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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 QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------------ ------------------
COMMISSION FILE NUMBER 33-92732
CAPSTAR RADIO BROADCASTING PARTNERS, INC.
(FORMERLY NAMED COMMODORE MEDIA, INC.)
(Exact name of registrant as specified in its charter)
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<C> <C>
DELAWARE 13-3034720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 FIFTH AVENUE
SUITE 3000
NEW YORK, NEW YORK 10110
(Address of principal executive offices) (Zip Code)
</TABLE>
(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 Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
AT AUGUST 7, 1997, 475,874,792 SHARES OF COMMON STOCK, PAR VALUE $.01 PER
SHARE, OF CAPSTAR RADIO BROADCASTING PARTNERS, INC. (THE "REGISTRANT") WERE
OUTSTANDING.
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
TABLE OF CONTENTS
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PAGE
NUMBER
------
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1997 and December
31, 1996.................................................. 2
Consolidated Statements of Operations for the three months
ended June 30, 1997
and 1996................................................ 3
Consolidated Statements of Operations for the six months
ended June 30, 1997
and 1996................................................ 4
Condensed Consolidated Statements of Cash Flows for the six
months ended
June 30, 1997 and 1996.................................. 5
Consolidated Statement of Stockholder's Equity (Deficit) for
the six months ended
June 30, 1997........................................... 6
Notes to Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14
PART II -- OTHER INFORMATION
Item 2. Changes in Securities....................................... 21
Item 4. Submission of Matters to a Vote of Security Holders......... 21
Item 6. Exhibits and Reports on Form 8-K............................ 21
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ITEM 1. FINANCIAL STATEMENTS.
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
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JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
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Current assets:
Cash and short term cash investments...................... $ 9,596,844 $ 4,367,847
Accounts receivable, net of allowance for doubtful
accounts of $1,738,021 and $838,081 at June 30, 1997
and December 31, 1996, respectively.................... 18,787,120 8,912,965
Note receivable........................................... 13,716,922 --
Prepaid expenses and other current assets................. 3,266,935 443,900
------------ ------------
Total current assets.............................. 45,367,821 13,724,712
------------ ------------
Property, plant and equipment, net.......................... 45,010,571 14,263,055
FCC licenses and goodwill, net.............................. 201,815,968 59,172,868
Other intangible assets, net................................ 9,387,431 2,964,621
Deferred charges, net....................................... 14,157,909 4,186,451
Deposits and other assets................................... 1,310,868 753,340
------------ ------------
Total assets...................................... $317,050,568 $ 95,065,047
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current portion of capital lease obligations.............. $ 16,056 $ 16,056
Current portion of long-term debt......................... -- 3,750,000
Accounts payable and accrued expenses..................... 9,901,072 2,260,066
Accrued compensation...................................... 412,471 422,062
Accrued interest.......................................... 1,762,812 960,084
Accrued income taxes...................................... 1,284,329 --
Due to parent............................................. 4,878,416 --
------------ ------------
Total current liabilities......................... 18,255,156 7,408,268
------------ ------------
Capital lease obligations, net of current portion........... 356,942 49,629
Long-term debt, net of current portion...................... 107,251,425 90,737,274
Other non-current obligations............................... 2,138,694 --
Deferred income taxes....................................... 38,006,585 1,700,000
------------ ------------
Total liabilities................................. 166,008,802 99,895,171
------------ ------------
Stockholder's equity (deficit):
Common Stock, $.01 par value, 350,000,000 shares
authorized, 249,847,909 and 106,757,000 shares issued
and outstanding at June 30, 1997 and December 31, 1996,
respectively........................................... 2,498,479 1,067,570
Additional paid-in capital................................ 211,894,423 54,125,332
Accumulated deficit....................................... (63,351,136) (60,023,026)
------------ ------------
Total stockholder's equity (deficit).............. 151,041,766 (4,830,124)
------------ ------------
Total liabilities and stockholder's equity
(deficit)....................................... $317,050,568 $ 95,065,047
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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FOR THE THREE MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1997 1996
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Gross broadcast revenue..................................... $29,728,071 $11,921,347
Less: agency commissions.................................... (1,972,967) (1,011,046)
----------- -----------
Net broadcast revenue..................................... 27,755,104 10,910,301
Operating expenses:
Programming, technical and news........................... 3,929,713 1,898,792
Sales and promotion....................................... 6,988,568 2,969,307
General and administrative................................ 4,123,992 2,020,491
Direct programmed music and entertainment................. 3,053,710 --
Corporate expenses.......................................... 2,210,668 634,804
Depreciation and amortization............................... 3,004,950 665,503
----------- -----------
Operating income............................................ 4,443,503 2,721,404
Other income (expense):
Interest expense.......................................... (4,464,833) (2,699,830)
Interest income........................................... 238,528 52,513
Other income (expenses), net.............................. 393,647 (669,953)
----------- -----------
Net income (loss)........................................... $ 610,845 $ (595,866)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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FOR THE SIX MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1997 1996
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Gross broadcast revenue..................................... $44,877,965 $19,968,915
Less: agency commissions.................................... (3,015,501) (1,642,933)
----------- -----------
Net broadcast revenue..................................... 41,862,464 18,325,982
Operating expenses:
Programming, technical and news........................... 6,463,404 3,412,260
Sales and promotion....................................... 11,004,541 5,390,460
General and administrative................................ 6,891,292 3,461,103
Direct programmed music and entertainment................. 4,092,960 --
Corporate expenses.......................................... 3,680,905 1,127,488
Depreciation and amortization............................... 4,726,380 1,145,713
----------- -----------
Operating income............................................ 5,002,982 3,788,958
Other income (expense):
Interest expense.......................................... (7,357,100) (5,151,468)
Interest income........................................... 366,149 167,765
Other income (expenses), net.............................. 33,085 (837,547)
----------- -----------
Loss before extraordinary item.............................. (1,954,884) (2,032,292)
Extraordinary item, loss on early extinguishment of debt.... (1,373,225) --
----------- -----------
Net loss.................................................... $(3,328,109) $(2,032,292)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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FOR THE SIX MONTHS ENDED
-----------------------------
JUNE 30, JUNE 30,
1997 1996
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Net cash (used in)/provided by operating activities......... $ (397,648) $ 253,064
Cash flows from investing activities:
Purchase of property, plant and equipment................. (4,429,897) (250,512)
Payments for deferred acquisition costs and intangible
assets................................................. (1,193,979) (2,696,574)
Proceeds from sale of assets.............................. 10,489,464 --
Loan to Emerald City...................................... (13,475,000) --
Acquisitions of stations and companies.................... (147,174,093) (31,000,000)
Other investing activities, net........................... (87,172) (160,670)
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Net cash used in investing activities............. (155,870,677) (34,107,756)
Cash flows from financing activities:
Proceeds from issuance of common stock to Parent.......... 157,400,000 --
Proceeds from issuance of preferred stock................. -- 9,877,932
Proceeds from issuance of debt............................ 37,983,019 18,700,000
Payment of deferred debt issuance costs................... (3,054,315) (772,634)
Repayment of amounts borrowed............................. (35,700,000) --
Principal repayments on capital lease obligations......... (9,747) (6,543)
Advances from parent...................................... 4,878,365 --
Payment of merger and IPO costs........................... -- (211,570)
------------- ------------
Net cash provided by financing activities......... 161,497,322 27,587,185
------------- ------------
Net increase (decrease) in cash and short term cash
investments............................................... 5,228,997 (6,267,507)
Cash and short term cash investments, beginning of period... 4,367,847 10,891,489
------------- ------------
Cash and short term cash investments, end of period......... $ 9,596,844 $ 4,623,982
============= ============
Supplemental disclosure of cash flow information:
Cash payments during the year for:
Interest paid.......................................... $ 3,876,783 $ 3,105,053
Taxes paid............................................. $ 191,243 $ 78,658
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
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ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDER'S
COMMON STOCK CAPITAL DEFICIT EQUITY (DEFICIT)
------------ ------------ ------------ ----------------
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Balance at December 31, 1996......... $1,067,570 $ 54,125,332 $(60,023,027) $ (4,830,125)
Proceeds from issuance of common
stock.............................. 1,430,909 155,969,091 -- 157,400,000
Equity contribution from Parent...... 1,800,000 -- 1,800,000
Net loss............................. -- -- (3,328,109) (3,328,109)
---------- ------------ ------------ ------------
Balance at June 30, 1997............. $2,498,479 $211,894,423 $(63,351,136) $151,041,766
========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(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 six month periods ended June 30, 1997, are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1997 or for any other interim period. For further
information, refer to the consolidated financial statements and footnotes
thereto included in Form 10-K for the year ended December 31, 1996 of Capstar
Radio Broadcasting Partners, Inc. (formerly named Commodore Media, Inc.) and its
subsidiaries (the "Company"). The Company is a wholly-owned subsidiary of
Capstar Broadcasting Partners, Inc. ("Capstar Partners") and all of the
outstanding common stock of Capstar Partners is owned by Capstar Broadcasting
Corporation ("Capstar Broadcasting"). The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries.
Certain amounts have been reclassified in the June 30, 1996 financial
statements to conform to the current period classifications.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
SFAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997.
Management does not believe the implementation of SFAS No. 130 and No. 131
will have a material effect on its financial statements.
3. CONSUMMATED ACQUISITIONS AND DISPOSITION (AS OF JUNE 30, 1997)
On February 20, 1997, the Company acquired (the "Osborn Acquisition")
Southern Star Communications, Inc. (formerly named Osborn Communications
Corporation ("Osborn")). The purchase price of the Osborn Acquisition was
approximately $118.8 million payable in $117 million cash and 1,636,361 shares
of common stock (having a deemed value of $1.10 per share) of Capstar
Broadcasting Partners, Inc., the Company's sole stockholder ("Capstar Partners
"). Osborn owned and operated or provided services to 18 stations upon
consummation of the Osborn Acquisition and had pending (i) the acquisitions of
five stations (two FM and three AM) in the Huntsville and Tuscaloosa, Alabama
markets and (ii) the disposition of three stations (two FM and one AM) in the
Ft. Myers, Florida market. Each of the pending transactions of Osborn has been
completed as more fully described hereinafter.
