<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT OF 1934
For the transition period from ---------------- to -------------------
Commission File Number 0-26530
TRIATHLON BROADCASTING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 33-0668235
State or other jurisdiction of (IRS Employer
Corporation or organization) Identification No.)
Symphony Towers
750 B Street, Suite 1920
San Diego, CA 92101
(Address of principal executive offices)
(619) 239-4242
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares of the registrant's Class A Common Stock, $.01
par value, Class B Common Stock, $.01 par value, Class C Common Stock, $.01 par
value, Class D Common Stock, $.01 par value, and Depositary Shares, each
representing a one tenth interest in a share of 9% Mandatory Convertible
Preferred Stock, outstanding as of May 8, 1998, was 3,172,533, 244,890, 31,000,
1,444,366, and 5,834,000, respectively.
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TRIATHLON BROADCASTING COMPANY
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed consolidated balance sheets - March 31, 1998 (unaudited) and December
31, 1997 3
Condensed consolidated statements of operations - Three months ended March 31,
1998 and 1997 (unaudited) 4
Condensed consolidated statements of cash flows - Three months ended March 31,
1998 and 1997 (unaudited) 5
Condensed consolidated statements of stockholders' equity - Three months ended
March 31, 1998 (unaudited) 6
Notes to condensed consolidated financial statements 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operation 10
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 16
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December31,
1998 1997(1)
---- -------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,570 $ 1,771
Accounts receivable, net of allowance
for doubtful accounts 6,207 7,510
Notes receivable from officer 100 75
Other current assets 536 875
----------- -----------
Total current assets 8,413 10,231
Property and equipment - less accumulated
depreciation and amortization 10,118 10,280
Intangible assets, net of accumulated amortization 110,826 111,674
Notes receivable from officer 250 250
Long term note receivable 252 266
Other assets 40 40
----------- -----------
$129,899 $132,741
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 5,399 $ 6,056
Due to affiliates 88 40
Amended Credit Agreement 58,500 58,500
Current portion of other long term debt 890 890
Non-compete payable - current portion 150 150
----------- -----------
Total current liabilities 65,027 65,636
Other long term debt, less current portion 943 943
Non-compete payable, less current portion 444 481
Deferred compensation 154 155
Deferred taxes 7,630 7,630
Stockholders' equity
Preferred stock 12 12
Common stock 49 49
Paid-in-capital 59,859 61,236
Deferred compensation (329) (363)
Accumulated deficit (3,890) (3,038)
---------- ----------
Total stockholders' equity 55,701 57,896
---------- ----------
$129,899 $132,741
======== ========
</TABLE>
(1) The condensed consolidated balance sheet at December 31, 1997 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.
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TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Net revenues $ 8,895 $ 5,661
Operating expenses
Station operating expenses 6,410 4,406
Depreciation and amortization 1,181 752
Corporate expenses 517 490
Deferred compensation 33 100
---------- ---------
Total operating expenses 8,141 5,748
---------- ---------
Operating income (loss) 754 (87)
Interest expense - net (1,606) (570)
---------- ---------
Net loss (852) (657)
Preferred stock dividend requirement (1,377) (1,377)
---------- ---------
Net loss applicable to common stock $(2,229) $(2,034)
======= =======
Net loss per basic common share $ (0.46) $ (0.42)
======== =======
Weighted average basic common shares outstanding 4,893 4,862
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
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<S> <C> <C>
Cash flow from operating activities $ 1,342 $ 596
Cash flow from investing activities
Acquisition of net assets of radio stations including
advance fees and deposits -- (17,545)
Capital expenditures (166) (181)
Due to affiliate -- 82
-------- --------
Net cash used in investing activities (166) (17,644)
Cash flow from financing activities
Borrowings -- 18,000
Payment of preferred stock dividends (1,377) (1,377)
-------- --------
Net cash (used in) provided by financing activities (1,377) 16,623
Net decrease in cash and cash equivalent (201) (425)
Cash and cash equivalents at beginning of period 1,771 3,083
-------- --------
Cash and cash equivalents at end of period $ 1,570 $ 2,658
======== ========
Supplemental cash flow information:
Interest paid $ 1,628 $ 794
Issuance of Class A Common Stock in connection
with acquisitions $ -- $ 237
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Series B Mandatory Total
