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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended DecemberFOR THE FISCAL YEAR ENDED DECEMBER 31, 19961997
OR
[ ][_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)15(D) OF THE SECURITIES ACT OF
1934 (NO FEE REQUIRED)
For the transition period from ___________ to _____________.
Commission file numberFOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-26102
AMERICAN RADIO SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3196245
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.EMPLOYER IDENTIFICATION NO.)
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
116 Huntington Avenue
Boston, MassachusettsHUNTINGTON AVENUE BOSTON, MASSACHUSETTS 02116
(Address of principal executive offices and Zip Code)(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(617) 375-7500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) of the Act:
Title of each class Name of Exchange on Which Registered(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------
Class A Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) of the Act:
(Title of Class)(G) OF THE ACT:
(TITLE OF CLASS)
None
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[X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].[_]
The aggregate market value of the voting and non-voting common equity stock
held by non-affiliates of the registrant as of March 3, 199722, 1998 was
approximately $471,872,971.$1,279,338,600. As of March 1,
1997, 15,176,39722, 1998 24,746,510 shares of Class
A Common Stock, 4,604,8623,494,325 shares of Class B Common Stock and 1,295,518 shares
of Class C Common Stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be held
May 29, 1997 are incorporated by reference into Part III.- -------------------------------------------------------------------------------
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AMERICAN RADIO SYSTEMS CORPORATION
TABLE OF CONTENTS
Part I Page
ITEM 1. Business 1
ITEM 2. Properties 18
ITEM 3. Legal Proceedings 18
ITEM 4. Submission of Matters to a Vote of Security Holders 18
Part II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters 19
ITEM 6. Selected Financial Data 20
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 25
ITEM 8. Financial Statements and Supplementary Data
PAGE
----
PART I.
ITEM 1. Business...................................................... 1
ITEM 2. Properties.................................................... 10
ITEM 3. Legal Proceedings............................................. 10
ITEM 4. Submission of Matters to a Vote of Security Holders........... 11
PART II.
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.......................................... 12
ITEM 6. Selected Financial Data....................................... 13
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 16
ITEM 8. Financial Statements and Supplementary Data................... 22
ITEM 9. Changes In and Disagreements With Accountants On Accounting
and Financial Disclosure..................................... 22
PART III.
ITEM 10. Directors and Executive Officers of the Registrant............ 23
ITEM 11. Executive Compensation........................................ 25
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 28
ITEM 13. Certain Relationships and Related Transactions................ 31
PART IV.
ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-
K............................................................ 32
Signatures.................................................... 33
ITEM 9. Changes In and Disagreements With Accountants On Accounting and
Financial Disclosure 33
PART III
ITEM 10. Directors and Executive Officers of the Registrant 34
ITEM 11. Executive Compensation 34
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 34
ITEM 13. Certain Relationships and Related Transactions 34
PART IV.
ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K 35
Signatures 36
INTRODUCTION
American Radio Systems Corporation ("American," "ARS" or the "Company")
desires to take advantage of the new "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. American's Annual Report on Form 10-K10-
K contains "forward-looking statements" including statements concerning
projections, plans, objectives, future events or performance and underlying
assumptions and other statements which are other than statements of historical
fact. For a description of the important factors, among others, that may have
affected and could in the future affect American's actual results and could
cause American's actual results for subsequent periods to differ materially
from those expressed in any forward-looking statement made by or on behalf of
American, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
As used in this Form 10-K, (a) "Tower Subsidiary", "Tower" and "ATS" mean
American Tower Systems Corporation (and include, unless the context otherwise
indicates, all of its subsidiaries), (b) "ATC" means American Tower
Corporation, (c) "ATC Merger" means the merger of ATC into ATS, (d) "American
Radio", the "Company" and "ARS" mean American Radio Systems Corporation (and
include, unless the context otherwise indicates, all of its subsidiaries), (e)
"CBS" means CBS Corporation, (f) "CBS Merger" means the merger of ARS into a
subsidiary of CBS, (g) "Tower Separation" means the separation of ATS from ARS
which will occur pursuant to the CBS Merger, (h) "ATSI" means American Tower
Systems (Delaware), Inc., a wholly-owned subsidiary of ATS which conducts the
site acquisition business of ATS, (i) "ATSLP" means American Tower Systems,
L.P., an indirect wholly-owned subsidiary of ATS, which conducts all of the
communications site business of ATS other than the site acquisition business,
and (j) "Operating Subsidiary" means each of ATSI and ATSLP.