In April 1997, the Company acquired substantially all of the assets of
Taylor Communications Corporation's two radio stations (one FM and one AM) in
the Tuscaloosa, Alabama market (the "Tuscaloosa
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Acquisition"). The purchase price of the acquisition was approximately $1.0
million. Such stations were managed by Osborn pursuant to an LMA (as defined)
since December 1996.
In April 1997, the Company acquired substantially all of the assets of City
Broadcasting Co., Inc. used or useful in the operations of two radio stations
(one FM and one AM) in the Melbourne-Titusville-Cocoa, Florida market (the "City
Acquisition"). The purchase price of the acquisition was approximately $3.0
million. In April 1997, the Company acquired substantially all of the assets of
EZY Com, Inc. used or useful in the operations of two radio stations (one FM and
one AM) in the Melbourne-Titusville-Cocoa, Florida market (the "EZY
Acquisition"). The purchase price of the acquisition was approximately $5.0
million. In April 1997, the Company acquired substantially all of the assets of
Roper Broadcasting, Inc. used or useful in the operations of one FM radio
station in the Melbourne-Titusville-Cocoa, Florida market (the "Roper
Acquisition" and, collectively with the City Acquisition and the EZY
Acquisition, the "Space Coast Acquisitions"). The purchase price of the
acquisition was approximately $4.0 million.
In April 1997, the Company sold substantially all of the assets of its
radio stations (two FM and one AM) in the Ft. Myers, Florida Market (the "Osborn
Ft. Myers Disposition"). The sale price was approximately $11.0 million.
In May 1997, the Company acquired all of the outstanding capital stock of
Dixie Broadcasting, Inc. and Radio WBHP, Inc., the owners of three radio
stations (one FM and two AM) in the Huntsville, Alabama market (the "Huntsville
Acquisition" and together with the Tuscaloosa Acquisition, the "Osborn Add-on
Acquisitions"). The purchase price of the acquisition was approximately $24.5
million.
All of the aforementioned acquisitions have been accounted for under the
purchase method of accounting and the results of operations and cash flows of
the acquired businesses are included in the accompanying consolidated statements
of operations.
Unaudited proforma results of the Company for the aforementioned
acquisitions which were completed during the six months ended June 30, 1997, and
which were accounted for using the purchase method of accounting, and the
aforementioned disposition as if they were purchased or sold on January 1, 1996
are as follows:
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SIX MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
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Net revenue................................................. $47,494 $39,383
======= =======
Loss before extraordinary item.............................. $(3,299) $(6,574)
======= =======
Loss income................................................. $(3,299) $(6,574)
======= =======
</TABLE>
4. PENDING ACQUISITIONS AND DISPOSITION
In June 1997, Capstar Broadcasting executed an agreement with GulfStar
Communications, Inc. ("GulfStar") whereby in July 1997, Capstar Broadcasting
acquired GulfStar through a merger (the "GulfStar Merger"), pursuant to which
each share of GulfStar's outstanding preferred and common stock was converted
into the right to receive shares of common stock of Capstar Broadcasting having
a deemed value of approximately $113.0 million, subject to a conversion ratio
calculated based on the relative value of Capstar Broadcasting and GulfStar
principally determined by utilizing projected broadcast cash flows for the year
ending December 31, 1998. The Company also repaid approximately $119.5 million
of GulfStar's indebtedness, which was funded with the proceeds of the Preferred
Stock Offering (as defined), the Hicks Muse GulfStar Equity Investment (as
defined) and the Capstar BT Equity Investment (as defined). Subsequently,
8
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capstar Broadcasting contributed the surviving entity in the GulfStar Merger
through Capstar Partners to the Company (collectively with the GulfStar Merger,
the "GulfStar Transaction").
Prior to the GulfStar Merger, GulfStar (i) agreed to acquire substantially
all of the assets of McForhun, Inc., Livingston Communications, Inc., American
General Media of Texas, Inc., Booneville Broadcasting Company, Arklahoma
Communications Company and KLAW Broadcasting, Inc. and (ii) entered into options
to acquire substantially all of the assets of KJEM-FM, Inc. and Noalmark
Broadcasting Corporation ("Noalmark"), for an aggregate purchase price of
approximately $18.4 million. In July 1997, the Company acquired substantially
all of the assets of McForhun, Inc. and Livingston Communications, Inc. for
approximately $7.1 million and $250,000, respectively, paid in cash. The other
GulfStar pending acquisitions are expected to be consummated at various dates
during the third and fourth quarters of 1997, except for the option to acquire
Noalmark which is expected to be exercised on or before March 6, 2000.
In December 1996, the Company agreed to acquire substantially all of the
assets of Community Pacific Broadcasting Company L.P. ("Community Pacific"),
which acquisition was consummated in July 1997. The purchase price of the
Community Pacific Acquisition equalled approximately $35.0 million paid in cash.
11 radio stations (six FM and five AM) in four markets located in Anchorage,
Alaska, Modesto and Stockton, California and Des Moines, Iowa were acquired.
The Company entered into an LMA with Community Pacific on February 28,
1997, to provide services to the radio stations owned and operated by Community
Pacific until the Community Pacific Acquisition was consummated.
Pursuant to the terms of several acquisition agreements, each dated
December 1996, Benchmark Communications Radio Limited Partnership, L.P.
("Benchmark") became an indirect wholly-owned subsidiary of the Company in
August 1997 through a series of mergers and stock purchases (the "Benchmark
Acquisition"). The purchase price of the Benchmark Acquisition equalled
approximately $176.2 million. 31 radio stations (21 FM and 10 AM) located in 11
markets primarily in the Southeastern United States, including Dover, Delaware;
Salisbury-Ocean City, Maryland; Montgomery, Alabama; Shreveport, Louisiana;
Jackson, Mississippi; Statesville, North Carolina; Columbia, South Carolina;
Greenville, South Carolina; Roanoke, Lynchburg and Winchester, Virginia were
acquired.
In January 1997, the Company agreed to acquire substantially all of the
assets of Cavalier Communications, L.P. ("Cavalier") (the "Cavalier
Acquisition"), which acquisition was consummated in July 1997. The purchase
price of the Cavalier Acquisition equalled approximately $8.3 million paid in
cash. Five radio stations (four FM and one AM) in the Roanoke and Lynchburg,
Virginia markets were acquired.
In January 1997, the Company agreed to acquire substantially all of the
assets of The Madison Radio Group ("Madison") (the "Madison Acquisition"). The
purchase price of the Madison Acquisition will equal approximately $38.8 million
payable in cash. Madison owns and operates six radio stations (four FM and two
AM) in Madison, Wisconsin. The Company anticipates that the Madison Acquisition
will be consummated in August 1997.
In January 1997, the Company agreed to acquire substantially all of the
assets of Commonwealth Broadcasting of Arizona, L.L.C. ("Commonwealth") (the
"Commonwealth Acquisition"). The purchase price of the Commonwealth Acquisition
will equal approximately $5.3 million payable in cash. Commonwealth owns and
operates three radio stations (two FM and one AM) in Yuma, Arizona. The Company
anticipates that the Commonwealth Acquisition will be consummated in October
1997.
In February 1997, the Company agreed to acquire substantially all of the
assets of COMCO Broadcasting, Inc. ("COMCO") (the "COMCO Acquisition"). The
purchase price of the COMCO Acquisition will equal approximately $6.7 million
payable in cash. COMCO owns and operates six radio stations (four FM and
9
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
two AM) in the Anchorage and Fairbanks, Alaska markets. Approval of the Federal
Communications Commission (the "FCC") is pending. The Company anticipates that
the COMCO Acquisition will be consummated in October 1997. Upon consummation of
the Community Pacific Acquisition and the COMCO Acquisition, the Company will
own and operate seven radio stations (four FM and three AM) in the Anchorage,
Alaska market, which number exceeds the multiple station ownership limitations
under the Communications Act of 1934, as amended (the "Communications Act").
Accordingly, the Company will dispose of radio station KASH-AM in Anchorage,
Alaska, which was acquired in the Community Pacific Acquisition, before the
COMCO Acquisition is consummated. The Company will be in compliance with the
ownership limitations of the Communications Act in the Anchorage, Alaska market
once it disposes of KASH-AM.
In March 1997, the Company agreed to acquire substantially all of the
assets of Emerald City Radio Partners, L.P. ("Emerald City") (the "Emerald City
Acquisition"). The Company has agreed to assign WNOK Acquisition Co.'s right to
acquire two of Emerald City's radio stations (WOIC-AM and WMFX-FM) to Clear
Channel Radio Licensing, Inc. on or before the date on which the Company
acquires Emerald City's third radio station (WNOK-FM). The purchase price of the
Emerald City Acquisition will equal approximately $14.9 million payable in cash,
of which approximately $9.5 million has been allocated to radio station WNOK-FM
and will be payable by the Company. Emerald City owns and operates three radio
stations (two FM and one AM) in the Columbia, South Carolina market. The Company
anticipates that the Emerald City Acquisition will be consummated in August
1997.
In April 1997, the Company, agreed to acquire substantially all of the
assets of WRIS, Inc. used or held for use in the operations of radio station
WJLM-FM in the Salem, Virginia market (the "WRIS Acquisition"). The purchase
price of the WRIS Acquisition will equal approximately $3.1 million payable in
cash. FCC approval is pending. The Company anticipates that the WRIS Acquisition
will be consummated in September 1997.
In April 1997, the Company agreed to acquire substantially all of the
assets of Ameron Broadcasting, Inc. used or held for use in the operation of
three radio stations (two FM and one AM) in the Birmingham, Alabama market (the
"Ameron Acquisition"). The purchase price of the Ameron Acquisition will equal
approximately $31.5 million payable in cash. FCC approval is pending. The
Company anticipates that the Ameron Acquisition will be consummated in October
1997.
In May 1997, the Company agreed to exchange substantially all of the assets
used or useful in the Company's operation of three radio stations (two FM and
one AM) in the Greenville, South Carolina market for substantially all of the
assets used or useful in SFX Broadcasting, Inc.'s ("SFX") operation of four
radio stations (three FM and one AM) in Wichita, Kansas and Daytona Beach,
Florida (the "SFX Exchange"). The Company and SFX intend to file in August 1997
(i) an application with the FCC for approval to transfer control of the radio
stations and (ii) a Notification and Report Form with the U.S. Department of
Justice and the Federal Trade Commission. The Company anticipates that the SFX
Exchange will be consummated in September 1997.