Convertible Convertible Class A Class B Class C Class D Stock-
Preferred Preferred Common Common Common Common Paid-In Deferred Accumulated holders
Stock Stock Stock Stock Stock Stock Capital Compensation Deficit Equity
----- ----- ----- ----- ----- ----- -------- ----------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1998 $6 $6 $32 $2 $1 $14 $61,236 $(363) $(3,038) $57,896
Deferred compensation -- -- -- -- -- -- -- 34 -- 34
Dividends on
Mandatory Convertible
Preferred Stock
($0.236 per share) -- -- -- -- -- -- (1,377) -- -- (1,377)
Net loss -- -- -- -- -- -- -- -- (852) (852)
---- ---- ---- ---- ---- ---- ------- ------ ------- ---------
Balances at
March 31, 1998 $6 $6 $32 $2 $1 $14 $59,859 $(329) $(3,890) $ 55,701
==== ==== ==== ==== ==== ==== ======= ====== ======= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
March 31, 1998
(unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Triathlon Broadcasting Company (the "Company") was incorporated in
Delaware on June 29, 1995, and on that date the stockholders of Triathlon
Broadcasting Company, Inc., a New York corporation ("Triathlon New York"),
contributed all of their shares of Triathlon New York's Common Stock to the
Company in exchange for all of the Company's Common Stock. The exchange of
common stock was accounted for as a business combination among companies under
common control. The Company was organized for the purpose of owning and
operating radio stations primarily in medium and small sized markets in the
midwestern and western United States. The Company commenced radio station
ownership and operations on September 13, 1995.
The Company has significantly expanded its operations and currently
owns and operates, sells advertising on behalf of or provides programming to 22
FM and 10 AM radio stations in six markets. The Company also owns Pinnacle
Sports Productions LLC, a regional sports radio network (the "Sports Network"),
which broadcasts all of the games of the men's football, basketball and
baseball and women's basketball and volleyball teams of the University of
Nebraska over a network of approximately 61 radio stations located in the
western United States.
NOTE 2 - 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-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for 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 Annual
Report on Form 10-K for the year ended December 31, 1997.
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.
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TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
March 31, 1998
(unaudited)
NOTE 3 - INDEBTEDNESS
On May 30, 1997, the Company entered into an Amended and Restated Loan
Agreement (the "Amended Credit Agreement") with AT&T Commercial Finance
Corporation and Union Bank of California, N.A. (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 Credit Agreement contains financial leverage and coverage
ratios, and restrictions on capital expenditures and other payments. As of
March 31, 1998, the Company did not meet certain financial covenants. The
Company has requested from the Lenders a waiver of the covenants not met as of
March 31, 1998. Although no assurance can be given, the Company believes that
such waiver will be granted based on discussions the Company has had with the
Lenders. Management believes that it is probable that it will not comply with
certain covenants in its quarterly tests during 1998 and the Lenders have
indicated that they are only willing to grant waivers on a quarter by quarter
basis. Accordingly, the entire debt outstanding under the Amended Credit
Agreement has been reclassified as a current liability on the Company's
condensed consolidated balance sheet as of March 31, 1998. Based on discussions
with the Lenders, management is confident that, if required, it will be able to
obtain the appropriate waivers in the future. However, in the event that such
waivers are not granted, management, after consultation with its regular
financing sources, believes that the Company would be able to refinance the
Amended Credit Agreement on acceptable terms. See "Item 2. Management's
Discussion and Analysis or Plan of Operation--Liquidity and Capital Resources."
NOTE 4 - DOJ INFORMATION REQUEST
Following the passage of the Telecommunications Act of 1996, the
Department of Justice, Antitrust Division ("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 and the JSA the Company has
in the 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 13% of the
Company's net revenues during the three months ended March 31, 1998. 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 provide more efficiently
the services currently performed by Citadel given the fee structure of the
Citadel JSA. The Company has begun preparations for an orderly transition in
the event that the DOJ requires the termination of the Citadel JSA.
