Indenture dated as of October 24, 1995,
the Third Supplemental
Indenture dated as of November 21, 1995
the Fourth Supplemental
Indenture dated as of January 5, 1996
the Fifth Supplemental
Indenture dated as of February 7, 1996
and the Sixth Supplemental
Indenture dated as of June 30, 1996
================================================================================
<PAGE>
SEVENTH SUPPLEMENTAL INDENTURE
SEVENTH SUPPLEMENTAL INDENTURE, dated as of January 7, 1997, among SULLIVAN
BROADCASTING COMPANY, INC., a corporation duly organized and existing under the
laws of the State of Delaware (formerly known as Act III Broadcasting, Inc. and
herein called the "Company"), having its principal office at 18 Newbury Street,
Boston, Massachusetts 02116, STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company (herein called the "Trustee"), as successor Trustee
to The First National Bank of Boston, a national banking association duly
organized and existing under the laws of the United States, under the Indenture,
dated as of December 15, 1993, among the Company, the Trustee and the Guarantors
named therein (as supplemented and amended, the "Indenture"), and SULLIVAN
BROADCASTING OF BUFFALO, INC., a corporation duly organized and existing under
the laws of the State of Delaware, SULLIVAN BROADCASTING OF CHARLESTON, INC., a
corporation duly organized and existing under the laws of the State of Delaware,
SULLIVAN BROADCASTING OF DAYTON, INC., a corporation duly organized and existing
under the laws of the State of Delaware, SULLIVAN BROADCASTING OF NASHVILLE,
INC., a corporation duly organized and existing under the laws of the State of
Tennessee, SULLIVAN BROADCASTING OF NEVADA, INC., a corporation duly organized
and existing under the laws of the State of Nevada, SULLIVAN BROADCASTING OF
RICHMOND, INC., a corporation duly organized and existing under the laws of the
State of Delaware, SULLIVAN BROADCASTING OF ROCHESTER, INC., a corporation duly
organized and existing under the laws of the State of Delaware, SULLIVAN
BROADCASTING OF TENNESSEE, INC., a corporation duly organized and existing under
the laws of the State of Delaware, SULLIVAN BROADCASTING OF UTICA, INC., a
corporation duly organized and existing under the laws of the State of Delaware,
SULLIVAN BROADCASTING OF WEST VIRGINIA, INC., a corporation duly organized and
existing under the laws of the State of Delaware, SULLIVAN BROADCASTING
MANAGEMENT SERVICES, INC., a corporation duly organized and existing under the
laws of the State of Delaware, and SULLIVAN BROADCASTING LICENSE CORP., a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Guarantors"), the Guarantors being all of the Subsidiaries
of the Company and were formerly known by the names set forth in the Indenture,
each having its principal office at 18 Newbury Street, Boston, Massachusetts
02116, except for Sullivan Broadcasting of Nevada, Inc., whose principal office
is 1325 Airmotive Way, Suite 130, Reno, Nevada 89502 and CASCOM INTERNATIONAL,
INC., a corporation duly organized and existing under the laws of the State of
Tennessee ("Cascom").
RECITAL OF THE TRUSTEE
WHEREAS, the Company, the Guarantors and the Trustee are parties to that
certain Indenture, dated as of December 15, 1993, as supplemented by the First
Supplemental Indenture thereto dated as of November 10, 1994, the Second
Supplemental Indenture thereto dated as of October 24, 1995, the Third
Supplemental Indenture thereto dated as
-1-
<PAGE>
of November 21, 1995, the Fourth Supplemental Indenture thereto dated as of
January 5, 1996, the Fifth Supplemental Indenture thereto dated as of February
7, 1996 and the Sixth Supplemental Indenture thereto dated as of June 30, 1996
(as so supplemented, the "Indenture"), pertaining to $100,000,000 principal
amount of the Company's 9 5/8% Senior Subordinated Notes due 2003 (including the
related guarantees, the "Securities").