In May 1997, the Company agreed to acquire all of the assets of Griffith
Broadcasting, Inc. used or held for use in the operation of stations WTAK-FM,
WXQW-FM and WWXQ-FM which serve the Huntsville, Alabama market (the "Griffith
Acquisition"). The purchase price of the Griffith Acquisition will equal
approximately $5.4 million payable in cash. FCC approval is pending. The Company
anticipates that the Griffith Acquisition will be consummated in September 1997.
In June 1997, the Company agreed to acquire all of the outstanding common
stock of Quass Broadcasting Company ("Quass") (the "Quass Acquisition"). The
purchase price of the Quass Acquisition will equal approximately $14.9 million
payable in cash. Quass owns and operates three radio stations (two FM and one
10
<PAGE> 12
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AM) in the Cedar Rapids, Iowa market. FCC approval is pending. The Company
anticipates that the Quass Acquisition will be consummated in January 1998.
In June 1997, the Company entered into an agreement to acquire all of the
outstanding preferred stock, common stock and common stock equivalents of
Patterson Broadcasting, Inc. ("Patterson") (the "Patterson Acquisition"). The
purchase price of the Patterson Acquisition will equal approximately $215.0
million payable in cash. Patterson owns and operates thirty-nine radio stations
(twenty-five FM and fourteen AM) in the Savannah, Georgia; Allentown and
Harrisburg, Pennsylvania; Fresno, California; Honolulu, Hawaii; Battle Creek and
Grand Rapids, Michigan; Reno, Nevada; Springfield, Illinois; and Pensacola,
Florida markets. FCC approval is pending and the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has not
yet terminated. The U.S. Department of Justice has raised an issue with the
Company regarding the number of radio stations that the Company will own in the
Allentown-Bethlehem, Pennsylvania area upon completion of the Patterson
Acquisition. The Company has begun discussions with the U.S. Department of
Justice to resolve this matter. The Company anticipates that the Patterson
Acquisition will be consummated in February 1998.
In June 1997, the Company agreed to acquire all of the assets of Grant
Communications Company used or held for use in the operations of their FM radio
station in the Tuscaloosa, Alabama market (the "Grant Acquisition"). The
purchase price of the Grant Acquisition will equal approximately $3.2 million
payable in cash. FCC approval is pending. The Company anticipates the Grant
Acquisition will be consummated in September 1997.
In June 1997, the Company agreed to acquire all of the assets of Knight
Radio, Inc., Knight Communications Corporation and Knight Broadcasting of New
Hampshire, Inc. (collectively, "Knight Quality") (the "Knight Quality
Acquisition'). Knight Quality owns and operates eight radio stations (five FM
and three AM) in five markets located in Worcester, Massachusetts, Manchester,
New Hampshire, Burlington, Vermont, Portsmouth, New Hampshire, and York Center,
Main. The purchase price of the Knight Quality Acquisition will equal
approximately $60 million payable in cash. FCC approval is pending. The Company
anticipates the Knight Quality Acquisition will be consummated in January 1998.
The Ameron Acquisition, the COMCO Acquisition, the Commonwealth
Acquisition, the Emerald City Acquisition, the Grant Acquisition, the Griffith
Acquisition, the Knight Quality Acquisition, the Madison Acquisition, the
Patterson Acquisition, the Quass Acquisition, the SFX Exchange, the WRIS
Exchange and the pending acquisitions of GulfStar are collectively referred to
herein as the "Pending Acquisitions."
The Company has agreed to sell all of the outstanding capital stock of
Bryan Broadcasting Operating Company, a wholly-owned subsidiary of GulfStar
("BBOC"). The Company anticipates that such sale will be completed in September
1997. BBOC owns and operates three FM radio stations in Bryan, Texas.
As part of the Company's ongoing acquisition strategy, the Company is
continually evaluating certain other potential acquisition opportunities.
Through August 1997, the Company has entered into six separate nonbinding
letters of intent to acquire and/or exchange substantially all of the assets of
the respective potential sellers used or useful in the operations of each
seller's radio stations, each of which is subject to various conditions,
including the ability of the Company to enter into a definitive agreement to
acquire such assets. No assurances can be given that definitive agreements will
be entered into to acquire such assets or that such acquisitions will be
consummated.
5. DEFERRED CHARGES
The Company recorded approximately $9.0 million and $1.0 million of
deferred financing costs and deferred station acquisition costs, respectively,
during the six month period ended June 30, 1997. Such amounts are included in
deferred charges, net, in the accompanying consolidated balance sheets.
11
<PAGE> 13
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DIRECT PROGRAMMED MUSIC AND ENTERTAINMENT
The Company, through its wholly owned subsidiary, Osborn distributes
programmed music (primarily MUZAK) in certain markets in the southeast. Revenue
and costs associated with the distribution of the programmed music are included
in gross broadcast revenue and direct programmed music and entertainment,
respectively, in the 1997 consolidated statement of operations from the date of
the Osborn Acquisition in February 1997.
7. STOCKHOLDER'S EQUITY
On February 20, 1997, the Company amended its Certificate of Incorporation
to reflect a new capital structure consisting of 350,000,000 authorized shares
of common stock, par value $.01 per share ("Common Stock"). Immediately upon the
filing of the amendment, each previously issued share of Class A common stock,
par value $.01 per share, and Class B common stock, par value $.01 per share, of
the Company was converted into 106,757 shares of Common Stock. The consolidated
financial statements have been adjusted retroactively to reflect this
conversion.
On February 20, 1997, the Company issued 143,090,909 shares of Common Stock
to Capstar Partners, its sole stockholder, at a purchase price of $1.10 per
share. The net proceeds were used in part to fund the Osborn Acquisition and
retire existing indebtedness of the Company and Osborn. In addition, on February
20, 1997 Capstar Partners exchanged 1,636,361 shares of common stock of Capstar
Partners having a deemed value of $1.8 million for shares of common stock of
Osborn also having a deemed value of $1.8 million as part of the purchase price
of the Osborn Acquisition and contributed its interest in Osborn to the Company.
The Company has reflected the contribution as additional paid-in capital.
8. EXTRAORDINARY ITEM
On February 20, 1997, in connection with the financing of the Osborn
Acquisition, the Company repaid its outstanding loan balance (including
principal and interest) under the Company's senior credit facility (the "AT&T
Credit Facility") with AT&T Commercial Finance Corporation and recognized an
extraordinary loss of $1.4 million as a result of the write off of unamortized
deferred financing costs plus a prepayment penalty.
9. CREDIT FACILITIES
On February 20, 1997, the Company entered into a credit facility (the
"Existing Credit Facility") with various banks and Bankers Trust Company, as
administrative agent, which consists of a $50.0 million revolving loan facility.
On August 12, 1997, the Company amended and restated the Existing Credit
Facility (the "New Credit Facility"). The New Credit Facility consists of a
$200.0 million revolving loan facility, and an additional $150 million of
multiple advancing term loans subject to future commitment availability from the
banks party to the New Credit Facility. $75.0 million of the revolving loan
facility is available to the Company for the issuance of letters of credit.
Indebtedness under the New Credit Facility is collateralized by the grant of a
first priority perfected pledge of the Company's assets, including, without
limitation, the capital stock of its subsidiaries. Capstar Broadcasting, Capstar
Partners and all of the direct and indirect subsidiaries of Capstar Partners
(other than the Company) have guaranteed the New Credit Facility, which
guarantees have been collateralized by grants of a first priority perfected
pledge of substantially all of their assets, including Capstar Broadcasting's
pledge of capital stock of Capstar Partners and Capstar Partners' pledge of the
capital stock of the Company. Borrowings under the New Credit Facility bear
interest at floating rates and require interest payments on varying dates
depending on the interest rate option selected by the Company. All loans
outstanding under the New Credit Facility will mature in 2004. As of August 14,
1997, a principal balance of $15.6 million (excluding $16.1 million of
outstanding letters of credit) was outstanding under the New Credit Facility and
approximately $168.3 million would have been available for borrowing thereunder.
12
<PAGE> 14
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY NAMED COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. NOTE RECEIVABLE
In March 1997, the Company entered into a $13.5 million credit agreement
with Emerald City. In accordance with the credit agreement, the Company loaned
Emerald City $13.5 million (the "Loan") which is to be repaid in two
installments. The first installment is to be a payment of principal of the Loan
equal to the purchase price under the asset purchase agreement for the radio
station WNOK-FM, together with any accrued and unpaid interest thereon, with the
second installment to consist of the remaining principal balance of the Loan,
together with any accrued and unpaid interest thereon, due and payable on the
Maturity Date (as defined in the credit agreement).
11. 1997 NOTES
On June 17, 1997, the Company issued (the "Capstar Radio Notes Offering")
$200.0 million in aggregate principal amount of its 9 1/4% Senior Subordinated
Notes due 2007 (the "1997 Notes"). The 1997 Notes, which mature on July 1, 2007,
are general unsecured obligations of the Company and rank pari passu in right of
payment to the Company's 13 1/4% Senior Subordinated Notes due 2003 (the "1995
Notes"). Interest on the 1997 Notes is payable semi-annually on January 1 and
July 1 of each year, commencing on January 1, 1998. The 1997 Notes are
redeemable at the option of the Company, in whole or in part, on or after July
1, 2002, at the redemption prices set forth in the indenture governing the 1997
Notes, plus accrued and unpaid interest to the date of redemption. In addition,
prior to July 1, 2001, the Company may, at its option, redeem up to 25% of the
aggregate principal amount of the 1997 Notes originally issued with the net cash
proceeds of one or more Public Equity Offerings or Major Assets Sales (both as
defined in the indenture), at the redemption prices set forth in the indenture;
provided, however, that after any such redemption there is outstanding at least
75% of the aggregate principal amount of the 1997 Notes originally issued. As of
June 30, 1997, the proceeds from the issuance of the 1997 Notes were held in
escrow to finance future acquisitions. All of the proceeds held in escrow as of
June 30, 1997 were used to finance acquisitions by the Company after June 30,
1997.
