<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported):
October 16, 1996
Commodore Media, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
33-92732 13-3034720
(Commission File No.) (IRS Employer
Identification No.)
500 Fifth Avenue, Ste. 3000, New York, NY 10110
(Address of principal executive offices) (Zip Code)
(212) 302-2727
Registrant's telephone number, including area code
not applicable
(Former Name of Former Address, if Changed Since Last Report)
Page 1 of 26 Pages
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY STANDARD I.R.S. EMPLOYER
NAME JURISDICTION OF INDUSTRIAL IDENTIFICATION
INCORPORATION CERTIFICATION NUMBER
NUMBER
<S> <C> <C> <C>
Commodore Media of Delaware, Inc. Delaware 4832 51-0286804
Commodore Media of Kentucky, Inc. Delaware 4832 61-0997863
Commodore Media of Pennsylvania, Inc. Delaware 4832 23-2207457
Commodore Media of Norwalk, Inc. Delaware 4832 06-1277523
Commodore Media of Florida, Inc. Delaware 4832 59-2813110
Commodore Media of Westchester, Inc. Delaware 4832 13-3356485
Commodore Holdings, Inc. Delaware 4832 13-3858506
Danbury Broadcasting, Inc. Connecticut 4832 13-3653113
</TABLE>
Page 2 of 26 Pages
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Adventure Communications, Inc.
- Independent Auditor's Report
- Balance Sheets at December 31, 1994 and 1995 and September
30, 1995 & 1996 (unaudited)
- Statements of Operations for the years ended December 31,
1993, 1994 and 1995, and for the nine months ended September
30, 1995 (unaudited) and 1996 (unaudited)
- Statements of Divisional Equity (Deficit) for the years ended
December 31, 1993, 1994 and 1995, and for the nine months
ended September 30, 1996 (unaudited)
- Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995, and for the nine months ended September
30, 1995 (unaudited) and 1996 (unaudited)
- Notes to Financial Statements
(b) Pro forma Financial Information.
Commodore Media:
- Unaudited Pro Forma Consolidated Statement of Operations for
the Twelve Months Ended December 31, 1995
- Unaudited Pro Forma Consolidated Statement of Operations for
the Nine Months Ended September 29, 1996
- Notes to Unaudited Pro Forma Consolidated Statements of
Operations
- Unaudited Pro Forma Consolidated Balance Sheet at September
29, 1996
- Notes to Unaudited Pro Forma Consolidated Balance Sheet
Page 3 of 26 Pages
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Adventure Communications--Huntington
(Division of Adventure Communications, Inc.)
We have audited the accompanying balance sheets of Adventure
Communications--Huntington (Division of Adventure Communications, Inc.) as of
December 31, 1995 and 1994, and the related statements of operations, division's
equity (deficit), and cash flows for the three years ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Adventure
Communications--Huntington (Division of Adventure Communications, Inc.) as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for the three years ended December 31, 1995 in conformity with generally
accepted accounting principles.
BROWN, EDWARDS & CO., LLP
Bluefield, West Virginia
May 1, 1996
Page 4 of 26 Pages
<PAGE> 5
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------- -----------------------
1994 1995 1995 1996
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash........................................ $ 271,000 $ 105,926 $ 187,265 $ 94,830
Accounts receivable, less allowance for
doubtful accounts of $48,000, $66,000,
$35,328 and $69,367 on December 31, 1994
and 1995 and September 30, 1995 and 1996,
respectively (Note 7).................... 535,031 647,986 736,949 32,974
Prepaid assets.............................. 8,310 1,325 1,400 425
Other receivables........................... 40,162 43,120 2,165 36,865
Deferred income taxes (Note 5).............. -- 26,400 26,400 26,400
---------- ---------- ---------- ----------
Total current assets................ 854,503 824,757 954,179 191,494
---------- ---------- ---------- ----------
PROPERTY AND EQUIPMENT, NET
(Notes 3 and 7)............................. 1,090,102 1,225,957 1,283,607 1,078,830
---------- ---------- ---------- ----------
INTANGIBLES, NET (Note 4)..................... 59,727 135,140 138,537 120,528
---------- ---------- ---------- ----------
$2,004,332 $2,185,854 $2,376,323 $1,390,852
========== ========== ========== ==========
LIABILITIES AND
DIVISION'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses....... $ 148,848 $ 177,321 $ 202,508 $ 60,456
Inter-divisional payable (Note 6)........... 2,327,152 2,282,170 2,438,634 1,567,172
---------- ---------- ---------- ----------
Total current liabilities........... 2,476,000 2,459,491 2,641,142 1,627,628
---------- ---------- ---------- ----------
Commitment (Note 7)........................... -- -- -- --
DIVISION'S EQUITY (DEFICIT)................... (471,668) (273,637) (264,819) (236,776)
---------- ---------- ---------- ----------
$2,004,332 $2,185,854 $2,376,323 $1,390,852
========== ========== ========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
Page 5 of 26 Pages
<PAGE> 6
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ --------------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Advertising revenue............... $2,370,460 $2,718,483 $3,352,771 $2,544,764 $ 784,194
Agency commissions................ 109,983 (144,313) (187,292) (138,048) (51,043)
---------- ---------- ---------- ---------- ----------
Net revenue............. 2,260,477 2,574,170 3,165,479 2,406,716 733,151
