<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 KNOWN AS COMMODORE MEDIA, INC.)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <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 MARCH 31, 1997, 249,847,909 SHARES OF COMMON STOCK, PAR VALUE $.01 PER
SHARE, OF THE REGISTRANT WERE OUTSTANDING.
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<PAGE> 2
1. ITEM 1 IS AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS:
ITEM 1. FINANCIAL STATEMENTS.
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
------------
<S> <C> <C>
Current assets:
Cash and short term cash investments...................... $ 4,367,847 $ 11,188,085
Accounts receivable, net.................................. 8,912,965 12,257,900
Note receivable........................................... -- 13,513,179
Prepaid expenses and other current assets................. 443,900 3,409,828
------------ ------------
Total current assets.............................. 13,724,712 40,368,992
Property, plant and equipment, net.......................... 14,263,055 40,690,071
FCC licenses and goodwill, net.............................. 59,172,868 172,511,050
Other intangible assets..................................... 2,964,621 2,773,029
Deferred charges, net....................................... 4,186,451 4,449,333
Deposits and other assets................................... 753,340 1,710,556
------------ ------------
Total assets...................................... $ 95,065,047 $262,503,031
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $ 2,260,066 $ 8,393,476
Payable to parent......................................... -- 771,212
Accrued compensation...................................... 422,062 378,269
Accrued interest.......................................... 960,084 2,400,228
Accrued income taxes...................................... -- 1,268,418
Current maturities of capital lease obligations........... 16,056 124,056
Current maturities of long-term debt...................... 3,750,000 --
------------ ------------
Total current liabilities......................... 7,408,268 13,335,659
Long term capital lease obligations......................... 49,629 262,025
Long-term debt.............................................. 90,737,274 70,736,960
Non-current compensation.................................... -- 1,022,655
Deferred income taxes....................................... 1,700,000 26,641,050
Stockholders' equity (deficit)
Common Stock, $.01 par value, 350,000,000 shares
authorized, 106,757,000, and 249,847,909 shares issued
and outstanding in 1996 and 1997, respectively......... 1,067,570 2,498,479
Additional paid-in capital................................ 54,125,332 211,894,423
Accumulated deficit....................................... (60,023,026) (63,888,220)
------------ ------------
Total stockholders' equity (deficit).............. (4,830,124) 150,504,682
------------ ------------
Total liabilities and stockholders' equity
(deficit)....................................... $ 95,065,047 $262,503,031
============ ============
</TABLE>
See accompanying notes.
2
<PAGE> 3
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED:
----------------------------
MARCH 31, MARCH 31,
1996 1997
------------ ------------
<S> <C> <C>
Gross broadcast revenue..................................... $ 8,047,568 $14,208,071
Less: agency commissions.................................... (631,887) (953,956)
----------- -----------
Net broadcast revenue....................................... 7,415,681 13,254,115
Operating expenses:
Programming, technical and news........................... 1,513,468 2,360,679
Sales and promotion....................................... 2,421,153 3,677,407
General and administrative................................ 1,440,612 2,612,057
Direct programmed music and entertainment................. -- 1,039,250
Corporate expenses.......................................... 465,684 1,423,892
Depreciation and amortization............................... 480,210 1,721,430
----------- -----------
Operating income............................................ 1,094,554 419,400
Interest expense............................................ 2,451,638 2,892,083
Interest income............................................. 115,252 127,621
Other expenses, net......................................... 167,594 100,562
----------- -----------
Income (loss) before provision for income taxes and
extraordinary item........................................ (1,409,426) (2,445,624)
Provision for income taxes.................................. 27,000 46,345
----------- -----------
Net income (loss) before extraordinary item................. (1,436,426) (2,491,969)
Extraordinary item, loss on early extinguishment of debt.... -- 1,373,225
----------- -----------
Net loss.................................................... $(1,436,426) $(3,865,194)
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED:
-----------------------------
MARCH 31, MARCH 31,
1996 1997
------------ -------------
<S> <C> <C>
Net cash provided by operating activities................... $ 1,890,560 $ 1,929,870
Cash flows from investing activities
Purchase of property, plant and equipment................. (124,192) (886,886)
Payments for intangible assets............................ (290,766) (149,975)
Loan to Affiliate......................................... -- (13,475,000)
Deposits on acquisitions.................................. (915,000) (90,000)
Acquisitions of stations and companies.................... (14,400,000) (111,401,140)
Other investing activities, net........................... (68,177) --
------------ -------------
Net cash used in investing activities............. (15,798,135) (126,003,001)
Cash flows from financing activities
Proceeds from common stock................................ -- 157,400,000
Proceeds from debt........................................ 8,500,000 --
Payment of deferred debt issuance costs................... (393,734) (1,801,263)
Repayment of amounts borrowed............................. -- (24,700,000)
Principal payments on capital leases...................... (3,455) (5,368)
------------ -------------
Net cash provided by financing activities......... 8,102,811 130,893,369
------------ -------------
Net (decrease) increase in cash and short term cash
investments............................................... (5,804,764) 6,820,238
Cash and short term cash investments, beginning of period... 10,891,489 4,367,847
------------ -------------
Cash and short term cash investments, end of period......... $ 5,086,725 $ 11,188,085
============ =============
Interest paid............................................. $ 46,738 $ 337,097
Taxes paid................................................ 58,908 164,386
</TABLE>
See accompanying notes.