The Company has offered to exchange new notes for the outstanding 1997
Notes. The terms of the new notes are identical in all material respects to the
1997 Notes, except that the new notes have been registered under the Securities
Act and, therefore, do not bear legends restricting their transfer. The exchange
offer period expires on September 11, 1997.
13
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE COMPANY
As of June 30, 1997, the Company owned and operated or provided services to
70 radio stations in 18 mid-sized markets. The following table sets forth the
growth in number of radio stations by market since January 1, 1996:
On February 20, 1997, the Company acquired Osborn. The purchase price of
the Osborn Acquisition was $118.8 million payable in cash and common stock of
Capstar Partners. Osborn owned and operated or provided services to 18 stations
upon consummation of the Osborn Acquisition and had pending (i) the acquisitions
of five stations (two FM and three AM) in the Huntsville and Tuscaloosa, Alabama
markets and (ii) the disposition of three stations (two FM and one AM) in the
Ft. Myers, Florida market. Each of the pending transactions of Osborn has been
completed as more fully described hereinafter.
On February 28, 1997, the Company entered into an LMA with Community
Pacific to provide services to the radio stations owned and operated by
Community Pacific until the Community Pacific Acquisition is consummated.
In April 1997, the Company acquired substantially all of the assets of
Taylor Communications Corporation's two radio stations (one FM and one AM) in
the Tuscaloosa, Alabama market The purchase price of the acquisition was
approximately $1.0 million. Such stations were managed by Osborn pursuant to an
LMA since December 1996.
In April 1997, the Company acquired substantially all of the assets of City
Broadcasting Co., Inc. used or useful in the operations of two radio stations
(one FM and one AM) in the Melbourne-Titusville-Cocoa, Florida market. The
purchase price of the acquisition was approximately $3.0 million. In April 1997,
the Company acquired substantially all of the assets of EZY Com, Inc. used or
useful in the operations of two radio stations (one FM and one AM) in the
Melbourne-Titusville-Cocoa, Florida market. The purchase price of the
acquisition was approximately $5.0 million. In April 1997, the Company acquired
substantially all of the assets of Roper Broadcasting, Inc. used or useful in
the operations of one FM radio station in the Melbourne-Titusville-Cocoa,
Florida market. The purchase price of the acquisition was approximately $4.0
million.
In April 1997, the Company sold substantially all of the assets of its
radio stations (two FM and one AM) in the Ft. Myers, Florida Market. The sale
price was approximately $11.0 million.
In May 1997, the Company acquired all of the outstanding capital stock of
Dixie Broadcasting, Inc. and Radio WBHP, Inc., the owners of three radio
stations (one FM and two AM) in the Huntsville, Alabama market. The purchase
price of the acquisition was approximately $24.5 million.
14
<PAGE> 16
RESULTS OF OPERATIONS
The following table sets forth certain consolidated summary data of the
Company for the three months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING DATA:
Net revenue............................................. $27,755,104 $10,910,301
Station operating expenses.............................. 18,095,983 6,888,590
Depreciation and amortization........................... 3,004,950 665,503
Corporate expenses...................................... 2,210,668 634,804
Operating income........................................ 4,443,503 2,721,404
Interest expense........................................ 4,464,833 2,699,830
Net income (loss)............................... $ 610,845 $ (595,866)
OTHER DATA:
Broadcast cash flow(1).................................. $ 9,659,121 $ 4,021,711
Broadcast cash flow margin.............................. 34.8% 36.9%
EBITDA(2)............................................... $ 7,448,453 $ 3,386,907
</TABLE>
- ---------------
(1) Broadcast cash flow consists of operating income before depreciation,
amortization and corporate expense.
(2) EBITDA consists of operating income before depreciation and amortization.
Although broadcast cash flow and EBITDA are not measures of performance
calculated in accordance with generally accepted accounting principles,
management believes that they are useful to an investor in evaluating the
Company because they are measures widely used in the broadcast industry to
evaluate a radio company's operating performance.
FORWARD LOOKING INFORMATION
This report contains forward-looking statements. The words "anticipate,"
"believe," "expect," "plan," "intend," "estimate," "project," "will," "could,"
"may" and similar expressions are intended to identify forward-looking
statements. Such statements reflect the Company's current views with respect to
future events and financial performance and involve risks and uncertainties,
including without limitation the ability of the Company to (i) repay
indebtedness, (ii) finance the Pending Acquisitions, (iii) pursue acquisition
opportunities, (iv) integrate successfully the operations of acquired radio
stations and radio groups, (v) hire additional personnel, (vi) enhance its
management systems to respond to changes in its ability, (vii) compete
effectively, and (viii) comply with the extensive regulation of the radio
broadcasting industry. Should one or more of these risks or uncertainties occur,
or should underlying assumptions prove incorrect, actual results may vary
materially and adversely from those anticipated, believed, expected, planned,
intended, estimated, projected or otherwise indicated.
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Net Revenue. Net revenue increased $16.8 million or 154.4% to $27.8 million
for the three months ended June 30, 1997 from $10.9 million for the three months
ended June 30, 1996. Net revenue included from the operations purchased in
connection with the Osborn Acquisition for the period February 21, 1997 through
June 30, 1997 comprised $11.1 million of the increase. The inclusion of revenue
from the acquisitions of radio stations and revenue generated from local
marketing agreements ("LMAs") and joint sales agreements ("JSAs") provided $2.1
million of the increase. For stations owned or operated for a comparable period
in 1997 and 1996, net revenue increased approximately $932,000 or 8.8% to $11.6
million for the three months ended June 30, 1997 from $10.6 million for the same
period in 1996.
15
<PAGE> 17
Station Operating Expenses. Station operating expenses increased $11.2
million or 162.7% to $18.1 million for the three months ended June 30, 1997 from
$6.9 million for the three months ended June 30, 1996. The increase is primarily
attributable to (i) additional operating expenses of the operations purchased in
connection with the Osborn Acquisition of $8.0 million, and (ii) station
operating expenses of the radio station acquisitions and the JSAs and LMAs which
contributed $1.6 million of the increase. For stations owned or operated for a
comparable period in 1997 and 1996, station operating expenses declined
approximately $305,000 or 4.6% to $6.3 million in 1997 from $6.6 million in 1996
as a result of efficiencies realized from market consolidation.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased approximately $5.6 million or 140.2% to $9.7 million for the
three months ended June 30, 1997 from $4.0 million for the same period in 1996.
The broadcast cash flow margin was 34.8% for the three months ended June 30,
1997 compared to 36.9% for the same period in 1996. The broadcast cash flow
provided from the Osborn Acquisition accounted for approximately $3.1 million of
the increase; the broadcast cash flow margin from these operations is 21.1%. The
inclusion of broadcast cash flows from the remaining acquisitions and LMAs
accounts for approximately $463,000 of the increase. Excluding the effects of
the acquisitions and LMAs, broadcast cash flow increased approximately $1.2
million, or 30.9% to $5.2 million for the three months ended June 30, 1997 from
$4.0 million for the same period in 1996 and the broadcast cash flow margin on a
same station basis increased to 45.3% from 37.6%.
Corporate Expenses. Corporate expenses increased approximately $1.6 million
or 248.2% to approximately $2.2 million for the three months ended June 30, 1997
from approximately $635,000 for the same period in 1996. This increase was
primarily due to the additional corporate expense associated with the Company's
parent, and the Osborn operations.
EBITDA. As a result of the factors described above, EBITDA increased
approximately $4.1 million or 119.9% to $7.4 million for the three months ended
June 30, 1997 from $3.4 million for the three months ended June 30, 1996. The
EBITDA margin for the three months ended June 30, 1997 was 26.8% compared to
31.0% for the same period in 1996.
Other Operating Expenses. Depreciation and amortization increased $2.3
million to $3.0 million for the three months ended June 30, 1997 from
approximately $666,000 for the three months ended June 30, 1996 primarily due to
the various acquisitions consummated during 1996 and 1997.
Operating Income. As a result of the factors described above, operating
income increased $1.7 million or 63.3% to $4.4 million for the three months
ended June 30, 1997 from $2.7 million for the same period in 1996.
Interest Expense. Interest expense increased approximately $1.8 million or
65.4% to $4.5 million for the three months ended June 30, 1997 from $2.7 million
for the three months ended June 30, 1996. The increase is attributable to
approximately $1.0 million of interest expense related to the Company's LMA of
Community Pacific, and approximately $800,000 of interest expense related to the
Company's credit facilities.
Net Income (Loss). As a result of the factors described above, the Company
recorded net income of $611,000 for the three months ended June 30, 1997 as
compared to a net loss of $596,000 for the three months ended June 30, 1996.
16
<PAGE> 18
The following table sets forth certain consolidated summary data of the
Company for the six months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING DATA:
Net revenue............................................. $41,862,464 $18,325,982
Station operating expenses.............................. 28,452,197 12,263,823
Depreciation and amortization........................... 4,726,380 1,145,713
Corporate expenses...................................... 3,680,905 1,127,488
Operating income........................................ 5,002,982 3,788,958
Interest expense........................................ 7,357,100 5,151,468
Net loss........................................ $ 3,328,109 $ 2,032,292
OTHER DATA:
Broadcast cash flow(1).................................. $13,410,267 $ 6,062,159
Broadcast cash flow margin.............................. 32.0% 33.1%
EBITDA(2)............................................... $ 9,729,362 $ 4,934,671
</TABLE>
- ---------------
(1) Broadcast cash flow consists of operating income before depreciation,
amortization and corporate expense.
(2) EBITDA consists of operating income before depreciation and amortization.
Although broadcast cash flow and EBITDA are not measures of performance
calculated in accordance with generally accepted accounting principles,
management believes that they are useful to an investor in evaluating the
Company because they are measures widely used in the broadcast industry to
evaluate a radio company's operating performance.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Revenue. Net revenue increased $23.6 million or 128.4% to $41.9 million
for the six months ended June 30, 1997 from $18.3 million for the six months
ended June 30, 1996. Net revenue included from the operations purchased in
connection with the Osborn Acquisition for the period February 21, 1997 through
June 30, 1997 comprised $14.8 million of the increase. The inclusion of revenue
from the acquisitions of radio stations and revenue generated from LMAs and JSAs
provided $8.0 million of the increase. For stations owned or operated for a
comparable period in 1997 and 1996, net revenue increased approximately $779,000
or 4.7% to $17.3 million for the six months ended June 30, 1997 from $16.6
million for the same period in 1996.
