<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended
March 31, 1996
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from __________ to __________
Commission file number: 33-92732
Commodore Media, Inc.
(Exact name of registrant as specified in its charter)
See Table of Additional Registrants
Delaware 13-3034720
(State or other jurisdiction of (IRS Employer
incorporation or organization) 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
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Shares Outstanding at
Class March 31, 1996
----- ----------------------
<S> <C>
Class A Common Stock, $.01 par value 61,002
Class B Common Stock, $.01 par value 486,373
</TABLE>
As of March 31, 1996, there was no public market for the Company's common stock.
Page 1 of 24 Pages
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY I.R.S. EMPLOYER
JURISDICTION OF STANDARD IDENTIFICATION
NAME INCORPORATION INDUSTRIAL NUMBER
CERTIFICATION
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>
-2-
<PAGE> 3
COMMODORE MEDIA, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
NUMBER
------
Item 1 Financial Statements (unaudited)
Consolidated Balance Sheets ............................ 4
Consolidated Statements of Operations .................. 5
Condensed Consolidated Statements of Cash Flows ........ 6
Consolidated Statement of Stockholders' Deficit ........ 7
Notes to Consolidated Financial Statements ............. 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 12
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security-Holders.... 17
Item 5 Other Information...................................... 17
Item 6 Exhibits and Reports on Form 8 - K .................... 18
Signatures ............................................ 20
-3-
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMMODORE MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and short term cash investments $ 10,891,489 $ 5,086,725
Accounts receivable, net 6,131,447 4,908,411
Prepaid expenses and other current assets 285,412 452,451
------------ ------------
Total current assets 17,308,348 10,447,587
Property, plant and equipment, net 8,080,043 10,015,567
FCC licenses, net 18,769,172 29,628,878
Goodwill, net 1,998,453 5,584,498
Other intangible assets 1,761,306 1,934,213
Deferred charges, net 3,910,582 4,184,346
Deposits and other assets 982,876 1,415,769
------------ ------------
Total assets $ 52,810,780 $ 63,210,858
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilites:
Accounts payable and accrued expenses $ 1,774,256 $ 1,546,938
Accrued compensation 815,162 415,972
Accrued interest 960,368 2,412,728
Accrued income taxes 16,840 10,603
Current maturities of long-term debt 11,977 11,977
------------ ------------
Total current liabilities 3,578,603 4,398,218
Long-term debt 65,142,763 74,465,671
Non-current compensation 1,482,275 1,463,345
Note payable - officer 1,161,706 1,174,617
Deferred income taxes -- 1,700,000
Stockholders' deficit:
Class A Common Stock, $0.01 par value; 3,000,000
shares authorized, 146,526 issued 1,465 1,465
Class B Common Stock, convertible into Class A Common Stock
$0.01 par value; 486,373 shares authorized and issued 4,864 4,864
Additional paid-in capital 23,580,184 23,580,184
Accumulated deficit (42,115,080) (43,551,506)
------------ ------------
(18,528,567) (19,964,993)
Less treasury stock, at cost 26,000 26,000
------------ ------------
Total stockholders' deficit (18,554,567) (19,990,993)
------------ ------------
Total liabilities and stockholders' deficit $ 52,810,780 $ 63,210,858
============ ============
</TABLE>
-4-
See accompanying notes.
<PAGE> 5
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
COMMODORE MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months ended:
---------------------------
March 26, March 31,
1995 1996
----------- -----------
<S> <C> <C>
Total revenue $ 6,507,658 $ 8,047,568
Less: agency commissions (540,271) (631,887)
----------- -----------
Net revenue 5,967,387 7,415,681
Operating expenses:
Programming, technical and news 1,090,881 1,513,468
Sales and promotion 1,867,684 2,421,153
General and administrative 1,210,206 1,440,612
Corporate expenses 460,738 465,684
Depreciation and amortization 436,991 480,210
Long-term incentive compensation 584,935 --
----------- -----------
Operating income 315,952 1,094,554
Interest expense 829,790 2,451,638
Interest income 110 115,252
Other expenses, net 56,666 167,594
----------- -----------
Income (loss) before provision for income
taxes (570,394) (1,409,426)
Provision for income taxes 15,000 27,000
----------- -----------
Net income (loss) $ (585,394) $(1,436,426)
=========== ===========
</TABLE>
-5-
See accompanying notes.