4
<PAGE> 5
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDERS'
COMMON STOCK CAPITAL DEFICIT DEFICIT
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance at December 31,
1996 -- restated...................... $1,067,570 $ 54,125,332 $(60,023,026) $ (4,830,124)
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 for the period................. (3,865,194) (3,865,194)
---------- ------------ ------------ ------------
Balance at March 31, 1997............... $2,498,479 $211,894,423 $(63,888,220) $150,504,682
========== ============ ============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 three month period ended March 31, 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 known as Commodore Media, Inc.) and
its subsidiaries (the "Company"). The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries.
Certain amounts have been reclassified in the March 31, 1996 financial
statements to conform to the current period classifications.
2. CONSUMMATED ACQUISITIONS AND DISPOSITION
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 $118.8
million payable in cash and common stock of Capstar Broadcasting Partners, Inc.,
the Company's sole stockholder ("Capstar"). In connection with the purchase of
Osborn, the Company agreed to pay the President of Osborn a guaranteed monthly
bonus over the next five years; accordingly, the Company has recorded a
liability equal to the net present value of these payments of $1.2 million at
the date of purchase. 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 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.
6
<PAGE> 7
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $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"). The purchase price of the acquisition was $24.5 million.
Unaudited proforma results of the Company for the aforementioned
acquisitions which were completed during the three months ended March 31, 1997,
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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1996 1997
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net revenue................................................. $16,831 $16,534
======= =======
Income before extraordinary item............................ $ 3,366 $ 4,453
======= =======
Net income.................................................. $ 1,993 $ 4,453
======= =======
</TABLE>
3. PENDING ACQUISITIONS
Under the terms of several acquisition agreements, each dated December
1996, Benchmark Communications Radio Limited Partnership, L.P. ("Benchmark")
will become an indirect wholly-owned subsidiary of the Company through a series
of mergers and stock purchases (the "Benchmark Acquisition"). The purchase price
of the Benchmark Acquisition will equal approximately $173.4 million. Benchmark
owns and operates 31 radio stations (21 FM and 10 AM). Those stations are
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. The Company anticipates that the Benchmark Acquisition
will be consummated in July 1997. The obligation of Benchmark to consummate the
Benchmark Acquisition is subject to Federal Communication Commission (" FCC")
approval.
In December 1996, a subsidiary of Capstar ("Pacific Star") agreed to
acquire substantially all of the assets of Community Pacific Broadcasting
Company L.P. ("Community Pacific") (the "Community Pacific Acquisition"). The
purchase price of the Community Pacific Acquisition will equal approximately
$35.0 million payable in cash. Community Pacific owns and operates 11 radio
stations (six FM and five AM) in four markets located in Anchorage, Alaska,
Modesto and Stockton, California and Des Moines, Iowa. The Company anticipates
that the Community Pacific Acquisition will be consummated in November 1997,
prior to which time the acquisition agreement will be assigned or otherwise
transferred to the Company.
In January 1997, a subsidiary of Capstar ("Madison Acquisition Co.") 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 October
1997, prior to which time the acquisition agreement will be assigned or
otherwise transferred to the Company.