Station Operating Expenses. Station operating expenses increased $16.2
million or 132.0% to $28.5 million for the six months ended June 30, 1997 from
$12.3 million for the six months ended June 30, 1996. The increase is primarily
attributable to (i) additional operating expenses of the operations purchased in
connection with the Osborn Acquisition of $10.9 million, and (ii) station
operating expenses of the radio station acquisitions and the JSAs and LMAs which
contributed $5.1 million of the increase. For stations owned or operated for a
comparable period in 1997 and 1996, station operating expenses declined
approximately $207,000 or 1.9% to $10.4 million in 1997 from $10.6 million in
1996 as a result of efficiencies realized from market consolidation.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased approximately $7.3 million or 121.2% to $13.4 million for
the six months ended June 30, 1997 from $6.1 million for the same period in
1996. The broadcast cash flow margin was 32.0% for the six months ended June 30,
1997 compared to 33.1% for the same period in 1996. The broadcast cash flow
provided from the Osborn Acquisition accounted for approximately $4.0 million of
the increase; the broadcast cash flow margin from these operations is 26.9%. The
inclusion of broadcast cash flows from the remaining acquisitions and
17
<PAGE> 19
LMAs accounts for approximately $2.3 million of the increase. Excluding the
effects of the acquisitions and LMAs, broadcast cash flow increased
approximately $986,000, or 16.7% to $6.9 million for the six months ended June
30, 1997 from $5.9 million for the same period in 1996 and the broadcast cash
flow margin on a same station basis increased to 39.8% from 35.7%.
Corporate Expenses. Corporate expenses increased approximately $2.6 million
or 226.5% to approximately $3.7 million for the six months ended June 30, 1997
from approximately $1.1 million for the same period in 1996. This increase was
primarily due to the additional corporate expense associated with the Company's
parent, and the Osborn operations.
EBITDA. As a result of the factors described above, EBITDA increased
approximately $4.8 million or 97.2% to $9.7 million for the six months ended
June 30, 1997 from $4.9 million for the six months ended June 30, 1996. The
EBITDA margin for the six months ended June 30, 1997 was 23.2% compared to 26.9%
for the same period in 1996.
Other Operating Expenses. Depreciation and amortization increased $3.6
million to $4.7 million for the six months ended June 30, 1997 from
approximately $1.1 million for the six months ended June 30, 1996 primarily due
to the various acquisitions consummated during 1996 and 1997.
Operating Income. As a result of the factors described above, operating
income increased to $5.0 million or 32.0% for the six months ended June 30, 1997
from $3.8 million for the same period in 1996.
Interest Expense. Interest expense increased approximately $2.2 million or
42.8% to $7.4 million for the six months ended June 30, 1997 from $5.2 million
for the six months ended June 30, 1996. The increase is attributable to
approximately $1.0 million of interest expense related to the Company's LMA of
Community Pacific, and approximately $800,000 of interest expense related to the
Company's credit facilities.
Net Loss. As a result of the factors described above, net loss increased
approximately $1.3 million to $3.3 million for the six months ended June 30,
1997 from $2.0 million for the six months ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Pursuit of the Company's acquisition strategy has required a significant
portion of the Company's capital resources. In February 1997, the Company funded
the $143.7 million purchase price (including transaction costs) for the Osborn
Acquisition and the retirement of existing indebtedness of the Company and
Osborn in connection therewith from (i) $150.3 million of the net proceeds of
Capstar Partners' issuance of its 12 3/4% Senior Discount Notes due 2009 (the
"Capstar Notes"), which proceeds were contributed to the Company, (ii) a $54.8
million investment in common stock of Capstar Partners by Hicks, Muse, Tate &
Furst Equity Fund III, L.P. ("HM Fund III") and its affiliates in connection
with the Osborn Acquisition, (iii) a contribution of shares of common stock of
Osborn to the Company by Frank D. Osborn in exchange for shares of common stock
of Capstar Partners having a deemed value of $1.8 million, and (iv) a $600,000
investment in common stock of Capstar Partners by certain members of management
(which was contributed to the Company). In April and May 1997, the Company
funded the purchase price (including transaction costs) of the Osborn Add-on
Acquisitions and the Space Coast Acquisitions through borrowings under the
Existing Credit Facility in the aggregate principal amount of $35.9 million. In
July and August 1997, the Company funded (A) the GulfStar Merger with $119.5
million in cash from the proceeds of HM Fund III's investment of approximately
$75.0 million in Capstar Broadcasting in connection with the GulfStar
Transaction, a portion of which was contributed through Capstar Partners to the
Company (the "Hicks Muse GulfStar Equity Investment"), the net proceeds from
Capstar Partners' issuance (the "Preferred Stock Offering") of 1,000,000 shares
of its 12% Senior Exchangeable Preferred Stock, par value $.01 per share (the
"Senior Exchangeable Preferred Stock"), which were contributed to the Company
and Capstar Partners BT, L.P.'s investment of approximately $11.1 million in
Capstar Broadcasting in connection with the Hicks Muse GulfStar Equity
Investment, which was contributed through Capstar Partners to the Company (the
"Capstar BT Equity Investment"), and the issuance of common stock of Capstar
Broadcasting having a deemed value of approximately $113.0 million, (C) the
Community Pacific Acquisition with $35.0 million in cash from the proceeds of
the Capstar Radio Notes Offering, (D) the Cavalier Acquisition with $8.3 million
in cash from
18
<PAGE> 20
the proceeds of the Capstar Radio Notes Offering, (E) the GulfStar -- McForhun
Acquisition with $7.1 million in cash from the proceeds of the Hicks Muse
GulfStar Equity Investment and the Capstar BT Equity Investment, (F) the
GulfStar -- Livingston Acquisition with $250,000 in cash from the proceeds of
Hicks Muse GulfStar Equity Investment and the Capstar BT Equity Investment and
(G) the Benchmark Acquisition with $174.1 million in cash from the proceeds from
the Capstar Radio Notes Offering, the Hicks Muse GulfStar Equity Investment, the
Capstar BT Equity Investment and borrowings under the Existing Credit Facility,
and the issuance of Class A common stock of Capstar Broadcasting having a deemed
value of approximately $2.1 million.
As a result of the financing of its acquisitions, the Company has a
substantial amount of long-term indebtedness, and for the foreseeable future,
the Company will use a larger percentage of its cash to make payments under the
New Credit Facility, the 1995 Notes (as defined) and the 1997 Notes.
The Company's 13 1/4% Senior Subordinated Notes due 2003 (the "1995 Notes")
are limited in aggregate principal amount to $76.8 million and bear interest at
a rate of 13 1/4% per annum, of which only 7 1/2% is payable in cash up to May
1, 1998. Beginning on May 1, 1998, the 1995 Notes will bear cash interest at a
rate of 13 1/4% per annum until maturity. The 1995 Notes require semi-annual
cash interest payments on each May 1 and November 1 of $2.9 million through May
1, 1998, and $5.2 million from November 1, 1998, until maturity. On June 17,
1997, the Company issued the 1997 Notes. Interest on the 1997 Notes is payable
semi-annually on January 1 and July 1 of each year, commencing on January 1,
1998, at a rate of 9 1/4% per annum. The 1997 Notes mature on July 1, 2007. The
Company entered into the New Credit Facility in August 1997, which provides for,
among other things, borrowings of up to $200.0 million under a revolving credit
facility. Borrowings under the New Credit Facility bear interest at floating
rates and require interest payments on varying dates depending on the interest
rate option selected by the Company. As of August 14, 1997, a principal balance
of $15.6 million (excluding $16.1 million of outstanding letters of credit) was
outstanding under the New Credit Facility and approximately $168.3 million would
have been available for borrowing thereunder.
In addition to debt service, the Company's principal liquidity requirements
will be for working capital and general corporate purposes, including capital
expenditures, which are not expected to be material in amount, and to consummate
the Pending Acquisitions and, as appropriate opportunities arise, to acquire
additional radio stations. The Company intends to fund the $402.5 million
aggregate purchase price for the Pending Acquisitions with borrowings under the
New Credit Facility and a combination of indebtedness of Capstar Broadcasting,
Capstar Partners and/or the Company and/or capital stock of Capstar Broadcasting
or its subsidiaries. The Company anticipates that it will fund the Pending
Acquisitions with indebtedness, rather than capital stock, to the fullest extent
then permitted under the debt incurrence covenants contained in the indentures
governing the 1995 Notes, the Capstar Notes, Capstar Partners' 12% Subordinated
Exchange Debentures due 2009, the Certificate of Designation governing the
Senior Exchangeable Preferred Stock and the New Credit Facility. The Company has
not determined the terms of any such indebtedness or capital stock. The
Company's ability to make such borrowings and issue such indebtedness and
capital stock will depend upon many factors, including, but not limited to, the
Company's success in operating and integrating its radio stations and the
condition of the capital markets at the times of consummation of the pending
acquisitions. No assurances can be given that such financings can be consummated
on terms considered to be favorable by management or at all.
Management believes that the proceeds from the commitment by HM Fund III
and its affiliates to invest an additional $50.0 million in equity of Capstar
Broadcasting (for which Capstar Broadcasting has committed to issue capital
stock in exchange therefore) and cash from operating activities, together with
available revolving credit borrowings under the New Credit Facility, should be
sufficient to permit the Company to fund its operations and meet its obligations
under the agreements governing its existing indebtedness. The Company may
require financing for additional future acquisitions, if any, and there can be
no assurance that it would be able to obtain such financing on terms considered
to be favorable by management. Management evaluates potential acquisition
opportunities on an on-going basis and has had, and continues to have,
preliminary discussions concerning the purchase of additional stations. The
Company expects that in connection with the financing of future acquisitions, it
may consider disposing of stations in its markets. The
19
<PAGE> 21
Company has no current arrangements to dispose of any of its stations other than
(i) the disposition of station KASH-AM in Anchorage, Alaska before consummation
of the COMCO Acquisition and (ii) the exchange of stations WESC-FM, WFNQ-FM and
WESC-AM in Greenville, South Carolina (which were acquired in the Benchmark
Acquisition) for stations KKRD-FM, KRZZ-FM, and KNSS-AM in Wichita, Kansas, and
WGNE-FM in Daytona Beach, Florida (which are owned by SFX).
