<PAGE>
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - - ----- ACT OF 1934
For the quarterly period ended June 30, 1997
- - - ----- TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ---------------------- to ---------------------
Commission File Number 0-26530
TRIATHLON BROADCASTING COMPANY
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0668235
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Symphony Towers
750 B Street, Suite 1920
San Diego, CA 92101
(Address of principal executive offices)
(619) 239-4242
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the Company's equity outstanding as of August 11, 1997
is: 3,148,533 shares of Class A Common Stock, par value $.01 per share;
244,890 shares of Class B Common Stock, par value $.01 per share; 50,000
shares of Class C Common Stock, par value $.01 per share; 1,444,366 shares of
Class D Common Stock, par value $.01 per share; and 5,834,000 Depository
Shares, each representing a one-tenth interest in a share of 9% Mandatory
Convertible Preferred Stock, par value $.01 per share.
Transitional Small Business Disclosure Format. Yes No x
<PAGE>
TRIATHLON BROADCASTING COMPANY
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
- - - ------- --------------------
Condensed consolidated balance sheets - June 30, 1997 (unaudited)
and December 31, 1996 3
Condensed consolidated statements of operations - Three and six months
ended June 30, 1997 and 1996 (unaudited) 4
Condensed consolidated statements of cash flows - Six months
ended June 30, 1997 and 1996 (unaudited) 5
Condensed consolidated statements of stockholders' equity - Six months
ended June 30, 1997 (unaudited) 6
Notes to condensed consolidated financial statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 11
- - - ------- ---------------------------------------------------------
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 19
- - - ------- ---------------------------------
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1997 1996
------------ ------------
(unaudited) (Note)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 4,195 $ 3,083
Accounts receivable, net 6,571 4,523
Notes receivable from officer 25 75
Other current assets 239 290
--------- --------
Total current assets 11,030 7,971
Property and equipment - less accumulated depreciation 10,458 7,534
Intangible assets, net of accumulated amortization 113,444 65,159
Other assets 701 7,730
Assets held for sale 20,000 --
--------- ---------
$ 155,633 $ 88,394
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Due to affiliates $ 347 $ 335
Accounts payable and accrued expenses 5,566 2,963
Notes payable -- current portion 1,418 179
--------- ---------
Total current liabilities 7,331 3,477
Notes payable 79,404 12,821
Non-compete payable 707 --
Deferred taxes 7,630 7,630
Deferred compensation 104 84
Stockholders' equity
Preferred stock 12 12
Common stock 49 48
Paid-in-capital 63,947 66,215
Deferred compensation (504) (682)
Accumulated deficit (3,047) (1,211)
--------- ---------
Total stockholders' equity 60,457 64,382
--------- ---------
$ 155,633 $ 88,394
========= =========
</TABLE>
Note: The condensed consolidated balance sheet at December 31, 1996 has been
derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 7,953 $ 4,526 $ 13,614 $ 6,587
Operating expenses
Station operating expenses 5,805 3,233 10,211 4,942
Depreciation and amortization 807 333 1,559 509
Corporate expenses 524 491 1,014 804
Deferred compensation 97 113 197 160
-------- -------- -------- --------
Total operating expenses 7,233 4,170 12,981 6,415
-------- -------- -------- --------
Operating income 720 356 633 172
Interest expense - net (941) (449) (1,511) (860)
-------- -------- -------- --------
Loss before extraordinary item (221) (93) (878) (688)
Extraordinary item - loss on early
extinguishment of debt (958) -- (958) (320)
-------- -------- -------- --------
Net loss (1,179) (93) (1,836) (1,008)
Preferred stock dividend requirement (1,377) (1,346) (2,754) (1,660)
-------- -------- -------- --------
Net loss applicable to common stock $ (2,556) $ (1,439) $(4,590) $ (2,668)
========= ========= ========= =========
Loss per common share:
Loss before extraordinary item $ (0.32) $ (0.30) $ (0.74) $ (0.45)
Extraordinary item $ (0.20) -- $ (0.20) $ (0.10)
-------- -------- -------- --------
Net loss per common share $ (0.52) $ (0.30) $ (0.94) $ (0.55)
========= ========= ========= =========
Weighted average common shares outstanding 4,881 4,842 4,871 4,842
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flow from operating activities $ 1,102 $ (2,893)
Investing activities
Acquisition of net assets of radio stations including
advance fees and deposits (63,708) (38,797)
Capital expenditures (277) (227)
Due to affiliate 12 (70)
-------- ---------
(63,973) (39,094)
Financing activities
Borrowings 108,279 9,000
Debt repayment (40,050) (9,000)
Financing costs (1,492) (2,926)
Net proceeds from sale of preferred stock -- 55,640
Payment of preferred stock dividends (2,754) (1,714)
-------- ---------
63,983 51,000
Net increase in cash and cash equivalents 1,112 9,013
Cash and cash equivalents at beginning of period 3,083 5,046
-------- ---------
Cash and cash equivalents at end of period $ 4,195 $ 14,059
======== =========
Supplemental cash flow information:
Interest paid $ 1,495 $ 600
Issuance of Class A Common Stock in connection
with acquisitions $ 487 --
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Series B Mandatory
Convertible Convertible Class A Class B Class C Class D
Preferred Preferred Common Common Common Common
Stock Stock Stock Stock Stock Stock
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1997 $6 $6 $31 $2 $1 $14
Issuance of 46,189 shares of
Common Stock upon acquisition
of stations 1
Deferred compensation
Dividends on Mandatory
Convertible Preferred Stock
($.472 per share)
Net loss
---- ------ ---- ---- ----- -----
Balances at June 30, 1997 $6 $6 $32 $2 $1 $14
==== ====== ==== ==== ===== =====
</TABLE>
(RESTUBBED FROM TABLE ABOVE)
<TABLE>
<CAPTION>
Total
Paid-In Deferred Accumulated Stockholders'
Capital Compensation Deficit Equity
------- ----------- ------- ------
<S> <C> <C> <C> <C>
Balances at January 1, 1997 $66,215 $(682) $(1,211) $64,382
Issuance of 46,189 shares of
Common Stock upon acquisition
of stations 486 487
Deferred compensation 178 178
Dividends on Mandatory
Convertible Preferred Stock
($.472 per share) (2,754) (2,754)
Net loss (1,836) (1,836)
------- ------- -------- -------
Balances at June 30, 1997 $63,947 $(504) $(3,047) $60,457
======== ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Item 310(b) of Regulation S-B. 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 an interim
period are not necessarily indicative of the results that may be expected for
a full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Triathlon Broadcasting
Company ("Company") annual report on Form 10-KSB for the transition period
from April 1, 1996 to December 31, 1996.
The accompanying unaudited condensed consolidated financial
statements' include the accounts and transactions of the Company and its
wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated.
The Company's revenues vary throughout the year. As is typical in the
radio broadcasting industry, the Company's first quarter generally produces
the lowest revenues for the year and the fourth quarter generally produces the
highest revenues for the year. The Company's operating results in any period
may be affected by the incurrence of advertising and promotion expenses that
do not necessarily produce commensurate revenues until the impact of the
advertising and promotion is realized in future periods.
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
The Company currently owns and operates, sells advertising on behalf
of or provides programming to 24 FM and 11 AM radio stations in seven markets
and owns a regional sports radio network (the "Sports Network") in the Western
United States. Upon consummation of the Little Rock Disposition (as defined
herein), the Company will own and operate, sell advertising on behalf of or
provide programming to 32 radio stations and the Sports Network in six markets.
On June 2, 1997, the Company purchased radio stations KFAB-AM and
KGOR-FM, operating in the Omaha, Nebraska market, and the exclusive Muzak
franchise for the Lincoln and Omaha, Nebraska markets, from American Radio
Systems Corporation ("ARS") for an aggregate purchase price of $38.0 million
(the "KFAB/KGOR Acquisition"). On May 15, 1997, the Company purchased Pinnacle
Sports Productions, LLC (the "Pinnacle Acquisition") which broadcasts all of
the men's football, basketball and baseball games and women's basketball and
volleyball games of the University of Nebraska. The purchase price of
approximately $3.3 million may be increased by $1.7 million if the University
of Nebraska renews its contract with the Company in 2001 for a minimum of an
additional three year term. On January 9, 1997 and April 25, 1997,
respectively, the Company purchased radio stations KZSN-FM and KZSN-AM, both
operating in the Wichita, Kansas market (the "Southern Skies Wichita
Acquisition"), and radio stations KSSN-FM and KMVK-FM, both operating in the
Little Rock, Arkansas market (the "Southern Skies Little Rock Acquisition"),
from Southern Skies Corporation ("Southern Skies") for an aggregate purchase
price of $22.6 million, 46,189 shares of the Company's Class A Common Stock
valued at $487,000 and a non-competition agreement with one of the principals
of Southern Skies Corporation under which it will pay $750,000 over a 5 year
period (collectively the "Southern Skies Acquisition"). Also on April 25, 1997,
the Company purchased radio station KOLL-FM, operating in the Little Rock
market, from SFX Broadcasting Inc. ("SFX"), an affiliate, for an aggregate
purchase price of $4.1 million (the "KOLL Acquisition"). The Company had
provided services for radio station KOLL-FM pursuant to a local market
agreement ("LMA") since March 15, 1996.