Other operating revenue........... 27,218 22,060 36,225 29,062 533,475
---------- ---------- ---------- ---------- ----------
Total revenue........... 2,287,695 2,596,230 3,201,704 2,435,778 1,266,626
---------- ---------- ---------- ---------- ----------
Operating expenses (Note 6):
Station operating expenses...... 1,472,000 1,657,235 2,118,139 1,537,381 607,220
Corporate expenses.............. 369,077 413,117 572,980 435,156 435,000
Depreciation.................... 88,635 97,374 230,600 172,950 147,425
Amortization.................... 8,932 9,511 13,587 10,190 18,333
---------- ---------- ---------- ---------- ----------
1,938,644 2,177,237 2,935,306 2,155,677 1,207,978
---------- ---------- ---------- ---------- ----------
Operating income
(loss)................ 349,051 418,993 266,398 280,101 58,648
Interest income................... 4,558 7,753 7,273 4,996 2,783
---------- ---------- ---------- ---------- ----------
Income (loss) before
taxes................. 353,609 426,746 273,671 285,097 61,431
(Provision) benefit for income
taxes (Note 5).................. -- -- (75,640) (78,248) (24,570)
---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 353,609 $ 426,746 $ 198,031 $ 206,849 $ 36,861
========== ========== ========== ========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
Page 6 of 26 Pages
<PAGE> 7
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
STATEMENTS OF DIVISION'S EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<S> <C>
Balance, December 31, 1992...................................................... $(1,252,023)
1993 net income............................................................... 353,609
-----------
Balance, December 31, 1993...................................................... (898,414)
1994 net income............................................................... 426,746
-----------
Balance, December 31, 1994...................................................... (471,668)
1995 net income............................................................... 198,031
-----------
Balance, December 31, 1995...................................................... (273,637)
Nine months ended September 30, 1996 net income (unaudited)................... 36,861
-----------
Balance, September 30, 1996 (unaudited)......................................... $ (236,776)
===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
Page 7 of 26 Pages
<PAGE> 8
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------- ---------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)........................ $ 353,609 $ 426,746 $ 198,031 $ 206,849 $ 36,861
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization......... 97,567 106,885 244,187 183,140 165,758
Deferred income taxes................. -- -- (26,400) (26,400) --
Changes in current assets and
liabilities:
(Increase) decrease in:
Accounts receivable................. (77,872) (115,602) (112,955) (201,918) 615,012
Prepaid expenses and other
receivables...................... 25,720 15,506 4,027 44,907 7,155
(Decrease) increase in:
Accounts payable and accrued
expenses......................... 2,317 (5,421) 28,473 53,660 (116,865)
--------- --------- --------- --------- ---------
Net cash provided by operating
activities..................... 401,341 428,114 335,363 260,238 707,921
--------- --------- --------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and
equipment............................. (52,697) (391,518) (366,455) (366,455) (4,019)
Purchase of intangible assets............ -- (35,000) (89,000) (89,000) --
--------- --------- --------- --------- ---------
Net cash used in investing
activities..................... (52,697) (426,518) (455,455) (455,455) (4,019)
--------- --------- --------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Increase in inter-divisional payable..... 369,077 813,117 975,018 731,482 435,002
Repayment of inter-divisional payable.... (580,000) (850,000) (1,020,000) (620,000) (1,150,000)
--------- --------- --------- --------- ---------
Net cash used in financing
activities..................... (210,923) (36,883) (44,982) 111,482 (714,998)
--------- --------- --------- --------- ---------
Increase (decrease) in cash...... 137,721 (35,287) (165,074) (83,735) (11,096)
CASH
Beginning................................ 168,566 306,287 271,000 271,000 105,926
--------- --------- --------- --------- ---------
Ending................................... $ 306,287 $ 271,000 $ 105,926 $ 187,265 $ 94,830
========= ========= ========= ========= =========
SUPPLEMENTAL SCHEDULE OF
NONCASH TRANSACTIONS
Barter revenue........................... $ 142,065 $ 181,861 $ 233,219 $ 140,505 $ 60,393
========= ========= ========= ========= =========
Barter expense........................... $ 142,370 $ 202,653 $ 163,100 $ 88,082 $ 61,019
========= ========= ========= ========= =========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
Page 8 of 26 Pages
<PAGE> 9
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
DECEMBER 31, 1995
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
Adventure Communications--Huntington (the Division) is a division of
Adventure Communications, Inc. (the Company). The Company's principal business
is the operation of AM and FM radio broadcasting stations in the areas of
Bluefield and Huntington, West Virginia; Statesville, North Carolina; and Hilton
Head, South Carolina. The Division operates WKEE-AM and FM, WBVB-FM, WZZW-AM and
WIRO-AM (the Stations).
