<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A-1
Amendment No. 1 to Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 25, 1996
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Spanish Broadcasting System, Inc.
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(Exact name of the Registrant as specified in charter)
Delaware
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(State or other jurisdiction of incorporation)
33-82114 13-3827791
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(Commission File Number) (IRS Employer Identification No.)
26 West 56th Street, New York, New York 10019
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: 212/541-9200
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Not Applicable
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(Former name or former address, if changed since last report)
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See List of Additional Registrants
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Page 1 of sequentially numbered pages
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<TABLE>
<CAPTION>
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Name State or Primary I.R.S. Employer
Other Standard Identification
Jurisdiction Industrial Number
of Classification
Incorporation Number
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<S> <C> <C> <C>
Spanish Broadcasting New Jersey 4832 13-3181941
System, Inc...............................
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Spanish Broadcasting California 4832 92-3952357
System of California, Inc.................
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Spanish Broadcasting Florida 4832 58-1700848
System of Florida, Inc....................
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Spanish Broadcasting New York 4832 13-3570696
System of New York, Inc.
Alarcon Holdings, Inc..................... New York 6512 13-3475833
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Spanish Broadcasting New York 4899 13-3511101
System Network, Inc.......................
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SBS Promotions, Inc....................... New York 7999 13-3456128
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SBS of Greater New York, New York 4832 Application
Inc....................................... Pending
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</TABLE>
2
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Item 1. Changes in Control of the Company.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
On March 25, 1996, SBS of Greater New York, Inc., a New York
corporation ("SBS-GNY"), an indirect wholly-owned subsidiary of Spanish
Broadcasting System, Inc., a Delaware corporation (the "Company"), acquired from
Park Radio of Greater New York, Inc. ("Park Radio") substantially all of the
tangible and intangible assets owned or held by Park Radio and used or useful in
the business or operations of radio station WPAT-FM, serving the New York
metropolitan area. The assets acquired included, among other things: (a)
personal property, including studio and transmission equipment; (b) licenses,
permits and other authorizations including those licenses issued by the Federal
Communications Commission (the "FCC") in connection with the business and
operations of radio station WPAT-FM; (c) leaseholds, including the leasehold for
the transmitter site for radio station WPAT-FM; (d) assumed contracts; and (e)
intangibles. The purchase price for the assets was approximately $84.6 million,
which reflects operations under the interim agreement with Park Radio described
below. The purchase price was determined by arms-length negotiation between the
Company and Park Radio, which are not affiliated with each other. The purchase
price was paid in cash. Approximately $78.6 million of the purchase price was
paid in cash at the closing of the acquisition on March 25, 1996, with the
balance having been paid (in part) to Park Radio in advance and held (in part)
in escrow by a third party for the benefit of Park Radio pending the closing.
SBS-GNY has been operating radio station WPAT-FM under an interim agreement with
Park Radio since January 20, 1996, when the format of this radio station was
changed from English language soft rock music to adult contemporary Spanish
language music format.
The acquisition was financed with (i) $72.5 million of proceeds
from the sale in a private placement of 37,500 shares of the Company's Series A
Exchangeable Preferred Stock, par value $.01 per share, and liquidation value of
$1,000 per share ("Exchangeable Preferred Stock"), $35.0 million of the
Company's 12 1/4% Senior Secured Notes due 2001 (the "Senior Secured Notes"),
and primary warrants to purchase 45,557 shares of the Company's Class A Common
Stock, par value $.01 per share, exercisable no later than June 29, 1998 (the
"Primary Warrants"); and the (ii) balance with cash on hand (collectively, the
"Acquisition Financing").
The Exchangeable Preferred Stock is entitled to dividends at
the rate of 12.75% per annum payable quarterly with the dividend rate increasing
by 0.25% for each period of three months from March 25, 1995 through March 24,
1997 and 0.50% for each period of three months thereafter, provided that the
dividend rate will at no time exceed 15.25%. During the first three years
dividends may be paid in cash or in additional shares of Exchangeable Preferred
Stock. Exchangeable Preferred Stock may be exchanged, at the option of the
holders for Senior Secured Notes. The Company is required to redeem the
Exchangeable Preferred Stock on December 1, 2002 and may redeem such stock at
100% of its liquidation value at any time on or before September 24, 1997 and at
any time after March 25, 1998. Between September 25, 1997 and March 25, 1998,
the Company may redeem Exchangeable Preferred Stock at a premium ranging from
105% to 101% of the liquidation value of such stock.
The Senior Secured Notes are secured by all of the proceeds from
any disposition of the FCC licenses for WPAT-FM and a pledge of the capital
stock of SBS-GNY and are guaranteed by each of the Company's subsidiaries. The
Senior Secured Notes are due on June 1, 2001 and bear interest at the rate of
12.25% per annum payable quarterly, with the interest rate increasing by 0.25%
for each three month period from March 25, 1996 to March 24, 1997, and 0.50% for
each period of three months thereafter, provided that the interest rate on the
Senior
3
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Secured Notes may not exceed 14.75% per annum. Until March 24, 1998, interest on
the Senior Secured Notes may be paid in cash or in additional Senior Secured
Notes. The Company may redeem all of the Senior Secured Notes at 100% of their
face amount at any time on or before September 24, 1997 and at any time after
March 25, 1998. Between September 25, 1997 and March 25, 1998, the Company may
redeem Senior Secured Notes at a premium ranging from 105% to 101% of the face
amount of such notes. Notwithstanding the foregoing, the Senior Secured Notes
may not be redeemed until all of the Exchangeable Preferred Stock is redeemed or
exchanged into Senior Secured Notes. The Senior Secured Notes were issued under
and pursuant to an Indenture dated as of March 25, 1996 (the "Secured Note
Indenture") among the Company, the Guarantors named therein and IBJ Schroder
Bank & Trust Company, as Trustee. Among other things, the Secured Note Indenture
provides that the Company sell certain non-strategic assets and use the net
proceeds from the sales, if they take place, first, to offer to redeem the
Company's outstanding 12 1/2% Senior Notes due 2002 (the "12 1/2% Senior Notes")
issued under and pursuant to Indenture dated as of June 29, 1994 (the "12 1/2%
Senior Note Indenture") by and among the Company, the Guarantors named therein
and IBJ Schroder Bank & Trust Company, as Trustee, second, to redeem the
Exchangeable Preferred Stock, third to offer to redeem the Senior Secured Notes,
and thereafter as permitted in the Secured Note Indenture. While the Senior
Secured Note Indenture and the terms of the Exchangeable Preferred Stock contain
covenants similar to the covenants contained in the 12 1/2% Senior Note
Indenture, including an obligation of the Company to offer to redeem the Senior
Secured Notes and the Exchangeable Preferred Stock upon a Change of Control (as
defined in the Secured Note Indenture and the Certificate of Designation
relating to the Exchangeable Preferred Stock, respectively), the Senior Secured
Note Indenture also prohibits the Company from incurring additional indebtedness
(other than $5.0 million of indebtedness for working capital and $5.0 million of
additional purchase money indebtedness) as long as there remains outstanding
Senior Secured Notes and Exchangeable Preferred Stock having a face amount and
liquidation value, as the case may be, aggregating $40.0 million or more.