7
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
The acquisitions referred to above were accounted for using the
purchase method of accounting and were financed through borrowings available
under the Company's $80.0 million Amended Loan Agreement (as defined herein)
or its prior loan agreement with AT&T Commercial Finance Corporation ("AT&T").
The operating results of the Southern Skies Acquisition, the KOLL Acquisition,
the Pinnacle Acquisition, and the KFAB/KGOR Acquisition are included in the
accompanying unaudited condensed consolidated statement of operations as of
their respective acquisition dates.
The Company has entered into an agreement with Clear Channel Radio,
Inc. ("Clear Channel"), pursuant to which the Company will sell to Clear
Channel, radio stations KOLL-FM, KSSN-FM and KMVK-FM, each operating in the
Little Rock, Arkansas market (the "Little Rock Disposition"). The aggregate
sale price is $20.0 million. While the purchase agreement with respect to the
Little Rock Disposition contemplates that the consummation of the Little Rock
Disposition could be as late as two years from the date of the agreement, the
Company anticipates that the Little Rock Disposition will be consummated during
the fourth quarter of 1997. The Company will not recognize a gain or loss on
the Little Rock Disposition. The stations being sold pursuant to the Little
Rock Disposition have been classified as Assets Held for Sale in the
accompanying unaudited June 30, 1997 condensed consolidated balance sheet.
During the period from the date of acquisition through June 30, 1997, the
Company capitalized a loss of approximately $1,000 related to the Southern
Skies Little Rock stations.
In the event that the Little Rock Disposition is not consummated by
November 14, 1997 due to the failure to obtain the necessary regulatory
consents, including the consent of the Department of Justice ("DOJ") and the
Federal Communications Commission, Clear Channel has agreed to guarantee the
third tranche (as defined herein) of the Amended Loan Agreement in the amount
of $20.0 million. In the event that the closing has not occurred by
November 14, 1998 due to the failure to obtain such consents, Clear Channel
has agreed to make a $20.0 million loan to the Company to be secured only by
the assets of the radio stations subject to the Little Rock Disposition.
The proceeds of this loan will be used to repay $20.0 million obtained under
the Amended Loan Agreement. The DOJ has approved the Little Rock Disposition.
8
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 3 - INDEBTEDNESS
On May 30, 1997, the Company entered into an Amended and Restated Loan
Agreement ("Amended Loan Agreement") with AT&T and Union Bank of California,
N.A. ("Union Bank") (collectively the "Lenders") in an aggregate amount of
$80 million. The purpose of the agreement was to refinance existing debt,
finance acquisitions and support working capital needs. The Amended Loan
Agreement is comprised of four tranches. The first, in the amount of $35
million, is a reducing revolver with principal payments due beginning on
July 1, 1998 with a maturity of April 1, 2004. The second, in the amount of
$25 million, is a term loan with principal payments due beginning on July 1,
1998 with a maturity of July 1, 2004. The third, in the amount of $20 million,
is a bridge loan that matures November 1, 1998 or the date of the closing of
the Little Rock Disposition, whichever is earlier. Once the third tranche is
fully repaid, the fourth tranche, an acquisition revolver in the amount of $20
million, will be made available to the Company with the same terms as the
second tranche. See "Item 2. Management's Discussion and Analysis or Plan of
Operation--Liquidity and Capital Resources for additional information."
The Company's subsidiaries borrowed $78.5 million under the Amended
Loan Agreement on June 2, 1997, in connection with repaying the Company's then
outstanding indebtedness with AT&T and the consummation of the KFAB/KGOR
Acquisition. Loans under the Amended Loan Agreement bear interest at a floating
rate equal to a base rate which approximates prime plus 1/2 of 1%, plus an
applicable margin, or the LIBOR rate plus an applicable margin. The applicable
margin for the first tranche is 1.75% for base rate loans and 2.75% for LIBOR
rate loans and may be reduced in the event the Company achieves certain lower
leverage ratios. The applicable margin for the second tranche is 2.50% for
base rate loans and 3.50% for LIBOR rate loans and for the third tranche,
2.25% for base rate loans and 3.25% for LIBOR rate loans.
The obligations of the Company's subsidiaries under the Amended Loan
Agreement are secured by a first priority security interest in all existing and
acquired property of the Company's subsidiaries, with the exception of
FCC licenses and authorizations to the extent it is unlawful to grant a
security interest in such licenses and authorizations, and all issued and
outstanding capital stock of the Company's subsidiaries. All outstanding
indebtedness under the Amended Loan Agreement is guaranteed by the Company. The
Amended Loan Agreement also contains financial leverage and coverage ratios
which may inhibit the Company's ability to incur other indebtedness, and
restrictions on capital expenditures and other payments.
In connection with the Amended Loan Agreement, the Company wrote off
all deferred financing costs related to the old credit facility resulting in an
extraordinary loss of $958,000 being recorded in the accompanying condensed
consolidated statements of operations.
Note 4 - DOJ Information Request
Following the passage of the Telecommunications Act of 1996, the DOJ
indicated its intention to investigate certain existing industry practices that
had not been previously subject to anti-trust review. The Company has received
information requests regarding the joint selling agreement ("JSA") the Company
had from September 1 to December 31, 1996 in the Wichita, Kansas market (the
"Wichita JSA") and the JSA the Company has in Colorado Springs, Colorado and
Spokane, Washington markets (the "Citadel JSA"). These information requests
also cover another JSA which the Company has in Spokane, Washington. The
Citadel JSA provided approximately 18% of the Company's net revenue's during
the six months ended June 30, 1997. In the event the DOJ requires the
termination or modification of the Citadel JSA, the Company believes that it
will not have a long-term material adverse effect on the Company.
9
<PAGE>
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 5 - Loss Per Common Share
Loss per common share is based upon the net loss applicable to common
shares which is net of preferred stock dividends and upon the weighted average
of common shares outstanding during the period. The conversion of securities
convertible into common stock and the exercise of stock options were not
assumed in the calculation of loss per common share because the effect would
be antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128"). FAS 128 establishes standards for computing and presenting earnings per
share ("EPS") and supersedes APB Opinion No. 15, "Earnings Per Share" ("Opinion
15"). FAS 128 replaces the presentation of primary EPS with a presentation of
basic EPS which excludes dilution and is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding during the period. This statement also requires dual presentation
of basic EPS and diluted EPS on the face of the income statement for all
periods presented. Diluted EPS is computed similarly to fully diluted EPS
pursuant to Opinion 15, with some modifications. FAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. Early adoption is not permitted and the statement
requires restatement of all prior-period EPS data presented after the effective
date. Management does not believe the implementation of FAS 128 will have a
material effect on the Company's EPS calculations.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the condensed
consolidated financial statements and related notes thereto. The following
discussion contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, risks and uncertainties relating to leverage,
the ability to obtain financing, consummation of the Little Rock Disposition
(see Note 2 to the Condensed Consolidated Financial Statements), integration of
the recently completed acquisitions, the ability of the Company to achieve
certain cost savings, the management of growth, the introduction of new
technology, changes in the regulatory environment, the popularity of radio
as a broadcasting and advertising medium and changing consumer tastes. The
company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect
any future events or circumstances.
GENERAL
The Company owns and operates radio stations primarily in medium and
small markets in the Midwestern and Western United States. The Company
currently owns and operates, sells advertising on behalf of or provides
programming to 24 FM and 11 AM radio stations in seven markets and owns
the Sports Network. Upon consummation of the Little Rock Disposition, the
Company will own and operate, sell advertising on behalf of or provide
programming to 32 radio stations and the Sports Network in six markets.
The following chart sets forth certain information with respect to
the Company's stations after giving effect to the Little Rock Disposition:
AM FM
-- --
Omaha,
Nebraska(1)...... 1 3
Spokane,
Washington(2)(3). 3 5
Wichita, Kansas....... 3 4
Colorado Springs,
Colorado(2)...... 2 2
Lincoln,
Nebraska(1)...... 0 4
Tri-Cities,
Washington(4).... 2 3
-- --
Total.............. 11 21
- ------------------
(1) The Company has acquired the rights to the Sports Network pursuant
to the Pinnacle Acquisition.