Net cash used in and provided by operating activities was $398,000 and
$253,000, respectively for the six-month periods ended June 30, 1997 and 1996.
Changes in the Company's net cash provided by operating activities are primarily
the result of the Company's completed acquisitions and station operating
agreements entered into during the period and their effects on income from
operations and working capital requirements.
Net cash used in investing activities was $155.9 million and $34.1 million,
respectively for the six month periods ended June 30, 1997 and 1996. Net cash
provided by financing activities was $161.5 million and $27.6 million for the
six-month periods ended June 30, 1997 and 1996. These cash flows primarily
reflect the borrowings, capital contributions and expenditures for station
acquisitions and dispositions.
EXTRAORDINARY ITEM
In connection with the Osborn Acquisition, the Company repaid the AT&T
Credit Facility. The repayment of the AT&T Credit Facility resulted in the write
off of unamortized deferred financing costs and prepayment penalties in the
amount of $1.4 million, which was reported as an extraordinary item. In July
1997 and in connection with the GulfStar Merger, the Company recorded a loss on
repurchase of GulfStar's preferred stock of approximately $5.4 million and an
extraordinary loss on early extinguishment of certain of GulfStar debt of
approximately $2.3 million. In connection with the Benchmark Acquisition,
Capstar Broadcasting issued $750,000 of capital stock of Capstar Broadcasting
for the benefit of the Company to an affiliate of Hicks Muse in consideration
for its agreement, upon the occurrence of certain events, to purchase the
outstanding indebtedness incurred by such affiliate's subsidiary in connection
with the Benchmark Acquisition. In August 1997, the Company recorded an
extraordinary charge of approximately $750,000 in connection with the issuance
of capital stock of Capstar Broadcasting for the benefit of the Company.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Restated Information," which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
SFAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997.
Management does not believe the implementation of SFAS No. 130 and No. 131
will have a material effect on its financial statements.
20
<PAGE> 22
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
The following information relates to all securities issued or sold by the
Registrant during the quarter ended June 30, 1997, and not registered under the
Securities Act of 1933 (the "Securities Act").
Each of the transactions described below was conducted in reliance upon the
exemption from registration provided in Section 4(2) of the Securities Act and
the rules and regulations promulgated thereunder. Furthermore, each of the
certificates representing the Registrant's securities issued in connection with
such transactions contains a restrictive legend, as appropriate, requiring each
person acquiring such securities from the Registrant to furnish investment
representations to the Registrant.
On June 17, 1997, the Registrant issued $200.0 million in aggregate
principal amount of its 9 1/4% Senior Subordinated Notes due 2007 (the "1997
Notes") to BT Securities Corporation and Credit Suisse First Boston Corporation
(collectively, the "Initial Purchasers") in exchange for gross proceeds to the
Company of $193.2 million. The Initial Purchasers subsequently resold the 1997
Notes in reliance on Rule 144A of the rules and regulations promulgated under
the Securities Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Pursuant to the written consent of Capstar Partners, the sole stockholders
of the Registrant, dated as of April 30, 1997, Capstar Partners consented to an
amendment to the Registrant's Certificate of Incorporation pursuant to which the
name of the Registrant was changed to Capstar Radio Broadcasting Partners, Inc.
Pursuant to the written consent of Capstar Partners, the sole stockholder
of the Registrant, dated as of June 26, 1997, Capstar Partners consented to an
amendment to the Registrant's Certificate of Incorporation pursuant to which the
number of shares of common stock, par value $.01 per share, authorized for
issuance by the Registrant was increased to 500,000,000 shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1.1 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant dated
February 17, 1997.(1)
3.1.2 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant dated
February 20, 1997.(1)
3.1.3 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant dated
April 30, 1997.(1)
3.1.4 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant dated June
26, 1997.(1)
4.1 -- Registration Rights Agreement dated June 17, 1997 by and
between the Registrant and BT Securities Corporation.(1)
4.2.1 -- Amendment No. 8 to Indenture, dated as of April 21, 1995,
among the Registrant, IBJ Schroder Bank & Trust Company,
as Trustee, and the Guarantors named therein, governing
the Registrant's 13 1/4% Senior Subordinated Notes due
2003 (the "1995 Indenture").(2)
4.2.2 -- Amendment No. 9 to 1995 Indenture(8)
4.2.3 -- Amendment No. 10 to 1995 Indenture.*
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.3 -- Indenture, dated June 17, 1997, between the Registrant
and U.S. Trust Company of Texas, N.A., governing the
Registrant's outstanding 9 1/4% Senior Subordinated Notes
due 2007.(2)
10.1.1 -- Agreement and Plan of Merger, dated as of December 9,
1996, by and among Benchmark Communications Radio Limited
Partnership, Benchmark Acquisition, Inc., Benchmark Radio
Acquisition Fund I Limited Partnership, Benchmark Radio
Acquisition Fund IV Limited Partnership, Benchmark Radio
Acquisition Fund VII Limited Partnership, Benchmark Radio
Acquisition Fund VIII Limited Partnership, Joe L. Mathis
IV, Bruce R. Spector, Capstar Broadcasting Partners, Inc.
("Capstar Partners") and BCR Holding, Inc. ("Benchmark
Merger Agreement").(3)
10.1.2 -- Letter Agreement amending Benchmark Merger Agreement,
dated January 9, 1997, by and among Benchmark
Communications Radio Limited Partnership, Benchmark
Acquisition, Inc. and the other signatories listed
therein.(3)
10.1.3 -- Letter Agreement amending Benchmark Merger Agreement,
dated January 31, 1997, by and among Benchmark
Communications Radio Limited Partnership, Benchmark
Acquisition, Inc., BCR Holding, Inc., Capstar Partners,
and the other signatories listed therein.(3)
10.1.4 -- Letter Agreement amending Benchmark Merger Agreement,
dated April 8, 1997, by and among Benchmark
Communications Radio Limited Partnership, Benchmark
Acquisition, Inc., BCR Holding, Inc., and Capstar
Partners.(3)
10.1.5 -- First Amendment to the Benchmark Merger Agreement, dated
July 1, 1997, by and among Benchmark, Benchmark
Acquisition, Inc., BCR Holding, Inc. and Capstar
Broadcasting.(8)
10.1.6 -- Second Amendment to the Benchmark Merger Agreement, dated
August 6, 1997, by and among Benchmark, Benchmark
Acquisition, Inc., BCR Holding, Inc. and Capstar
Broadcasting.(8)
10.2 -- Asset Purchase Agreement, dated as of January 27, 1997,
by and among Point Communications Limited Partnership,
Midcontinent Broadcasting Co. of Wisconsin, Inc., The
Madison Radio Group and Point Madison Acquisition
Company, Inc.(3)
10.3.1 -- Asset Purchase Agreement, dated as of December 26, 1996,
between Community Pacific Broadcasting Company L.P.
("Community Pacific") and Pacific Star Communications,
Inc. (formerly named Community Acquisition Company, Inc.)
("Pacific Star").(3)
10.3.2 -- Amendment No. 1 to Asset Purchase Agreement, dated May
28, 1997, between Community Pacific and Pacific Star.(4)
10.3.3 -- Amendment No. 2 to Asset Purchase Agreement, dated July
14, 1997, between Community Pacific and Pacific Star.(4)
10.4 -- Credit Agreement, dated February 20, 1997, among the
Registrant, as borrower, Capstar Partners, as guarantor,
various banks, and Bankers Trust Company, as
administrative agent.(5)
10.5 -- Employment Agreement, dated January 27, 1997, between
Pacific Star and Claude C. Turner (also known as Dex
Allen).(6)
10.6 -- Employment Agreement, dated February 20, 1997, between
Frank D. Osborn and Southern Star Communications, Inc.(7)
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.7 -- Employment Agreement between the Registrant, Capstar
Broadcasting and David J. Benjamin, III.(8)
10.8.1 -- Letter Agreement, dated May 9, 1997, between Ameron
Broadcasting, Inc. and Capstar Acquisition Company,
Inc.(2)
10.8.2 -- Amendment to Asset Purchase Agreement, dated May 9, 1997,
between Ameron Broadcasting, Inc. and Capstar Acquisition
Company, Inc.(2)
10.9.1 -- Stock Purchase Agreement, dated June 12, 1997, by and
among Capstar Acquisition Company, Inc., Capstar
Partners, Patterson Broadcasting, Inc. and the selling
stockholders name therein.(2)
10.9.2 -- First Amendment to Stock Purchase Agreement, dated July
2, 1997, by and among Patterson Broadcasting, Inc.,
Capstar Acquisition Company, Inc. and Dyson-Kissner-Moran
Corporation, as representative of the selling
stockholders named therein.(8)
10.10.1 -- Asset Purchase Agreement, dated June 18, 1997, between
Knight Radio, Inc. and Capstar Acquisition Company,
Inc.(2)
10.10.2 -- Asset Purchase Agreement, dated June 18, 1997, between
Knight Broadcasting of New Hampshire, Inc. and Capstar
Acquisition Company, Inc.(2)
10.10.3 -- Asset Purchase Agreement, dated June 18, 1997, between
Knight Communications Corp. and Capstar Acquisition
Company, Inc.(2)
10.11 -- Exchange Agreement, Dated May 23, 1997, between SFX
Broadcasting, Inc., SFX Broadcasting of Kansas, Inc.,
SFXKS Limited Partnership, SFX Broadcasting of Florida,
Inc., Southern Starr Limited Partnership, and Capstar
Acquisition Company, Inc.(2)
10.12 -- Agreement and Plan of Merger, dated June 16, 1997, by and
among GulfStar Communications, Inc., Capstar Broadcasting
Corporation, CBC-GulfStar Merger Sub, Inc. and the
stockholders listed therein.(2)
10.13 -- Employment Agreement between GulfStar Communications,
Inc. and John D. Cullen.(8)
10.14 -- Employment Agreement among the Registrant, Capstar
Broadcasting Corporation and Joseph L. Mathias IV.(8)
10.15 -- Stock Purchase Agreement, dated June 5, 1997, by and
among Capstar Acquisition Company, Inc., Quass
Broadcasting Company and the selling stockholders named
therein.(2)
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-4, dated August 6, 1997, File No. 333-32979.