The Company may repurchase the Primary Warrants at prices
ranging from $182.70 to $439.38 per Warrant before March 25, 1998, if no
Exchangeable Preferred Stock and no Senior Secured Notes are outstanding on the
date of such repurchase. The Company also agreed to issue warrants to purchase
10% of the Company's Class A Common Stock on a fully diluted basis (the
"Contingent Warrants") exercisable at any time before March 24, 2007 for an
aggregate purchase price of $5.0 million, if on March 25, 1997, 1998 or 1999,
the sum of the aggregate liquidation value of the Exchangeable Preferred Stock
and the accreted value of the Senior Secured Notes exceeds the sum of $50.0
million plus the accreted value of any 12 1/2% Senior Notes that have
theretofore been repurchased, redeemed or otherwise retired by the Company. The
Company is entitled to repurchase the Contingent Warrants and shares issuable
upon the exercise thereof for $5.0 million in the aggregate if the Company has
redeemed or repurchased in full all of the Secured Senior Notes and Exchangeable
Preferred Stock prior to the first anniversary of the issuance of the Contingent
Warrant.
As part of the private placement of securities, the Company
agreed to register the Senior Secured Notes and Exchangeable Preferred Stock by
September 27, 1997. In addition, under certain circumstances, the holders of the
Senior Secured Notes, Exchangeable Preferred Stock, Primary Warrants and
Contingent Warrants (as defined below) may require the Company to register these
securities.
The consent of holders of a majority in aggregate principal
amount of the 12 1/2% Senior Notes was sought and obtained in connection with
the creation and issuance of the Senior Secured Notes and the Exchangeable
Preferred Stock and the execution and delivery of the First Supplemental
Indenture dated as of March 25, 1996 by and among the Company, the Guarantors
and IBJ Schroder Bank & Trust Company, as Trustee, which amends various
provisions of the 12 1/2% Senior Note Indenture.
4
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CIBC Wood Gundy Securities Corp. served as Financial Advisor to
and Placement Agent for the Company in connection with the solicitation of
consents from the holders of 12 1/2% of Senior Notes and the private placement
of the Senior Secured Notes Exchangeable Preferred Stock and Primary Warrants
for which it will be paid an aggregate of approximately $2.5 million, of which
$2.1 million has been paid. Walter F. McLallen IV, a Director of the Company is
a Managing Director of CIBC Wood Gundy Securities Corp.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Company's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
Not Applicable.
Item 6. Registration of Company's Directors.
Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of Businesses Acquired.
PARK RADIO OF GREATER NEW YORK, INC.
Independent Auditors' Report
Balance Sheets at December 31, 1994 and 1995
Statements of Operations and Accumulated Deficit for each of the
years in the two-year period ended December 31, 1994 and the
period from January 1, 1995 to May 10, 1995 and the period from
May 11, 1995 to December 31, 1995.
Statements of Cash Flows for each of the years in the two-year
period ended December 31, 1994 and the period from January 1,
1995 to May 10, 1995 and the period from May 11, 1995 to
December 31, 1995
Notes to Financial Statements
Financial statement schedule for each of the years in the
three-year period ended December 31, 1995
Schedule II Valuation and qualifying accounts.
Balance Sheet at March 31, 1996 (unaudited)
Condensed Statements of Operations and Accumulated Deficit for
the three months ended March 31, 1995 and 1996 (unaudited)
Condensed Statements of Cash Flows for each of the three months
ended March 31, 1995 and 1996 (unaudited)
Notes to Condensed Financial Statements
(b) Pro Forma Financial Information
The unaudited pro forma combined statement of operations data
for the six months ended March 31, 1996 is presented as if,
at the
5
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beginning of the period, the Company had completed the WPAT-FM
acquisition and the net proceeds from the Acquisition Financing
together with $13.5 million of cash on hand and a $3 million
deposit held in escrow were used to finance the acquisition of
WPAT-FM.
The unaudited pro forma combined statement of operations data
for the fiscal year ended September 24, 1995 is presented as if,
at the beginning of the period, the Company had completed the
WPAT-FM acquisition and the net proceeds from the Acquisition
Financing together with $16.5 million of cash on hand were used
to finance the acquisition of WPAT-FM.
In the opinion of management, all adjustments necessary to
present fairly this pro forma information have been made.
The pro forma combined financial statements should be read in
conjunction with the Company's Consolidated Financial Statements
and the Notes thereto as of and for the fiscal year ended
September 24, 1995, included in the Company's 1995 Form 10-K,
the Company's Condensed Consolidated Financial Statements and
the Notes thereto as of and for the three months and six months
ended March 31, 1996, included in the Company's March 1996
Form 10-Q and the Financial Statements and Notes thereto of
Park Radio of Greater New York, Inc., for the years ended
December 31, 1993, 1994 and 1995, and the three months ended
March 31, 1966, included elsewhere in this filing. The pro-
forma information is not necessarily indicative of the results
that would have been reported had such events actually
occurred on the dates specified, nor is it indicative of the
Company's future results.
Pro Forma Combined Statement of Operations for the six months
ended March 31, 1996
Pro Forma Combined Statement of Operations for the fiscal year
ended September 24, 1995
<TABLE>
<CAPTION>
(c) Exhibits
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* 3.1.1 Amended and Restated Certificate of
Incorporation of Spanish Broadcasting
System, Inc., a Delaware corporation
(the "Company").
* 3.2 Certificate of Designation of Series
A Exchangeable Preferred Stock
* 3.9.1 Certificate of Incorporation of SBS
of Greater New York, Inc. ("SBS-GNY")
* 3.9.2 By-laws of SBS-GNY
* 4.2.2 First Supplemental Indenture dated as
of March 25, 1996 to Indenture dated
as of June 29, 1994 among the
Company, the Guarantors named therein
and IBJ Schroder Bank & Trust
Company, as Trustee, which was filed
as Exhibit 4.1 to the Company's
Registration Statement on Form S-4
No. 33-82114.
