<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 25, 1997
TRIATHLON BROADCASTING COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 0-26530 33-0668235
--------------------------- -------------------- -------------------
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
Symphony Towers, 750 B Street, Suite 1920, San Diego, CA 92101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 239-4242
---------------------------
N/A
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The audited financial statements for the radio stations acquired
from Southern Skies and Arkansas Skies for the years ended
December 31, 1995 and 1994 are set forth in the Prospectus dated March 4, 1996,
contained in the Registration Statement filed by the Company with the
Securities and Exchange Commission (File No. 333-1186), which is incorporated
herein by reference. The unaudited financial information for the radio stations
acquired from Southern Skies and Arkansas Skies as of March 31, 1997 and
for the three month Periods ended March 31, 1997 and 1996 are set forth in
the Company's Amendment 1 dated July 9, 1997 to current Report on Form 8K,
dated April 25, 1997.
The audited financial statements for the radio stations serving the
Little Rock, Arkansas market acquired from Southern Skies Corporation and
Arkansas Skies Corporation ("Southern Skies Little Rock Acquisition") as of
and for the years ended December 31, 1996 and 1995, and the unaudited
information as of and for the three months ended March 31, 1997 follows:
<PAGE>
KPMG Peat Marwick LLP Letterhead
INDEPENDENT AUDITORS' REPORT
The Boards of Directors
Southern Skies Corporation
Arkansas Skies Corporation:
We have audited the accompanying combined balance sheet of the Little Rock,
Arkansas Radio Station Operations (KSSN and KMVK) of Southern Skies
Corporation and Arkansas Skies Corporation Sold to Triathlon Broadcasting
Corporation as of December 31, 1996, and the related combined statements of
operations and radio station equity and cash flows for the year then ended.
These combined financial statements are the responsibility of Southern Skies
Corporation's and Arkansas Skies Corporation's management. Our responsibility
is to express an opinion on these combined financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
As described in note 1(a) to the combined financial statements, the Radio
Stations had no separate legal status or existence and the accompanying
combined financial statements exclude material assets, liabilities, and
expenses, that would not be comparable to those future combined financial
statements resulting from the radio station operations acquired.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Little Rock,
Arkansas Radio Station Operations (KSSN and KMVK) of Southern Skies
Corporation and Arkansas Skies Corporation Sold to Triathlon Broadcasting
Corporation as of December 31, 1996, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Little Rock, Arkansas
April 7, 1997, except as
to note 6, which is as
of April 25, 1997
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Combined Balance Sheet
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash $ 118,911
Trade accounts, receivable, net of allowance for doubtful
accounts of $58,373 816,507
Prepaid expenses and other current assets 1,806
----------
Total current assets 937,224
----------
Property and equipment (note 2) 1,309,213
Less accumulated depreciation 1,082,928
----------
Net property and equipment 226,285
----------
Goodwill, net of accumulated amortization 1,318,937
Other intangible assets, net of accumulated amortization (note 3) 1,436,947
Other assets 13,395
----------
$3,932,788
==========
Liabilities and Radio Station Equity
Current liabilities:
Accounts payable 431,011
Other accrued expenses and liabilities 262,923
----------
Total current liabilities 693,934
----------
Radio station equity 3,238,854
Commitments and contingencies (notes 5 and 6)
----------
$3,932,788
==========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Combined Statement of Operations
and Radio Station Equity
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Gross revenues $ 4,651,852
Less commissions 512,707
-----------
Net revenues 4,139,145
-----------
Expenses:
Operating expenses 815,400
Selling expenses 1,633,888
General and administrative expenses 695,870
Depreciation and amortization (notes 2 and 3) 669,084
-----------
3,814,242
-----------
Excess of revenues over operating expenses 324,903
Interest expense 739,581
-----------
Net loss (414,678)
Radio station equity - beginning of year 4,109,169
Distibutions (note 4) (456,637)
-----------
Radio station equity - end of year $ 3,238,854
===========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Combined Statement of Cash Flows
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $(414,678)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 67,708
Amortization of intangibles 601,376