The Company also has joint operating and marketing agreements with other
radio stations located in the Huntington area. Under these agreements, the
Company is responsible for various promotional and marketing activities of the
Stations. Revenue and expenses resulting from these agreements are included in
the Division's operations.
On April 8, 1996, the Company entered into an asset purchase agreement to
sell substantially all the assets relating to the operations of the Stations
(Note 11).
Revenue recognition:
Advertising revenue is recognized in the accounting period which
corresponds with the broadcast of the advertisement. Barter revenue is reported
when advertisements are broadcast and barter merchandise or services received
are expensed when used. Barter transactions are valued at the market value of
the broadcast time which approximates the market value of the product or
services received.
Property and equipment:
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives using straight-line and accelerated methods.
Valuation of receivables:
The Division provides for bad debts under the reserve method which charges
current operations for estimated uncollectibles based upon the Division's
collection experience and an evaluation of the receivables at year end.
Intangible assets:
Acquisition costs (non-compete covenants and goodwill) in excess of the net
tangible assets of acquired radio stations are amortized on a straight-line
basis over periods of up to 15 years, and are included in the financial
statements at cost less accumulated amortization.
Income taxes:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to the allowance for doubtful accounts which is not deductible
for income tax return purposes until the accounts are written off as
uncollectible. The deferred tax asset represents the future tax return
deduction.
Effective January 1, 1995, the Company revoked its S Corporation election
and became a taxable entity. Previously, its income and losses were included in
the personal tax returns of the stockholders, and the Company did not record an
income tax provision or benefit.
Page 9 of 26 Pages
<PAGE> 10
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
DECEMBER 31, 1995
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Statement of cash flows:
Separate disclosures have not been made for cash paid for interest and
income taxes because these amounts are included in inter-divisional transactions
with the Company.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 2. ACQUISITIONS
In November 1994, the Company purchased selected assets of an AM radio
station in Milton, West Virginia. The acquisition was accounted for by the
purchase method, and the statement of income includes the results of operations
of this station from the date of acquisition.
<TABLE>
<S> <C>
Property and equipment............................................ $365,000
Intangibles....................................................... 35,000
--------
$400,000
========
</TABLE>
In June 1995, the Company purchased selected assets of an AM radio station
in Ironton, Ohio. The acquisition was accounted for by the purchase method, and
the statement of income includes the results of operations of this station from
the date of acquisition.
<TABLE>
<S> <C>
Property and equipment............................................ $211,000
Intangibles....................................................... 89,000
--------
$300,000
========
</TABLE>
Pro forma results of operations from these acquisitions were not material
to the Division's operations. Therefore, such information has not been
presented.
NOTE 3. PROPERTY AND EQUIPMENT
Major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------------
1994 1995 1995 1996
<S> <C> <C> <C> <C>
Land and improvements............. $ 50,000 $ 60,000 $ 60,000 $ 60,000
Buildings and improvements........ 520,557 550,557 550,557 551,318
Broadcasting equipment............ 1,482,136 1,735,498 1,735,498 1,735,848
Furniture and fixtures............ 119,846 124,756 124,756 124,756
Transportation equipment.......... 4,480 22,280 22,280 22,280
Computer and office equipment..... 137,033 187,416 187,416 190,323
---------- ---------- ---------- ----------
2,314,052 2,680,507 2,680,507 2,684,525
Less accumulated depreciation..... 1,223,950 1,454,550 1,396,900 1,605,695
---------- ---------- ---------- ----------
$1,090,102 $1,225,957 $1,283,607 $1,078,830
========== ========== ========== ==========
</TABLE>
Page 10 of 26 Pages
<PAGE> 11
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
DECEMBER 31, 1995
NOTE 4. INTANGIBLES
Intangibles are stated at cost, net of amortization and consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------- ---------------------
1994 1995 1995 1996
<S> <C> <C> <C> <C>
Non-compete covenant.................... $ 10,000 $ 20,000 $ 20,000 $ 20,000
Goodwill................................ 99,317 163,317 163,317 163,317
License fees............................ 15,000 30,000 30,000 30,000
-------- -------- -------- --------
124,317 213,317 213,317 213,317
Less accumulated amortization........... 64,590 78,177 74,780 92,789
-------- -------- -------- --------
$ 59,727 $135,140 $138,537 $120,528
======== ======== ======== ========
</TABLE>
NOTE 5. INCOME TAXES
The (provision) benefit for income taxes consists of the following
components:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------------
1995 1995 1996
<S> <C> <C> <C>
Current (expense) benefit.......................... $ (102,040) $(104,648) $(24,570)
Deferred........................................... 26,400 26,400 --
------------ --------- --------
(Provision) benefit for income taxes.......... $ (75,640) $ (78,248) $(24,570)
========== ========= ========
</TABLE>
Income tax (expense) benefit differs from the statutory federal rate of 34%
as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ----------------------
1995 1995 1996
<S> <C> <C> <C>
Tax (expense) benefit.............................. $ (109,468) $(114,048) $(24,570)
Non-deductible items............................... (4,172) (2,200) --
Change in tax status............................... 38,000 38,000 --
------------ -------- --------
(Provision) benefit for income taxes.......... $ (75,640) $ (78,248) $(24,570)
========== ========= ========
</TABLE>
As discussed in Note 1, the Company changed its tax status from nontaxable
to taxable effective for 1995. Accordingly, the deferred tax asset of
approximately $38,000 at the date that the termination election became effective
has been recorded through a charge to the tax provision for 1995.