* 4.3 Indenture dated as of March 25, 1996,
among the Company, the Guarantors
named therein, IBJ Schroder
</TABLE>
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<TABLE>
<S> <C> <C>
Bank & Trust Company, as Trustee and
the Purchasers named therein.
* 10.5.3 AM Broadcast Station Construction
Permit dated February 1, 1991 issued
by the FCC to Spanish Broadcasting
System, Inc., a New Jersey
corporation ("SBS-NJ") in connection
with WXLX.
* 10.5.4 Ground Lease dated December 18, 1995
between Louis Viola Company and
SBS-NJ.
* 10.5.5 Ground Lease dated December 18, 1995
between Frank F. Viola and Estate of
Thomas C. Viola and SBS-NJ.
* 10.7.2 Evidence of renewal of Federal
Communications Commission ("FCC")
Broadcast Radio License for WCMQ-AM.
* 10.8.2 Evidence of renewal of FCC Broadcast
Radio License for WCMQ-FM.
* 10.9.2 Evidence of renewal of FCC Broadcast
Radio License for WZMQ-FM.
* 10.12.3 Evidence of renewal of FCC Broadcast
Radio License for WSKP-FM.
* 10.29.2 Lease Option Agreement made as of
October 1, 1995 between KPWR, Inc.
and the Company relating to Flint
Peak
* 10.29.3 Form of Lease Agreement by and
between KPWR, Inc. and the Company
relating to KLAX.
10.32.1 Asset Purchase Agreement dated as of
October 30, 1995 between SBS-NJ and
Park Radio of Greater New York, Inc.
("Park Radio"). Incorporated by
reference to Exhibit 10.32 of the
Company's Annual Report on Form 10-K
for the year ended September 24,
1995.
* 10.32.2 First Amendment dated as of March 18,
1996 to the Asset Purchase Agreement
dated as of October 1995, among
SBS-NJ, Park Radio and SBS-GNY.
* 10.33 Escrow Agreement dated as of October
30, 1995 by and among SBS-NJ, Park
Radio and Media Ventures.
* 10.34 Time Brokerage Agreement dated as of
January 20, 1995 between the SBS-GNY
and Park Radio.
* 10.35 Broadcast Station License dated June
1, 1984 issued by the FCC to Capital
Cities Communications, Inc. ("Capital
Cities") in connection with WPAT-FM,
together with FCC License Renewal
authorization granted October 29,
1991 to Park Radio, as assignee of
Capital Cities and the assignment of
the Broadcast Station License for
WPAT-FM from Park Radio to SBS-GNY.
</TABLE>
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<TABLE>
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* 10.36 Agreement of Lease dated as of March
3, 1992 No. WT-1744-A-110 (1067)
between The Port Authority of New
Jersey and SBS-GNY, as assignee of
Park Radio.
* 10.37 Securities Purchase Agreement dated
as of March 25, 1996 by and among the
Company, the Guarantors named therein
and each of the purchasers named
therein.
* 10.38 Warrant Agreement dated as of March
25, 1996 by and among the Company and
IBJ Schroder Bank and Trust Company,
as Warrant Agent
* 10.39 Common Stock Registration Rights and
Stockholders Agreement dated as of
March 25, 1996 among the Company,
certain management stockholders and
each of the purchasers named therein.
* 10.40 Senior Secured Note and Exchangeable
Preferred Stock Registration Rights
Agreement dated as of March 25, 1996
among the Company and each of the
purchasers named therein.
* 10.41 Pledge and Security Agreement dated
as of March 25, 1996 by and among
SBS-NJ, SBS-GNY and IBJ Schroder Bank
& Trust Company, as agent.
</TABLE>
* Filed with the initial filing of this Form 8-K.
Item 8. Change in Fiscal Year.
Not Applicable.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, each of SPANISH BROADCASTING SYSTEM, INC., a Delaware corporation,
SPANISH BROADCASTING SYSTEM, INC., a New Jersey corporation, SPANISH
BROADCASTING SYSTEM OF NEW YORK, INC., SPANISH BROADCASTING SYSTEM OF FLORIDA,
INC., SPANISH BROADCASTING SYSTEM NETWORK, INC., SBS PROMOTIONS, INC., ALARCON
HOLDINGS, INC., SBS of GREATER NEW YORK, INC. and SPANISH BROADCASTING SYSTEM OF
CALIFORNIA, INC., has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, New York as of
the 14th day of May, 1996.
SPANISH BROADCASTING SYSTEM, INC., a Delaware corporation,
SPANISH BROADCASTING SYSTEM, INC., a New Jersey corporation
SPANISH BROADCASTING SYSTEM OF NEW YORK, INC.
SPANISH BROADCASTING SYSTEM OF FLORIDA, INC.
SPANISH BROADCASTING SYSTEM NETWORK, INC.
SBS PROMOTIONS, INC.
ALARCON HOLDINGS, INC.
SBS OF GREATER NEW YORK, INC.
SPANISH BROADCASTING SYSTEM OF CALIFORNIA, INC.
By:/s/ Joseph A. Garcia
---------------------------------------------
Joseph A. Garcia,
Vice President
<PAGE> 10
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Description Seq. Page No.
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PARK RADIO OF GREATER NEW YORK, INC.
(a) Financial Statements of Business Acquired
Independent Auditors' Report
Balance Sheets at December 31, 1994 and 1995
Statements of Operations and Accumulated Deficit for each of the years
in the two-year period ended December 31, 1994 and the period from
January 1, 1995 to May 10, 1995 and the period from May 11, 1995 to
December 31, 1995.
Statements of Cash Flows for each of the years in the two-year period
ended December 31, 1994 and the period from January 1, 1995 to May 10,
1995 and the period from May 11, 1995 to December 31, 1995
Notes to Financial Statements
Financial statement schedule for each of the years in the three-year
period ended December 31, 1995
Schedule II Valuation and qualifying accounts.