(2) Incorporated by reference to Capstar Partners' Amendment No. 1 to
Registration Statement on Form S-4, dated July 8, 1997, File No. 333-25683.
(3) Incorporated by reference to Capstar Partners' Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, File No. 333-25683.
(4) Incorporated by reference to Capstar Partners' Current Report on Form 8-K,
dated July 23, 1997, File No. 333-25683.
(5) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated February 20, 1997, File No. 33-92732.
23
<PAGE> 25
(6) Incorporated by reference to Capstar Partners' Registration Statement on
Form S-1 (File No. 333-25263), dated April 16, 1997.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996, File No. 33-92732.
(8) Incorporated by reference to the Registrant's Current Report on Form 8-K,
dated August 14, 1997, File No. 33-92732.
(B) REPORTS ON FORM 8-K
During the quarter ended June 30, 1997, the following reports on Form 8-K
were filed:
Current Report on Form 8-K/A dated February 20, 1997, relating to the
Registrant's acquisition of Southern Star Communications, Inc. Item 7 was
reported.
Current Report on Form 8-K dated May 1, 1997, relating to the Registrant's
acquisition of Dixie Broadcasting, Inc. and Radio WBHP, Inc. Item 2 was
reported.
Current Report on Form 8-K dated May 3, 1997, relating to a change in the
Registrant's independent accountants. Item 4 was reported.
24
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPSTAR RADIO BROADCASTING
PARTNERS, INC.
By: /s/ PAUL D. STONE
----------------------------------
Name: Paul D. Stone
Title: Executive Vice President
and Chief Financial Officer
(principal
financial officer)
Date: August 14, 1997
25
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1.1 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant dated
February 17, 1997.(1)
3.1.2 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant dated
February 20, 1997.(1)
3.1.3 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant dated
April 30, 1997.(1)
3.1.4 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant dated June
26, 1997.(1)
4.1 -- Registration Rights Agreement dated June 17, 1997 by and
between the Registrant and BT Securities Corporation.(1)
4.2.1 -- Amendment No. 8 to Indenture, dated as of April 21, 1995,
among the Registrant, IBJ Schroder Bank & Trust Company,
as Trustee, and the Guarantors named therein, governing
the Registrant's 13 1/4% Senior Subordinated Notes due
2003 (the "1995 Indenture").(2)
4.2.2 -- Amendment No. 9 to 1995 Indenture(8)
4.2.3 -- Amendment No. 10 to 1995 Indenture.*
4.3 -- Indenture, dated June 17, 1997, between the Registrant
and U.S. Trust Company of Texas, N.A., governing the
Registrant's outstanding 9 1/4% Senior Subordinated Notes
due 2007.(2)
10.1.1 -- Agreement and Plan of Merger, dated as of December 9,
1996, by and among Benchmark Communications Radio Limited
Partnership, Benchmark Acquisition, Inc., Benchmark Radio
Acquisition Fund I Limited Partnership, Benchmark Radio
Acquisition Fund IV Limited Partnership, Benchmark Radio
Acquisition Fund VII Limited Partnership, Benchmark Radio
Acquisition Fund VIII Limited Partnership, Joe L. Mathis
IV, Bruce R. Spector, Capstar Broadcasting Partners, Inc.
("Capstar Partners") and BCR Holding, Inc. ("Benchmark
Merger Agreement").(3)
10.1.2 -- Letter Agreement amending Benchmark Merger Agreement,
dated January 9, 1997, by and among Benchmark
Communications Radio Limited Partnership, Benchmark
Acquisition, Inc. and the other signatories listed
therein.(3)
10.1.3 -- Letter Agreement amending Benchmark Merger Agreement,
dated January 31, 1997, by and among Benchmark
Communications Radio Limited Partnership, Benchmark
Acquisition, Inc., BCR Holding, Inc., Capstar Partners,
and the other signatories listed therein.(3)
10.1.4 -- Letter Agreement amending Benchmark Merger Agreement,
dated April 8, 1997, by and among Benchmark
Communications Radio Limited Partnership, Benchmark
Acquisition, Inc., BCR Holding, Inc., and Capstar
Partners.(3)
10.1.5 -- First Amendment to the Benchmark Merger Agreement, dated
July 1, 1997, by and among Benchmark, Benchmark
Acquisition, Inc., BCR Holding, Inc. and Capstar
Broadcasting.(8)
10.1.6 -- Second Amendment to the Benchmark Merger Agreement, dated
August 6, 1997, by and among Benchmark, Benchmark
Acquisition, Inc., BCR Holding, Inc. and Capstar
Broadcasting.(8)
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.2 -- Asset Purchase Agreement, dated as of January 27, 1997,
by and among Point Communications Limited Partnership,
Midcontinent Broadcasting Co. of Wisconsin, Inc., The
Madison Radio Group and Point Madison Acquisition
Company, Inc.(3)
10.3.1 -- Asset Purchase Agreement, dated as of December 26, 1996,
between Community Pacific Broadcasting Company L.P.
("Community Pacific") and Pacific Star Communications,
Inc. (formerly named Community Acquisition Company, Inc.)
("Pacific Star").(3)
10.3.2 -- Amendment No. 1 to Asset Purchase Agreement, dated May
28, 1997, between Community Pacific and Pacific Star.(4)
10.3.3 -- Amendment No. 2 to Asset Purchase Agreement, dated July
14, 1997, between Community Pacific and Pacific Star.(4)
10.4 -- Credit Agreement, dated February 20, 1997, among the
Registrant, as borrower, Capstar Partners, as guarantor,
various banks, and Bankers Trust Company, as
administrative agent.(5)
10.5 -- Employment Agreement, dated January 27, 1997, between
Pacific Star and Claude C. Turner (also known as Dex
Allen).(6)
10.6 -- Employment Agreement, dated February 20, 1997, between
Frank D. Osborn and Southern Star Communications, Inc.(7)
10.7 -- Employment Agreement between the Registrant, Capstar
Broadcasting and David J. Benjamin, III.(8)
10.8.1 -- Letter Agreement, dated May 9, 1997, between Ameron
Broadcasting, Inc. and Capstar Acquisition Company,
Inc.(2)
10.8.2 -- Amendment to Asset Purchase Agreement, dated May 9, 1997,
between Ameron Broadcasting, Inc. and Capstar Acquisition
Company, Inc.(2)
10.9.1 -- Stock Purchase Agreement, dated June 12, 1997, by and
among Capstar Acquisition Company, Inc., Capstar
Partners, Patterson Broadcasting, Inc. and the selling
stockholders name therein.(2)
10.9.2 -- First Amendment to Stock Purchase Agreement, dated July
2, 1997, by and among Patterson Broadcasting, Inc.,
Capstar Acquisition Company, Inc. and Dyson-Kissner-Moran
Corporation, as representative of the selling
stockholders named therein.(8)
10.10.1 -- Asset Purchase Agreement, dated June 18, 1997, between
Knight Radio, Inc. and Capstar Acquisition Company,
Inc.(2)
10.10.2 -- Asset Purchase Agreement, dated June 18, 1997, between
Knight Broadcasting of New Hampshire, Inc. and Capstar
Acquisition Company, Inc.(2)
10.10.3 -- Asset Purchase Agreement, dated June 18, 1997, between
Knight Communications Corp. and Capstar Acquisition
Company, Inc.(2)
10.11 -- Exchange Agreement, Dated May 23, 1997, between SFX
Broadcasting, Inc., SFX Broadcasting of Kansas, Inc.,
SFXKS Limited Partnership, SFX Broadcasting of Florida,
Inc., Southern Starr Limited Partnership, and Capstar
Acquisition Company, Inc.(2)
10.12 -- Agreement and Plan of Merger, dated June 16, 1997, by and
among GulfStar Communications, Inc., Capstar Broadcasting
Corporation, CBC-GulfStar Merger Sub, Inc. and the
stockholders listed therein.(2)
10.13 -- Employment Agreement between GulfStar Communications,
Inc. and John D. Cullen.(8)
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.14 -- Employment Agreement among the Registrant, Capstar
Broadcasting Corporation and Joseph L. Mathias IV.(8)
10.15 -- Stock Purchase Agreement, dated June 5, 1997, by and
among Capstar Acquisition Company, Inc., Quass
Broadcasting Company and the selling stockholders named
therein.(2)
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-4, dated August 6, 1997, File No. 333-32979.
(2) Incorporated by reference to Capstar Partners' Amendment No. 1 to
Registration Statement on Form S-4, dated July 8, 1997, File No. 333-25683.
(3) Incorporated by reference to Capstar Partners' Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, File No. 333-25683.
(4) Incorporated by reference to Capstar Partners' Current Report on Form 8-K,
dated July 23, 1997, File No. 333-25683.
(5) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated February 20, 1997, File No. 33-92732.
(6) Incorporated by reference to Capstar Partners' Registration Statement on
Form S-1 (File No. 333-25263), dated April 16, 1997.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996, File No. 33-92732.