<PAGE> 6
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
COMMODORE MEDIA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months ended:
---------------------------
March 26 March 31
1995 1996
------------ ------------
<S> <C> <C>
Net cash provided by operating activities $ 59,632 $ 1,890,560
Cash flows from investing activities
Purchase of property, plant and equipment (42,030) (124,192)
Deferred acquisition costs -- (290,766)
Loans to stockholders and employees (65,488) --
Deposit on acquisitions (150,000) (915,000)
Acquisitions of stations -- (14,400,000)
Other investing activities, net (12,646) (68,177)
------------ ------------
Net cash (used in) investing activities (270,164) (15,798,135)
Cash flows from financing activities
Proceeds from debt -- 8,500,000
Payment of deferred debt issuance costs (224,101) (393,734)
Repayment of amounts borrowed (333,333) --
Principal payments on capital leases (1,463) (3,455)
Purchase of redeemable warrant (1,000,000) --
Repurchase of common stock (25,000) --
------------ ------------
Net cash provided by (used in) financing activities (1,583,897) 8,102,811
------------ ------------
Net decrease in cash and short term cash investments (1,794,429) (5,804,764)
Cash and short term cash investments beginning of period 2,042,249 10,891,489
------------ ------------
Cash and short term cash investments end of period $ 247,820 $ 5,086,725
============ ============
Interest paid $ 958,418 $ 46,738
Taxes paid 224,440 58,908
</TABLE>
-6-
See accompanying notes.
<PAGE> 7
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
COMMODORE MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON STOCK PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
CLASS A CLASS B CAPITAL DEFICIT STOCK DEFICIT
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 1,465 $ 4,864 $ 23,580,184 $(42,115,080) $ (26,000) $(18,554,567)
Net loss for the period (1,436,426) (1,436,426)
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 1996 $ 1,465 $ 4,864 $ 23,580,184 $(43,551,506) $ (26,000) $(19,990,993)
============ ============ ============ ============ ============ ============
</TABLE>
-7-
See accompanying notes.
<PAGE> 8
COMMODORE MEDIA,INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1996
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Form 10-K
for the year ended December 31, 1995. The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries.
2. RECAPITALIZATION TRANSACTIONS
On April 21, 1995 the Company completed the offering of its 13 1/4%
Senior Subordinated Notes due 2003 (the "Senior Subordinated Notes"). The gross
proceeds of approximately $65.0 million were used to: (i) retire existing senior
and subordinated indebtedness of approximately $39.2 million resulting in an
extraordinary loss of approximately $444,000; (ii) redeem the preferred stock of
approximately $8.7 million; (iii) pay the long-term incentive compensation of
Mr. Friedman and Mr. Shea of approximately $1.9 million; (iv) pay a portion of
the estimated fees and expenses of the Recapitalization Transactions which total
approximately $3.5 million; and (v) reserve approximately $11.7 million for
general corporate purposes, possible future acquisitions and to fund the
purchase of radio station WQOL-FM in Vero Beach, Florida. In addition, the
Company converted all of its existing common stock for 486,373 shares of its
Class B Common Stock ("Class B") and 146,526 shares (including treasury shares)
of its Class A Common Stock ("Class A"). At the time of conversion, Mr. Friedman
and Mr. Shea purchased 27,369 shares and 6,319 shares, respectively, of Class A
from Mr. Burden. The consolidated financial statements have been retroactively
adjusted for this conversion. Furthermore, on April 21, 1995 William A.M. Burden
and Company, an affiliated entity, exercised its option to acquire 27,314 shares
of Class A from the Company. Each share of Class B is entitled to 8 votes and
each share of Class A is entitled to 1 vote. The above transactions constitute
the Recapitalization Transactions.
On May 26, 1995 the Company filed with the Securities and Exchange
Commission a registration statement on Form S-4 offering to exchange the Senior
Subordinated Notes for new notes which are substantially identical except they
are freely transferable (the "Exchange Offer"). The Form S-4 became effective on
July 28, 1995 and the Exchange Offer was consummated on August 28, 1995.
-8-
<PAGE> 9
COMMODORE MEDIA,INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
3. ACQUISITIONS AND JOINT OPERATING AGREEMENTS
On March 27, 1996 the Company purchased (i) certain defined assets of
radio stations WZZN-FM in Mount Kisco, New York, WVYB-FM in Patterson, New
York and WPUT-AM in Brewster, New York from Hudson Valley Growth, L.P. for
$4,950,000 and (ii) all of the issued and outstanding common stock of Danbury
Broadcasting, Inc. owner of WRKI-FM and WINE-AM in Brookfield, Connecticut,
plus certain real property for $9,950,000. The transaction was financed with
the Company's existing cash and borrowings under its senior credit facility
with AT&T (Note 4).