PART I
ITEM 1. BUSINESS
GeneralBUSINESS.
GENERAL
American Radio Systems Corporation (the "Company" or "American") is a national radio broadcasting company committedformed in 1993 to acquiring, developingacquire,
develop and operatingoperate radio stations throughout the United States in markets
where it can be a leading radio operator (i.e., one of the top two radio
operators in terms of local market revenues). In
July 1995, the Company organized American Tower Systems, Inc. (the Tower
Subsidiary or Tower) for the purpose of acquiring, developing, and operating
communications towers throughout the United States, for use by American's radio
stations, other radio operators and other communications related businesses. As of December 31, 1996,1997, the
Company (which ranks among the four largest U.S. radio
broadcasting companies in terms of 1996 net revenues), owned and/or operated 71approximately 100 radio stations (48 FM and 23 AM) in 1421 markets
consisting of Austin, Baltimore, Boston, Baltimore,Buffalo, Charlotte, Cincinnati,
Dayton, Fresno, Hartford, Buffalo, Austin,Kansas City, Las Vegas, Pittsburgh, Portsmouth,
Portland, Riverside/San Bernadino, Rochester, Sacramento, San Jose, Seattle,
St. Louis and West Palm Beach Fresno, Rochester, Dayton, Las
Vegas, Omaha, Portland, Sacramento and San Jose and owned and/or operated approximately 760
wireless communication sites.
ATS is a leading independent owner and operated over 200
stand-aloneoperator of wireless communications
towers in the U.S. ATS's primary business is the leasing of antennae sites on
multi-tenant towers for a diverse range of wireless communications industries,
including personal communications services, cellular, paging, specialized
mobile radio, enhanced specialized mobile radio and rooftop towers. The Companyfixed microwave services,
as well as radio and television broadcasters. ATS also offers its customers
network development services, including site acquisition, zoning, antennae
installation, site construction and network design. These services are offered
on a time and materials or fixed fee basis or incorporated into build to suit
construction contracts. ATS intends to expand these services and to capitalize
on its relationships with its wireless customers through major build to suit
construction projects. ATS is also a party to a merger
agreement (the EZ Merger) with EZ Communications, Inc. (EZ) pursuant to which
the Company will acquire over twenty additional stations in seven new markets
consisting of Charlotte, Kansas City, Philadelphia, Pittsburgh, New Orleans,
Seattle and St. Louis and additional stations in Sacramento. The Company expects
to consummate the EZ Mergerengaged in the second quartervideo, voice and data
transmission business, which it currently conducts in the New York City to
Washington, D.C. corridor and in Texas.
ATS is a holding company whose principal asset is all of 1997.the issued and
outstanding capital stock of ATSI. In January 1998, ATSI transferred
substantially all of its assets and business, other than its site acquisition
business to ATSLP. ATSI and ATSLP are co-borrowers under ATS's loan agreement
with the banks. References to ATS include ATS and its consolidated
subsidiaries, including ATSI and ATSLP, unless the context otherwise requires.
1
Pursuant to the CBS Merger, American Radio will become a wholly-owned
subsidiary of CBS and each holder of ARS Common Stock, at the effective time
of the CBS Merger, will receive for each share of ARS Common Stock held by
such holder, $44.00 per share in cash and one share of ATS Common Stock of the
same class as the ARS Common Stock to be surrendered. The balance of the
shares of ATS owned by ARS will be distributed to holders of options to
purchase ARS common stock and will be transferred to holders of ARS 7%
Convertible Exchangeable Preferred Stock, $1,000 liquidation preference
(Convertible Preferred Stock) upon conversion thereof. The CBS Merger has been
approved by the ARS common stockholders and did not require approval of the
CBS stockholders. Consummation of the CBS Merger is conditioned on, among
other things, the expiration or earlier termination of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, (HSR Act) waiting period and
approval of the FCC of the transfer of control of ARS's radio broadcasting
licenses. Subject to satisfaction of such conditions, the CBS Merger is
expected to occur in the Spring of 1998. As a result of the Tower Separation,
Tower will cease to be a subsidiary of, or otherwise be affiliated with ARS,
and will thereafter operate as an independent publicly held company. See
Pending Transactions.
SeeRECENT TRANSACTIONS
During 1997, the table set forth on page 2Company consummated the following station acquisitions, all
of which were accounted for additional information about the
Company's radio stations.