Balance Sheets at March 31, 1995 and 1996 (unaudited)
Condensed Statement of Operations and Accumulated Deficit for the three
months ended March 31, 1995 and 1996 (unaudited)
Condensed Statement of Cash Flows for each of the three months ended
March 31, 1995 and 1996 (unaudited)
Notes to Condensed Financial Information
(b) Pro Forma Financial Information
Pro Forma Combined Statement of Operations for the six months ended
March 31, 1996
Pro Forma Combined Statement of Operations for the fiscal year ended
September 24, 1995
</TABLE>
<PAGE> 11
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Financial Statements and Schedule
December 31, 1993, 1994 and 1995
(With Independent Auditors' Report Thereon)
<PAGE> 12
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Financial Statements and Schedule
December 31, 1993, 1994 and 1995
(With Independent Auditors' Report Thereon)
AD/SPANISHBR/35-1181
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Park Radio of Greater New York, Inc.:
We have audited the accompanying balance sheets of Park Radio of Greater New
York, Inc. (a subsidiary of Park Acquisitions, Inc. - assets pending sale (note
2)) as of December 31, 1994 and 1995, and the related statements of operations
and accumulated deficit and cash flows for each of the years in the two-year
period ended December 31, 1994 and for the period from January 1, 1995 to May
10, 1995 and for the period from May 11, 1995 to December 31, 1995. In
connection with our audits of the financial statements, we have also audited the
financial statement schedule. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in note 3 to the financial statements, the Company was acquired by
Park Acquisitions, Inc. on May 11, 1995 in a transaction accounted for as a
purchase. The purchase price and an allocable portion of debt have been "pushed
down" to the financial statements of the Company and, as a result, the
post-acquisition financial statements are not comparable to the pre-acquisition
financial statements.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Park Radio of Greater New York,
Inc. as of December 31, 1994 and 1995, and the results of its operations and its
cash flows for each of the years in the two-year period ended December 31, 1994
and for the period from January 1, 1995 to May 10, 1995 and for the period from
May 11, 1995 to December 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
New York, New York
February 9, 1996, except as to note 2,
which is as of March 26, 1996
F-1
<PAGE> 14
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Balance Sheets
December 31, 1994 and 1995
<TABLE>
<CAPTION>
ASSETS (notes 2 and 8) 1994 1995
---- ----
(note 3)
<S> <C> <C>
Current assets:
Cash $ 326,627 174,634
Receivables, net of allowance for doubtful
accounts of $58,716 in 1994
and $193,146 in 1995 2,106,429 1,896,355
Other current assets 2,077 2,371
------------ ------------
Total current assets 2,435,133 2,073,360
Intercompany receivable, net (note 7) -- 623,316
Property and equipment, net of accumulated
depreciation and amortization of $5,322,447
in 1994 and $215,975 in 1995 (note 5) 9,020,915 7,397,769
Intangible assets, net of accumulated amortization
of $15,610,472 in 1994 and $1,319,344 in
1995 (note 6) 19,527,060 50,468,057
Other assets 728 --
------------ ------------
Total assets $ 30,983,836 60,562,502
============ ============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable 227,661 249,867
Accrued expenses 427,425 115,743
Accrued interest -- 2,124,488
------------ ------------
Total current liabilities 655,086 2,490,098
Intercompany payable, net (note 7) 32,140,204 --
Deferred income taxes (note 11) 1,543,678 13,913,170
Long-term debt (note 8) -- 46,737,255
Commitments (notes 2, 8 and 10)
Stockholder's deficit:
Common stock, $1,000 stated value; authorized,
issued and outstanding 1,000 shares 1,000,000 1,000,000
Additional paid-in capital -- (1,000,000)
Accumulated deficit (4,355,132) (2,578,021)
------------ ------------
Total stockholder's deficit (3,355,132) (2,578,021)
------------ ------------
Total liabilities and stockholder's deficit $ 30,983,836 60,562,502
============ ============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 15
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Statements of Operations and Accumulated Deficit
Years ended December 31, 1993 and 1994 and the period from
January 1, 1995 to May 10, 1995 and the period from
May 11, 1995 to December 31, 1995
<TABLE>
<CAPTION>
Period from Pro forma
1/1/95 to 5/11/95 to 1995
1993 1994 5/10/95 12/31/95 (unaudited)
---- ---- ------- -------- -----------
<S> <C> <C> <C> <C> <C>
Gross revenues $ 8,845,487 10,287,321 3,463,506 5,755,339 9,218,845
Less agency commissions 1,271,522 1,402,882 417,030 731,148 1,148,178
----------- ----------- ----------- ----------- -----------
Net revenues 7,573,965 8,884,439 3,046,476 5,024,191 8,070,667
----------- ----------- ----------- ----------- -----------
Station operating expenses (note 10) 3,924,141 4,885,853 1,593,660 3,212,937 4,806,597
Other administrative expenses (note 7) 143,337 143,631 -- 159,861 159,861
Depreciation and amortization 2,112,291 2,122,022 794,283 1,535,319 2,424,230
----------- ----------- ----------- ----------- -----------
6,179,769 7,151,506 2,387,943 4,908,117 7,390,688
----------- ----------- ----------- ----------- -----------
Operating income 1,394,196 1,732,933 658,533 116,074 679,979
Interest expense, net (note 7) (3,484,882) (3,443,950) (328,085) (3,838,500) (4,907,412)
Other, net -- -- (182,062) (2,722) (184,784)
----------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes (2,090,686) (1,711,017) 148,386 (3,725,148) (4,412,217)
Income tax benefit (note 11) 556,108 423,490 39,200 1,147,127 1,456,032
----------- ----------- ----------- ----------- -----------
Net income (loss) (1,534,578) (1,287,527) 187,586 (2,578,021) (2,956,185)
===========
Accumulated deficit at beginning of period (1,533,027) (3,067,605) (4,355,132) --
----------- ----------- ----------- -----------
Accumulated deficit at end of period $(3,067,605) (4,355,132) (4,167,546) (2,578,021)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
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PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Statements of Cash Flows
Years ended December 31, 1993 and 1994 and the period from January
1, 1995 to May 10, 1995 and the period from
May 11, 1995 to December 31, 1995
<TABLE>
<CAPTION>
Period from
1/1/95 to 5/11/95 to
1993 1994 5/10/95 12/31/95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,534,578) (1,287,527) 187,586 (2,578,021)
----------- ----------- ----------- -----------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,112,291 2,122,022 794,283 1,535,319
Bad debt expense 82,613 78,940 15,025 131,405
Deferred income taxes 733,801 (33,070) (84,013) (157,595)
Loss on sale of property and equipment -- -- 182,062 --
Changes in operating assets and liabilities:
Decrease (increase) in receivables (236,161) (520,620) 324,773 (261,129)
Decrease (increase) in other current assets 4,444 964 (5,889) 5,595
Decrease (increase) in other assets (1,182) 2,407 630 98
Increase (decrease) in accounts payable (65,939) (241) (36,554) 58,760
Increase (decrease) in accrued expenses (145,863) 107,645 (343,564) 31,882
Increase in accrued interest -- -- -- 2,124,488
----------- ----------- ----------- -----------
Total adjustments 2,484,004 1,758,047 846,753 3,468,823
----------- ----------- ----------- -----------
Net cash provided by operating
activities 949,426 470,520 1,034,339 890,802
----------- ----------- ----------- -----------
Cash flows from investing activities:
Additions to property and equipment (95,237) (49,321) (55,813) (51,923)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Decrease in intercompany
receivable/payable, net (791,947) (413,671) (1,234,758) (734,640)
----------- ----------- ----------- -----------
Net increase (decrease) in cash 62,242 7,528 (256,232) 104,239
Cash at beginning of period 256,857 319,099 326,627 70,395
----------- ----------- ----------- -----------
Cash at end of period $ 319,099 326,627 70,395 174,634
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 17
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Notes to Financial Statements
December 31, 1993, 1994 and 1995
(1) ORGANIZATION AND NATURE OF BUSINESS
Park Radio of Greater New York, Inc. (the "Company") was organized under
the laws of the State of New Jersey on September 12, 1985. The Company is
a wholly owned subsidiary of Park Broadcasting, Inc. ("PBI") which is a
wholly owned subsidiary of Park Communications, Inc. ("PCI") which became
a wholly owned subsidiary of Park Acquisitions, Inc. ("PAI" or the
"Parent") effective May 11, 1995.