NOTE 6. INTER-DIVISIONAL TRANSACTIONS
The Company has allocated to the Division various expenses it incurred for
corporate services, overhead and interest costs. The amounts included in
corporate services and overhead allocations are comprised mainly of corporate
office salaries, related payroll taxes and employee benefits, professional fees
and administrative expenses. These costs have been allocated based on revenues
of the Division compared to total revenues of the Company. Management believes
the amounts allocated to the Division have been computed and charged to the
Division on a reasonable basis.
Page 11 of 26 Pages
<PAGE> 12
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
DECEMBER 31, 1995
NOTE 6. INTER-DIVISIONAL TRANSACTIONS--(CONTINUED)
The Division is obligated to the Company for monies received from the
Company for the original purchase of the Stations as well as the allocated
expenses mentioned above. The Division, in return, transfers cash to the Company
that is in excess of its operating needs. These transactions are conducted on an
interest free basis. The inter-divisional payable is analyzed below:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- -------------------------
1994 1995 1995 1996
<S> <C> <C> <C> <C>
Balance, beginning....................... $2,364,035 $ 2,327,152 $2,327,152 $2,282,170
Allocations of corporate costs to the
Division............................... 413,117 675,018 431,482 435,002
Purchase of Stations..................... 400,000 300,000 300,000 --
Cash transfers........................... (850,000) (1,020,000) (620,000) (1,150,000)
---------- ----------- ---------- ----------
Balance, ending.......................... $2,327,152 $ 2,282,170 $2,438,634 $1,567,172
========== =========== ========== ==========
</TABLE>
NOTE 7. COMMITMENT
Adventure Communications Inc. is obligated for long-term debt of
approximately $6,900,000 for which substantially all assets of the Company
(including the Division) are pledged as collateral. At December 31, 1995, the
book value of total assets of the Company exceeds the long-term debt.
Approximately $3,700,000 of the debt is also secured by a $4,000,000 life
insurance policy on the majority stockholder of the Company.
A note payable to the majority stockholder of the Company of $2,400,000 is
included in the $6,900,000 debt referred to above.
NOTE 8. EMPLOYEE BENEFIT PLANS
The Company has a contributory profit sharing plan covering all full time
employees with one or more years of service. The plan provides for annual
employer contributions on a discretionary basis as determined by the Board of
Directors. No contributions were made to the plan in 1993, 1994 or 1995.
The Company also has a 401(k) retirement plan, whereby participants may
contribute a percentage of their compensation.
The Company's matching contribution percentage (which is determined
annually by the Company) is limited to 10% of the participant's compensation for
each plan year. The Division's contributions were approximately $8,600, $9,400
and $8,200 for the years ended December 31, 1993, 1994 and 1995, respectively.
NOTE 9. OPERATING LEASES
The Division leases certain transmission towers and automobiles under
non-cancelable lease agreements. These leases have been classified as operating
leases; and accordingly, all rents are charged to operations as incurred.
Page 12 of 26 Pages
<PAGE> 13
ADVENTURE COMMUNICATIONS--HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
DECEMBER 31, 1995
NOTE 9. OPERATING LEASES--(CONTINUED)
The following is a schedule by years of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1995:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31:
1996............................................................... $15,630
1997............................................................... 8,500
1998............................................................... 2,400
1999............................................................... 2,400
2000............................................................... 2,400
-------
Total minimum payments required.................................... $31,330
=======
</TABLE>
Lease expense was approximately $30,800, $28,200 and $15,630 for 1993, 1994
and 1995, respectively.
NOTE 10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the inter-divisional payable approximates fair
value. It is included in the financial statements as a current liability due to
the pending sales discussed in Note 11. The inter-divisional payable will be
satisfied by the proceeds of the sale. In the financial statements of the
Company, all inter-divisional payables/receivables are eliminated.
NOTE 11. SUBSEQUENT EVENT
On April 8, 1996, the Company entered into an asset purchase agreement to
sell substantially all the assets relating to the operations of the Stations for
$7,765,000. The sale of the Station is contingent based on FCC consent. The
buyer will purchase all of the assets for the Stations, free and clear of any
liabilities, mortgages, liens, pledges, conditions or encumbrances except for
the Stations' cash, rights to refunds or deposits which relate to the period
prior to closing and accounts receivable. Also at closing, $475,000 of the sales
price will be deposited with the indemnification escrow agent. The
indemnification period will be for a period of two (2) years following the
closing. The indemnification by seller and buyer shall be for any losses,
liabilities or damages resulting from untrue representations, breach of warranty
or non-fulfillment of covenants, liabilities not expressly assumed by buyer,
liabilities resulting from operations prior to the closing date for the buyer or
liabilities resulting from operation after the closing date for the seller.