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TRIATHLON BROADCASTING COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
March 31, 1998
(unaudited)
NOTE 5 - LOSS PER BASIC COMMON SHARE
Loss per basic common share is based upon the net loss applicable to
basic common shares which is net of preferred stock dividends and upon the
weighted average of basic 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 basic common
share because the effect would be antidilutive.
NOTE 6 - INCOME TAXES
For the three months ended March 31, 1998 and 1997, net income tax
benefits of approximately $300,000 and $225,000, respectively, have been fully
offset by a corresponding increase in the valuation allowance due to the
uncertainty of realizing a tax benefit for the Company's losses.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, the level and volatility of interest rates,
integration of the acquisitions completed during Fiscal Year 1997, 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, changing consumer
tastes, the effect of economic and market conditions, the impact of current or
pending legislation and regulation and other factors, including those discussed
in this document and in prior SEC filings, press releases and other public
filings of the Company. 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 10 AM and 22 FM radio stations in six markets and owns the
Sports Network as set forth in the following chart:
AM FM
---- ----
Omaha, Nebraska(1) 1 3
Spokane, Washington(2) 3 5
Wichita, Kansas 2 4
Colorado Springs, Colorado(3) 2 2
Lincoln, Nebraska(1) 0 4
Tri-Cities, Washington(4) 2 4
--- ---
Total 10 22
- ------------------
(1) The Company owns the Sports Network operating in Nebraska in addition to
the stations in Omaha and Lincoln, Nebraska.
(2) Includes four stations for which Citadel Broadcasting Company sells
advertising pursuant to a JSA and one station that is not owned by the
Company but on which the Company sells advertising pursuant to a JSA.
(3) Consists of four stations owned by the Company for which Citadel
Broadcasting Company sells advertising pursuant to a JSA.
(4) Includes two stations that are not owned by the Company but on which it
provides programming services and sells advertising pursuant to local
marketing agreements. The Tri Cities, Washington market consists of the
cities of Richland, Kennewick and Pasco in the State of Washington.
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The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow. 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
that 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 The Arbitron
Company (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 as a means 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. During Fiscal Year 1997, approximately
81% of the Company's revenues (exclusive of Citadel JSA fees received) were
from local advertising. 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 calendar quarter generally
produces the lowest revenues for the year, and the fourth calendar 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.
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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.
Following the passage of the Telecom Act, the DOJ indicated its
intention to investigate certain existing industry practices that had not been
previously subject to anti trust review. The DOJ is investigating the Citadel
JSA in connection with the concentration of radio station ownership in the
Colorado Springs, Colorado and Spokane, Washington markets. 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 provided approximately 13% of the
Company's net revenues during the three months ended March 31, 1998. In the
event that the DOJ requires the termination or modification of the Citadel JSA,
the Company believes that such termination or modification would have a
favorable long term impact on the Company's operations, although the Company
may suffer a short term disruption in sales efforts caused by the transition,
because the Company's income from the Citadel JSA, which is a share of the
combined profits of the stations involved in the Citadel JSA, currently is
negatively impacted by a disproportionate share of the combined operating
expenses. The Company has begun preparations for an orderly transition in the
event that the DOJ requires the termination of 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 MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Net revenues increased approximately $3.2 million or 57% to
approximately $8.9 million for the three months ended March 31, 1998 (the "1998
Quarter") from approximately $5.7 million for the three months ended March 31,
1997 (the "1997 Quarter") as a result of acquisitions consummated subsequent to
March 31, 1997 as well as growth at continuously owned and operated stations.
On a same station basis for the radio stations owned and operated as of March
31, 1998, net revenues increased by 10% to approximately $8.9 million for the
1998 Quarter from approximately $8.1 million for the 1997 Quarter. Despite the
growth in net revenues, the Company has continued to be impacted by disruptions
in sales efforts as a result of restructuring of sales management and turnover
of sales staff of acquisitions consummated during the prior fiscal year.