Changes in operating assets and liabilities:
Accounts receivable 27,301
Prepaid expenses and other assets (3,254)
Accounts payable 77,766
Other accrued expenses and liabilities 150,100
---------
Net cash provided by operating activities 506,319
Cash flows from investing activities - purchase of property
and equipment (23,205)
Cash flows from financing acitivities - distributions (455,637)
---------
Net increase in cash 27,477
Cash at beginning of year 91,434
---------
Cash at end of year $ 118,911
=========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Notes to Combined Financial Statements
Year ended December 31, 1996
(1) Summary of Significant Accounting Policies
(a) Organization and Operations
Southern Skies Corporation ("Southern Skies") and Arkansas Skies
Corporation ("Arkansas Skies") (collectively, "Companies") own and
operate radio broadcasting stations. Southern Skies owns and operates
an FM station (KSSN) in Little Rock, Arkansas and an AM/FM station
(KZSN) located in Wichita, Kansas. Arkansas Skies owns an FM station
(KMVK) located in Benton, Arkansas. Southern Skies operates KMVK under
a local marketing agreement dated September 3, 1993, with Arkansas
Skies. Under this agreement, Southern Skies has agreed to provide all
programming, accounting, financial and administrative functions to
KMVK. Southern Skies is responsible for all expenses associated with
the local marketing agreement and receives all revenue from the sale
of advertising time. In return, fees are paid to Arkansas Skies as
set forth in the agreement.
Southern Skies is owned by one individual ("stockholder"). Arkansas
Skies is owned 51% by the stockholder and 49% by the stockholder's
spouse. Because of the common control and management aspects of the
Companies, the accompanying financial statements are presented on a
combined basis.
The accompanying combined financial statements include the accounts of
the Little Rock, Arkansas Radio Station Operations (KSSN and KMVK) of
Southern Skies and Arkansas Skies ("the Radio Stations") sold to
Triathlon Broadcasting Corporation ("Triathlon") pursuant to a
sales agreement between Triathlon, Southern Skies and Arkansas Skies
(note 6). The Radio Stations have no separate legal status or
existence. These combined financial statements are presented as if
the Radio Stations had existed as an entity separate from the
Companies and include the historical assets, liabilities, revenues
and expenses that are directly related to the Radio Stations'
operations. These combined financial statements also include an
allocation of the Companies' interest expense related to the
debt incurred by the Companies in connection with the acquisition
and operation of the Radio Stations.
Certain intangible assets, long-term debt, notes payable to
stockholders and accrued interest are not included in the
accompanying combined balance sheet as these assets are not being
purchased nor are the liabilities being assumed by Triathlon under
the terms of the purchase agreement. Additionally, all expenses
that are "non-operational" in nature, including but not limited to,
amortization of certain intangible assets and certain corporate
expenses, have been excluded from the accompanying combined
financial statements.
(Continued)
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Notes to Combined Financial Statements
The financial information presented herein reflects the financial
position, results of operations and cash flows of the Radio Stations
and is not necessarily indicative of the financial position or results
of operations had the Radio Stations actually operated as a separate
stand-alone entity during the reporting period. The results of
operations do not necessarily reflect any trends or future prospects
for the Radio Stations as an independent entity.
Radio station equity represents the cumulative earnings, which have not
been distributed to Southern Skies or Arkansas Skies, of the radio
stations adjusted for all non-operational activities.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(c) Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed
by the straight-line method based on the estimated useful lives of
the respective assets. Leasehold improvements are amortized over
the lesser of the estimated useful lives of the assets or the
lease term (note 2).
(d) Goodwill and Other Intangible Assets
The cost of acquired radio stations is allocated first to identifiable
assets and liabilities based on estimated fair market values. The
excess of cost over identifiable assets and liabilities is recorded
as goodwill and amortized on a straight-line basis over a period of
40 years. Accumulated amortization of goodwill approximated $351,500
at December 31, 1996. Costs allocated to identifiable intangible
assets are amortized over the remaining estimated useful lives of
the assets as determined by underlying contract terms, independent
appraisals or asset lives for existing assets (note 3).