The Company operates a FM and an AM radio station serving the New York
and New Jersey metropolitan areas. The radio stations share virtually the
same programming content and advertising revenue base. Management,
administrative, sales and technical support are also jointly provided to
the two stations.
(2) DISPOSITION OF ASSETS
In November 1995, the Company entered into separate agreements to sell
substantially all of the Company's assets used or useful in the operation
of its FM and AM radio stations, each under contract to be sold for
approximately $83,500,000 and $19,500,000, respectively. In conjunction
with the sale of the FM radio station, the Company entered into an
interim agreement in January 1996 for the buyer to program and sell all
of the advertising for the radio station and retain the revenues until
the sale is consummated, for up to a twelve-month period. The
transactions relating to the sale of the FM and AM radio stations were
consummated on March 25, 1996 and March 26, 1996, respectively. The
Company's assets were sold free and clear of their existing liens and
encumbrances relating to PAI indebtedness (see note 8).
(3) BASIS OF PRESENTATION
The accompanying financial statements have been prepared under the
accrual basis of accounting and present the financial position, results
of operations and cash flows of the two radio stations on a combined
basis as of and for the periods presented. The accompanying financial
statements reflect the Company's transactions with PBI, PCI and PAI and
are not indicative of the Company's financial position, results of
operations and cash flows as an independent entity (see note 7). The
accompanying financial statements also do not reflect the financial
position, results of operations and cash flows of each radio station as
if each were operated independently.
(Continued)
F-5
<PAGE> 18
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Notes to Financial Statements
(3), CONTINUED
On May 11, 1995, PCI and its subsidiaries were acquired by PAI, a private
investment concern, for approximately $711,427,000 in a transaction
accounted for as a purchase. Such transaction was financed principally
through third-party indebtedness. In connection with this transaction,
PCI and its subsidiaries' assets were revalued by an independent
appraiser. As a result, the carrying values of fixed and intangible
assets have been adjusted to reflect their fair market values as of May
11, 1995. As a consequence of the change in ownership of PCI, under
generally accepted accounting principles, the Company is deemed for
financial reporting purposes to have become a new reporting entity
effective with the change in ownership. The portion of the debt allocable
to the Company has been "pushed down" to the financial statements of the
Company, and the assets and liabilities have been adjusted to reflect
their fair market values as of May 11, 1995.
The accompanying financial statements reflect the operations of the
Company prior to the acquisition on May 11, 1995. Subsequent to that
date, the financial statements reflect the operations of the Company
utilizing the new basis of accounting.
The unaudited pro forma statement of operations for 1995 reflects the
operations of the Company under the new basis of accounting and assumes
the acquisition closed on January 1, 1995. Depreciation, amortization and
interest expense reflect those costs that would be charged to operations
for fixed and intangible assets and the long-term debt "push down" to the
Company. The pro forma income tax benefit has been computed at an
effective rate of 33%.
The following is a summary of the adjustments made to the historical
costs of the assets and liabilities of the Company as of May 10, 1995, as
a result of applying "push down" acquisition accounting at that date to
arrive at the new basis for the Company:
<TABLE>
<CAPTION>
(Unaudited)
-----------
Adjustments
Debit (Credit)
--------------
<S> <C>
Intangible assets $ 32,793,703
Intercompany payable, net 30,794,122
------------
63,587,825
------------
Property and equipment, net (1,071,924)
Deferred taxes (12,611,100)
Long-term debt (46,737,255)
Stockholders' equity (3,167,546)
------------
$(63,587,825)
============
</TABLE>
(Continued)
F-6
<PAGE> 19
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Notes to Financial Statements
(4) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUE RECOGNITION
Revenues are recognized when advertisements are aired.
(B) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated useful
lives of the assets, which range from three to 40 years through
May 10, 1995 and from three to 20 years thereafter, except for
leasehold improvements, which are amortized using the
straight-line method over the related lease period.
(C) INTANGIBLE ASSETS
Intangible assets consist of the excess of cost over the aggregate
fair value of the net assets acquired, as well as the values
assigned to the identifiable intangibles. Such costs are being
amortized on a straight-line basis over the respective useful
lives which range from six to 40 years. In evaluating the
recoverability of intangible assets, management gives
consideration to a number of factors, including the operating
performance of its stations and dispositions of other radio
properties in specific markets, among other things.
(D) BARTER TRANSACTIONS
The Company records barter transactions at the fair value of goods
or services received.
(E) INCOME TAXES
The Company was included in the consolidated Federal income tax
return of PCI in 1993 and 1994 and will be included in the
consolidated Federal income tax return of PCI through May 10, 1995
and in the 1995 consolidated Federal income tax return of PAI
thereafter. The Company has calculated its provision for income
taxes on a separate company basis in the accompanying financial
statements.
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 (Statement
109), "Accounting for Income Taxes." Statement 109 requires a
change from the deferred method of accounting for income taxes of
APB Opinion No. 11 to the asset and liability method of accounting
for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date.
(Continued)
F-7
<PAGE> 20
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Notes to Financial Statements
(4), CONTINUED
(E), CONTINUED
Effective January 1, 1993, the Company adopted Statement 109 on a
prospective basis. This change did not have a material affect on
the accompanying financial statements.