Unaudited proforma results of the Company for the above listed
acquisitions and the acquistion of WQOL(FM), which were accounted for under
the purchase method of accounting, as if they were purchased on January 1, 1995
are as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
Three Months Ended
March 26, 1995 March 31, 1996
-------------- --------------
<S> <C> <C>
Net Revenue $ 7,113 $ 7,410
Loss Before Extraordinary Item $ (792) $(1,556)
Net Loss $ (792) $(1,556)
</TABLE>
On February 16, 1996, the Company entered into an Asset Purchase
Agreement to purchase radio stations WKQS-FM, WAVW-FM and WAXE-AM in the Fort
Pierce-Stuart-Vero Beach Market from Media VI for approximately $8,000,000. In
addition, the Company entered into a Joint Sales Agreement ("JSA") with Media VI
to provide sales, marketing and certain other functions to the stations pending
the closing of the acquisition. The Company expects to close on the Media VI
acquisition in the second quarter of 1996 and will fund the transaction with
borrowings from the AT&T Senior Credit Facility (Note 4) and funds from the
Preferred Stock Facility (Note 5).
On March 15, 1996, the Company entered into an Asset Purchase Agreement
to acquire radio stations WKHL-FM and WSTC-AM in Stamford Connecticut from Q
Broadcasting, Inc. for approximately $9,500,000. The Company expects to close
on the Q Broadcasting acquisition in the second quarter of 1996 and will fund
the transaction with borrowings from the AT&T Senior Credit Facility (Note 4)
and funds from the Preferrred Stock Facility (Note 5).
-9-
<PAGE> 10
COMMODORE MEDIA,INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
3. ACQUISITIONS AND JOINT OPERATING AGREEMENTS (CONT'D)
On April 8, 1996 the Company entered into (i) an Asset Purchase
Agreement to purchase from Adventure Communications, Inc., radio stations
WKEE-FM and WKEE-AM in Huntington, West Virginia, WZZW-AM in Milton, West
Virginia, WBVB-FM in Coal Grove, Ohio and WIRO-AM in Ironton, Ohio for an
aggregate purchase price of approximately $7,765,000 and (ii) an Asset Purchase
Agreement with Simmons Broadcasting Company and an Option Agreement with Michael
R. Shott to acquire radio stations WHRD-AM in Huntington, West Virginia,
WFXN-FM in Milton, West Virginia and WMLV-FM in Ironton, Ohio for an aggregate
purchase price of approximately $4,235,000. In addition, the Company entered
into Local Marketing Agreements with each of Adventure Communications, Inc. and
Simmons Broadcasting Company to provide, on a cooperative basis, the
programming, sales, marketing and certain other services to the stations pending
the closing of these acquisitions. The Company expects to close on the
aforementioned acquisitions in the latter part of 1996 and will fund the
transaction with borrowings from the AT&T Senior Credit Facility (Note 4) and
funds from the Preferred Stock Facility (Note 5).
4. DEBT
On March 13, 1996, the Company entered into a Loan and Security
Agreement with AT&T Commercial Finance Corporation ("AT&T") pursuant to which
AT&T will make available to the Company senior secured (i) revolving loans in an
amount up to $30 million and (ii) accounts receivable loans in an amount which
shall be the lessor of (A) $5 million or (B) 85% of the net book value of the
accounts receivable of the Company (the "Senior Credit Facility"). The Company's
subsidiaries agreed to guarantee the indebtedness to AT&T. Interest is payable
monthly at a rate of 3.5% over LIBOR and principal amortization of the revolving
loans and accounts receivable loans begins June 1, 1998 and November 30, 1997,
respectively.
-10-
<PAGE> 11
COMMODORE MEDIA,INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
5. PREFERRED STOCK FACILITY
On May 1, 1996, the Company entered into a Securities Purchase
Agreement with CIBC WG Argosy Merchant Fund 2, LLC ("CIBC Merchant Fund"),
pursuant to which the CIBC Merchant Fund agreed to purchase from the Company,
if and when requested by the Company, up to an aggregate liquidation value of
$12,500,000 of Senior Exchangeable Redeemable Preferred Stock, Series A, $.01
par value per share, of the Company in such amounts as the Company may request
(the "Preferred Stock Facility"), provided that such request be for an
aggregate liquidation value of at least $2,500,000 and be made no later than
October 31, 1996. The Preferred Stock accrues cash dividends at the rate of 8%
per annum, or 10% per annum if paid in additional shares of Preferred Stock,
through April 30, 1999. The Company has the option to purchase the Preferred
Stock at any time for a price equal to its liquidation value plus accrued
dividends. However, if the Company does not purchase the Preferred Stock in
the case of a change in control, an initial public offering, or certain asset
sales or under certain circumstances, the dividend rate increases by four
hundred basis points. In connection with the Preferred Stock Facility, the
Company issued to the CIBC Merchant Fund a warrant to purchase 7,550 shares of
the Company's Class A Common Stock, at an exercise price of $.01 per warrant,
which is immediately exercisable and expires April 30, 2000. Should the
Preferred Stock not be redeemed by October 31, 1996, the Company is obligated
to issue additional warrants for 1% of the Company's fully-diluted common
equity for each $2,500,000 of Preferred Stock liquidation value outstanding.