(Continued)
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Notes to Combined Financial Statements
The Radio Stations continually assesses the recoverability of goodwill
by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired radio stations. The amount of
goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate
reflecting Southern Skies' average cost of funds. The assessment of
the recoverability of goodwill will be impacted if estimated operating
cash flows are not achieved. At this time, the Radio Stations believe
that no significant impairment of goodwill has occurred and that no
reduction of the estimated useful lives is warranted.
(e) Income Taxes
The Companies operate as Subchapter S corporations for income tax
purposes. Income tax benefits have not been provided in the
accompanying financial statements as the results of operations
are reported to the Companies' stockholders for inclusion in their
individual tax returns.
(f) Revenues and Accounts Receivable
Revenues are primarily derived from local, regional and national
advertising and network compensation. Advertising revenues are
recognized upon the airing of commercials, while network revenues
are recognized monthly as earned. Revenues are presented net of
advertising agency and national sales representatives' commissions.
Financial instruments which potentially subject the Radio Stations to
concentrations of credit risk consist primarily of trade receivables.
All of the Radio Stations' receivables are from a large number of
customers located primarily in Central Arkansas. Accordingly, the
Radio Stations' credit risk is affected by general economic conditions
in this area.
(g) Barter Transactions
The Radio Stations exchange unsold advertising time for products and
services. These transactions are reported at the estimated fair
market value of the product or service received. Barter revenues
are recorded when the commercials are broadcast and barter expenses
are recorded when merchandise or services are used. If merchandise
or services are received prior to the broadcast of a commercial, a
liability is recorded. Likewise, a receivable is recorded if a
commercial is broadcast before the goods or services are received.
(Continued)
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Notes to Combined Financial Statements
The statement of operations and radio station equity includes barter
revenues of $799,000 and barter expenses of $770,000 for the year
ended December 31, 1996.
(h) Advertising Costs
All advertising costs are expensed as incurred.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Radio Stations adopted the provisions of SFAS No. 121, "ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF," on January 1, 1996. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair
value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount of fair value less costs to sell.
Adoption of this Statement did not have a material impact on the
Radio Stations' combined financial position, results of operations,
or liquidity.
(j) Fair Value of Financial Instruments
FASB Statement No. 107, "DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS," defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in a
current transaction between willing parties. The carrying value of
cash, trade accounts receivable and accounts payable approximates
fair value because of the short maturity of those instruments.
(k) Interest Expense
Interest expense allocated to the Radio Stations has been determined
by applying the ratio of the Radio Stations' average assets to total
average assets of the Companies to total interest expense incurred
by the Companies during 1996, as management considers this allocation
method to be reasonable for the operation of the Radio Stations.
(Continued)
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Notes to Combined Financial Statements
(2) Property and Equipment
A summary of property and equipment at December 31, 1996 follows:
Life in years
-------------
Building and leasehold improvements 20 - 31.5 $ 165,478
Equipment and furnishings 2 - 7 1,143,735
---------
$1,309,213
=========
(3) Other Intangible Assets
A summary of other intangible assets at December 31, 1996 and their
amortization period follows:
Amortization
period in years
---------------
Favorable lease 14 - 28 $1,000,000
FCC license 10 3,196,300
---------
4,196,300
Less accumulated amortization 2,759,353
---------
$1,436,947
=========
(4) Related Party Transactions
Periodically, the Radio Stations receive available funds from or
pay expenses on behalf of their sister radio station, KZSN, or on
behalf of Southern Skies or Arkansas Skies. Such amounts are reflected
as distributions in the accompanying statement of operations and radio
station equity.