(2) Includes four stations in each of the Colorado Springs and Spokane
markets subject to a JSA.
(3) Includes one station that is not owned by the Company but on which it
sells advertising pursuant to a JSA.
(4) Includes one station that is not owned by the Company but on which it
provides services and sells advertising pursuant to a local marketing
agreement.
11
<PAGE>
The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow.
"Broadcast Cash Flow" is defined as net revenues less station operating
expenses. Although Broadcast Cash Flow is not a measure of performance
calculated in accordance with generally accepted accounting principles
("GAAP"), the Company believes that Broadcast Cash Flow is accepted by the
broadcasting industry as a generally recognized measure of performance and is
used by analysts who report publicly on the performance of broadcasting
companies. Nevertheless, this measure should not be considered in isolation or
as a substitute for operating income, net income, net cash provided by
operating activities or any other measure for determining the Company's
operating performance or liquidity that is calculated in accordance with GAAP.
The primary source of the Company's revenues is the sale of
advertising time on its radio stations. The Company's most significant station
operating expenses are employee salaries and commissions, programming expenses
and advertising and promotional expenditures. The Company seeks to reduce
expenses at the stations by implementing cost controls, operating the stations
as groups in their respective markets and lowering overhead by combining and
centralizing administrative and financing functions of its stations.
The Company's revenues are primarily affected by the advertising rates
its radio stations charge. The Company's advertising rates are in large part
based on a station's ability to attract audiences in the demographic groups
targeted by its advertisers, as measured principally by Arbitron (an
independent rating service) on a quarterly basis. Because audience ratings in
local markets are crucial to a station's financial success, the Company
endeavors to develop strong listener loyalty. The Company seeks to diversify
the formats on its stations, which helps to insulate it from the effects of
changes in the musical tastes of the public in any particular format. The
number of advertisements that can be broadcast without jeopardizing audience
levels (and the resulting ratings) is limited in part by the format of a
particular station. The Company's stations strive to maximize revenue by
constantly managing the number of commercials available for sale and adjusting
prices based upon local market conditions. In the broadcasting industry, radio
stations often utilize trade (or barter) agreements which exchange advertising
time for goods or services (such as travel or lodging), instead of for cash.
The Company generates most of its revenue from local advertising, which is sold
primarily by a station's sales staff. To generate national advertising sales,
the Company engages independent advertising sales representatives that
specialize in national sales for each of its stations.
The Company's revenues vary throughout the year. As is typical in the
radio broadcasting industry, the Company's first quarter generally produces
the lowest revenues for the year, and the fourth quarter generally produces
the highest revenues for the year. The Company's operating results in any
period may be affected by the incurrence of advertising and promotion expenses
that do not necessarily produce commensurate revenues until the impact of the
advertising and promotion is realized in future periods.
The radio broadcasting industry is highly competitive. The financial
results of each of the Company's stations are dependent to a significant
degree upon its audience ratings and its share of the overall advertising
revenue within the station's geographic market.
On February 12, 1997, the Company adopted a change in the Company's
fiscal year end from March 31 to December 31, effective December 31, 1996.
12
<PAGE>
The DOJ is investigating the Citadel JSA in connection with the
concentration of radio station ownership within Colorado Springs, Colorado
and Spokane, Washington. The DOJ is increasingly scrutinizing the radio
broadcasting industry. In a recent case unrelated to the Company, the DOJ has,
for the first time, requested the termination of a radio station JSA that, in
the opinion of the DOJ, would have given a radio station owner, together with
its proposed acquisition of other radio stations in the area, control over more
than 60% of radio advertising revenue in the area. The Citadel JSA currently
may be deemed to provide Citadel control over approximately 53.6% and 55.5% of
the sales of radio advertising in the Spokane, Washington market and the
Colorado Springs, Colorado market, respectively. The Citadel JSA provided
approximately 18% of the Company's net revenues in the six month period ending
June 30, 1997. In the event the DOJ requires the termination or modification
of the Citadel JSA the Company believes that it will not have a long-term
material adverse effect on the Company because the Company believes that it
can establish an independent sales force for the stations under the Citadel JSA.
RESULTS OF OPERATIONS
The Company's condensed consolidated financial statements are not
directly comparable from period to period due to acquisition and disposition
activity.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Net revenues increased approximately $3.5 million or 78% to
approximately $8.0 million for the three months ended June 30, 1997 from
approximately $4.5 million for the three month period in 1996 as a result of
acquisitions, local marketing agreements ("LMAs") and JSAs entered into
subsequent to June 30, 1996 as well as the growth at continuously owned and
operated stations. Net revenues from the stations owned and operated by the
Company as of June 30, 1997 increased to approximately $9.0 million for the
three months ended June 30, 1997 from approximately $8.3 million for the three
months ended June 30, 1996 which represented a 8% increase over the net
revenues on a same station basis. Despite the growth in net revenues, the
Company continued to be impacted by disruptions in sales efforts as a result of
the pending sales of the radio stations to the Company, restructuring of
sales management and turnover of sales staff during the periods after the
acquisitions of stations. The Company expects the impact of these disruptions
to continue in the short term. Further, the Company experienced a decline in
net revenue in the Lincoln, Nebraska market due to what the Company believes is
increased competition from an additional television station in the market. Net
revenues during the 1996 quarter, were impacted by disruptions in sales efforts
as a result of the pending sales of the radio stations to the Company. Revenues
in the 1997 quarter were increased by the inclusion in net revenues of the
reimbursement for operating expenses under the Citadel JSA. No revenue in
respect of expense reimbursement was recorded during the three months ended
June 30, 1996 since the Company operated those radio stations under a LMA with
Pourtales Radio Partnership ("Pourtales") at that time.
13
<PAGE>
Station operating expenses increased by approximately $2.6 million or
81% in three months ended June 30, 1997 to approximately $5.8 million from
approximately $3.2 million for three months ended June 30, 1996 primarily due
to the inclusion of expenses related to the stations acquired, LMAs and JSAs
entered into during calendar 1996 and 1997. On a same station basis for the
radio stations owned and operated by the Company as of June 30, 1997, operating
expenses for the three months ended June 30, 1997 increased 11% as compared to
the three months ended June 30, 1996. Station operating expenses during the
period prior to the Company's operation and/or ownership lack comparability in
some instances as a result of the absence of certain costs including salaries
for owner-management. The benefits of continuing implementation of the
Company's cost reduction programs and efficiencies of combined operations in
the markets served during the three months ended June 30, 1997 did not fully
offset the impact of the additional required costs not incurred in the prior
period by the former owners such as the addition of a General manager to a
station that was managed personally by the prior owner. Further, station
operating expenses during the three months ended June 30, 1997 include amounts
expended for radio stations subject to the Citadel JSA for which no expenses
were included in the prior year quarter.
Broadcast Cash Flow for the three months ended June 30, 1997 was
approximately $2.1 million with Broadcast Cash Flow as a percentage of net
revenues ("Broadcast Cash Flow Margin") of 27.0% versus Broadcast Cash Flow of
approximately $1.3 million and Broadcast Cash Flow Margin of 28.6% for the
three months ended June 30, 1996. Broadcast Cash Flow Margin in the three
months ended June 30, 1997 was reduced by approximately 3 percentage points by
the impact of recording as revenues the reimbursement of expenses under the
Citadel JSA and including the related expenses in station operating expenses.
On a same station basis, Broadcast Cash Flow for the three months ended June
30, 1997 increased approximately 1% as compared to the three months ended June
30, 1996 principally as a result of the improved cost structure of the newly
acquired stations, offset in part by the negative revenue growth in the
Lincoln, Nebraska market.
Depreciation and amortization expense for the three months ended June
30, 1997 was approximately $807,000 versus approximately $333,000 for the 1996
quarter. The increase was principally attributable to amortization of
intangible assets resulting from acquisitions consummated subsequent to June
30, 1996.
Corporate expenses consisting primarily of officer's salary, financial
consulting and professional fees and expenses, and corporate office expenses
for the three months ended June 30, 1997 were approximately $524,000 as
compared to $491,000 for the three months ended June 30, 1996. The increase is
principally attributed to the loss of reimbursement of expenses by Pourtales
pursuant to the Shared Expense Agreement as a result of the acquisition by the
Company of the Pourtales owned stations. Included in corporate expense are fees
paid to SFX for services rendered by The Sillerman Companies ("TSC") under the
Amended and Restated SCMC Agreement of $142,000 and $92,000 for the three
months ended June 30, 1997 and the three months ended June 30, 1996,
respectively.