Page 13 of 26 Pages
<PAGE> 14
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The Unaudited Pro Forma Consolidated Statement of Operations for the twelve
months ended December 31, 1995 presents the statement of operations of Commodore
Media, Inc. (the "Company") as if (i) the issuance of 13 -1/4% Senior
Subordinated Notes, due 2003, and Warrants to purchase 75,500 shares of Class A
Common Stock (the "Recapitalization Transactions"), (ii) the issuance of Senior
Exchangeable Redeemable Preferred Stock, Series A, $.01 par value per share (the
"Preferred Stock Offering"), (iii) borrowings from the AT&T Commercial Finance
Corporation (the "Senior Credit Facility") and (iv) the acquisition of Danbury
Broadcasting, Inc. (the "Danbury Acquisition"), the acquisition of radio
stations from Treasure Coast Media, Inc. (the "1995 Treasure Coast
Acquisition"), Hudson Valley Growth, L.P. (the "Westchester Acquisition"), Media
VI (the "1996 Treasure Coast Acquisition"), Q Broadcasting, Inc. (the "Stamford
Acquisition") and Adventure Communications, Inc. and Simmons Broadcasting
Company (the "Huntington Acquisition") (collectively, the "Acquisitions") had
occurred on January 1, 1995. The Unaudited Consolidated Pro Forma Statement of
Operations for the nine months ended September 29, 1996 presents the statement
of operations of the Company as if the Recapitalization Transactions, the
Preferred Stock Offering, the Senior Credit Facility and the Acquisitions
(excluding the 1995 Treasure Coast Acquisition) had occurred on January 1, 1995.
The Unaudited Pro Forma Consolidated Balance Sheet at September 29, 1996
presents the balance sheet of the Company as if the Huntington Acquisition had
occurred on September 29, 1996.
The Acquisitions have been accounted for using the purchase method of
accounting. The total cost of such Acquisitions has been allocated to the
tangible and intangible assets acquired and liabilities assumed based on their
respective fair values. The allocation of the respective purchase prices assumed
in the pro forma financial statements is preliminary. The Company does not
expect that the final allocation of the purchase price will materially differ
from the preliminary allocation.
The pro forma adjustments are based on available information and on certain
assumptions that the Company believes are reasonable under the circumstances.
The pro forma consolidated financial information should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto, as well
as the Financial Statements and Notes thereto of Danbury Broadcasting, Inc.,
(included in the Form 8-K/A filed June 10, 1996), Q Broadcasting, Inc. and Media
VI, (included in the Form 8-K/A filed August 12, 1996) and Adventure
Communications, Inc. which includes the operating results of the Simmons
Broadcasting stations purchased (included elsewhere in this filing). The pro
forma statement of operations data are not necessarily indicative of the results
that would have occurred if the Recapitalization Transactions, the Preferred
Stock Offering, the Senior Credit Facility and the Acquisitions had occurred on
the date indicated, nor are they indicative of the Company's future results of
operations.
Page 14 of 26 Pages
<PAGE> 15
COMMODORE MEDIA, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------
1995 1996
Treasure Treasure
Commodore Coast Westchester Danbury Coast Stamford
Media, Inc. Acquisition Acquisition Acuisition(a) Acquisition Acquisition(b)
-- --------- ----------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 33,653 $ 537 $ 714 $ 2,734 $ 2,131 $ 3,044
Less: agency commissions (2,858) (43) (37) (247) (139) (224)
-------- ---- ----- -------- -------- --------
Net revenue 30,795 494 677 2,487 1,992 2,820
Station operating expenses 19,033 319 601 1,896 1,492 3,496
Corporate expenses 2,051 0 0 369 0 0
Depreciation and amortization 1,926 169 172 432 149 444
Long-term incentive compensation 2,007 0 0 0 0 0
-------- ---- ----- -------- -------- --------
Operating income (loss) 5,778 6 (96) (210) 351 (1,120)
Interest expense, net 7,000 0 128 296 216 518
Other expenses (income) 434 0 (43) (26) 0 0
-------- ----- ----- -------- ------- --------
Net (loss) income before income taxes
and extraordinary item (1,656) 6 (181) (480) 135 (1,638)
Income taxes 140 0 0 0 0 0
-------- ----- -------- -------- -------- --------
Net (loss) income before extraordinary item $ (1,796) $ 6 $ (181) $ (480) $ 135 $ (1,638)
======== ===== ======== ======== ======== ========
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1995
-----------------------------------------------
Huntington Pro Forma