1
The following table sets forth certain key information about the Company's
radio stations owned and operated as of December 31, 1996:purchases:
Market Year Acquired Market Year Acquired
Market (1) & Revenue or began Market (1) & Revenue or began
Station Rank(3) LMA(2) Station Rank(3) LMA(2)
------------ ------- ------------- ------------ ------- ------------AGGREGATE
NUMBER PRELIMINARY
DESCRIPTION/LOCATION OF STATIONS PURCHASE PRICE
-------------------- ----------- --------------
EZ Communications, Inc. ............................ 24 stations $830.0 million
Austin, TX.......................................... 3 stations 28.7 million
Baltimore, MD....................................... 2 stations 90.0 million
Boston/Worcester, MA................................ 3 stations 29.3 million
Charlotte, NC....................................... 1 station 10.0 million
Cincinnati, OH...................................... 1 station 30.5 million
Dayton, OH.......................................... 3 stations 15.6 million
Fresno, CA.......................................... 2 stations 6.0 million
Lebanon, OH......................................... 1 station 3.0 million
Palm Springs, CA.................................... 1 station 5.1 million
Portsmouth, NH...................................... 4 stations 6.0 million
Rochester, NY....................................... 5 stations 35.0 million
Sacramento, CA...................................... 3 stations 50.0 million
San Jose, CA........................................ 2 stations 31.0 million
Certain of these properties were operated by the Company prior to
acquisition under local marketing agreements (LMA's).
During 1997, the Company consummated the following station exchange
transactions:
GIVEN BY COMPANY RECEIVED BY COMPANY
- ----------------------------------- -------------------------------------------------------
NUMBER OF NUMBER OF OTHER CONSIDERATION
LOCATION STATIONS LOCATION STATIONS RECEIVED (GIVEN)
-------- ---------- -------- ---------- -------------------
Austin, TX 37 Las Vegas, NV 42
KKMJ-FM(2) 1995 KMZQ-FM 1996
KAMX-FM(2) 1995 KXTE-FM 1996
KJCE-AM(2) 1995 KMXB-FM 1996
KXNT-AM 1996
Baltimore, MD 19 KXNO-AM 1996
WQSR-FM 1994 KLUC-FM 1996
WBMD-AM 1994
WBGR-AM 1996 Omaha, NE 57
WWMX-FM(2) 1996 KGOR-FM 1996
WOCT-FM(2) 1996 KFAB-AM 1996
Boston, MA 9 Portland, OR 23
WBMX-FM 1988 KUFO-FM 1996
WRKO-AM 1988 KUPL-AM 1996
WEEI-AM 1992 KUPL-FM 1996
WEGQ-FM 1994 KKJZ-FM 1996
WAAF-FM(2) 1996 KBBT-FM 1996
WWTM-AM(2) 1996Philadelphia, PA........ 2 stations Charlotte, NC........... 5 stations None
Charlotte, NC........... 1 station Pittsburgh, PA.......... 1 station $ 20.0 million
Rochester, NY 54
Buffalo, NY 41 WCMF-FM 1983
WYRK-FM 1980 WRMM-FM 1988
WJYE-FM 1994 WCMF-AM 1988
WECK-AM 1994
WBLK-FM(2) 1996NY........... 3 stations Cincinnati, OH.......... 1 station (16.0) million
Philadelphia, PA........ 1 station Sacramento, CA 25
WSJZ-FM 1996 KSTE-AM 1996
KSFM-FM(2) 1996
Dayton, OH 55 KMJI-AM(2) 1996
WMMX-FM 1985 KYMX-FM 1996
WTUE-FM 1993 KCTC-AM 1996
WONE-AM 1993 KSSJ-FM 1996
WXEG-FM(2) 1996 KXOA-FM(2) 1996
WLQT-FM(2) 1996 KXOA-AM(2) 1996
WBTT-FM(2) 1996 KQPT-FM(2) 1996
Fresno, CA 62 San Jose, CA 43
KSKS-FM 1996 KSJO-FM 1996
KKDJ-FM 1996 KUFX-FM 1996
KMJ-AM 1996 KBAY-FM(2) 1996
KOQO-AM(2) 1996 KKSJ-AM(2) 1996
KOQO-FM(2) 1996
KNAX-FM 1996CA.......... 2 stations None
Sacramento, CA.......... 1 station West Palm Beach, FL 48
KVSR-FM 1996 WIRK-FM 1994
WKGR-FM 1995
Hartford, CT 34 WBZT-AM 1994
WZMX-FM 1988 WEAT-FM(2) 1996
WRCH-FM 1994 WEAT-AM(2) 1996
WTIC-AM 1996 WOLL-FM(2) 1996
WTIC-FM 1996
(1) Actual community of license may differ from the metropolitan market served.