The Company recorded deferred compensation expense of $97,000 for the
three months ended June 30, 1997 and $113,000 in the prior period. This
recurring expense, not currently, and in some cases, never affecting cash flow,
is related to stock, stock options and stock appreciation rights granted to
officers, directors and advisors in prior periods.
Operating income (net revenues less total operating expenses) for the
three months ended June 30, 1997 was approximately $720,000 as compared to
$356,000 for the three months ended June 30, 1996. The increase in the
operating income results principally from the inclusion of three full months of
operations for stations acquired subsequent to June 30, 1996.
14
<PAGE>
Net interest expense for the three months ended June 30, 1997 was
approximately $941,000 as compared to $449,000 for the three months ended June
30, 1996. The net increase in expense was principally attributable to the
increased borrowings to complete the acquisition of radio stations subsequent
to June 30, 1996.
Net loss before extraordinary item for the three months ended June
30, 1997 was $221,000 versus a loss of $93,000 for the three months ended June
30, 1996 period. In the three months ended June 30, 1997, the Company incurred
an extraordinary loss in connection with the write off of deferred financing
costs of $958,000 associated with the early extinguishment of debt. Net loss
for the three months ended June 30, 1997 and 1996 was $1.2 million and
$93,000, respectively. Net loss applicable to common stock for the three
months ended June 30, 1997 was approximately $2.6 million as compared to
approximately $1.4 million for the three months ended June 30, 1996. The
increase in the net loss applicable to common stock was principally due to the
extraordinary loss incurred in the 1997 quarter and higher interest expense.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net revenues increased approximately $7.0 million or 106% to
approximately $13.6 million for the six months ended June 30, 1997 from
approximately $6.6 million for the six month period in 1996 as a result of
acquisitions, LMAs and JSAs entered into during calendar 1996 and the growth at
continuously owned and operated stations. Net revenues from the stations owned
and operated by the Company as of June 30, 1997 increased to $17.1 million for
the six months ended June 30, 1997 from approximately $14.6 million which
represented a 18% increase over the net revenues on a same station basis for
the same period in 1996. Despite the growth in net revenues, the Company
continued to be impacted by disruptions in sales efforts as a result of the
pending sales of radio stations to the Company, restructuring of sales
management and turnover of sales staff during the periods after the
acquisitions of stations. The Company expects the impact of these disruptions
to continue in the short term. Revenues increased during the six months ended
June 30, 1997 due to the inclusion in net revenues of the reimbursement for
operating expenses under the Citadel JSA. No reimbursement was recorded during
the six months ended June 30, 1996 since the Company operated those radio
stations under a LMA during the 1996 period.
Station operating expenses increased by approximately $5.3 million in
six months ended June 30, 1997 to approximately $10.2 million from
approximately $4.9 million for six months ended June 30, 1996 primarily due to
the inclusion of expenses related to the acquisitions and operating agreements
entered into during 1996 and 1997. On a same station basis for the radio
stations owned and operated by the Company as of June 30, 1997, operating
expenses for the six months ended June 30, 1997 were approximately $12.9
million as compared to $10.7 million for the six months ended June 30, 1996
which represented an increase of 20%. Station operating expenses during the
period prior to the Company's operation and/or ownership lack comparability in
some instances as a result of the absence of certain costs including salaries
for owner-management. The benefits of continuing implementation of the
Company's cost reduction programs and efficiencies of combined operations in
the markets served during the six months ended June 30, 1997 did not fully
offset the impact of the additional required costs not incurred in the prior
period by the former owners such as the addition of a General Manager to a
station that was managed personally by the prior owner. Further, station
operating expenses during the six months ended June 30, 1997 include amounts
expended for radio stations subject to the Citadel JSA for which no expenses
were included in the prior year quarter.
15
<PAGE>
Broadcast Cash Flow for the six months ended June 30, 1997 was
approximately $3.4 million with Broadcast Cash Flow Margin of 25.0% versus
Broadcast Cash Flow of approximately $1.6 million and Broadcast Cash Flow
Margin of 25.0% for the six months ended June 30, 1996. Broadcast Cash Flow
Margin in the six months ended June 30, 1997 was reduced by approximately 3
percentage points by the impact of recording as revenues the reimbursement of
expenses under the Citadel JSA and including the related expenses in station
operating expenses. On a same station basis, Broadcast Cash Flow for the six
months ended June 30, 1997 increased approximately 10% as compared to the six
months ended June 30, 1996 principally due to increased revenue in all markets
except the Lincoln, Nebraska market and the cost reduction program implemented
by the Company.
Depreciation and amortization expense for the six months ended June
30, 1997 was approximately $1.5 million versus approximately $509,000 for the
six months ended June 30, 1996. The increase was attributable to the
additional depreciation of fixed assets and amortization of intangible assets
resulting from acquisitions consummated during calendar 1996 and 1997.
Corporate expenses consisting primarily of officer's salary,
financial consulting and professional fees and expenses, and corporate office
expenses for the six months ended June 30, 1997 were approximately $1.0
million as compared to $804,000 for the six months ended June 30, 1996. The
increase is principally attributed to the loss of reimbursement of expenses by
Pourtales pursuant to the Shared Expense Agreement as a result of the
acquisition by the Company of the Pourtales owned stations and increased
expenses related to acquisitions subsequent to June 30, 1996. Included in
corporate expense are fees paid to SFX for services rendered by TSC under the
Amended and Restated SCMC Agreement of $283,000 and $160,000 for the six
months ended June 30, 1997 and the six months ended June 30, 1996,
respectively.
The Company recorded deferred compensation expense of $197,000 for
the six months ended June 30, 1997 and $160,000 for the six months ended June
30, 1996. This recurring expense, not currently, and in some cases, never
affecting cash flow, is related to stock, stock options and stock appreciation
rights granted to officers, directors and advisors in prior periods.
Operating income for the six months ended June 30, 1997 was
approximately $633,000 as compared to $172,000 for the six months ended June
30, 1996. The increase in operating income results principally from the
inclusion of six full months of operations for stations acquired during
calendar 1996 and the first quarter of 1997.
Net interest expense for the six months ended June 30, 1997 was
approximately $1.5 million as compared to $860,000 for the six months ended
June 30, 1996. The net increase in expense was principally attributable to the
increased borrowings to complete the Company's acquisition of radio stations
subsequent to June 30, 1996.
Net loss before extraordinary item for the six months ended June 30,
1997 was $878,000 versus a loss of $688,000 for the six months ended June 30,
1996 period. The Company incurred extraordinary losses of $958,000 and
$320,000 in the six month periods ended June 30, 1997 and 1996, respectively,
in connection with the early extinguishment of debt. Net loss for the six
months ended June 30, 1997 and 1996 was $1.8 million and $1.0 million,
respectively. Net loss applicable to common stock for the six months ended
June 30, 1997 was approximately $4.6 million as compared to approximately $2.7
million for the six months ended June 30, 1996. The increase in the net loss
applicable to common stock was principally due to the extraordinary loss
incurred in the 1997 period and the full six month provision for
16
<PAGE>
dividends in 1997 on the Depository Shares each representing a one tenth
interest in a share of 9% Mandatory Convertible Preferred Stock issued in
March 1996 (the "Preferred Stock Offering").
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's principal sources of funds have been
the proceeds from the Company's initial public offering on September 5, 1995
(the "Initial Public Offering") of approximately $12.9 million, the borrowing
of $9.0 million under the loan agreement with AT&T (the "Initial Loan
Agreement"), net proceeds of approximately $56.4 million from the sale of
preferred stock, the borrowing of $40.0 million under the credit agreement
with AT&T, and the borrowing of $78.5 million under the Amended Loan Agreement.
The cost of the acquisitions completed through June 30, 1997 of approximately
$130.9 million were financed with the proceeds from the Company's Initial
Public Offering, the Preferred Stock Offering and the borrowings mentioned
above. In addition, in April 1997, the Company entered into an agreement with
respect to the Little Rock Disposition for $20.0 million.
Cash flow from operating activities for the six months ended June 30,
1997 was approximately $1.1 million as compared to cash used in operations of
$2.9 million for the same period in 1996. The increase in cash flow from
operating activities was principally due to growth in broadcast cash flow as
compared to the 1996 period. Cash used in investing activities was
approximately $64.0 million during the six months ended June 30, 1997 and
approximately $39.1 million for the same period in 1996, and primarily related
to the acquisitions of radio stations. Cash flow from financing activities
during these periods amounted to approximately $64.0 million during the six
months ended June 30, 1997 and approximately $51.0 million for the same period
in 1996, principally related to borrowings under the Amended Loan Agreement
during the six months ended June 30, 1997 and net proceeds from the
Preferred Stock Offering in the 1996 period.