Acquisition adjustments Combined
----------- ----------- --------
<S> <C> <C> <C>
Total revenue $ 3,389 $ $ 46,202
Less: agency commissions (187) (3,735)
-------- --------
Net revenue 3,202 42,467
Station operating expenses 2,118 (2,004)(c) 26,951
Corporate expenses 573 (849)(d) 2,144
Depreciation and amortization 244 98 (e) 3,634
Long-term incentive compensation 0 2,007
-------- --------
Operating income (loss) 267 7,731
Interest expense, net 0 1,168 (f) 11,301
2,549 (g)
584 (h)
(1,158)(i)
Other expenses (income) (7) 35 (j) 613
220 (k)
-------- --------
Net (loss) income before income taxes
and extraordinary item 274 (4,183)
Income taxes 76 (76)(t) 140
-------- --------
Net (loss) income before extraordinary item $ 198 $ (4,323)
======== ========
Page 15 of 26 Pages
</TABLE>
<PAGE> 16
COMMODORE MEDIA, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 29, 1996
-------------------------------------------------------------------------------
1996
Treasure
Commodore Coast Stamford Huntington
Media, Inc.(l) Acquisition (m) Acquisition Acquisition (n)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 32,273 $ 310 $ 1,271 $ 801
Less: agency commissions (2,657) (15) (102) (51)
--------- --------- -------- ---------
Net revenue 29,616 295 1,169 750
Station operating expenses 19,841 245 2,100 91
Corporate expenses 1,685 0 0 435
Depreciation and amortization 2,021 26 127 165
--------- --------- -------- ---------
Operating income (loss) 6,069 24 (1,058) 59
Interest expense, net 7,743 46 (25) 0
Other expenses (income) 1,708 0 0 (2)
--------- --------- -------- ---------
Net loss before income taxes
and extraordinary item (3,382) (22) (1,033) 61
Income taxes 133 0 0 24
--------- --------- -------- ---------
Net loss before extraordinary item $ (3,515) $ (22) $ (1,033) $ 37
========= ========= ======== =========
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 29, 1996
---------------------------------
Pro Forma Pro Forma
Adjustments Combined
---------------------------------
<S> <C> <C>
Total revenue $ $34,655
Less: agency commissions (2,825)
--------
Net revenue 31,830
Station operating expenses (1,672)(c) 20,605
Corporate expenses (400)(d) 1,720
Depreciation and amortization 200 (o) 2,539
--------
Operating income (loss) 6,966
Interest expense, net 277 (p) 8,691
266 (q)
405 (r)
(21)(i)
Other expenses (income) 32 (s) 1,738
--------
Net loss before income taxes
and extraordinary item (3,463)
Income taxes (24)(t) 133
--------
Net loss before extraordinary item $ (3,596)
========
</TABLE>
Page 16 of 26 Pages
<PAGE> 17
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Reflects the historical statement of operations of the Danbury
Acquisition. The Danbury Acquisition operated on a June 30 fiscal year
end. The historical statement of operations included in the unaudited
pro forma consolidated statement of operations, however, has been
prepared on a calendar year basis based on the unaudited quarterly
financial statements of the Danbury Acquisition.
(b) Reflects the historical statement of operations of the Stamford
Acquisition. The Stamford Acquisition operated on a September 30 fiscal
year end. The historical statement of operations included in the
unaudited pro forma consolidated statement of operations, however, has
been prepared on a calendar year basis from the unaudited quarterly
financial statements of the Stamford Acquisition.
(c) Cost savings expected to be realized by combining duplicative
programming, general and administrative functions and sales
responsibilities in markets with multiple stations, commission
reduction, facilities consolidation and reductions in professional fees
due to consolidation.
(d) Corporate and general administrative expenses have been incrementally
adjusted due to the Acquisitions.
(e) To reflect reduced depreciation and amortization (net) related to the
Acquisitions due to differences arising from the purchase price
allocation and changes in accounting policy, according to the
following:
<TABLE>
<S> <C>
Reduced pro forma depreciation and amortization expense due to
differences in accounting policy $(500)
Incremental pro forma depreciation and amortization expense due to
purchase price allocation 598
-----
$ 98
=====
</TABLE>
Page 17 of 26 Pages
<PAGE> 18
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(f) To reflect adjustment to interest expense associated with the financing
of the Danbury and Westchester Acquisitions. The Company used $6.7
million of available cash and financed the remaining $8.2 million of
the purchase price with funds obtained from the Senior Credit Facility.