(5) Commitments
At December 31, 1996, all of the assets of the Radio Stations were
pledged as collateral on certain debt incurred by Southern Skies and
Arkansas Skies. For the year ended December 31, 1996, Southern Skies
was not in compliance with certain financial covenants of the debt
agreements and is in default under the debt agreements. Although
the lender has a right to call the debt at any time as a result of
the default, it has not indicated any intention to do so. Management
of the Companies expect to get waivers from the lender as a result of
the purchase agreement discussed in note 6.
(Continued)
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
CORPORATION
Notes to Combined Financial Statements
(6) Subsequent Event
On February 8, 1996, as amended on November 26, 1996, the Companies
agreed in principle to sell virtually all the assets of their radio
station operations to Triathlon for $23,117,000 (consisting of cash
of $22,617,000 and common stock of Triathlon having a quoted market
value of approximately $500,000), including, but not limited to,
all property, equipment, and FCC licenses for the operation of KSSN,
KZSN, and KMVK. On January 9, 1997, the sale of KZSN was consummated
and on April 25, 1997, the sale of KSSN and KMVK was consummated
whereby Triathlon now owns and operates all of the radio station
operations of the Companies.
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
COMPANY
Combined Balance Sheet
(unaudited)
March 31, 1997
ASSETS
Current assets $ 758,830
Property and equipment, net 214,738
Intangible assets, net 2,631,466
Other assets 63,606
------------
$ 3,668,640
============
LIABILITIES & RADIO STATION
EQUITY
Current liabilities $ 15,385,263
Long term liabilities 722,500
Radio station equity (12,439,123)
------------
$ 3,668,640
============
See notes to Combined Financial Statements
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING
COMPANY
Combined Statements of Operations
(unaudited)
3 Months Ended
March 31,
1997 1996
---- ----
Net revenue $ 809,891 $ 690,513
Station operating expenses 633,182 694,527
Depreciation and amortization 131,234 177,935
Corporate expenses 71,064 71,064
---------- ----------
Operating (loss) (25,589) (253,013)
Interest expense (160,051) (309,936)
Other income 623 891
---------- ----------
$ (185,017) $ (562,058)
========== ==========
Net (loss)
See notes to Combined Financial Statements
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION
AND ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING COMPANY
Combined Statements of Cash Flows
(Unaudited)
3 Months Ended
MARCH 31,
1997 1996
---- ----
Net cash used in operating activities $ (401,755) $ (599,389)
Cash flows provided by investing activities 349,483 590,236
---------- ----------
Net decreases in cash (52,272) (9,153)
Cash at beginning of period 118,911 24,257
---------- -----------
Cash at end of period $ 66,639 $ 15,104
========== ===========
See notes to combined financial statements
Page 1
<PAGE>
LITTLE ROCK, ARKANSAS RADIO STATION
OPERATIONS (KSSN AND KMVK) OF
SOUTHERN SKIES CORPORATION AND
ARKANSAS SKIES CORPORATION
SOLD TO
TRIATHLON BROADCASTING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- UNAUDITED
1. NATURE OF BUSINESS AND ORGANIZATION
Southern Skies Corporation ("Southern Skies") and Arkansas Skies
Corporation ("Arkansas Skies") (collectively, "the Companies") own and operate
radio stations. Southern Skies owns and operates an FM radio station "KSSN" in
Little Rock, Arkansas. Arkansas Skies owns and operates an FM radio station
"KMVK" in Benton, Arkansas. Southern Skies operates KMVK under a local
marketing agreement with Arkansas Skies whereby Southern Skies has agreed to
provide all programming, accounting, financial and administrative functions
to KMVK.
The accompanying combined financial statements include the combined
financial position, results of operations and cash flows of KSSN and KMVK
(collectively, "the Stations") after eliminating all significant
interdivisional accounts and transactions between the stations; as they are
under common control and subject to the sale described below.
On April 25, 1997, the Companies consummated the sale of the Stations to
Triathlon Broadcasting Company ("Triathlon") for approximately $12,000,000
(consisting of cash of $11,600,000 and common stock of Triathlon having a
quoted market value of approximately $250,000).