The Company completed a refinancing of its credit facility with AT&T
by entering into the Amended Loan Agreement with AT&T and Union Bank in an
aggregate amount of $80 million. Currently, the Company has borrowed $78.5
million under the Amended Loan Agreement and has $1.5 million available. The
Company's ability to borrow funds under the Amended Loan Agreement is
conditioned on meeting certain financial ratios discussed below and therefore,
the maximum amounts which might become available under the facility, and the
maximum amounts actually available to the Company at any particular time may be
less. The Amended Loan Agreement consists of four senior secured credit
facilities.
The first facility ("Tranche A") is revolver in the maximum amount of
$35.0 million (the "Initial Revolver"). The Initial Revolver will bear
interest at a rate based, at the Company's option, on LIBOR or an alternative
base rate which is substantially equivalent to the Lenders' prime rate. The
interest rate may vary from LIBOR + 0.50% (or the alternative base rate +
1.50%) to LIBOR + 2.75% (or the alternative base rate + 1.50%), based upon the
Company's consolidated leverage ratio. The amount available under the Initial
Revolver decreases on a quarterly basis, in amounts ranging from $350,000 per
quarter in mid-1998 to approximately $1.8 million per quarter in 2004. The
final maturity of Tranche A is April 1, 2004.
The second facility ("Tranche B") is a term loan in the maximum
amount of $25.0 million (the "Term Loan"). The Term Loan will bear interest at
LIBOR + 3.50% (or the alternative base rate + 2.50%). The principal of the
Term Loan must be reduced by $125,000 per year (paid on a quarterly basis)
until the final maturity on July 1, 2004.
17
<PAGE>
The third facility ("Tranche C") is a term loan in the amount of
$20.0 million (the "Little Rock Facility"). The Little Rock Facility will bear
interest at LIBOR + 3.25% for so long as the agreement with respect to the
Little Rock Disposition is in force, and at rates up to LIBOR + 5.50% if that
agreement is no longer in force. The Little Rock Facility must be paid from
the proceeds of the Little Rock Disposition, which is anticipated to be
consummated during the fourth quarter of 1997 for a sale price of $20.0
million. Clear Channel, the buyer, has agreed to guarantee the Little Rock
Facility if the FCC and HSR approvals required to consummate the Little Rock
Disposition are not obtained within six months after the filings requesting
such approvals, and has agreed to loan the Company $20.0 million, if such
approvals are not obtained within 18 months after such filings.
The fourth facility (the "Acquisition Revolver") will be made
available to the Company to fund future acquisitions, after the Tranche C
loans have been paid in full, in an aggregate amount of up to $20 million. The
amount available may reduced pursuant to total debt limitations specified in
the Amended Loan Agreement. The Acquisition Revolver will bear interest at
LIBOR + 3.50% (or the alternative base rate + 2.50%). The principal of the
Term Loan must be reduced by $125,000 per year (paid on a quarterly basis)
until the final maturity on July 1, 2004.
The Company has incurred additional indebtedness pursuant the
Pinnacle Acquisition consisting of a note, which the Company assumed from the
prior owners, of $525,000 to Havelock Bank of Lincoln, Nebraska bearing an
interest rate of 1/2 of 1% under prime which matures on December 31, 1997 and
notes to the prior owners which require a payment of $1 million on each of
May 15, 1998 and 1999. The purchase price of the Pinnacle Acquisition may be
increased by $1.7 million if the University of Nebraska renews its contract
with the Company in 2001 for a minimum of an additional three year term and
the payment of such would be required at the time the renewal is obtained.
Additionally, under the Company's broadcast rights agreement with the
University of Nebraska, annual rights fee payments ranging from approximately
$1.7 million in 1997 to approximately $1.8 million in 2000 are due on October
1 of each year, or, at the option of the Company each year, may be paid in
seven equal principal installments plus interest at the prime rate.
For the remainder of 1997, the Company expects its capital needs,
including interest expense, dividends, corporate, capital expenditures and
other commitments to be approximately $9.5 million. It is anticipated the
Company will be able to meet those obligations from cash on hand and cash
provided from operations which assumes a substantial improvement in the
operating results of the Company's radio stations. The Company anticipates
that future debt service, dividends, and other commitments will be met from
cash on hand, cash provided from operations, which assumes a substantial
improvement in the operating results of the Company's radio stations, and
additional borrowings available under the Amended Loan Agreement. The Company's
ability to make these improvements will be subject to prevailing economic
conditions and to legal, financial, business, regulatory, industry and other
factors, many of which are beyond the Company's control.
The Company will be required to incur additional indebtedness or raise
additional equity financing in connection with future acquisitions of radio
properties and is likely to need to incur or raise such additional financing
when the balloon payment is due in 2004 under the Amended Loan Agreement. There
can be no assurance that the Company will be able to incur such additional
indebtedness or raise additional equity on terms acceptable to the Company, if
at all. Without such sources of funding, it is unlikely that the Company will
be able to continue to implement its acquisition strategy.
In pursuing the Company's acquisition strategy, management is also
aware that the Company's current group of stations combined with the aggressive
thrust towards consolidation in the industry may, at a future time, present an
attractive opportunity to maximize stockholder value through a sale of the
Company's assets by the combination of the Company's business with that of a
larger broadcasting company. The Company has engaged TSC to actively explore
alternatives to maximize stockholder value and will continue to consider all
available opportunities.
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<PAGE>
PART II. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- - - ------- ----------------------
<S> <C>
**3.1 Amended and Restated Certificate of Incorporation of Triathlon Broadcasting Company
+3.2 Certificate of Amendment to The Amended and Restated Certificate of Incorporation of Triathlon Broadcasting
Company
*3.3 By-laws of the Company
*4.1 IPO Underwriters' Warrant
*4.2 Specimen Stock Certificate for Class A Common Stock
**4.3 Certificate of Designations of the Series B Convertible Preferred Stock
**4.4 Form of Certificate of Designations of the % Mandatory Convertible Preferred Stock
**4.5 Form of Deposit Agreement relating to the % Mandatory Convertible Preferred Stock
**4.6 Form of Stock Certificate for % Mandatory Convertible Preferred Stock
**4.7 Form of Depository Receipt Evidencing Depository Shares
10.65 Sales Representation Agreement dated as of April 1, 1997 by and between Triathlon Broadcasting of Spokane,
Inc. and Rook Broadcasting of Idaho, Inc.
27 Financial Data Schedule
<FN>
- - - ---------------
* Incorporated by reference to the Registrant's Registration Statement on Form SB-2 (File No. 33-94316), as
amended, originally filed with the Securities and Exchange Commission on July 6, 1995.
** Incorporated by reference to the Registrant's Registration Statement on Form SB-2 (File No. 333-1186), as
amended, originally filed with the Securities and Exchange Commission on February 9, 1996.
+ Incorporated by reference to the Registrant's Annual Report on Form 10-KSB for the transition period from
April 1, 1996 to December 31, 1996, filed with the Securities and Exchange Commission on May 13, 1997.
</FN>
</TABLE>
(b) Reports on Form 8-K
Form 8-K filed with Securities and Exchange Commission on May 8, 1997
reporting the completion of the acquisition of radio stations KSSN-FM and
KMVK-FM, both operating in the Little Rock, Arkansas market under Item 2.
Under Item 5, the Company reported the completion of the acquisition of radio
station KOLL-FM operating in the Little Rock, Arkansas market and also
reported entering in to an agreement to sell the three aforementioned radio
stations to Clear Channel, Inc.
Form 8-K filed with Securities and Exchange Commission on May 16,
1997 reporting under Item 5 the acquisition of Pinnacle Sports Productions,
LLC
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<PAGE>
Form 8-K filed with Securities and Exchange Commission on June 11,
1997 reporting the acquisition of radio stations KGOR FM and KFAB AM, each
operating in the Omaha, Nebraska market, and the exclusive Muzak franchise for
the Omaha and Lincoln, Nebraska markets under Item 2. In addition under Item
5, the Company reported entering into a credit agreement with AT&T Commercial
Finance Corporation and Union Bank of California, N.A. which was contained
under Item 7(c).
Form 8K/A filed with the Securities and Exchange Commission on July
9, 1997 and amended on July 11, 1997 including under Item 7(a) the audited
financial statements for the radio stations acquired from Southern Skies
Corporation and Arkansas Skies Corporation (collectively "Southern Skies") for
the year ended December 31, 1996 and the unaudited financial information as of
March 31, 1997 and for the three months ended March 31, 1997 and 1996 and
under Item 7(b) the unaudited pro forma financial information of the Company
which included radio stations acquired from Southern Skies for the year ended
December 31, 1996 and for the three months ended March 31, 1997.