Pro forma interest expense, net, associated with the transaction is as
follows (dollars in thousands):
<TABLE>
<S> <C>
Incremental pro forma interest expense related to financed
portion of purchase price ($8.2 million, 9.74%, 12 months) $ 799
Interest income forfeited due to available cash used to fund
purchase price ($6.7 million, 5.5%, 12 months) 369
------
$1,168
======
</TABLE>
(g) To reflect the adjustment to interest expense associated with the
Recapitalization Transactions and the 1995 Treasure Coast Acquisition
as well as the financing of the 1996 Treasure Coast and Stamford
Acquisitions. The Company used $3.1 million of available cash to fund
the 1995 Treasure Coast Acquisition, and 1.05 million of available
cash, $10.0 million of proceeds received from the issuance of the
Preferred Stock Offering and $6.45 million of advances received from
the Senior Credit Facility to fund the 1996 Treasure Coast and
Stamford Acquisitions. Pro forma interest expense, net,
associated with the above is as follows (dollars in thousands):
<TABLE>
<S> <C>
Incremental pro forma interest expense related to the
Recapitalization Transactions $ 2,773
Elimination of interest expense related to the Company's debt retired
in 1995 as part of the Recapitalization Transaction (995)
Interest income forfeited due to available cash used to fund the
1995 Treasure Coast Acquisition ($3.1 million,
5.5%, 6 months) 85
1996 Treasure Coast Acquisition and Stamford Acquisition:
Incremental pro forma interest expense due to financed portion of
purchase price ($6.45 million, 9.74%, 12 months) 628
Interest income forfeited due to available cash used to fund
purchase price ($1.05 million, 5.5%, 12 months) 58
-------
$ 2,549
=======
</TABLE>
Page 18 of 26 Pages
<PAGE> 19
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(h) To reflect adjustment to interest expense associated with the financing
of the Huntington Acquisition. The Company obtained $6.0 million of
equity funding from Capstar Broadcasting Partners and financed the
remaining $6.0 million of the purchase price with funds obtained from
the Senior Credit Facility. Pro forma interest expense, net, associated
with the transaction is as follows (dollars in thousands):
<TABLE>
<S> <C>
Incremental pro forma interest expense related to
financed portion of purchase price ($6.0 million, 9.74%,
12 months) $ 584
</TABLE>
(i) To eliminate interest on debt not assumed by the Company.
(j) Elimination of non-operating income that is not expected to be realized
by the Company.
(k) To reflect incremental amortization expense of deferred financing fees
as follows:
<TABLE>
<S> <C>
Amortization of deferred financing fees related to debt retired
during 1995 $ (69)
Incremental pro forma amortization of deferred financing fees
associated with the Senior Credit Facility 129
Incremental pro forma amortization of deferred financing fees
associated with Recapitalization Transactions 160
-----
$ 220
=====
</TABLE>
Page 19 of 26 Pages
<PAGE> 20
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(l) The Company had been operating the Danbury and Westchester Acquisitions
under a Local Marketing Agreement ("LMA") since October 30, 1995 and,
therefore, has included actual results of operations in its
consolidated statement of operations for the nine months ended
September 29, 1996.
(m) The Company had been operating the 1996 Treasure Coast Acquisition
under and LMA since February 19, 1996 and, therefore, has included
actual results of operations in its consolidated statement of
operations since that date.
(n) The Company had been operating the Huntington Acquisition under an LMA
since April 1, 1996 and, therefore, has included actual results of
operations in its consolidated statement of operations since that date.
(o) To reflect incremental depreciation and amortization (net) related to
the Acquisitions due to differences arising from the purchase price
allocation and changes in accounting policy, according to the
following:
<TABLE>
<S> <C>
Reduced pro forma depreciation and amortization expense due to
differences in accounting policy $ (85)
Incremental pro forma depreciation and amortization expense due to
purchase price allocation 285
-----
$ 200
=====
</TABLE>
(p) To reflect adjustment to interest expense associated with the purchase
on March 27, 1996 of the Danbury and Westchester Acquisitions, as
stated in adjustment (f). Pro forma net interest expense associated
with the transaction is as follows (dollars in thousands):
<TABLE>
<S> <C>
Incremental pro forma interest expense related to financed
portion of purchase price ($8.2 million, 9.00%, 3 months) $ 185
Interest income forfeited due to available cash used to fund
purchase price ($6.7 million, 5.5%, 3 months) 92
-----
$ 277
=====
</TABLE>
Page 20 of 26 Pages
<PAGE> 21
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(q) To reflect adjustment to interest expense associated with the purchase
on May 31, 1996 and May 30, 1996 of the 1996 Treasure Coast and
Stamford Acquisitions, respectively, as stated in adjustment (g).
Pro forma net interest expense associated with the transaction is as
follows (dollars in thousands):
<TABLE>
<S> <C>
Incremental pro forma interest expense due to financed portion
of purchase price ($6.45 million, 9.00%, 5 months) $ 242
Interest income forfeited due to available cash used to fund
purchase price ($1.05 million, 5.5%, 5 months) 24
-----
$ 266
=====
</TABLE>
(r) To reflect adjustment to interest expense associated with the purchase
of the Huntington Acquisition, as stated in adjustment (h). Pro forma
net interest expense associated with the transaction is as follows
(dollars in thousands):
<TABLE>
<S> <C>
Incremental pro forma interest expense due to financed portion
of purchase price ($6.0 million, 9.00%, 9 months) $ 405
</TABLE>
(s) To reflect incremental pro forma amortization expense of deferred
financing fees associated with the Senior Credit Facility.
(t) Elimination of tax expense that is not expected to be realized by the
Company.