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. 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 adjustments) considered necessary
for a fair presentation have been included, except that certain intangible
assets, long-term debt, notes payable to stockholders and accrued interest are
not included in the accompanying combined balance sheet as these assets were
not purchased nor were liabilities assumed by Triathlon under the terms of
the asset purchase agreement between the Companies and Triathlon (see Note 1).
Operating results for an interim period are not necessarily indicative of the
results that may be expected for a full year.
<PAGE>
(b) Pro Forma Financial Information
The unaudited pro forma financial information of Triathlon Broadcasting Company
(the "Company") for the year ended December 31, 1996 and as of and for the
three months ended March 31, 1997 follows:
<PAGE>
TRIATHLON BROADCASTING COMPANY
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
The Pro Forma Condensed Combined Balance Sheet as of March 31, 1997 is
presented as if, at such a date, the Company had completed the acquisitions of
radio stations KSSN - (FM) and KMVK - (FM) (the "Southern Skies Little Rock
Acquisition") and KOLL - (FM) (the "KOLL Acquisition"), received proceeds from
additional borrowings under the Company's credit facility with AT&T Commercial
Finance Corporation (the "Credit Facility"), and received proceeds from the
subsequent sale of KSSN - (FM), KMVK - (FM) and KOLL - (FM) (the "Little Rock
Disposition").
The Pro Forma Condensed Combined Statements of Operations for the year ended
December 31, 1996 and for the three months ended March 31, 1997 gives effect to
the following transactions as if they had occurred as of January 1, 1996: (i)
the acquisitions of KTGL - (FM) and KZKX - (FM) (the "Lincoln Acquisition"),
KIBZ - (FM), KKNB - (FM) and KHAT-AM (the "Rock Steady Acquisition"), KTNP -
(FM) (formerly KRRK - (FM)) (the "93.3, Inc. Acquisition"), KXKT - (FM) (the
"Valley Acquisition"), KALE-AM and KIOK - (FM) (the "Sterling Acquisition"),
KISC - (FM), KNFR - (FM) and KAQQ-AM (the "Silverado Acquisition"), KVOR-AM,
KSPZ - (FM), KTWK-AM, KVUU - (FM), KEYF - (AM), KEYF (FM), KEYN - (FM),
KUDY-AM, KKZX - (FM), KEGX - (FM) and KTCR-AM (the "Pourtales Acquisition"),
KZSN - (FM) and KZSN-AM (the "Southern Skies Wichita Acquisition" and together
with the Southern Skies Little Rock Acquisition, the "Southern Skies
Acquisition"); (ii) the Little Rock Disposition; and (iii) the financing and
other costs of the acquisitions.
No adjustments have been made to the Pro Forma Condensed Combined Statements of
Operations to reflect the Southern Skies Little Rock Acquisition since the
related stations are subject to the Little Rock Disposition. The Company has
been operating KOLL - (FM) under a local marketing agreement since March 15,
1996, therefore the Pro Forma Condensed Combined Statements of Operations
eliminate such operations which are subject to the Little Rock Disposition.
The above acquisitions have been accounted for using the purchase method of
accounting. The total cost of each acquisition has been allocated to the
tangible and intangible assets of the stations acquired and liabilities assumed
based on their respective fair values. The allocations of the purchase price
assumed in the pro forma financial statements are preliminary. The Company does
not expect that the final allocations will materially differ from the
preliminary allocations. The Southern Skies Little Rock Acquisition which
closed on April 25, 1997 was the subject of an agreement, as amended, dated
November 26, 1996 which also included the acquisition of two radio stations in
Wichita, Kansas which closed in January 1997. See Note 2 to the Pro Forma
Condensed Combined Balance Sheet for reallocation of amounts recorded by the
Company for the Southern Skies Wichita Acquisition.