<PAGE> 1
EXHIBIT 4.2.3
================================================================================
CAPSTAR RADIO BROADCASTING PARTNERS, INC.,
AS ISSUER,
THE PARTIES LISTED
ON THE SIGNATURE PAGES
HERETO AS GUARANTORS,
AS GUARANTORS,
AND
IBJ SCHRODER BANK & TRUST COMPANY, AS TRUSTEE
--------------------
AMENDMENT NO. 10
DATED AS OF AUGUST 11, 1997
TO THE
INDENTURE
DATED AS OF APRIL 21, 1995
--------------------
$76,808,000
13 1/4% SENIOR SUBORDINATED NOTES DUE 2003
================================================================================
<PAGE> 2
AMENDMENT NO. 10, dated as of August 11, 1997 ("Amendment No. 10"), to
the INDENTURE, dated as of April 21, 1995, as amended (the "Indenture"), among
CAPSTAR RADIO BROADCASTING PARTNERS, INC., a Delaware corporation, as Issuer
(the "Company"), the parties listed on the signature pages hereto as Guarantors
(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. Wilmington WJBR-FM, L.L.C. a Delaware limited liability
company ("Wilmington"), is a wholly-owned subsidiary of Commodore Media of
Delaware, Inc., a Delaware corporation and indirect subsidiary of the Company,
and is a Restricted Subsidiary acquired or created pursuant to Section 4.14(ii)
of the Indenture. Wilmington delivers herewith the Guarantee attached as
Exhibit A to this Amendment No. 10 pursuant to the provisions set forth in
Sections 4.14 and 10.04 of the Indenture guaranteeing the obligations of the
Company under the Indenture. For all purposes of the Indenture, Wilmington
shall be deemed a party to the Indenture by virtue of their execution of this
Amendment No. 10 and the defined term the "Guarantor" contained in Article 1.01
of the Indenture shall be deemed to include Wilmington.
2. This Amendment No. 10 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. 10 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. 10 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 THAT WOULD RESULT IN THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION).
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 Guarantor of this Amendment No. 10. The Trustee makes no
representation as to the validity or sufficiency of this Amendment No. 10.
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment No. 10 to
the Indenture to be duly executed and attested as of the date and year first
written above.
CAPSTAR RADIO BROADCASTING PARTNERS, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
----------------------------------
William S. Banowsky, Jr.
Executive Vice President
ATTEST:
/s/ KEVIN MISCHNICK
- ------------------------------
Kevin Mischnick
Assistant Secretary
GUARANTORS:
ATLANTIC STAR COMMUNICATIONS, INC.
CAPSTAR ACQUISITION COMPANY, INC.
COMMODORE MEDIA OF DELAWARE, INC
COMMODORE MEDIA OF PENNSYLVANIA, INC.
COMMODORE MEDIA FLORIDA, INC.
COMMODORE MEDIA OF KENTUCKY, INC.
COMMODORE MEDIA OF NORWALK, INC.
COMMODORE MEDIA OF WESTCHESTER, INC.
DANBURY BROADCASTING, INC
PACIFIC STAR COMMUNICATIONS, INC.
CENTRAL STAR COMMUNICATIONS, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
----------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KEVIN MISCHNICK
- ------------------------------
Kevin Mischnick
Assistant Secretary
<PAGE> 4
SOUTHERN STAR COMMUNICATIONS, INC.
ATLANTIC CITY BROADCASTING CORP.
O.C.C., INC.
BREADBASKET BROADCASTING CORPORATION
SOUTHEAST RADIO HOLDING CORP.
HOUNDSTOOTH BROADCASTING CORPORATION
SNG HOLDINGS, INC.
OSBORN ENTERTAINMENT ENTERPRISES
CORPORATION
ORANGE COMMUNICATIONS, INC.
MOUNTAIN RADIO CORPORATION
LADNER COMMUNICATIONS HOLDING CORP.
RKZ TELEVISION, INC.
YELLOW BRICK RADIO CORPORATION
ASHEVILLE BROADCASTING CORP.
CORKSCREW BROADCASTING CORPORATION
DAYTONA BEACH BROADCASTING CORP.
RAINBOW BROADCASTING CORPORATION
GREAT AMERICAN EAST, INC.
NELSON BROADCASTING CORPORATION
SHORT BROADCASTING CORPORATION
JAMBOREE IN THE HILLS, INC
BEATRICE BROADCASTING CORP.
CURREY BROADCASTING CORPORATION
OSBORN SOUND AND COMMUNICATIONS CORP.
WAITE BROADCASTING CORP.
AMERON BROADCASTING CORPORATION
WNOK ACQUISITION COMPANY, INC.
DIXIE BROADCASTING, INC.
RADIO WBHP, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
----------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KEVIN MISCHNICK
- ------------------------------
Kevin Mischnick
Assistant Secretary
<PAGE> 5
MOUNTAIN LAKES BROADCASTING, L.L.C.
By: Dixie Broadcasting, Inc.,
its Member
By: /s/ WILLIAM S. BANOWSKY, JR.
----------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KEVIN MISCHNICK
- ------------------------------
Kevin Mischnick
Assistant Secretary
By: Radio WBHP, Inc.,
its Member
By: /s/ WILLIAM S. BANOWSKY, JR.
----------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KEVIN MISCHNICK
- ------------------------------
Kevin Mischnick
Assistant Secretary
WILMINGTON WJBR-FM, L.L.C.
By: Commodore Media of Delaware,
Inc.,
its Manager
By: /s/ WILLIAM S. BANOWSKY, JR.
----------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KEVIN MISCHNICK
- ------------------------------
Kevin Mischnick
Assistant Secretary
<PAGE> 6
MUSIC HALL CLUB, INC.
By:
-------------------------------
Larry Anderson
President
ATTEST:
- --------------------------------
Nancy Anderson
Secretary and Treasurer
<PAGE> 7
GULFSTAR COMMUNICATIONS, INC.
GULFSTAR COMMUNICATIONS HOLDINGS, INC.
GULFSTAR COMMUNICATIONS MANAGEMENT, INC.
GULFSTAR COMMUNICATIONS BEAUMONT, INC.
GULFSTAR COMMUNICATIONS LUFKIN, INC.
GULFSTAR COMMUNICATIONS PORT ARTHUR, INC.
GULFSTAR COMMUNICATIONS TEXARKANA, INC.
GULFSTAR COMMUNICATIONS TYLER, INC.
GULFSTAR COMMUNICATIONS VICTORIA, INC.
GULFSTAR COMMUNICATIONS BATON ROUGE, INC.
BATON ROUGE BROADCASTING COMPANY, INC.
GULFSTAR COMMUNICATIONS CORPUS CHRISTI, INC.
GULFSTAR COMMUNICATIONS WACO, INC.
GULFSTAR COMMUNICATIONS ARKANSAS, INC.
GULFSTAR COMMUNICATIONS NEW MEXICO, INC.
GULFSTAR COMMUNICATIONS KILLEEN, INC.
GULFSTAR COMMUNICATIONS LUBBOCK, INC.
SONANCE WACO OPERATING COMPANY, INC.
BRYAN BROADCASTING OPERATING COMPANY, INC.
GULFSTAR COMMUNICATIONS OKLAHOMA, INC.
GULFSTAR COMMUNICATIONS BEAUMONT LICENSEE, INC.
GULFSTAR COMMUNICATIONS LUFKIN LICENSEE, INC.
GULFSTAR COMMUNICATIONS PORT ARTHUR LICENSEE, INC.
GULFSTAR COMMUNICATIONS TEXARKANA LICENSEE, INC.
GULFSTAR COMMUNICATIONS TYLER LICENSEE, INC.
GULFSTAR COMMUNICATIONS VICTORIA LICENSEE, INC.
GULFSTAR COMMUNICATIONS BATON ROUGE LICENSEE, INC.
GULFSTAR COMMUNICATIONS CORPUS CHRISTI LICENSEE, INC.
GULFSTAR COMMUNICATIONS WACO LICENSEE, INC.
GULFSTAR COMMUNICATIONS ARKANSAS LICENSEE, INC.
GULFSTAR COMMUNICATIONS NEW MEXICO LICENSEE
GULFSTAR COMMUNICATIONS KILLEEN LICENSEE, INC.
GULFSTAR COMMUNICATIONS LUBBOCK LICENSEE, INC.
GULFSTAR COMMUNICATIONS OKLAHOMA LICENSEE, INC.
<PAGE> 8
SONANCE WACO LICENSE SUBSIDIARY, INC.
BRYAN BROADCASTING LICENSE SUBSIDIARY, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
----------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KEVIN MISCHNICK
- ------------------------------
Kevin Mischnick
Assistant Secretary
<PAGE> 9
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: /s/
----------------------------
Name:
--------------------------
Title:
-------------------------
ATTEST:
/s/
- ----------------------------
Name:
------------------------
Title:
----------------------
<PAGE> 10
EXHIBIT A
<PAGE> 11
GUARANTEE
The Guarantor (the "Guarantors," which term includes any successor
Person under the Indenture, dated April 21, 1995, as amended, among Capstar
Radio Broadcasting Partners, Inc. and its subsidiaries and IBJ Schroder Bank &
Trust Company (the "Indenture")) has unconditionally guaranteed, on a senior
subordinated basis, to the extent set forth in the Indenture and subject to the
provisions of the Indenture, (a) the due and punctual payment of the principal
of and interest on the Notes, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on overdue principal, and,
to the extent permitted by law, interest, and the due and punctual performance
of all other obligations of the Company to the Noteholders or the Trustee all
in accordance with the terms set forth in Article 10 of the Indenture, and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms of this Guarantee. Terms used and not defined herein shall have
the meaning set forth in the Indenture.
GUARANTOR:
WILMINGTON WJBR-FM, L.L.C.
By: Commodore Media of Delaware,
Inc.,
its Manager
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,596,844
<SECURITIES> 0
<RECEIVABLES> 34,242,063
<ALLOWANCES> 1,738,021
<INVENTORY> 0
<CURRENT-ASSETS> 45,367,821
<PP&E> 57,520,552
<DEPRECIATION> 12,509,981
<TOTAL-ASSETS> 317,050,568
<CURRENT-LIABILITIES> 18,255,156
<BONDS> 0
0
0
<COMMON> 2,498,479
<OTHER-SE> 148,543,287
<TOTAL-LIABILITY-AND-EQUITY> 317,050,568
<SALES> 0
<TOTAL-REVENUES> 41,862,464
<CGS> 0
<TOTAL-COSTS> 28,452,197
<OTHER-EXPENSES> 8,407,285
<LOSS-PROVISION> 2,930,372
<INTEREST-EXPENSE> 6,957,866
<INCOME-PRETAX> (1,954,884)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,954,884)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,373,225)
<CHANGES> 0
<NET-INCOME> (3,328,109)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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