Form 8K/A filed with the Securities and Exchange Commission on August
13, 1997 including under Item 7(a) the audited financial statements for the
radio stations and Muzak franchise acquired from American Radio Systems
Corporation for the period from July 3, 1996 to December 31, 1996, and for the
six months ended June 30, 1996 and the unaudited financial information as of
March 31, 1997 and for the three months ended March 31, 1997 and 1996 and
under Item 7(b) the unaudited pro forma financial information of the Company
which included radio stations acquired from American Radio Systems Corporation
for the year ended December 31, 1996 and for the three months ended March 31,
1997.
20
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TRIATHLON BROADCASTING COMPANY
Dated: August 14, 1997 By: /s/ Norman Feuer
---------------------
Chief Executive Officer
By: /s/ William G. Thompson
---------------------------
Chief Accounting Officer
21
<PAGE>
JOINT SELLING AGREEMENT
-----------------------
This JOINT SELLING AGREEMENT (this "Agreement") is made and entered
into as of this 1st day of April, 1997, by and between ROOK BROADCASTING OF
IDAHO, INC., an Idaho corporation with its principal place of business in
Spokane, Washington ("Licensee"), and TRIATHLON BROADCASTING OF SPOKANE, INC.,
a Delaware corporation with its principal place of business in Spokane,
Washington ("Broker").
WHEREAS, Licensee is the owner and operator of radio broadcast
station KCDA(FM), Coeur d'Alene, Idaho (the "Station"); and
WHEREAS, Licensee wishes to sell to Broker certain commercial
advertising time of the Station; and
WHEREAS, Broker desires to purchase such commercial advertising time
of the Station subject to the terms and conditions hereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto have agreed
and do agree as follows:
1. Advertising Time. Commencing at 12:01 AM on April 1, 1997 (the
"Effective Date"), Broker will have the exclusive right to sell all available
commercial time on the Station other than commercial advertising time
allocated to network broadcasters, as long as the total of such commercial
time does not exceed fifteen percent (15%) of the Station's total broadcast
time in any seven (7) day period. Broker shall have the right to resell such
commercial time to advertisers or their agents at such rates and in such
manner as it may choose, subject to all applicable rules and regulations of
the Federal Communications Commission ("FCC") and to Licensee's review as
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<PAGE>
provided for in Section 3 hereof. All advertising provided by Broker to
Licensee for broadcast on the Station shall be placed at mutually agreeable
breaks in the programming of the Station. Broker shall be entitled to market
the commercial advertising time on the Station jointly with the sale of
commercial air time on stations owned or operated by Broker, provided that any
purchaser will continue to have the right to buy time on the Station
individually.
2. Term. The term of this Agreement (the "Term") shall commence on
the Effective Date and shall terminate at 11:59 p.m. on December 31, 2001. The
parties shall have the right to extend the Term of this Agreement for an
additional five (5) year term (the "Extended Term") on terms to be negotiated
between and mutually agreed to by the parties, in which event all references
in this Agreement to the "Term" shall include the "Extended Term" as the
context shall require.
3. Content of Advertising. All advertising provided by Broker to the
Station shall be in good taste, compatible with the Station's format and in
accordance with good broadcast standards. All advertising spots and advertiser
promotional announcements supplied by Broker shall comply with all applicable
federal, state, FCC and local regulations and policies and with the
advertising standards of Licensee. Licensee shall have the absolute right to
review and refuse to broadcast due to objectionable content any particular
advertising furnished by Broker, and nothing in this Agreement shall be
construed as impinging on Licensee's discretion to do so as the licensee of
the Station.
4. Control of Station and Licensee Obligations.
4.1 Licensee Control and Authority Absolute. Notwithstanding
anything to the contrary in this Agreement, Licensee shall have full and
exclusive authority and power over the operation of the Station during the
Term of this Agreement. The general manager of the Station shall report solely
to and be accountable solely to Licensee and shall direct the day-to-day
operation of the Station in accordance with Licensee's direction. Licensee
shall retain control in its absolute discretion over the policies,
programming, personnel, operations and finances of the Station,
2
<PAGE>
including, without limitation, the right to make all programming decisions,
the right to reject any advertisements and the right to take any other actions
necessary for compliance with the laws of the United States, the State of
Washington and the rules, regulations and policies of the FCC. Nothing in this
Agreement shall be construed as giving to Broker any authority to dilute,
diminish, assume any control from, or substitute for, the exclusive authority
of Licensee in regard to the aforesaid matters.
4.2 Licensee Obligations. Licensee has exclusive and sole
responsibility for complying with its obligations as licensee of the Station
under the terms of its license, FCC rules and regulations and the
Communications Act of 1934, as amended (the "Communications Act"). While
Broker is obliged hereunder to assure that its own operations in connection
with this Agreement are not inconsistent with the aforesaid requirements,
Licensee has the primary responsibility for such compliance. Such essential
responsibilities of Licensee as licensee include, but are not limited to, the
following, which shall be Licensee's exclusive responsibilities and which
Licensee shall carry out:
(a) Control over all programming, advertising and
promotion;
(b) Control over all Station finances;
(c) Control over all Station personnel;
(d) Preparation and placement into the Station's public
inspection file of all issues/programs lists;
(e) Broadcast of programming responsive to community
issues;
(f) Maintenance of local public inspections file;
(g) Compliance with all pertinent technical operating
requirements;
(h) Broadcast of all Station identifications;
(i) Compliance with all political broadcasting, personal
attack and issue-oriented programming and
advertising requirements;
(j) Compliance with all rules relating to contests,
promotions, lotteries, payola, plugola and telephone
recordings/broadcasts;
(k) Compliance with all rules relating to sponsorship
identification;
3
<PAGE>
(l) Compliance with all rules, policies and laws
relating to indecent and obscene programming and
false/misleading advertising and programming;
(m) Supervision and direction of all Station personnel
including particularly the general manager, program
director and chief engineer;
(n) Maintenance of a main studio within the principal
city contours of the Station;
(o) Preparation and filing of all required and pertinent
reports and applications at the FCC;
(p) Payment of all of the Station's operating
expenses and existing debt service and for
all existing capital improvements;
(q) Payment of any fines or forfeitures arising from the
operation of the Station payable to any governmental
authorities or third parties, provided such fines
are not the result of acts or omissions of Broker;
and
(r) Maintenance of the Station's equipment in a
condition consistent with good engineering standards
and in compliance with applicable rules, regulations
and policies of the FCC.
5. Licensee Responsibility for Employees and Expenses. Licensee shall
be responsible for the salaries, taxes, insurance and related costs for all
personnel utilized in the management and operation of the Station, including,
but not limited to, its general manager, program director, accounting and
clerical personnel, engineer and on-air announcing staff. Licensee shall also
be responsible for all expenses related to its operations, studios and
broadcast transmission, including, but not limited to, administrative
expenses, music license fees, copyright fees, its consultant and attorney
fees, tower and studio rent, maintenance, utilities, telephone, liability and
property damage insurance on its facilities, insurance for errors and
omissions and broadcast content, automobile expense, property taxes and income
taxes, including income taxes relating to its earnings from the arrangement
contemplated by this Agreement.
4
<PAGE>
6. Broker Responsibility for Employees and Expenses. Broker shall
employ and be responsible for the salaries, commissions, taxes, insurance and
all other related costs of all of its own personnel involved in the
production, broadcast and sale of its commercial advertising time on and with
respect to the Station including, but not limited to, salespersons, sales
managers, and billing, traffic, and accounts receivable collection personnel.
Broker shall be responsible for delivering the commercial advertising material
in the form to be aired to Licensee's Station. Broker shall be fully
responsible for the supervision and direction of its own employees. Broker
shall be solely responsible for payment of any and all copyright license fees
attributable to its commercial advertising broadcasts on the Station pursuant
to this Agreement, and shall reimburse Licensee for the costs of any license
fees attributable to the broadcast of Broker's commercial advertising on the
Station that shall have been paid by Licensee.
7. Advertising Revenues, Advertising Contracts, Accounts Receivable
and Licensee Payments.
7.1 Advertising Revenues. All revenues from the sale of
advertising time delivered by Broker to the Station pursuant to this Agreement
or sold by Licensee prior to the Effective Date of this Agreement but
scheduled to air during the term of this Agreement shall be the sole and
exclusive property of Broker.
7.2 Performance of Broker's Advertising Contracts. In the
event this Agreement is terminated by Broker or expires in accordance with its
terms, Licensee agrees to assume and perform all advertising contracts entered
into by Broker in the usual and normal course of business and consistent with
past practices prior to the termination date, which are to be performed after
the termination date. All benefits and collections for such advertising time
run after the termination date shall be for the benefit of Licensee.