(5) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1994 and
1995:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Land $ 7,000,000 5,100,000
Building and leasehold improvements 1,221,860 811,100
Broadcast equipment 5,842,057 1,499,608
Furniture and fixtures 243,771 164,320
Vehicles 35,674 38,716
----------- -----------
14,343,362 7,613,744
Less accumulated depreciation and amortization 5,322,447 215,975
----------- -----------
$ 9,020,915 7,397,769
=========== ===========
</TABLE>
(6) INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
FCC licenses $16,807,000 23,158,346
Goodwill 1,144,300 15,495,573
Music Format 10,999,100 --
Advertising base 3,949,300 --
Other 2,237,832 13,133,482
----------- -----------
35,137,532 51,787,401
Less accumulated amortization 15,610,472 1,319,344
----------- -----------
$19,527,060 50,468,057
=========== ===========
</TABLE>
(Continued)
F-8
<PAGE> 21
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Notes to Financial Statements
(7) RELATED PARTY TRANSACTIONS
Substantially all of the Company's capital requirements were funded by
PCI through May 10, 1995 and PAI thereafter. The Company also has
transactions with PBI.
At December 31, 1994 and 1995, intercompany amounts consist of the
following:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Due from PBI $ 48,007,235 720,886
Due to PCI (80,147,439) (97,570)
------------ -------
$(32,140,204) 623,316
============ =======
</TABLE>
Included in amounts due from PBI are allocated income tax benefits of
$371,996 and $701,004 as of December 31, 1994 and 1995, respectively (see
note 11). Amounts due from PBI were noninterest bearing, while amounts
due to PCI bore interest at 6-7/8% per annum through May 10, 1995.
Effective May 11, 1995, all intercompany balances bear interest at an
average annnual interest rate of 5.6%. Interest expense charged by PCI
amounted to $3,484,882, $3,443,950 and $328,085 during the years ended
December 31, 1993, 1994 and the period from January 1, 1995 to May 10,
1995, respectively. Interest charged by PAI relating to long-term debt
amounted to $3,847,918 during the period from May 11, 1995 to December
31, 1995.
During the years ended December 31, 1993, 1994 and 1995, other
administrative expenses allocated to the Company by PCI consist of the
following:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Audit $ 5,682 5,170 7,355
Legal 12,000 12,000 12,000
Insurance 125,655 126,461 140,506
-------- -------- --------
$143,337 143,631 159,861
======== ======== ========
</TABLE>
The Company made no cash payments for interest or income taxes during the
years ended December 31, 1993, 1994 and 1995.
F-9
<PAGE> 22
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Notes to Financial Statements
(8) LONG-TERM DEBT
In connection with the sale of PCI and its subsidiaries, including the
Company, PAI entered into a loan agreement to borrow up to $593.8
million, the proceeds of which were used to finance the purchase. A
portion of the loan was pushed down by PAI to PBI because PBI is jointly
and severally liable under the loan agreement. Accordingly, $46,737,255
of this indebtedness has been reflected in the accompanying balance sheet
of the Company as of December 31, 1995. The assets of PAI and its
subsidiaries, including the Company, are pledged as collateral under this
loan agreement. The loan accrues interest at 9.5% per annum plus an
additional interest rate of 1%, for a total of 10.5% which is payable on
October 1 and April 1. PAI and the Company are also accruing a yield
maintenance premium of 3% per annum due to the lender by May 11, 1998.
Principal payments are required only to the extent that PAI's cash
balances, as defined in the loan agreement, exceed $8 million (declining
to $6 million at October 1, 1997) at each interest payment date through
October 1, 1997. The loan agreement contains covenants which, among other
things, limit or restrict payment of cash dividends, additional debt,
repurchase of common stock and capital expenditures, among other things.
(9) EMPLOYEE BENEFIT PLANS
The Company maintained a profit sharing plan covering all of its
employees whereby a portion of company profits are allocated to employees
based upon a percentage of each of their respective salaries. Amounts
charged to expense in connection with this plan were $141,198 and $85,122
during the years ended December 31, 1993 and 1994, respectively. No
amounts were charged during the year ended December 31, 1995. Employees
are vested in the plan after five years of employment with the Company.
In addition, PCI sponsors a 401(k) retirement savings plan which covers
all of the Company's employees. The plan is fully funded by employees and
no contributions are supplemented by the Company.
(10) COMMITMENTS
The Company leases antenna space under an operating lease that expires in
1999 and office space under an operating lease that expires in 1996. At
December 31, 1995, future minimum lease payments under these leases are
as follows:
<TABLE>
<CAPTION>
Year ending December 31 Amount
----------------------- ------
<S> <C>
1996 $ 63,018
1997 30,504
1998 30,504
1999 5,330
--------
Total $129,356
========
</TABLE>
Total rent expense amounted to $152,369, $156,943 and $168,708 for 1993,
1994 and 1995, respectively.
(Continued)
F-10
<PAGE> 23
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Notes to Financial Statements
(10), CONTINUED
The Company has agreements to sublease its radio signal. Such agreements
provide for payments through March 3, 1999. Future income scheduled to be
received under these agreements as of December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Year ending December 31 Amount
- ----------------------- ------
<S> <C>
1996 $24,684
1997 25,672
1998 26,699
1999 20,619
-------
Total $97,674
=======
</TABLE>
(11) INCOME TAXES
The Company's income tax benefit has been allocated pursuant to a
tax-sharing agreement with the Parent. The income tax benefit, determined
after consideration of non-deductible goodwill amortization, results from
the utilization of losses generated by the Company, to offset taxable
income of the Parent and other members of the consolidated group. There
are no assurances that these tax benefits would have been realized by the
Company on a stand-alone basis. The Company files separate state income
tax returns. There was no state income tax expense during the years ended
December 31, 1993, 1994 and 1995 due to the availability of net operating
loss carryforwards.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The components of the Company's deferred tax assets and
liabilities are as follows at December 31:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Deferred tax asset:
Allowance for doubtful accounts $ 20,551 78,900
----------- -----------
Deferred tax liability:
Depreciation and amortization (1,564,229) (13,992,070)
----------- -----------
Net deferred tax liability $(1,543,678) (13,913,170)
=========== ===========
</TABLE>
F-11
<PAGE> 24
SCHEDULE II
PARK RADIO OF GREATER NEW YORK, INC.