In January 1997, Pacific Star agreed to acquire substantially all of the
assets of Commonwealth Broadcasting of Arizona, L.L.C. ("Commonwealth") (the
"Commonwealth Acquisition"). The purchase
7
<PAGE> 8
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, prior to which time the
acquisition agreement will be assigned or otherwise transferred to the Company.
In January 1997, Madison Acquisition Co. agreed to acquire substantially
all of the assets of Cavalier Communications, L.P. ("Cavalier") (the "Cavalier
Acquisition"). The purchase price of the Cavalier Acquisition will equal
approximately $8.3 million payable in cash. Cavalier owns and operates five
radio stations (four FM and one AM) in the Roanoke and Lynchburg, Virginia
markets. FCC approval is pending. The Company anticipates that the Cavalier
Acquisition will be consummated in October 1997, prior to which time the
acquisition agreement will be assigned or otherwise transferred to the Company.
In February 1997, Pacific Star 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 two AM)
in the Anchorage and Fairbanks, Alaska markets. FCC approval is pending. The
Company anticipates that the COMCO Acquisition will be consummated in October
1997, prior to which time the acquisition agreement will be assigned or
otherwise transferred to the Company.
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 has sought permission from
the FCC to consummate both the Community Pacific Acquisition and the COMCO
Acquisition provided that the Company agrees to sell radio station KASH-AM in
Anchorage, Alaska within 18 months of the date on which the Community Pacific
Acquisition is consummated. The Company would be in compliance with the
ownership limitations of the Communications Act in the Anchorage, Alaska market
once it disposes of KASH-AM. In May 1997, the Company entered into a nonbinding
letter of intent to sell substantially all of the assets used or useful in the
operations of radio station KASH-AM to Alaska Broadcast Television, Inc. No
assurances can be given that the FCC will grant permission to the Company to
consummate both the Community Pacific Acquisition and the COMCO Acquisition and
dispose of KASH-AM, or if the FCC grants such permission, that the Company will
be able to sell KASH-AM.
In March 1997, WNOK Acquisition Company, Inc., a subsidiary of the Company
("WNOK Acquisition Co."), 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. FCC
approval is pending. The Company anticipates that the Emerald City Acquisition
will be consummated in July 1997.
In April 1997, Capstar Acquisition Company, Inc. ("Capstar Acquisition
Co."), a subsidiary of 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 August 1997.
8
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CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In April 1997, Capstar Acquisition Co. 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.
The Company has entered into nine 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. As part of
the Company's ongoing acquisition strategy, the Company is continually
evaluating certain other potential acquisition opportunities.
4. STOCKHOLDERS' 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 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, 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 exchanged shares of common stock of Capstar 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.
5. 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.
6. NEW CREDIT FACILITY
On February 20, 1997, the Company entered into a credit facility (the "New
Credit Facility") with various banks and Bankers Trust Company, as
administrative agent, which consists of a $50.0 million revolving loan facility.
The indebtedness under the New Credit Facility is secured by a first priority
perfected pledge of substantially all of Capstar's assets, including, without
limitation, the capital stock of the subsidiaries of Capstar, and is guaranteed
by Capstar and all of the direct and indirect subsidiaries of Capstar (other
than 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 2002. As of May 13, 1997, a principal balance
of $24.9 million was outstanding under the New Credit Facility.
9
<PAGE> 10
CAPSTAR RADIO BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS COMMODORE MEDIA, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CREDIT AGREEMENT
In March 1997, the Company entered into a $13.5 million Credit Agreement
with Emerald City (the "Credit Agreement"). 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).