7.3 Collection of Broker's Accounts Receivable. In the event
this Agreement is terminated by Broker or expires in accordance with its
terms, as of the termination date, Broker shall
5
<PAGE>
continue to collect its own accounts receivable arising out of the conduct of
the Broker's sale of commercial advertising time on the Station prior to the
termination date.
7.4 Payments To Licensee. In consideration for the sale to
Broker of the commercial advertising on the Station, Broker shall pay to
Licensee during the Term the Guaranteed Fixed Monthly Payments and the Net
Profits Payments in the amounts and on the dates set forth in Schedule A.
8. Warranties and Representations of Licensee. Licensee
warrants and represents to Broker that each of the following is now true and
correct, and all will continue to be true at all times during the Term hereof:
8.1 Licenses and Permits. Licensee has all licenses and
permits (including, without limitation, all FCC authorizations) necessary to
operate the Station and to broadcast as required by this Agreement.
8.2 Material Compliance. Licensee is in material
compliance with all requirements set forth in each of the FCC licenses
pertaining to the Station and in material compliance with all legal
requirements associated with the operation of the Station.
8.3 No Default. The execution, delivery and performance
of this Agreement shall not constitute a breach or default under any agreement
to which Licensee is a party.
8.4 Facilities. The broadcast facilities of the Station are
in good working order, normal wear and tear excepted, and such facilities
shall be maintained in good working order and condition throughout the Term of
this Agreement.
9. Warranties and Representations of Broker. Broker represents and
warrants to Licensee that the execution, delivery and performance by Broker of
this Agreement has been duly
6
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authorized by all necessary corporate action of Broker, that Broker has the
financial capability and personnel to perform its obligations under this
Agreement and that the execution, delivery and performance by Broker of this
Agreement shall not constitute a breach or default under Broker's charter or
bylaws or any agreement to which it is a party.
10. Additional Covenants and Agreements of Broker. In addition
to its other obligations under this Agreement, Broker covenants and agrees
that throughout the Term hereof:
10.1 Advertising Log. Broker shall prepare and furnish to
Licensee prior to each day's broadcasts an advertising log which shall list
every commercial advertising announcement which Broker has furnished to
Licensee in any of the particular forms described in Section 10.2 hereof and
which Licensee is to broadcast in accordance with the schedule set forth in
such log.
10.2 Advertising Materials. Broker shall furnish to Licensee
prior to each day's broadcasts all necessary materials to permit Licensee to
broadcast the commercial advertising messages listed in the advertising log
described in Section 10.1. These materials may variously consist of
typewritten advertising continuity to be read live by the on-air announcer,
transcriptions such as, but not limited to, tape cassettes, recordable CD
discs, or feeds from telephone lines, radios, satellites or a combination
thereof. Such materials shall be broadcast ready and in form and format
acceptable to Licensee, and Licensee shall have no obligation to provide
additional production with respect thereto other than in accordance with its
customary past practices.
10.3 Political and Issue-Oriented Broadcasts. During the
Term of this Agreement, Broker shall not sell paid political programming or
announcements without the prior written approval of Licensee, and if so
granted Broker shall be responsible for preparing, and shall maintain and
deliver to the Station, such records and information required by the FCC to be
placed in the public inspection files of the Station pertaining to the
broadcast of paid political programming and advertisement furnished by Broker
in accordance with the provisions of Sections 73.1940 and 73.3526 of the FCC's
rules, and pertaining to the broadcast of paid issue-oriented programming and
7
<PAGE>
advertisements addressing political issues or controversial subjects of public
importance, in accordance with the provisions of Section 73.1212 of the FCC's
rules. Broker shall also consult with Licensee and adhere strictly to the
political advertising policies of Licensee and to the rules, regulations and
policies of the FCC, as announced from time to time, with respect to the
furnishing to Licensee for broadcast of paid political advertisements and
programming (including, without limitation, the rights of candidates and, as
appropriate, others to "equal opportunities" and the carriage of contrasting
points of view with respect to such "issue-oriented" advertising as may be
broadcast) and the charges permitted therefor. Broker will provide to Licensee
such documentation relating to such programming as Licensee shall reasonably
request.
10.4 Sponsorship. Broker, in compliance with Section 508 of
the Communications Act, will, in advance of any sale of advertising time,
disclose to Licensee any information of which Broker has knowledge, or which
has been disclosed to it, as to any money, service or other valuable
consideration which any person has paid or accepted, or has agreed to pay or
to accept, for the inclusion of any matter as a part of the commercial matter
to be supplied to Licensee pursuant to this Agreement. Broker will cooperate
with Licensee as necessary to ensure compliance with the Communications Act's
sponsorship identification requirements and with all rules, laws and
regulations pertaining to false and misleading advertising and programming.
Broker further agrees that it will at all times proceed in good faith to
assure compliance with the Federal Trade Commission rulings on installment
sales and other advertising practices.
10.5 Contests. Any commercial advertising time sold by
Broker under this Agreement for broadcast by Licensee which contains material
that deals with contests, similar commercial promotions and related schemes,
shall comply with all appropriate FCC rules and policies.
11. Additional Covenants and Agreements of Licensee.
In addition to its other obligations under this Agreement, Licensee covenants
and agrees that throughout the Term hereof:
8
<PAGE>
11.1 Rights to Advertising Materials. Licensee shall have no
right, title or interest in and to all advertising copy, continuity,
transcriptions, tapes, jingles, music, trademarks and trade names and all
manner of other intellectual property rights generated, arising out of or
connected with the advertising furnished by Broker to Licensee for broadcast
(whether or not any of such materials were produced at the Station or by the
Station's personnel) except for a license from Broker to broadcast same over
the Station pursuant to this Agreement.
11.2 Public Affairs. Licensee shall provide to Broker as
soon as practical prior to any broadcast of same a schedule of Licensee's
public affairs programming so that Broker may take account of same in
scheduling advertising announcements.
11.3 Affidavits of Deletion. Licensee shall provide to
Broker on a weekly basis during the Term hereof electronic or written
notification of which commercial advertising furnished by Broker was not
broadcast as scheduled during the preceding week.
12. Force Majeure. Any failure or impairment of facilities
or any delay or interruption in broadcasting due to acts of God, strikes or
force majeure, shall not constitute a breach of this Agreement. If desired,
broadcast interruption insurance shall be carried by Broker at Broker's
expense.
13. Compliance With Law. Broker and Licensee each agrees
that throughout the Term of this Agreement in their respective performance
hereunder, they will comply with all laws and regulations applicable in the
conduct of the Station's business.
14. Broker Events of Default. The following shall, after the
expiration of the applicable cure periods, constitute Events of Default by
Broker under this Agreement:
14.1 Non-Payment. If the Broker shall fail to timely
pay the amounts provided for in Section 7.4 hereof and which are set forth on
Schedule A.
9
<PAGE>
14.2 Default in Covenants. If the Broker shall
default in the material observance or performance of any material covenant,
condition or agreement contained herein.
14.3 Breach of Representation. If any material
representation or warranty made herein by Broker, or in any certificate or
document furnished to Licensee pursuant to the provisions hereof, shall prove
to be false or misleading in any material respect as of the time made or
furnished.
15. Licensee Events of Default. The following shall, after
the expiration of the applicable cure periods, constitute Events of Default by
Licensee under this Agreement:
15.1 Default in Covenants. If the Licensee shall
default in the material observance or performance of any material covenant,
condition or agreement contained herein.
15.2 Breach of Representation. If any material
representation or warranty made herein by Licensee, or in any certificate or
document furnished to Broker pursuant to the provisions hereof, shall prove to
be false or misleading in any material respect as of the time made or
furnished.
15.3 Failure to Broadcast. If Licensee shall fail to
broadcast ten percent (10%) of the advertising programs submitted by Broker
pursuant to this Agreement in any month during the term of this Agreement.
Notwithstanding the provisions of Section 16 hereof, there shall be no "cure"
period for an event of default pursuant to this Section 15.3.
16. Cure Periods. Except as provided in Section 15.3, an Event of
Default shall not be deemed to have occurred until ten (10) business days
after the non-defaulting party has provided the defaulting party with written
notice specifying the event or events that if not cured would constitute an
Event of Default and specifying the actions necessary to cure the default
within said period, and such cure has not occurred within said time period.
This period may be extended for a reasonable period of time, if the defaulting
party is acting in good faith to cure the default and such delay is not
materially adverse to the other party.