-11-
<PAGE> 12
COMMODORE MEDIA, INC.
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The following table sets forth certain consolidated summary data of the
Company:
<TABLE>
<CAPTION>
(dollars in thousands)
For the Three Months Ended
--------------------------
March 26, March 31,
1995 1996
------ ------
<S> <C> <C>
Non barter revenue ........................... $5,752 $7,132
Barter revenue ............................... 756 915
------ ------
Total revenue (a) ........................ 6,508 8,047
Variable expenses (b) (c) .................... 1,679 2,089
Other operating expenses (c) (d) ............. 2,290 3,048
Barter expense (c) ........................... 740 870
Corporate expenses ........................... 461 465
Depreciation and amortization ................ 437 480
Long-term incentive compensation.............. 585 0
------ ------
Operating income ......................... $ 316 $1,095
====== ======
Other data:
Broadcast cash flow (e) ...................... $1,799 $2,040
EBITDA (e) ................................... 1,338 1,575
Variable expenses as a percent of
non barter revenue ......................... 29.2% 29.3%
Other operating expenses as a
percent of non barter revenue .............. 39.8% 42.7%
</TABLE>
(a) Net revenue, as detailed in the Company's unaudited financial statements,
equals total revenue less agency commissions.
(b) Variable expenses consist of all commissions (including agency,
salesperson, national representative and tower representative), music
licensing fees and bad debts, and excludes barter expense.
(c) Station operating expenses consists of variable expenses plus other
operating expenses plus barter expense less agency commissions.
(d) Other operating expenses consist primarily of employee salaries,
programming and similar expenses, advertising and promotional expenses and
lease costs for office, studio space and transmission sites, and excludes
barter expense.
(e) EBITDA is defined as net income (loss) before (i) interest expense, net,
(ii) income taxes, (iii) depreciation and amortization, (iv) extraordinary
gain (loss), (v) other expenses (income) and (vi) long-term incentive
compensation expense. Broadcast cash flow means EBITDA before corporate
expenses.
-12-
<PAGE> 13
RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 26, 1995.
Total Revenue. Total revenue increased 23.7% to $8.0 million in the
first quarter of 1996 from $6.5 million during the same period in 1995
primarily due to the addition of revenues from the acquisition of WQOL-FM in
the Treasure Coast, Florida, from the JSA agreements entered into with WPAW-FM,
WAVW-FM, WKQS-FM and WAXE-AM in the Treasure Coast, Florida and WKAP-AM in
Allentown, Pennsylvania and from the LMA agreements entered into with WRKI-FM
and WINE-AM in Fairfield County, Connecticut and WVYB-FM, WZZN-FM and WPUT-AM
in Westchester County and Putnam County, New York. On a same station
basis, total revenue increased 1.1% to $6.6 million in the first quarter of
1996 from $6.5 million in the first quarter of 1995.
Station Operating Expenses. Station operating expenses increased 28.9%
to $5.4 million in the first quarter of 1996 from $4.2 million during the same
period in 1995. The increase was due primarily to the addition of operating
expenses from WQOL-FM, WPAW-FM, WAVW-FM, WKQS-FM and WAXE-AM in the Treasure
Coast, Florida, WRKI-FM and WINE-AM in Fairfield County, Connecticut and
WVYB-FM, WZZN-FM and WPUT-AM in Westchester County and Putnam County, New York.