<PAGE>
In the opinion of management, all adjustments necessary to fairly present this
pro forma information have been made. These Pro Forma Condensed Combined
Financial Statements have been prepared utilizing, and should be read in
conjunction with (i) the Company's Consolidated Financial Statements as of and
for the year ended December 31, 1996 (including in the Company's Transition
Report on Form 10KSB); (ii) the Company's Condensed Consolidated Financial
Statements as of and for the three months ended March 31, 1997 (included in
the Company's Form 10QSB; and (iii) the historical financial statements of the
sellers of the Lincoln Acquisition (consisting of KZKX - (FM), Inc., KTGL
Corporation, KZKX and KTGL, divisions of Pourtales Radio Partnership), the Rock
Steady Acquisition (consisting of Rock Steady, Inc.), the 93.3, Inc.
Acquisition (consisting of 93.3, Inc.), the Valley Acquisition (consisting of
Valley Broadcasting, Inc.), the Sterling Acquisition (consisting of KALE/KIOK
Radio Station, a unit of Sterling Realty Organization), the Silverado
Acquisition (consisting of KAQQ-AM, KISC - (FM) and KNFR - (FM), divisions of
Silverado Broadcasting Company, Inc.), the Pourtales Acquisition (consisting of
Springs Radio, Inc., KVUU/KSSS, Inc., KOTY - (FM), Inc., KEYF Corporation,
Fourth Street Broadcasting, Inc., and KTCR/KEGX, KEYF, KUDY/KKZX and KEYN,
divisions of Pourtales Radio Partnership), the KOLL Acquisition (consisting of
KOLL - (FM), a division of Southern Starr Broadcasting Group, Inc. and
KOLL - (FM), a division of Southern Starr of Arkansas, Inc.) and the Southern
Skies Acquisition (consisting of Southern Skies Corporation and Arkansas Skies
Corporation) all included, as applicable, in the Prospectus, dated March 4,
1996, and Item 7(a) included elsewhere herein. The pro forma information does
not purport to be indicative of the results that would have been reported had
such events actually occurred on the dates specified, nor is it indicative of
the Company's future results if the aforementioned transactions are completed.
Each of the sellers of the acquired radio stations has its own historical
financial and operating structures and may include or exclude items which may
affect the comparability of certain items. Management believes that the pro
forma results are a better indicator of the Company's performance in that pro
forma numbers reflect the proposed capital structure and acquisition prices.
<PAGE>
TRIATHLON BROADCASTING COMPANY
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
<TABLE>
<CAPTION>
TRIATHLON
BROADCASTING PRO FORMA PRO FORMA
COMPANY ADJUSTMENTS COMBINED
-------------- --------------- -------------
(HISTORICAL)
<S> <C> <C> <C>
ASSETS $ 7,608,000 $ 9,000,000 (1)$ 9,785,841
Current assets (6,822,159)(2)
Property and equipment, net 7,737,000 7,737,000
Intangible assets, net 76,566,000 (2,516,111)(2) 74,049,8
Assets held for sale 20,000,000 (2) --
(20,000,000)(2)
Other assets 13,807,000 (10,480,839)(2) 3,326,11
-------------- --------------- -------------
$105,718,000 $(10,819,109) $94,898,891
============== =============== =============
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities $ 4,660,000 $ (447,005)(2)$ 4,212,995
Long term liabilities 30,358,000 9,000,000 (1) 19,358,000
(20,000,000)(3)
Non-compete payable 300,000 375,000 (2) 675,000
Deferred taxes 7,630,000 7,630,000
Deferred compensation 96,000 96,000
Stockholder's equity 62,674,000 252,896 (2) 62,926,896
-------------- --------------- -------------
$105,718,000 $(10,819,109) $94,898,891
============== =============== =============
</TABLE>
<PAGE>
TRIATHLON BROADCASTING COMPANY
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
TRIATHLON SOUTHERN LITTLE
BROADCASTING SKIES WICHITA ROCK PRO FORMA
COMPANY ACQUISITION DISPOSITION COMBINED
-------------- --------------- ----------- --------------
(HISTORICAL) (5) (6)
<S> <C> <C> <C> <C>