10
<PAGE>
17. Termination.
17.1 Upon Default. In the event of the occurrence of an
Event of Default, the non-defaulting party may terminate this Agreement
provided that such party is not then also in default. In the event that a
dispute arises under this provision and litigation ensues, the prevailing
party in said litigation shall be entitled to recover reasonable attorneys'
fees and its related costs, and the parties agree that New York law shall
govern in any such dispute with the matter to be decided by the courts in the
State of New York. The parties agree that this Agreement has been executed in
the State of New York and both agree to be subject to the jurisdiction of the
state and federal courts in New York.
17.2 Upon Revocation, Non-Renewal or Other Governmental
Action. This Agreement shall terminate without further liability on the part
of either party hereto in the event that Licensee's license to operate the
Station is not renewed or is revoked by a final order of the FCC, or in the
event the parties are required to terminate this Agreement by judicial order
or any binding and enforceable order of any other administrative or
governmental entity. For the purposes of this Agreement, "final order" shall
mean an order of the FCC which has not been reversed or stayed, as to which no
administrative or judicial appeal, reconsideration, or review is pending or
has been requested, and with respect to which the time for the institution of
any further judicial or administrative appellate proceedings has expired.
18. No Joint Venture. This Agreement shall not create, nor
shall it be construed to create, any partnership or joint venture between the
parties hereto.
19. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties and supersedes all prior
understandings, agreements or representations by or between the parties,
whether written or oral, which relate in any way to the subject matter hereof.
11
<PAGE>
20. Modification and Waiver. No modification or waiver of any
provision of this Agreement shall in any event be effective unless the same
shall be in writing signed by the party sought to be charged with such
modification or waiver, and then such waiver or modification and consent shall
be effective only in the specific instance and for the purpose for which
given.
21. No Waiver; Remedies Cumulative. No failure or delay on the part
of either party in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right
or power, preclude either party of the exercise of any other right or power.
The rights and remedies of Licensee and Broker herein provided are cumulative
and are not exclusive of any right or remedies which it may otherwise have.
22. Construction. This Agreement shall be construed in accordance
with the laws of the State of New York, and the obligations of the parties
hereto are subject to all federal, state and municipal laws or regulations now
or hereafter in effect and to the regulations of the FCC and all other
governmental bodies or authorities presently or hereafter constituted.
23. Severability. It is the desire and intent of the parties that the
provisions of this Agreement shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision or
portion of this Agreement shall be adjudicated to be invalid or unenforceable,
this Agreement shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of this section in the particular jurisdiction in
which such adjudication is made.
24. Headings. The headings contained in this Agreement are
included for convenience only and no such heading shall in any way alter the
meaning of any provision.
12
<PAGE>
25. Benefit and Assignment. This Agreement shall be binding on and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns, including any subsequent purchaser or
assignee of the Station or the Station's FCC licenses. Broker may not assign
any or all of its interests under this Agreement to a third party without the
prior written approval of Licensee, which approval shall not be unreasonably
withheld; provided, however, that Broker may assign its interests under this
Agreement to (a) any purchaser of all of Broker's radio stations, other than
Citadel Broadcasting Company, or (b) an affiliate or a wholly-owned subsidiary
of Broker, in either event without Licensee's consent.
26. Notices. Any notice required hereunder shall be in writing and
any payment, notice or other communication shall be deemed to have been duly
delivered and received on the date of personal delivery or on the date of
receipt, if mailed by registered or certified mail, postage prepaid and return
receipt requested, or on the date of a stamped receipt, if sent by an
overnight delivery service, and shall be addressed to the following addresses,
or to such other address as any party may request:
If to Licensee: Rook Broadcasting of Idaho, Inc.
450 University City Shopping Center
Spokane, Washington 99206
Attention: John Rook, President
Copy to: Vincent Pepper, Esq.
Pepper & Corazzini, P.A.
1776 K Street, N.W.
Suite 200
Washington, D.C. 20006
If to Broker: Triathlon Broadcasting of Spokane, Inc.
750 B Street
Suite 1920
San Diego, California 92101
Attention: Norman Feuer, President and CEO
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<PAGE>
Copy to: Howard Berkower, Esq.
Baker & McKenzie
805 Third Avenue
New York, New York 10022
27. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ROOK BROADCASTING OF IDAHO, INC.
By: /s/John Rook
-------------------------------
Name: John Rook
Title: President
TRIATHLON BROADCASTING OF SPOKANE, INC.
By: /s/ Norman Feuer
--------------------------------
Name: Norman Feuer
Title: President and CEO
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<PAGE>
SCHEDULE A
1. During each month of the Term of this Agreement, Broker agrees to
pay to Licensee the following amounts (the "Guaranteed Fixed Monthly
Payments") by no later than the tenth (10th) day of each month:
April 1997 through December 1997 $25,000 per month
January 1998 through December 1998 $31,000 per month
January 1999 through December 1999 $37,000 per month
January 2000 through December 2000 $42,000 per month
January 2001 through December 2001 $47,000 per month
Broker shall first deduct from the Guaranteed Fixed Monthly Payments due to
Licensee an amount sufficient to cover the monthly debt obligations owed by
Licensee to Deschutes and First Interstate (together, the "Licensee Debt
Obligations") for such month; and Broker shall, on Licensee's behalf each
month, pay to the holders of the Licensee Debt Obligations the amount so
deducted and shall remit to Licensee the balance of the Guaranteed Fixed
Monthly Payments.
2. During the Term of this Agreement, Broker shall pay to Licensee as
additional consideration for the right to sell the commercial advertising on
the Station an additional fee (the "Net Profits Payment") equal to (i) sixty
percent (60%) of the amount by which the Net Collected Revenues (as
hereinafter defined) for the Station in calendar year 1997 exceed $450,000
net; and (ii) in each of the remaining years of the Term, if the Station's
gross billings equal or exceed the Minimum Gross Billing Amount set forth
below, fifty percent (50%) of the amount by which the Net Collected Revenues
for the Station derived from the Minimum Gross Billing Amount exceed the Net
Collected Revenues derived from the Base Gross Billing Amount set forth below:
<TABLE>
<CAPTION>
Year Minimum Gross Billing Amount Base Gross Billing Amount
---- ---------------------------- -------------------------
<S> <C> <C>
1998 $715,000.00 $660,000.00
1999 $786,500.00 $720,000.00
2000 $865,150.00 $798,600.00
2001 $951,665.00 $878,460.00
</TABLE>
For the purposes of this Agreement, "Net Collected Revenues" shall mean all
revenues which are collected in any calendar year for the sale of commercial
advertising on the Station, whether local, regional or national, less all
sales and agency commissions. The Net Profits Payment shall be payable in
arrears within thirty (30) days following the end of each calendar year during
the Term of this Agreement.
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<PAGE>
3. Licensee and Broker agree that each will pay fifty percent (50%)
of all advertising and promotion expenses incurred at the Station in
accordance with a promotional budget to be mutually agreed upon between the
parties.
4. Licensee shall have the right to utilize the services of Broker's
engineer at the Station at no cost to Licensee, and such engineer shall be
entitled to make required repairs to the Station's facilities at Licensee's
expense, subject to Licensee's prior approval for non-emergency repairs.
5. Broker shall pay that portion of the Station's ASCAP and BMI
Licensing Fees which are billed to the Station based upon the amount of the
Station's net billings each year in excess of the net billings derived from
the Gross Billings set forth below:
Year Net Billings in Excess Of Gross Billings Of
---- -------------------------------------------
1997 $600,000.00
1998 $660,000.00
1999 $720,000.00
2000 $798,600.00
2001 $878,460.00
6. All advertising rates for combination sales for the Station and
radio station KNFR(FM) shall be allocated proportionally between the stations
based on the Arbitron ratings for the stations in the Adults 25-54, 6 a.m. to
midnight, Monday to Sunday, demographic in the four (4) most recent Arbitron
books. The allocation between the stations shall be re-evaluated and
re-calculated every six (6) months during the Term.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,195,000
<SECURITIES> 0
<RECEIVABLES> 7,210,000
<ALLOWANCES> 614,000
<INVENTORY> 0
<CURRENT-ASSETS> 11,030,000
<PP&E> 11,475,000
<DEPRECIATION> 1,017,000
<TOTAL-ASSETS> 155,633,000
<CURRENT-LIABILITIES> 7,331,000
<BONDS> 0
6,000
6,000
<COMMON> 49,000
<OTHER-SE> 60,396,000
<TOTAL-LIABILITY-AND-EQUITY> 155,633,000
<SALES> 15,139,000
<TOTAL-REVENUES> 13,614,000
<CGS> 0
<TOTAL-COSTS> 11,736,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,495,000
<INCOME-PRETAX> (878,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (878,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (958,000)
<CHANGES> 0
<NET-INCOME> (4,590,000)
<EPS-PRIMARY> (0.94)
<EPS-DILUTED> (0.94)
</TABLE>