(a subsidiary of Park Acquisitions, Inc. -
assets pending sale (note 2))
Valuation and Qualifying Accounts
Years ended December 31, 1993 and 1994 and the
period from January 1, 1995 to May 10, 1995 and the period
from May 11, 1995 to December 31, 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
----------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
YEAR 1993
Allowance for Doubtful
Accounts $62,450 82,613 - 59,585 85,478
YEAR 1994
Allowance for Doubtful
Accounts $85,478 78,940 - 105,702 58,716
JANUARY 1, 1995 TO
MAY 10, 1995
Allowance for Doubtful
Accounts $58,716 15,025 - -- 73,741
MAY 11, 1995 TO
DECEMBER 31, 1995
Allowance for Doubtful
Accounts $73,741 131,405 - 12,000 193,146
</TABLE>
F-12
<PAGE> 25
PARK RADIO OF GREATER NEW YORK, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1996
(UNAUDITED)
--------------
<S> <C>
ASSETS
CURRENT ASSETS:
CASH $80,162
RECEIVABLES, NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
OF $135,982 AT MARCH 31, 1995 AND $170,857 AT MAR. 31, 1996 213,038
OTHER CURRENT ASSETS 641,871
----------
TOTAL CURRENT ASSETS 935,071
INTERCOMPANY RECEIVABLE 56,621,684
PROPERTY AND EQUIPMENT, NET -
INTANGIBLE ASSETS, NET -
OTHER ASSETS -
----------
TOTAL ASSETS 57,556,755
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE 232,937
ACCRUED EXPENSES 59,231
ACCRUED INTEREST 3,596,711
INCOME TAXES PAYABLE 27,763,332
----------
TOTAL CURRENT LIABILITIES 31,652,211
INTERCOMPANY PAYABLE -
DEFERRED INCOME TAXES -
STOCKHOLDERS' EQUITY
COMMON STOCK, $1,000 STATED VALUE; AUTHORIZED,
ISSUED AND OUTSTANDING 1,000 SHARES 1,000,000
ADDITIONAL PAID-IN CAPITAL (1,000,000)
RETAINED EARNINGS 25,904,544
----------
TOTAL STOCKHOLDERS' EQUITY 25,904,544
----------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY 57,556,755
==========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS.
F-13
<PAGE> 26
PARK RADIO OF GREATER NEW YORK, INC.
STATEMENTS OF OPERATIONS AND (ACCUMULATED DEFICIT) RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
GROSS REVENUES 2,082,324 1,392,445
LESS AGENCY COMMISSIONS 275,231 1,770
---------- -----------
NET REVENUES 1,807,093 1,390,675
---------- -----------
STATION OPERATING AND
ADMINISTRATIVE EXPENSES 903,129 850,459
DEPRECIATION AND AMORTIZATION 716,079 377,977
---------- -----------
1,619,208 1,228,436
---------- -----------
OPERATING INCOME 187,885 162,239
INTEREST EXPENSE, NET 328,083 1,472,223
GAIN ON SALE OF RADIO PROPERTIES -- (44,118,000)
OTHER, NET 27 475,289
---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (140,225) 42,332,727
INCOME (TAXES) BENEFIT (9,810) 13,850,162
---------- -----------
NET INCOME (LOSS) (130,415) 28,482,565
ACCUMULATED DEFICIT AT BEGINNING
OF PERIOD (4,355,132) (2,578,021)
---------- -----------
RETAINED EARNINGS (ACCUMULATED DEFICIT
AT END OF PERIOD) (4,485,547) 25,904,544
========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS.
F-14
<PAGE> 27
PARK RADIO OF GREATER NEW YORK, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) (130,415) 28,482,565
--------- ------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATIO 716,079 377,977
CHANGE N PROVISION FOR LOSSES ON RECEIVABLES 77,266 (22,289)
DEFERRED INCOME TAXES 243,021 (13,913,170)
GAIN ON SALE OF RADIO PROPERTIES -- (44,118,000)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
DECREASE IN RECEIVABLES 304,275 1,705,606
INCREASE IN OTHER CURRENT ASSETS (304,609) (639,500)
DECREASE IN OTHER ASSETS 438 --
DECREASE IN ACCOUNTS PAYABLE (104,597) (16,930)
DECREASE IN ACCRUED EXPENSES (88,830) (56,512)
INCREASE IN ACCRUED INTEREST -- 1,472,223
INCREASE IN INCOME TAXES PAYABLE -- 27,763,332
--------- ------------
TOTAL ADJUSTMENTS 843,043 (27,447,263)
--------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 712,628 1,035,302
--------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF RADIO PROPERTIES 101,605,849
CHANGES TO PROPERTY AND EQUIPMENT (19,885) --
--------- ------------
NET CASH USED IN INVESTING ACTIVITIES (19,885) 101,605,849
--------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
DECREASE IN INTERCOMPANY RECEIVABLE, NET (772,452) (55,998,368)
REPAYMENT OF LONG-TERM DEBT -- (46,737,255)
--------- ------------
NET (CASH USED IN) PROVIDED BY INVESTING ACTIVITIES (772,452) (102,735,623)
--------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (79,709) (94,472)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 326,627 174,634
--------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $246,918 $80,162
========= ============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS.
F-15
<PAGE> 28
PARK RADIO OF GREATER NEW YORK, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1995 and 1996
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying financial statements have been prepared under the accrual
basis of accounting and present the financial position, results of operations
and cash flows of Park Radio of Greater New York, Inc. for the periods
presented. The accompanying financial statements reflect the Company's
transactions with Park Broadcasting, Inc., Park Communications, Inc. and Park
Acquisitions, Inc. and are not indicative of the Company's financial position,
results of operations and cash flows as an independent entity. The accompanying
financial statements also do not reflect the financial position, results of
operations and cash flows of each of the Company's radio stationsas if each
were operated independently. These financial statements should be read in
conjunction with the financial statements of the Company as of and for the year
ended December, 31, 1995.
(2) RELATED PARTY TRANSACTIONS
Substantially all of the Company's capital requirements have been funded by
Park Communications, Inc. The Company also has transactions with Park
Broadcasting. Inc.
(3) DISPOSITION OF ASSETS
In November, 1995, the Company entered into separate agreements to sell
substantially all of the Company's assets used or useful in the operation of
its FM and AM radio stations. The transactions relating to the sale of the FM
and AM radio stations were consummated on March 25, 1996 and March 26, 1996
respectively.
Aggregate proceeds from the sale were approximately $103 million, some of which
was used to repay its long-term debt of $46.7 million. The gain on this sale,
net of taxes, was $29.9 million.
F-16
<PAGE> 29
Pro Forma Financial Information
The unaudited pro forma combined statement of operations data for the six
months ended March 31, 1996 is presented as if, at the beginning of the period,
the Company had completed the WPAT-FM acquisition and the net proceeds from the
Acquisition Financing together with $13.5 million of cash on hand and $3
million deposit held in escrow were used to finance the acquisition of WPAT-FM.