On a same station basis, station operating expenses remained unchanged at $4.2
million in the first quarter of 1996. The variable expense component of station
operating expenses increased to $2.1 million in the first quarter of 1996 from
$1.7 million during the same period in 1995. The increase was due primarily to
higher commissions from increased revenues and a higher effective commission
rate at certain of the Company's stations. Variable expenses as a percent of non
barter revenue were 29.3% in the first quarter of 1996 as compared to 29.2% in
the first quarter of 1995. On a same station basis, variable expenses remained
unchanged at $1.7 million in the first quarter of 1996. On a same station basis,
variable expenses as a percent of non barter revenue were 30.2% in the first
quarter of 1996 as compared to 29.2% in the first quarter of 1995. The increase
was due primarily to higher effective commission rates at certain of the
Company's stations. The other operating expense component of station operating
expenses increased 33.1% to $3.0 million in the first quarter of 1996 from $2.3
million during the same period in 1995 primarily due to the additional operating
expenses associated with WQOL-FM, WPAW-FM, WAVW-FM, WKQS-FM and WAXE-AM in the
Treasure Coast, Florida, WKAP-AM, in Allentwon, Pennsylvania, WRKI-FM and
WINE-AM in Fairfield County, Connecticut and WVYB-FM, WZZN-FM and WPUT-AM in
Westchester County and Putnam County, New York. Other operating expenses were
42.7% of non barter revenue in the first quarter of 1996 increasing from 39.8%
of non barter revenue in the first quarter of 1995 primarily due to the fees
associated with the various joint operating arrangements. On a same station
basis, other operating expenses decreased 2.8% to $2.2 million or 38.5% of non
barter revenue in the first quarter of 1996 from $2.3 million or 39.8% of non
barter revenue during the same period of 1995.
-13-
<PAGE> 14
RESULTS OF OPERATIONS (CONT'D)
Corporate Expenses. Corporate expenses increased 1.1% in the first
quarter of 1996 to approximately $465,000 from approximately $461,000 during the
same period in 1995. In the first quarter of 1996 corporate expenses included
higher salary expenses, which were partially offset by lower incentive accruals
as compared to the first quarter of 1995. Corporate expenses as a percent of non
barter revenue was 6.5% in the first quarter of 1996 compared to 8.0% in the
first quarter of 1995.
Other Expenses. Depreciation and amortization increased 9.9% to
approximately $480,000 in the first quarter of 1996 from approximately $437,000
during the same period in 1995 due primarily to the addition of WQOL-FM in the
Treasure Coast, Florida. Interest expense increased to $2.5 million in the first
quarter of 1996 from approximately $830,000 during the same period in 1995 due
to increased interest expense associated with the Company's 13 1/4% Senior
Subordinated Notes. Interest income of $115,000 was earned on the Company's
temporary cash investments. Other expenses increased to approximately $168,000
in the first quarter of 1996 from approximately $57,000 during the same period
in 1995. The increase was due primarily to the amortization of financing costs
associated with the April 21, 1995 Recapitalization Transactions.
Operating Income. Operating income in the first quarter of 1996
increased to $1.1 million from approximately $316,000 in the first quarter of
1995. The increase was partially due to higher revenues and lower long-term
incentive compensation which was partially offset by higher station operating
expenses. On a same station basis, operating income for the first quarter of
1996 increased to approximately $982,000 from approximately $316,000 in the
first quarter of 1995. The increase was due primarily to lower long-term
incentive compensation expense.
Net Loss. Net loss for the three months ended March 31, 1996 was $1.4
million compared to a net loss of approximately $585,000 during the same period
in 1995. The net loss was due primarily to increased interest expense and
depreciation and amortization, which were partially offset by increased revenues
and interest income and lower long-term incentive compensation.
Broadcast Cash Flow. Broadcast cash flow for the three months ended
March 31, 1996 was approximately $2.0 million a 13.4% increase from the first
quarter of 1995.
-14-
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES:
The Company's liquidity needs arise primarily from its debt service
obligations, funding of the Company's working capital needs, acquisitions and
capital expenditures. Net cash provided by operations was approximately $1.9
million and $60,000 in the first quarter of 1996 and 1995, respectively.
Changes in the Company's net cash flows from operating activities are primarily
the result of changes in advertising revenue, the timing of its revenue receipts
and its operating expense and interest payments.
During the first three months of 1996, net cash flow used in investing
activities increased to $15.8 million from approximately $270,000 in the first
quarter of 1995. These investing activities in the first three months of 1996
included approximately $124,000 of capital expenditures, approximately $291,000
of deferred acquisition costs, $915,000 of deposits on acquisitions (including
$500,000 for WKHL-FM and WSTC-AM in Fairfield County, Connecticut and $400,000
for WAVW-FM, WKQS-FM and WAXE-AM in the Treasure Coast, Florida) and $14.4
million for the acquisition of WRKI-FM and WINE-AM and WVYB-FM, WZZN-FM and
WPUT-AM in Fairfield County, Connecticut and Westchester County and Putnam
County, New York, respectively. In the first quarter of 1995 investing
activities included approximately $42,000 of capital purchases, approximately
$65,000 of loans to employees and $150,000 of deposits on acquisitions.