Station operating expenses increased by approximately $2.0 million or
45% to approximately $6.4 million for the 1998 Quarter from approximately $4.4
million for the 1997 Quarter primarily due to the inclusion of expenses related
to the stations acquired subsequent to March 31, 1997. On a same station basis
for the radio stations owned and operated by the Company as of March 31, 1998,
operating expenses for the 1998 Quarter increased by 3% to approximately $6.4
million from approximately $6.2 million for the 1997 Quarter. The increase in
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operating expenses related principally to a larger volume of business during
the 1998 Quarter reduced by the improved cost structure of stations acquired
subsequent to March 31, 1997 and continuing implementation of the Company's
cost reduction programs and efficiencies of combined operations.
Broadcast Cash Flow ("BCF") increased by approximately $1.2 million or
98% to approximately $2.5 million for the 1998 Quarter from approximately $1.3
million for the 1997 Quarter. BCF as a percentage of net revenues increased to
28% for the 1998 Quarter versus 22% for the 1997 Quarter principally due to
increases in net revenues exceeding increases in operating expenses. On a same
station basis, BCF of approximately $2.5 million for the 1998 Quarter
represented an increase of approximately 31% as compared to the 1997 Quarter
BCF of approximately $1.9 million for the 1997 Quarter principally as a result
of increased net revenues, improved cost structure of the newly acquired
stations and the effects of the Company's cost reduction programs.
Depreciation and amortization expense increased by 57% to
approximately $1.2 million for the 1998 Quarter versus approximately $752,000
for the 1997 Quarter. The increase was principally attributable to the
amortization of intangible assets resulting from acquisitions consummated
subsequent to March 31, 1997.
Corporate expenses consisting primarily of officer's salary, financial
consulting and professional fees and expenses, and corporate office expenses
were approximately $517,000 for the 1998 Quarter as compared to approximately
$490,000 for the 1997 Quarter. Included in corporate expenses are fees of
approximately $133,000 and approximately $142,000 for the 1998 Quarter and the
1997 Quarter, respectively, paid and or payable to SFX Entertainment, Inc.
("SFX Entertainment"), an affiliate, for financial, legal and advisory services
rendered by The Sillerman Companies, an affiliate, under the Amended and
Restated SCMC Agreement. The interests of SFX Broadcasting, Inc. ("SFX
Broadcasting"), an affiliate, were assigned to SFX Entertainment in connection
with the spin-off of SFX Entertainment from SFX Broadcasting in April, 1998.
For more information, see "Item 13--Certain Relationships and Related
Transactions," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 filed with the Securities and Exchange Commission on March
31, 1998.
The Company recorded deferred compensation expense of approximately
$33,000 for the 1998 quarter and approximately $100,000 for the 1997 Quarter.
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
1998 Quarter was approximately $754,000 as compared to a loss of approximately
$87,000 for the 1997 Quarter. This increase results principally from the
inclusion of three full months of operations for stations acquired subsequent
to March 31, 1997.
Net interest expense for the 1998 Quarter was approximately $1.6
million as compared to approximately $570,000 for the 1997 Quarter. The net
increase in expense was principally
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attributable to the increased borrowings to complete the acquisitions of radio
stations subsequent to March 31, 1997.
Net loss for the 1998 Quarter was approximately $852,000 as compared
to a loss of approximately $657,000 for the 1997 Quarter. Net loss applicable
to common stock for the 1998 Quarter was approximately $2.2 million as compared
to approximately $2.0 million for the 1997 Quarter. The increased net loss and
loss applicable to common stock resulted from the factors described above.
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, net proceeds of
approximately $56.4 million from the sale of preferred stock (the "Preferred
Stock Offering") and the borrowing of $9.0 million and $40 million under loan
agreements which have subsequently been refinanced with borrowing of $78.5
million under the Amended Credit Agreement. The cost of the acquisitions
completed through March 31, 1998 of approximately $130.9 million were financed
with the proceeds from the Initial Public Offering, the Preferred Stock
Offering and the borrowings mentioned above. In addition, in October, 1997, the
Company reduced it's outstanding indebtedness to the Lenders by $20.0 million
with the proceeds of the disposition of radio stations KOLL FM, KSSN FM and
KMVK FM, each operating in the Little Rock, Arkansas market.