10
<PAGE> 11
2. ITEM 2 IS AMENDED TO READ IN ITS ENTIRETY AS FOLLOWS:
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE COMPANY
As of March 31, 1997, the Company owned and operated or provided services
to 53 radio stations in 12 mid-sized markets. The following table sets forth the
growth in number of radio stations by market since January 1, 1996:
<TABLE>
<CAPTION>
NUMBER OF
MARKET STATIONS DATE ACQUIRED
------ --------- -------------
<S> <C> <C>
Huntington WV-Ashland, KY................................. 7 October 1996(1)
1 LMA
Fairfield, CT
Acquisition 1........................................... 2 March 1996(1)
Acquisition 2........................................... 2 May 1996
Ft. Pierce-Stuart-Vero Beach, FLA......................... 3 May 1996(1)
Westchester-Putnam Counties, NY........................... 3 March 1996(1)
OSBORN ACQUISITION:
Asheville, NC............................................. 2 February 1997
Wheeling, WV.............................................. 6 February 1997
Wheeling, WV.............................................. 1 JSA
Jackson, TN............................................... 3 February 1997
Tuscaloosa, AL............................................ 1 February 1997
Tuscaloosa, AL............................................ 2 April 1997(1)
Gadsden, AL............................................... 2 February 1997
Huntsville, AL............................................ 3 April 1997
</TABLE>
- ---------------
(1) The Company provided services to these stations pursuant to an LMA or a JSA
(as defined) prior to the date acquired. "JSA" refers to a joint sales
agreement, whereby a station licensee obtains, for a fee, the right to sell
substantially all of the commercial advertising on a separately-owned and
licensed station. JSAs take varying forms. A JSA, unlike an LMA, normally
does not involve programming. "LMA" refers to a local marketing agreement,
whereby a radio station outsources the management of certain limited
functions of its operations. LMAs take varying forms; however, the FCC
requires that, in all cases, the licensee maintain independent control over
the programming and operations of the station.
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. 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 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
11
<PAGE> 12
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 $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 $24.5 million.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated summary data of the
Company:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1996 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING DATA:
Net revenue............................................... $ 7,416 $13,254
Station operating expenses................................ 5,375 9,689
Depreciation and amortization............................. 480 1,721
Corporate expenses........................................ 466 1,424
Operating income (loss)................................... 1,095 420
Interest expense.......................................... 2,452 2,892
Other (income)expense..................................... 53 (27)
Extraordinary loss on early extinguishment of debt........ -- 1,373
Net loss.......................................... $(1,436) $(3,865)
OTHER DATA:
Broadcast cash flow (1)................................... $ 2,041 $ 3,565
Broadcast cash flow margin................................ 27.5% 26.9%
EBITDA (2)................................................ $ 1,575 $ 2,141
</TABLE>
- ---------------
(1) Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expense and other expense.
(2) EBITDA consists of operating income before depreciation, amortization and
other expense.
Three months ended March 31, 1997 compared to three months ended March 31, 1996
Net Revenue. Net revenue increased $5.8 million or 78.7% to $13.3 million
for the three months ended March 31, 1997 from $7.4 million for the three months
ended March 31, 1996. Net revenue included from the operations purchased in
connection with the Osborn Acquisition for the period February 21, 1997 through
March 31, 1997 comprised $3.7 million of the increase. The inclusion of revenue
from the acquisitions of radio stations and revenue generated from LMAs and JSAs
provided $1.9 million of the increase. For stations owned or operated for a
comparable period in 1997 and 1996, net revenue increased approximately $232,000
or 3.2% to $7.4 million for the three months ended March 31, 1997 from $7.2
million for the same period in 1996.
Station Operating Expenses. Station operating expenses increased $4.3
million or 80.3% to $9.7 million for the three months ended March 31, 1997 from
$5.3 million for the three months ended March 31, 1996. The increase is
primarily attributable to (i) additional operating expenses of the operations
purchased in connection with the Osborn Acquisition of $2.9 million, and (ii)
station operating expenses of the radio station acquisitions and the JSAs and
LMAs which contributed $1.5 million of the increase. For stations owned or
operated for a comparable period in 1997 and 1996, station operating expenses
declined approximately
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$86,000 or 1.7% to $5.1 million in 1997 from $5.2 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 $1.5 million or 74.7% to $3.6 million for the
three months ended March 31, 1997 from $2.0 million for the same period in 1996.
The broadcast cash flow margin was 26.9% for the three months ended March 31,
1997 compared to 27.5% for the same period in 1996. The broadcast cash flow
provided from the Osborn Acquisition accounted for approximately $861,000 of the
increase; the broadcast cash flow margin from these operations is 23.0%. The
inclusion of broadcast cash flows from the remaining acquisitions and LMAs
accounts for approximately $345,000 of the increase. Excluding the effects of
the acquisitions and LMAs, broadcast cash flow increased approximately $319,000,
or 15.7% to $2.3 million for the three months ended March 31, 1997 from $2.0
million for the same period in 1996 and the broadcast cash flow margin on a same
station basis increased to 31.4% from 28.0%.