Net cash flow provided by financing activities in the three months
ended March 31, 1996 totaled $8.1 million as compared to $1.6 million of net
cash flow used in financing activities during the first quarter of 1995. These
financing activities included $8.5 million of senior debt issued by AT&T under
the Senior Credit Facility as partial funding for the acquisition of WRKI-FM and
WINE-AM and WVYB-FM, WZZN-FM and WPUT-AM in Fairfield County, Connecticut
and Westchester County and Putnam County, New York, respectively, and the
payment of approximately $394,000 of deferred debt issuance costs in
connection with the Company's Senior Credit Facility. In the first quarter of
1995 net cash flows used in investing activities included approximately
$224,000 of deferred debt issuance costs, approximately $333,000 of principal
payments on the Company's senior credit facility and payment of $1.0 million to
The Bank of New York for the purchase of the redeemable warrant.
The Senior Credit Facility allows the Company to borrow up to $30
million in revolving loans and up to $5 million in accounts receivable loans.
Interest is payable monthy at a rate of 3.5% over LIBOR. Principal
amortization commences on November 30, 1997 for the receivable loan.
-15-
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES (cont'd)
On May 1, 1996, the Company entered into a Securities Purchase
Agreement with CIBC WG Argosy Merchant Fund 2, LLC ("CIBC Merchant Fund"),
pursuant to which the CIBC Merchant Fund agreed to purchase from the Company,
if and when requested by the Company, up to an aggregate liquidation value of
$12,500,000 of Senior Exchangeable Redeemable Preferred Stock, Series A, $.01
par value per share, of the Company in such amounts as the Company may request
(the "Preferred Stock Facility"), provided that such request be for an
aggregate liquidation value of at least $2,500,000 and be made no later than
October 31, 1996. The Preferred Stock accrues cash dividends at the rate of 8%
per annum, or 10% per annum if paid in additional shares of Preferred Stock,
through April 30, 1999. The Company has the option to purchase the Preferred
Stock at any time for a price equal to its liquidation value plus accrued
dividends. However, if the Company does not purchase the Preferred Stock in
the case of a change in control, an initial public offering, or certain asset
sales or under certain circumstances, the dividend rate increases by four
hundred basis points. In connection with the Preferred Stock Facility, the
Company issued to the CIBC Merchant Fund a warrant to purchase 7,550 shares of
the Company's Class A Common Stock, at an exercise price of $.01 per warrant,
which is immediately exercisable and expires April 30, 2000. Should the
Preferred Stock not be redeemed by October 31, 1996, the Company is obligated
to issue additional warrants for 1% of the Company's fully-diluted common
equity for each $2,500,000 of Preferred Stock liquidation value outstanding.
Management believes that cash from operating activities together with
available revolving credit borrowings under the AT&T Credit Agreement and the
Preferred Stock Facility should be sufficient to permit the Company to meet its
financial obligations, fund its operations for the foreseeable future and
consummate its planned acquisitions. The Company's long-term debt is comprised
of the Senior Subordinated Notes and the Senior Credit Facility. The Company may
require additional financing for future acquisitions and there can be no
assurance that it will be able to obtain such financing on terms considered by
management to be favorable.
-16-
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Pursuant to a written consent of the Stockholders of the Company
dated February 14, 1996, stockholders controlling approximately 98% of
the common stock voting power of the Company voted (in the Company's
capacity as a stockholder) to elect Susan L. Burden as the sole
director of Commodore Holdings, Inc., a wholly-owned subsidiary of the
Company, to fill the vacancy created by the death of Carter Burden.
Pursuant to the written consent of the holders of approximately
59% of the Company's Senior Subordinated Notes, such holders approved
Amendment No. 3, dated as of March 11, 1996, ("Amendment No.
3"), to the Indenture dated as of April 21, 1995, as amended, among
the Company, IBJ Schroder Bank & Trust Company and the Guarantors
named therein (the "Indenture"). Amendment No. 3 provided clarifying
changes to certain defined terms in the Indenture required in
connection with the Senior Credit Facility. A copy of Amendment No. 3
is included in Exhibit 4.1.4 to this Form 10-Q.
ITEM 5. OTHER INFORMATION
In April 1996, Susan Burden was appointed Chairman of the
Company's Board of Directors.
-17-
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
Number Exhibit Title
------ -------------
4.1.4* Amendment No. 3 to Indenture. Incorporated by
reference to the Company's 10-K.