Cash flow provided from operating activities for the 1998 Quarter was
approximately $1.3 million as compared to approximately $596,000 for the 1997
Quarter. The increase in cash flow from operating activities was principally
due to growth in net revenues as compared to the 1997 Quarter. Cash used in
investing activities was approximately $166,000 during the 1998 Quarter and
approximately $17.6 million for the 1997 Quarter. The decrease related to the
absence of radio station acquisition activity during the 1998 Quarter. Cash
flow used for financing activities of approximately $1.4 million during the
1998 Quarter related to the payment of dividends to the preferred stockholders
while the cash flow provided from financing activities during the 1997 Quarter
of approximately $16.6 million principally related to additional borrowings.
The Amended Credit Agreement contains financial leverage and coverage
ratios, and restrictions on capital expenditures and other payments. As of
March 31, 1998, the Company did not meet certain financial covenants. The
Company has requested from the Lenders, a waiver of the covenants not met as of
March 31, 1998. Although no assurance can be given, the Company believes that
such waiver will be granted based on discussions the Company has had with the
Lenders. Management believes that it is probable that it will not comply with
one of these covenants in its quarterly tests during 1998 and the Lenders have
indicated that they are only willing to grant waivers on a quarter by quarter
basis. Accordingly, the entire debt outstanding under the Amended Credit
Agreement has been reclassified as a current liability on its balance sheet as
of March 31, 1998. Based on discussions with the Lenders, management is
confident that, if required, it will be able to obtain the appropriate waivers
in the future. However, in the
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event that such waivers are not granted, management, after consultation with
its regular financing sources, believes that the Company would be able to
refinance the Amended Credit Agreement on acceptable terms.
For the remainder of 1998, the Company expects its capital needs,
including interest expense, dividends, corporate expenses, capital expenditures
and other commitments, to be approximately $12.0 million. It is anticipated the
Company will be able to meet these obligations from cash on hand, cash provided
from operations which assumes a substantial improvement in the operating
results of the Company's radio stations and borrowing which may be available
under the Amended Credit Agreement. The Company anticipates that future debt
service, dividends, and other commitments will be met from cash on hand and
cash provided from operations, which assumes a substantial improvement in the
operating results of the Company's radio stations. There can be no assurance
that the Company will be able to make these improvements which are 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 to fund its operations in the event that its
operations do not improve and in connection with possible future acquisitions
of radio properties and will likely need to incur or raise such additional
financing when the balloon payments are due in 2004 under the Amended Credit
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.
The Company is aware that its current group of radio stations combined
with the trend towards consolidation in the industry may present an attractive
opportunity to maximize stockholder value through a sale of the Company's
assets or by the combination of the Company's business with that of a larger
broadcasting company. The Company will continue to consider all available
opportunities and has engaged Goldman, Sachs & Co. to actively explore
alternatives to maximize stockholder value.
-15-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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
By: /s/ Norman Feuer
--------------------------
Chief Executive Officer
By: /s/ William G. Thompson
-----------------------------------
Chief Financial Officer
Dated: May 15, 1998
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,570,000
<SECURITIES> 0
<RECEIVABLES> 6,870,000
<ALLOWANCES> 663,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,413,000
<PP&E> 12,185,000
<DEPRECIATION> 2,067,000
<TOTAL-ASSETS> 129,899,000
<CURRENT-LIABILITIES> 65,027,000
<BONDS> 0
6,000
6,000
<COMMON> 49,000
<OTHER-SE> 55,640,000
<TOTAL-LIABILITY-AND-EQUITY> 129,899,000
<SALES> 9,810,000
<TOTAL-REVENUES> 8,895,000
<CGS> 0
<TOTAL-COSTS> 8,141,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,606,000
<INCOME-PRETAX> (852,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (852,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,229,000)
<EPS-PRIMARY> (1.16)
<EPS-DILUTED> (1.16)
</TABLE>