RECITALS OF THE COMPANY, THE GUARANTORS AND CASCOM
WHEREAS, Cascom is a newly formed, wholly-owned subsidiary of the Company;
WHEREAS, the Company, the Guarantors and Cascom desire, pursuant to Section
901 of the Indenture, to execute this Supplemental Indenture in order to comply
with Section 1017 of the Indenture; and
WHEREAS, the Company, the Guarantors and Cascom have duly authorized the
execution and delivery of this Supplemental Indenture in order for Cascom to
assume all the obligations of a Subsidiary Guarantor under the Securities and
the Indenture.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree for the equal and proportionate benefit
of all Holders of the Securities, as follows:
Section 1. Cascom hereby assumes all the obligations of a Guarantor, under
the Securities and the Indenture; and Cascom may exercise every right and power
of a Guarantor under the Indenture with the same effect as if Cascom had been
named as a Guarantor therein.
Section 2. Any notice or communication by the Trustee to Cascom shall be
addressed as follows:
Cascom International, Inc.
18 Newbury Street
Boston, Massachusetts 02116
Attn: President
Section 3. From and after the date hereof, the Indenture, as supplemented
by this Supplemental Indenture, shall be read, taken and construed as one and
the same instrument with respect to the Securities.
Section 4. This Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instruments.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year above written.
SULLIVAN BROADCASTING COMPANY, INC.
SULLIVAN BROADCASTING OF TENNESSEE, INC.,
as Guarantor
SULLIVAN BROADCASTING OF BUFFALO, INC.,
as Guarantor
SULLIVAN BROADCASTING OF CHARLESTON, INC.,
as Guarantor
SULLIVAN BROADCASTING OF DAYTON, INC.,
as Guarantor
SULLIVAN BROADCASTING OF NASHVILLE, INC.,
as Guarantor
SULLIVAN BROADCASTING OF NEVADA, INC.,
as Guarantor
SULLIVAN BROADCASTING OF RICHMOND, INC.,
as Guarantor
SULLIVAN BROADCASTING OF ROCHESTER, INC.,
as Guarantor
SULLIVAN BROADCASTING OF UTICA, INC.,
as Guarantor
SULLIVAN BROADCASTING OF WEST VIRGINIA, INC.,
as Guarantor
SULLIVAN BROADCASTING MANAGEMENT SERVICES, INC.,
as Guarantor
SULLIVAN BROADCASTING LICENSE CORP.,
as Guarantor
By: /s/
----------------------------------------
Title: President
CASCOM INTERNATIONAL, INC., as Guarantor
By: /s/
-----------------------------------------
Title: Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000914029
<NAME> SULLIVAN BROADCASTING CO INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,667
<SECURITIES> 0
<RECEIVABLES> 29,235
<ALLOWANCES> 1,432
<INVENTORY> 0
<CURRENT-ASSETS> 55,125
<PP&E> 54,005
<DEPRECIATION> 12,027
<TOTAL-ASSETS> 699,783
<CURRENT-LIABILITIES> 55,229
<BONDS> 125,185
0
0
<COMMON> 5
<OTHER-SE> 206,797
<TOTAL-LIABILITY-AND-EQUITY> 177,754
<SALES> 75,358
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 71,807
<OTHER-EXPENSES> 9
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,914
<INCOME-PRETAX> (14,372)
<INCOME-TAX> (4,276)
<INCOME-CONTINUING> (10,096)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,096)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001002573
<NAME> SULLIVAN BROADCAST HOLDINGS INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,675
<SECURITIES> 0
<RECEIVABLES> 29,235
<ALLOWANCES> 1,432
<INVENTORY> 0
<CURRENT-ASSETS> 55,738
<PP&E> 54,005
<DEPRECIATION> 12,027
<TOTAL-ASSETS> 701,683
<CURRENT-LIABILITIES> 48,828
<BONDS> 155,585
0
123,247
<COMMON> 8
<OTHER-SE> 65,057
<TOTAL-LIABILITY-AND-EQUITY> 28,894
<SALES> 75,358
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 72,351
<OTHER-EXPENSES> 8
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,169
<INCOME-PRETAX> (18,170)
<INCOME-TAX> (5,795)
<INCOME-CONTINUING> (12,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,375)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