(2) Programmed and marketed under Local Marketing Agreement (LMA).
(3) Ranking of the principal radio market served by the station among all radio
markets in the United States by 1995 market revenue according to the Duncan
Guide. James H. Duncan, publisher of the Duncan Guide, is a director of the
Company.
FL..... 3 stations (33.0) million
New Orleans, LA......... 3 stations Seattle, WA............. 2 stations (7.5) million
2
History
On November 1, 1993During 1997, the Company commenced operations following the merger
of four radio broadcasting entities: Stoner Broadcasting Systems, Inc., Atlantic
Radio, L.P., Multi Market Communications, Inc. and Boston AM Radio Corporation.
As a result, American owned and operated eleven FM and seven AM stations in
eight markets consisting of Boston, Hartford, Buffalo, Rochester, Dayton, Des
Moines, Binghamton and Louisville. Between November 1, 1993 and January 1, 1996,
American entered three new markets, Baltimore, Austin and West Palm Beach, and
disposed of all of its stations in Des Moines, Binghamton and Louisville. During
such period, American also agreed to purchase or acquired options to purchase
additional stations in several existing and new markets. See Notes to the Consolidated Financial Statements of American.
Recent Transactions
1996 Station Acquisitions:
Baltimore: In October 1996, American acquired the assets of WBGR-AM for
approximately $2.8 million.
Buffalo: In August 1996, the Company acquired the assets of WSJZ-FM for
approximately $12.5 million. The Company had been programming and marketing the
station pursuant to an LMA beginning in April 1996.
Fresno: In December 1996, the Company acquired the assets of KNAX-FM and
KVSR-FM (formerly KRBT-FM) for approximately $11.0 million. American had been
programming and marketing the stations pursuant to an LMA beginning in August
1996.
Fresno, Omaha, Portland and Sacramento: In July 1996, the transactions
contemplated by a merger agreement by and between the Company and Henry
Broadcasting Company (HBC) were consummated. Pursuant thereto, the Company
acquired KUFO-FM and KUPL-AM (formerly KBBT-AM) in Portland, Oregon, KYMX-FM and
KCTC-AM in Sacramento, California, KGOR-FM and KFAB-AM in Omaha, Nebraska (See
pending transactions for information with respect to the sale of the Omaha
stations), and KSKS-FM, KKDJ-FM, and KMJ-AM in Fresno, California, for an
aggregate purchase price of approximately $110.4 million. The acquisition was
financed through a $5.0 million escrow deposit, the issuance of 1,879,034 shares
of Class A Common Stock valued at approximately $64.0 million, approximately
$4.1 million in available cash, together with the assumption of approximately
$37.3 million in long term debt, which was paid by the Company at closing. As
part of a related transaction with the principal stockholder of HBC, the Company
acquired certain real estate used in the business of HBC for approximately $2.0
million in cash and obtained a five-year option to acquire certain other real
estate for a purchase price of approximately $1.0 million.
Hartford: In May 1996, the Company consummated the acquisitions of WTIC-AM
and WTIC-FM. In August 1995, the Company had entered into a series of
transactions with the owner of those stations and certain affiliates, pursuant
to which, among other things, the Company agreed to purchase the assets of the
stations for approximately $39.0 million, including approximately $1.1 million
of working capital.following properties:
NUMBER OF CONSIDERATION
LOCATION STATIONS RECEIVED
-------- ---------- ----------------
Detroit, MI........................................ 1 station $ 20.0 million
Omaha, NE.......................................... 2 stations 38.0 million
Rochester, NY...................................... 1 station 0.7 million
Sacramento, CA..................................... 2 stations 29.0 million
San Jose, CA....................................... 1 station 3.2 million
Seattle, WA........................................ 1 station 1.8 million
St. Louis, MO...................................... 1 station 10.0 million
West Palm Beach, FL................................ 3 stations 29.0 million and
a tower property
The Company also paid $1.0 million for a two-year option to
purchase for $1.00acquired the New England Weather Service (which provides weather
information(NEWS), located in
Hartford, CT, during 1997. The Company exercised an option to subscribers).acquire NEWS
which it had obtained in 1995; consideration paid consisted of an option
purchase price of $1.0 million, which had been paid in 1995, and nominal
purchase consideration at the time of closing.