Net revenue $ 5,660,780 $46,397 $224,321 $ 5,482,856
Station operating expenses 4,406,149 34,698 208,556 4,232,291
Depreciation and amortization 751,671 -- 274 751,397
Corporate expenses 490,400 -- -- 490,400
Deferred compensation 100,464 -- -- 100,464
-------------- --------------- ----------- --------------
Operating (loss) income (87,904) 11,699 15,491 (91,696)
Interest expense (764,123) -- (87,304) (676,819)
Other income 194,623 -- -- 194,623
-------------- --------------- ----------- --------------
Net (loss) income (657,404) $11,699 $(71,813) (573,892)
=============== ===========
Preferred stock dividend requirement (1,376,824) (1,376,824)
-------------- --------------
Net loss to common shares $(2,034,228) $(1,950,716)
============== ==============
Net loss per common share $ (0.42) $ (0.40)
============== ==============
Weighted average common shares
outstanding 4,861,568 (13) 4,887,789
</TABLE>
<PAGE>
TRIATHLON BROADCASTING COMPANY
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUISITIONS
COMPLETED
TRIATHLON DURING THE YEAR SOUTHERN LITTLE
BROADCASTING ENDED DECEMBER SKIES WICHITA ROCK PRO FORMA PRO FORMA
COMPANY 31, 1996 ACQUISITION DISPOSITION ADJUSTMENTS COMBINED
-------------- --------------- --------------- ----------- --------------- --------------
(HISTORICAL) (4) (5) (6)
<S> <C> <C> <C> <C> <C> <C>
Net revenue $18,963,101 $ 3,434,842 $2,687,337 $797,284 $ (296,221)(11) $23,991,775
Station operating expenses 13,678,117 3,087,384 1,889,942 623,456 (296,221)(11) 17,735,766
Depreciation and amortization 1,426,759 875,367 69,515 273 481,452 (7) 2,852,820
Corporate expenses 1,719,283 448,571 -- -- (367,854)(8) 1,800,000
Deferred compensation 365,992 -- -- -- 365,992
DOJ information costs 300,000 -- -- -- -- 300,000
-------------- --------------- --------------- ---------- --------------- --------------
Operating income (loss) 1,472,950 (976,480) 727,880 173,555 (113,598) 937,197
Interest expense (2,581,423) (188,938) (348,326) -- (598,869)(9) (3,717,556)
Other income (expense) 669,637 (635,633) (486,829) -- 1,108,484 (10) 655,659
-------------- --------------- --------------- ---------- --------------- --------------
Income (loss) before
extraordinary item (438,836) $(1,801,051) $ (107,275) $173,555 $ 396,017 (2,124,700)
=============== =============== ========== ===============
requirement (4,414,523) (12) (5,507,296)
-------------- --------------
Net loss before extraordinary
item applicable to common
shares $(4,853,359) $(7,631,996)
============== ==============
Net loss before extraordinary
item per common share $ (0.97) $ (1.56)
============ ============
Weighted average common shares
outstanding 4,841,600 (13) 4,887,789
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
BALANCE SHEET ADJUSTMENTS
(1) To reflect the proceeds for additional borrowings under the Credit
Facility.
(2) To reflect the purchase price of approximately $20 million for the radio
stations subject to the Southern Skies Little Rock Acquisition and KOLL
Acquisition. The aggregate purchase price includes fees and expenses of
$652,865, including fees to The Sillerman Companies of $239,500. Consideration
for the radio stations included the issuance of 23,725 shares of the Company's
Class A Common Stock and a note for $375,000 payable over five years. Deposits
and advances to one of the sellers aggregating $10,112,500 were also applied
against the amounts due at closing. The Company has also reallocated a portion
of amounts previously recorded in connection with Southern Skies Wichita
Acquisition to the purchase price of Southern Skies Acquisition to the purchase
price of Southern Skies Little Rock, in accordance with generally accepted
accounting principles, to reflect the subsequent sales price of the radio
station so that no gain or loss will be recognized in connection with the
disposition of this part of the Southern Skies Acquisition.