4.1.5 Amendment No. 4 to Indenture.
10.48* Asset Purchase Agreement dated as of February
16, 1996 between Media VI and
Commodore-Florida. Incorporated by reference
to the Company's 10-K.
10.49* Joint Sales Agreement dated as of February
16, 1996 between Commodore-Florida and Media
VI. Incorporated by reference to the
Company's 10-K.
10.50* Loan and Security Agreement dated as of March
13, 1996 among Commodore Holdings, Inc., as
Borrower, the Company, Commodore-Delaware,
Commodore-Pennsylvania, Commodore-Florida,
Commodore-Kentucky, and
Commodore-Westchester, as Guarantors, and
AT&T Commercial Finance Corporation, as
Lender. Incorporated by reference to the
Company's 10-K.
10.51* Supplement No. 1 to the Loan Agreement.
Incorporated by reference to the Company's
10-K.
10.52* Asset Purchase Agreement dated as of March
15, 1996 between Commodore Media of Norwalk,
Inc. and Q Broadcasting, Inc. Incorporated by
reference to the Company's 10-K.
*Previously filed with the Company's Annual Report on Form 10-K dated March 28,
1996.
-18-
<PAGE> 19
PART II - OTHER INFORMATION
(b) REPORTS ON FORM 8-K:
During the quarter ended March 31, 1996 the following
reports on Form 8-K were filed:
(i) A Form 8-K dated January 23, 1996 was filed reporting
the death of Carter Burden, the Chairman of the Board of
Directors and the principal stockholder of the Company.
(ii) A Form 8-K dated February 16, 1996 was filed
reporting the Company's execution of definitive agreements
to acquire stations WKQS-FM, WAVW-FM and WAXE-AM in Ft.
Pierce-Stuart-Vero Beach, Florida and operate such
stations pending closing pursuant to a Joint Sales
Agreement.
(iii) A Form 8-K dated March 15, 1996 was filed reporting
the Company's execution of definitive agreements to
acquire stations WSTC-AM and WKHL-FM in Stamford,
Connecticut.
-19-
<PAGE> 20
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: May 13, 1996 /s/ Bruce A. Friedman
-------------------------------------------
Bruce A. Friedman
Chief Executive Officer and President
(principal executive officer)
Date: May 13, 1996 /s/ James J. Sullivan
-------------------------------------------
James J. Sullivan
Chief Financial Officer
(principal financial and accounting officer)
-20-
<PAGE> 21
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: May 13, 1996 By: /s/ Bruce A. Friedman
------------------------------------
Bruce A. Friedman
Chief Executive Officer and
President
(principal executive officer)
Date: May 13, 1996 By: /s/ James J. Sullivan
------------------------------------
James J. Sullivan
Chief Financial Officer
(principal financial and accounting
officer)
-21-
<PAGE> 22
EXHIBIT INDEX
-------------
Exhibit
No. Description
- - -------- -------------
4.1.4* Amendment No. 3 to Indenture. Incorporated by
reference to the Company's 10-K.
4.1.5 Amendment No. 4 to Indenture.
10.48* Asset Purchase Agreement dated as of February
16, 1996 between Media VI and Commodore-Florida.
Incorporated by reference to the Company's 10-K.
10.49* Joint Sales Agreement dated as of February 16, 1996
between Commodore-Florida and Media VI. Incorporated
by reference to the Company's 10-K.
10.50* Loan and Security Agreement dated as of March 13, 1996
Commodore Holdings, Inc., as Borrower, the Company,
Commodore-Delaware, Commodore-Pennsylvania, Commodore-
Florida, Commodore-Kentucky, and Commodore-Westchester,
as Guarantors, and AT&T Commercial Finance Corporation, as
Lender. Incorporated by reference to the Company's 10-K.
10.51* Supplement No. 1 to the Loan Agreement. Incorporated by
reference to the Company's 10-K.
10.52* Asset Purchase Agreement dated as of March 15, 1996 between
Commodore Media of Norwalk, Inc. and Q Broadcasting, Inc.
Incorporated by reference to the Company's 10-K.
*Previously filed with the Company's Annual Report on Form 10-K dated March 28,
1996.
<PAGE> 1
Exhibit 4.1.5
-------------
=============================================================================
COMMODORE MEDIA, INC., as Issuer,
COMMODORE MEDIA OF DELAWARE, INC.