Corporate Expenses. Corporate expenses increased approximately $934,000 or
200.4% to approximately $1.4 million for the three months ended March 31, 1997
from approximately $466,000 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 $500,000 or 31.3% to $2.1 million for the three months ended March
31, 1997 from $1.6 million for the three months ended March 31, 1996. The EBITDA
margin for the three months ended March 31, 1997 was 22.0% compared to 21.2% for
the same period in 1996.
Other Operating Expenses. Depreciation and amortization increased $1.2
million to $1.7 million for the three months ended March 31, 1997 from
approximately $480,000 for the three months ended March 31, 1996 primarily due
to the various acquisitions consummated during 1996 and 1997.
Operating Income. As a result of the factors described above, operating
income decreased to $420,000 or 61.8%% for the three months ended March 31, 1997
from $1.1 million for the same period in 1996.
Other (Income) Expenses. Interest expense increased approximately $440,000
or 18.0% to $2.9 million for the three months ended March 31, 1997 from $2.5
million for the three months ended March 31, 1996 due to interest expense on
$24.7 million of the principal balance of the AT&T Credit Facility. The AT&T
Credit Facility was repaid upon consummation of the Osborn Acquisition on
February 20, 1997. Interest income increased 10.7% to $128,000 as a result of
the interest accrual on the Loan to Emerald City. Other expenses, net decreased
approximately $67,000 for the three months ended March 31, 1997 compared to the
same period in 1996. The Company realized an extraordinary loss on early
retirement of the AT&T Credit Facility during the three months ended March 31,
1997 of approximately $1.4 million which is comprised of the write off of
unamortized deferred loan costs of approximately $775,000 and prepayment
penalties and fees of approximately $595,000.
Net Loss. As a result of the factors described above, net loss increased
approximately $2.5 million to $3.9 million for the three months ended March 31,
1997 from $1.4 million for the three months ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company funded the $118.8 million purchase price for the Osborn
Acquisition with an equity investment made by Capstar. The Company funded the
purchase price of the Huntsville Acquisition, the Tuscaloosa Acquisition and the
Space Coast Acquisitions through borrowings under the New Credit Facility in the
aggregate principal amount of $35.9 million.
The Company's 13 1/4% Senior Subordinated Notes due 2003 (the "Notes")
accrue interest at a stated rate of 13 1/4% per annum of their face value of
$76.8 million. The 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. Borrowings under the New Credit Facility bear
interest at floating rates and
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<PAGE> 14
require interest payments on varying dates depending on the interest rate option
selected by the Company. The New Credit Facility consists of the $50.0 million
revolver. All loans outstanding under the New Credit Facility will mature in
2002. As of May 13, 1997, a principal balance of $24.9 million was outstanding
under the New Credit Facility.
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, as
appropriate opportunities arise, to acquire additional radio stations. The
Company used the $11.0 million in net proceeds of the Osborn Ft. Myers
Disposition to repay indebtedness under the New Credit Facility. The Company
intends to fund the aggregate purchase price for the pending acquisitions
through a combination of borrowings under the New Credit Facility (as it may be
amended to increase the borrowing limit thereunder) and a combination of
indebtedness of the Company and/or Capstar (which proceeds will be invested in
the Company) and/or capital stock of Capstar or its subsidiaries. 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 cash from operating activities, together with
available revolving credit borrowings under the New Credit Facility and equity
investments by Capstar, should be sufficient to permit the Company to fund its
operations and meet its obligations under the agreements governing the 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 Company has no current plans or arrangements to dispose of any of
its stations other than the disposition of station KASH-AM in Anchorage, Alaska
at or after consummation of the Community Pacific Acquisition and the possible
exchange of three stations to be acquired in the Benchmark Acquisition for three
stations owned by SFX Broadcasting, Inc.
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
connection with the Benchmark Acquisition, Capstar will issue $750,000 of
capital stock of Capstar for the benefit of the Company to an affiliate of
Hicks, Muse, Tate & Furst Incorporated 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. The issuance of capital stock of Capstar for the benefit of the
Company will be reported as an extraordinary item in the period in which the
Company consummates the Benchmark Acquisition. Had the Benchmark Acquisition
been consummated at December 31, 1996, the Company would have recorded an
extraordinary charge of approximately $750,000.
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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
Date: June 26, 1997
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