The unaudited pro forma combined statement of operations data for the fiscal
year ended September 24, 1995 is presented as if, at the beginning of the
period, the Company had completed the WPAT-FM acquisition and the net proceeds
from the Acquisition Financing together with $16.5 million of cash on hand were
used to finance the acquisition of WPAT-FM.
In the opinion of management, all adjustments necessary to present fairly this
pro forma information have been made.
The pro forma combined financial statements should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto as of and
for the fiscal year ended September 24, 1995, included in the Company's 1995
Form 10K, the Company's Condensed Consolidated Financial Statements and the
Notes thereto as of and for the three and six months ended March 31, 1996,
included in the Company's March 1996 Form 10Q and the Financial Statements and
the Notes thereto of Park Radio of Greater New York, Inc., for the years ended
December 31, 1993, 1994 and 1995 and the three months ended March 31, 1996,
included elsewhere in this filing. The pro-forma information is not necessarily
indicative of the results that would have been reported had such events
actually occurred on the dates specified, nor is it indicative of the Company's
future results.
F-17
<PAGE> 30
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 24, 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
Reported by Pro Forma
Park Radio Adjustments for
Company of Greater New the Acquisition Pro Forma
Historical York, Inc.(1) of WPAT-FM Combined
---------- -------------- --------------- ---------
<S> <C> <C> <C> <C>
Gross broadcasting revenues 54,152 9,486 (510)(2) 63,128
Less agency commissions (6,828) (1,230) (8,058)
------ ------- ------- ------
Net revenues 47,324 8,256 (510) 55,070
Station operating expenses 22,998 4,824 27,822
Depreciation and amortization 3,389 2,710 (567)(3) 5,532
Corporate expenses 4,281 76 (76)(2) 4,281
------ ------- ------- ------
Operating income 16,656 646 133 17,435
Interest expense (13,701) (1,158) (4,666)(2)(4) (19,525)
Interest income 827 (709)(5) 118
Other, net (381) (183) 183 (2) (381)
Income tax (expense) benefit (1,411) 278 (278)(2) (1,411)
------ ------- ------- ------
Net income (loss) 1,990 (417) (5,337) (3,764)
====== ======= ======= ======
</TABLE>
- ----------------
(1) To reflect the historical results for the acquisition of WPAT-FM for
the twelve month period October 1, 1994 through September 30, 1995 based
upon unaudited financial statements. The fiscal year end for WPAT-FM is
December 31 under the ownership of Park Radio of Greater New York, Inc.
(a subsidiary of Park Acquisitions, Inc. and formerly of Park
Communications, Inc.). To conform with the Company's fiscal year end,
such financial information has been recast by combining the fourth
quarter of fiscal 1994 with the first three quarters of fiscal 1995.
(2) Assumes certain revenues would not have been earned nor certain costs
incurred by the Company during this period. Such items consist primarily
of (i) the exclusion of revenue derived solely from WPAT-AM programming
which is not being acquired by the Company, (ii) the elimination of
corporate, interest and certain other expenses that would not have been
incurred by the Company and (iii) to eliminate the benefit for income
taxes that would not have been recognized by the Company.
(3) To reflect pro forma depreciation and amortization expense based upon
the preliminary allocation of the purchase price of WPAT-FM based on the
following: Franchise Costs and Other Intangible assets of approximately
$84.6 million plus estimated transaction costs of $1.1 million over a
period of 40 years. The depreciation and amortization expense may change
upon final appraisal of the fair values of the net assets acquired.
(4) To reflect additional interest expense on the Acquisition Financing, at
an assumed interest rate of 15.934%, plus amortization of transaction
costs of approximately $3.3 million to finance a portion of the
acquisition of WPAT-FM.
(5) To eliminate interest income on approximately $16.5 million cash on
hand used to finance the acquisition of WPAT-FM based upon the average
interest rate of 4.3% earned by the Company during fiscal 1995.
F-18
<PAGE> 31
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
Reported by Pro Forma
Park Radio Adjustments for
Company of Greater New the Acquisition Pro Forma
Historical York, Inc.(1) of WPAT-FM Combined
---------- -------------- --------------- ---------
<S> <C> <C> <C> <C>
Gross broadcasting revenues 24,170 4,315 (1,421)(2) 27,064
Less agency commissions 2,932 316 3,248
------ ------- ------- ------
Net revenues 21,238 3,999 (1,421) 23,816
Station operating expenses 13,417 2,635 16,052
Depreciation and amortization 1,637 530 361 (3) 2,528
Corporate expenses 1,936 114 (114)(2) 1,936
------ ------- ------- ------
Operating income 4,248 720 (1,668) 3,300
Interest expense (6,955) (5,320) 2,530 (2)(4) (9,745)
Interest income 306 9 (9)(2)
(306)(5)
Other, net (911) 43,641 (43,641)(2) (911)
Income tax (expense) benefit 1,325 (12,704) 12,704 (2) 1,325
------ ------- ------- ------
Net income (loss) (1,987) 26,346 (30,390) (6,031)
====== ======= ======= ======
</TABLE>
- ----------------
(1) To reflect the historical results of WPAT-FM for the six month period
from October 1, 1995 through March 31, 1996 based upon unaudited
financial statements. The fiscal year end for WPAT-FM was December 31
under the ownership of Park Radio of Greater New York, Inc. (a
subsidiary of Park Acquisitions, Inc.).
(2) Assumes certain revenues would not have been earned nor certain costs
incurred by the Company during this period. Such items consist primarily
of (i) the exclusion of revenue derived solely from WPAT-AM programming
which was not acquired by the Company, (ii) the elimination of
corporate, interest and certain other expenses that would not have been
incurred by the Company, and (iii) the elimination of income tax expense
that would not have been incurred by the Company.
(3) To reflect pro forma depreciation and amortization expense based upon
the preliminary allocation of the purchase price of WPAT-FM based on the
following: Franchise Costs and Other Intangible assets of approximately
$84.6 million plus estimated transaction costs of $1.1 million over a
period of 40 years. The depreciation and amortization expense may change
upon final appraisal of the fair values of the net assets acquired.
(4) To reflect additional interest expense on the Acquisition Financing, at
an assumed interest rate of 15.934%, plus amortization of transaction
costs of approximately $3.3 million to finance a portion of the
acquisition of WPAT-FM.
(5) To eliminate interest income on approximately $13.5 million of cash on
hand and $3 million of deposit held in escrow used to finance the
acquisition of WPAT-FM based upon the average interest rate of 3.9%
earned by the Company during the six months ended March 31, 1996.
F-19