Page 21 of 26 Pages
<PAGE> 22
Commodore Media, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
(Dollars in thousands)
<TABLE>
<CAPTION>
As of September 29, 1996
----------------------------------------------------------
Commodore Huntington Pro Forma Pro Forma
Media, Inc.(a) Acquisition Adjustments Combined
-------------- ----------- ----------- ---------
ASSETS:
<S> <C> <C> <C> <C>
Cash $ 5,325 $ 95 $ (12,500)(b) $ 5,425
600 (b)
(95)(b)
6,000 (c)
6,000 (d)
Accounts receivable, net 7,825 33 (33)(b) 7,825
Prepaid expenses and other current assets 513 37 (37)(b) 513
Deferred income taxes -- 26 (26)(b) --
-------- ------- ----------- ----------
Total current assets 13,663 191 (91) 13,763
Property, plant and equipment, net 11,930 1,079 (79)(b) 12,930
FCC licenses and goodwill, net 49,505 121 11,379 (b) 61,005
Other intangible and other assets, net 8,870 0 (600)(b) 8,270
-------- ------- ----------- ----------
Total assets $ 83,968 $ 1,391 $ 10,609 $ 95,968
======== ======= =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Accounts payable and accrued liabilities $ 5,487 $ 1,628 $ (1,628)(b) 5,487
Current portion of long-term debt 12 0 12
-------- ------- ----------- ----------
Total current liabilities 5,499 1,628 (1,628) 5,499
Long-term debt 87,591 0 6,000 (c) 93,591
Noncurrent compensation 1,425 0 1,425
Deferred income taxes 1,700 0 1,700
Senior Preferred Stock 9,165 0 9,165
Stockholders' equity (deficit) (21,412) (237) 237 (b) (15,412)
6,000 (d)
-------- ------- ----------- ----------
Total liabilities and
stockholders' equity (deficit) $ 83,968 $ 1,391 $ 10,609 $ 95,968
======== ======= =========== ==========
</TABLE>
Page 22 of 26 Pages
<PAGE> 23
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) The Danbury and Westchester Acquisitions both closed on March 27, 1996
and are therefore reflected in the Company's financial position as of
September 29, 1996.
The Stamford Acquisition and the 1996 Treasure Coast Acquisition closed
on May 30, 1996 and May 31, 1996, respectively, and are therefore,
reflected in the Company's financial position as of September 29, 1996.
(b) To reflect the purchase of the Huntington Acquisition for $12.0 million
and the preliminary allocation of the purchase price, including fees and
expenses of $500,000. A deposit of $600,000 had been paid for the
Huntington Acquisition that was applied to the purchase price at the
closing.
The allocation of purchase price and elimination of the assets not acquired
and the liabilities not assumed in connection with the Huntington
Acquisition is as follows (dollars in thousands):
<TABLE>
<CAPTION>
Allocation of
Purchase Carrying
Price Value Adjustment
------------- -------- ----------
<S> <C> <C> <C>
ASSETS:
Cash $ 0 $ 95 $ (95)
Accounts receivable, net 0 33 (33)
Prepaid expense and other
current assets 0 37 (37)
Deferred taxes -- 26 (26)
Property, plant and equipment, net 1,000 1,079 (79)
Intangible assets, net 11,500 121 11,379
-------- -------- --------
Total assets $ 12,500 $ 1,391 $ 11,109
======== ======== ========
LIABILITIES:
Accounts payable and accrued
expenses 0 1,628 (1,628)
Current portion of long-term debt 0 0 0
Long-term debt 0 0 0
-------- -------- --------
Net assets $ 12,500 $ (237) $ 12,737
======== ======== ========
Stockholders' equity $ (237) $ 237
======== ========
</TABLE>
Page 23 of 26 Pages
<PAGE> 24
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED)
(b) The preliminary allocation of purchase price may change upon final
determination of the fair value of net assets acquired.
(c) To reflect funds totaling $6,000,000 received from the Senior Credit
Facility for the purchase of the Huntington acquisition.
(d) To reflect equity funding from Capstar Broadcasting Partners of
$6,000,000 for the purchase of the Huntington Acquisition.
Page 24 of 26 Pages
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Commodore Media, Inc.
(Registrant)
Date: December 31, 1996 /s/ James T. Shea, Jr.
--------------------------
James T. Shea, Jr.
President
(principal executive officer)
Date: December 31, 1996 /s/ James J. Sullivan
--------------------------
James J. Sullivan
Chief Financial Officer
(principal financial and accounting officer)
Page 25 of 26 Pages
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Commodore Media of Delaware, Inc.
a Delaware Corporation
Commodore Media of Kentucky, Inc.
a Delaware Corporation
Commodore Media of Pennsylvania, Inc.
a Delaware Corporation
Commodore Media of Norwalk, Inc.
a Delaware Corporation
Commodore Media of Florida, Inc.
a Delaware Corporation
Commodore Media of Westchester, Inc.
a Delaware Corporation
Commodore Holdings, Inc.
a Delaware Corporation
Danbury Broadcasting, Inc.
a Connecticut Corporation
Date: December 31, 1996 By: /s/ James T. Shea, Jr.
--------------------------
James T. Shea, Jr.
President
(principal executive officer)
Date: December 31, 1996 By: /s/ James J. Sullivan
---------------------------
James J. Sullivan
Secretary, Treasurer
(principal financial and accounting
officer)
Page 26 of 26 Pages