During 1997, the Tower Subsidiary consummated the following acquisitions:
CONSIDERATION
DESCRIPTION/LOCATION NUMBER OF TOWERS GIVEN
-------------------- ---------------- -------------
Northern California................... 1 tower $2.0 million
Northern California................... 110 towers and a site 45.0 million
management business
Mid-Atlantic/California/Texas......... 128 towers and video, 70.3 million
voice and data transport
Massachusetts/Rhode Island/Oklahoma... 9 towers and a landsite 7.8 million
Connecticut/Rhode Island.............. 6 towers 1.5 million
Southern California................... 56 towers and a site 33.5 million
management business
Washington, D.C....................... 1 tower 0.9 million
Pennsylvania.......................... 6 towers 0.3 million
Maryland.............................. Building rights for 5 0.5 million
towers
Georgia, North and South Carolina..... 21 towers and a site 5.4 million
management business
Several geographic areas.............. Tower site development 13.0 million
businesses
Massachusetts......................... 3 towers 0.3 million
In August 1995,May 1997, the Company was prevented under the
then current Federal Communications Commission (FCC) regulations from acquiring
these stations,Tower Subsidiary and therefore loaned an aggregate of $35.5unaffiliated party formed a limited
liability corporation to own and operate communication towers which will be
constructed on over 50 tower sites in northern California. The Tower
Subsidiary paid approximately $0.8 million to the owner
of such stationsunaffiliated party and
an affiliate thereof . Upon receipt of FCC approvalcurrently owns a 70% interest in May,
1996, the escrow deposit of $2.0 million, the loans and $1.1 million of
available cash were used to finance the acquisition. The Company also paid $3.5
million to purchase the tower of one of the stations in October 1995.
3
Las Vegas: In October 1996, the Company acquired KMZQ-FM and KXTE-FM
(formerly KFBI-FM) for approximately $28.0 million. American had been
programming and marketing the stations pursuant to an LMA beginning in May 1996.
As part of such transaction, American paid an additional $0.2 million to acquire
the seller's right (and obligation) to purchase KXNT-AM (formerly KVEG-AM) for
approximately $1.9 million which purchase, as noted below, was consummated in
September 1996.
In September, 1996, the Company acquired the assets of KXNT-AM for
approximately $1.9 million. The Company had been programming and marketing the
station pursuant to an LMA beginning in May 1996.
In July 1996, the Company acquired the assets of KMXB-FM (formerly KJMZ-FM)
for approximately $8.0 million. The Company had been programming and marketing
the station pursuant to an LMA beginning in May 1996.
In July 1996, the Company acquired the assets of KLUC-FM and KXNO-AM for
approximately $11.0 million.
Philadelphia and Detroit: In May 1996, the Company consummated the
transactions contemplated by a merger agreement with Marlin Broadcasting, Inc.
(Marlin). American acquired WFLN-FM in Philadelphia, Pennsylvania, WQRS-FM in
Detroit, Michigan and WTMI-FM in Miami, Florida for an aggregate purchase price
of approximately $58.5 million, togetherentity, with the assumption of approximately
$9.0 million of long-term debt which was paid in full at closing. The principal
stockholder of Marlin immediately thereafter acquired WTMI-FM from the Company
for approximately $18.0 million in cash. Proceeds from the sale of WTMI-FM were
held in an escrow account pursuant to a like-kind exchange agreement and were
utilized to partially fund the Portland and San Jose transaction discussed
below. The Company retained certain Philadelphia real estate and tower assets
valued at approximately $1.5 million. In June 1996, the Company entered into an
agreement withremaining 30% owned by
an unaffiliated party pursuant to which it will exchange the
assets of the Philadelphia station for two stations in Sacramento and sell the
Detroit station for approximately $20.0 million in cash. This party began
programming the Philadelphia and Detroit stations under an LMA beginning in June
1996. The net assets and liabilities of the Detroit and Philadelphia stations
included in this exchange agreement are carried on the consolidated balance
sheet as net assets held under exchange agreement. See 1997 Station
Acquisitions - Sacramento.
Portland: In July 1996, the Company acquired the assets of KBBT-FM
(formerly KDBX-FM) for approximately $14.0 million. The Company also granted the
seller the right to exercise American's option to acquire the assets of WBNW-AM.
Portland and San Jose: In August 1996, the Company acquired the assets of
KUPL-FM and KKJZ- FM in Portland, Oregon and KSJO-FM and KUFX-FM in San Jose,
California for approximately $103.0 million. The acquisition was partly financed
through $18.0 million in restricted cash. (See Philadelphia and Detroit
transaction discussed above).