COMMODORE MEDIA OF PENNSYLVANIA, INC.,
COMMODORE MEDIA OF FLORIDA, INC.,
COMMODORE MEDIA OF KENTUCKY, INC.,
COMMODORE MEDIA OF NORWALK, INC.,
COMMODORE MEDIA OF WESTCHESTER, INC.,
COMMODORE HOLDINGS, INC., and
DANBURY BROADCASTING, INC., as Guarantors,
and
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
----------------
AMENDMENT NO. 4
Dated as of March 27, 1996
to the
INDENTURE
Dated as of April 21, 1995
----------------
$76,808,000
13 1/4% Senior Subordinated Notes due 2003
=============================================================================
<PAGE> 2
AMENDMENT NO. 4, dated as of March 27, 1996 ("Amendment No. 4"), to the
INDENTURE, dated as of April 21, 1995, as amended (the "Indenture"), among
COMMODORE MEDIA, INC., a Delaware corporation, as Issuer (the "Company"),
COMMODORE MEDIA OF DELAWARE, INC., a Delaware corporation, COMMODORE MEDIA OF
PENNSYLVANIA, INC., a Delaware corporation, COMMODORE MEDIA OF FLORIDA, INC., a
Delaware corporation, COMMODORE MEDIA OF KENTUCKY, INC., a Delaware corporation,
COMMODORE MEDIA OF NORWALK, INC., a Delaware corporation, COMMODORE MEDIA OF
WESTCHESTER, INC., a Delaware corporation, COMMODORE HOLDINGS, INC., a Delaware
corporation and DANBURY BROADCASTING, INC., a Connecticut corporation (each
individually, a "Guarantor" and collectively, the "Guarantors"), and IBJ
SCHRODER BANK & TRUST COMPANY, a New York banking corporation, as Trustee (the
"Trustee").
Each party agrees for the benefit of the other parties and for the
equal and ratable benefit of the Holders of the Company's 13 1/4% Senior
Subordinated Notes due 2003 (the "Notes") to amend, pursuant to Section 8.01
(4) of the Indenture, the Indenture as follows:
1. Danbury Broadcasting, Inc. a Connecticut corporation and a wholly
owned subsidiary of Commodore Media of Norwalk, Inc. ("Danbury Broadcasting"),
is a Restricted Subsidiary acquired pursuant to Section 4.14(ii) of the
Indenture. Danbury Broadcasting delivers herewith the Guarantee attached as
Exhibit A to this Amendment No. 4 pursuant to the provisions set forth in
Section 4.14 and 10.04 of the Indenture guaranteeing the obligations of the
Company under the Indenture for all purposes of the Indenture, Danbury
Broadcasting shall be deemed a party to the Indenture by virtue of its
execution of this Amendment No. 4 and the defined term the "Guarantor"
contained in Article 1.01 of the Indenture shall be deemed to include Danbury
Broadcasting.
2. This Amendment No. 4 supplements the Indenture and shall be a part
and subject to all the terms thereof. Except as supplemented hereby, the
Indenture and the Securities issued thereunder shall continue in full force and
effect.
3. This Amendment No. 4 may be executed in counterparts, each of which
shall be deemed an original, but all of which shall together constitute one and
the same instrument.
4. THIS AMENDMENT NO. 4 SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF).
5. The Trustee shall not be responsible for any recital herein as such
recitals shall be taken as statements of the Company, or the validity of the
execution by the Guarantors
-2-
<PAGE> 3
of this Amendment No. 4. The Trustee makes no representation as to the validity
or sufficiency of this Amendment No. 4.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to the
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date and year first written above.
COMMODORE MEDIA, INC.
By: /s/ BRUCE A. FRIEDMAN
-----------------------------------
Bruce A. Friedman
President and Chief
Executive Officer
ATTEST:
/s/ JAMES J. SULLIVAN
- - -----------------------------------
James J. Sullivan
Chief Financial Officer
-3-
<PAGE> 4
Guarantors:
COMMODORE HOLDINGS, INC.
COMMODORE MEDIA OF DELAWARE, INC.
COMMODORE MEDIA OF PENNSYLVANIA, INC.
COMMODORE MEDIA OF FLORIDA, INC.
COMMODORE MEDIA OF KENTUCKY, INC.
COMMODORE MEDIA OF NORWALK, INC.
COMMODORE MEDIA OF WESTCHESTER, INC.
DANBURY BROADCASTING, INC.
By: /s/ BRUCE A. FRIEDMAN
-----------------------------------
Bruce A. Friedman
President and Chief
Executive Officer
ATTEST:
/s/ JAMES J. SULLIVAN
- - -----------------------------------
James J. Sullivan
Chief Financial Officer
and Assistant Secretary
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:
-----------------------------------
Name:
Title:
ATTEST:
- - -----------------------------------
Name:
Title:
-4-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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