(3) To reflect proceeds to be received from Little Rock Disposition, which
will be applied to amounts outstanding under the Credit Facility.
- 5 -
<PAGE>
STATEMENT OF OPERATIONS ADJUSTMENTS
(4) Includes the historical results of operations for stations acquired by
the Company during the year ended December 31, 1996, for periods prior to
their acquisition, as follows:
<TABLE>
<CAPTION>
LINCOLN ROCK STEADY 93.3 INC. VALLEY
ACQUISITION(A) ACQUISITION(B) ACQUISITION(C) ACQUISITION(C)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net revenue ............... $151,856 $353,297 $150,460 $338,119
Station operating
expenses.................. 109,942 330,054 125,311 212,794
Depreciation and
amortization ............. 39,556 47,963 28,704 50,366
Corporate expenses ........ -- -- -- --
-------------- -------------- ------------- --------------
Operating income (loss) .. 2,358 (24,720) (3,555) 74,959
Interest income ...........
Interest expense .......... (489) (60,919) -- --
Other income (expense) ... (17,806) 2,593 -- --
-------------- -------------- ------------- --------------
Net income (loss) ......... $(15,937) $(83,046) $ (3,555) $ 74,959
============== ============== ============= ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
STERLING SILVERADO POURTALES
ACQUISITION(D) ACQUISITION(E) ACQUISITION
-------------- -------------- -----------
<S> <C> <C> <C>
Net revenue ............... $117,530 $ 433,825 $ 1,889,755
Station operating
expenses.................. 203,345 424,221 1,681,716
Depreciation and
amortization ............. 11,007 119,379 578,393
Corporate expenses ........ -- -- 448,571
------------- ------------- -------------
Operating income (loss) .. (96,822) (109,775) (818,925)
Interest income ...........
Interest expense .......... -- -- (127,530)
Other income (expense) ... -- 1,245 (621,665)
------------- ------------- -------------
Net income (loss) ......... $(96,822) $(108,530) $(1,568,120)
============= ============= =============
</TABLE>
- ------------
(a) For the period from January 1, 1996 through January 23, 1996.
(b) For the period from January 1, 1996 through June 12, 1996.
(c) For the period from January 1, 1996 through April 9, 1996.
(d) For the period from January 1, 1996 through April 18, 1996.
(e) For the period from January 1, 1996 through February 29, 1996.
(f) For the period from January 1, 1996 through November 21, 1996.
(5) Represents the historical results of operations for stations acquired by
the Company on January 9, 1997 pursuant to the Southern Skies Wichita
Acquisition, for periods prior to their acquisition.
(6) Represents elimination of the historical results of operations of
KOLL--(FM) which the Company has been operating under a local marketing
agreement since March 15, 1996. This station will be sold in connection
with the Little Rock Disposition.
- 6 -
<PAGE>
(7) To reflect the incremental additional amortization expense relating
to the acquisitions based on the preliminary purchase price
allocations. The actual depreciation and amortization expense may
change upon final determination of the fair value of the net assets
acquired.
(8) To adjust corporate expenses to reflect the incremental additional
corporate office costs for a larger station for an entire year,
offset by the elimination of expenses of the acquired stations not
expected to be incurred by the Company.
(9) To adjust interest expense to reflect outstanding borrowings for
entire period. Proceeds from the Little Rock Disposition will be used
to reduce debt, and therefore, interest expense has been adjusted
accordingly.
(10) To eliminate non-operating expenses that are not expected to be
incurred by the Company.
(11) To adjust for JSA/LMA fees.
(12) To reflect the full year dividend requirement for the Company's
preferred stock.
(13) To reflect the weighted average number of common stock outstanding
for a full year.
- 7 -
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereto duly authorized.
TRIATHLON BROADCASTING COMPANY
July 9, 1997 By: /s/ Jan E. Chason
------------------------------
Name: Jan E. Chason
Title: Chief Financial Officer
and Treasurer