Sacramento: In September 1996, the Company acquired the assets of KSSJ-FM
for approximately $14.0 million. The Company had been programming and marketing
the station pursuant to an LMA beginning in July 1996. (See Pending Transactions
- - EZ Merger - Sacramento for information with respect to the exchange of the
station).
In July 1996, the Company acquired the assets of KSTE-AM serving Rancho
Cordova, California for approximately $7.25 million. The Company had been
programming and marketing the station pursuant to an LMA beginning in April
1996. (See Pending Transactions - West Palm Beach for information with respect
to the exchange of the station).
1996 Station Dispositions
In December 1996, the Company sold WNEZ-AM serving New Britain, Connecticut
for approximately $710,000, and a loss of approximately $140,000 was recorded
upon disposition.
4
1996 Tower Acquisitions:
In November 1996, the Tower Subsidiary acquired a 32.5 percent interest in
a partnership for approximately $325,000. The partnership owns and operates a
tower site in Los Angeles, California and was formed by the minority partner in
the Needham venture discussed below.
In October 1996, the Tower Subsidiary acquired the assets of tower sites
located in Hampton, Virginia and North Stonington, Connecticut for approximately
$1.4 million and 1.0 million, respectively.
In July 1996, the Tower Subsidiary entered into an agreement with an
unaffiliated party to operate a tower site in Needham, Massachusetts. In
connection therewith, the Tower Subsidiary advanced approximately $3.8 million
to the corporation.party. The Tower Subsidiary has a 50.1% interest inis obligated to provide additional
financing for the corporation.construction of these and any additional towers it may
approve; the obligation for such 50 tower sites is estimated to be
approximately $5.3 million. The accounts of the limited liability corporation
are included in the consolidated financial statements with the other shareholder'sparty's
investment reflected as minority interest in subsidiary onsubsidiary.
For further information regarding these transactions, see the consolidated balance sheet.
In April 1996,Consolidated
Financial Statements.
3
1998 Station Acquisitions and Dispositions:
During the first quarter of 1998, the Company has consummated the following
station exchange transactions:
GIVEN BY COMPANY RECEIVED BY COMPANY
- ----------------------------------- -------------------------------------------------------
NUMBER OF NUMBER OF OTHER CONSIDERATION
LOCATION STATIONS LOCATION STATIONS GIVEN
-------- ---------- -------- ---------- -------------------
Dayton, OH.............. 6 stations Kansas City, MO......... 4 stations None
Kansas City, MO......... 2 stations St. Louis, MO........... 1 station $7.0 million
During the first quarter of 1998, the Company has disposed of the following
station:
CONSIDERATION
LOCATION NUMBER OF STATIONS RECEIVED
-------- ------------------ -------------
Sacramento, CA................................ 1 station $4.0 million
During the first quarter of 1998, the Company has consummated the following
station acquisition:
CONSIDERATION
LOCATION NUMBER OF STATIONS GIVEN
- -------- ------------------ -------------
Riverside, San Bernadino/Sun City, CA......... 2 stations $60.0 million
1998 Tower Acquisitions:
During the first quarter of 1998, the Tower Subsidiary acquired BDS Communications, Inc. and
BRIDAN Communications Corporation for approximately $9.1consummated the
following acquisitions:
NUMBER OF CONSIDERATION
DESCRIPTION/LOCATION TOWERS GIVEN
-------------------- --------- -------------
Tucson, AZ.............................................. 6 towers $12.0 million
Palm Springs, CA........................................ 1 tower 0.75 million
Northern CA............................................. 11 towers 11.8 million
which consisted
of 257,495 shares of the Company's Class A Common Stock valued at approximately
$7.4 million and the assumption of approximately $1.7 million of long-term debt,
of which approximately $1.5 million was paid at closing. BDS Communications owns
three towers in Pennsylvania and BRIDAN Communications manages or has sublease
agreements with respect to approximately forty tower sites located throughout
the Mid-Atlantic region.
In February 1996,January 1998, the Tower Subsidiary acquired Skyline Communications and
Skyline Antenna Management for approximately $3.3 million which consisted of
26,989 sharesconsummated an agreement to acquire
all of the Company's Class A Common Stock valued atoutstanding stock of Gearon & Co. Inc. (Gearon), a company based in
Atlanta, Georgia, for an aggregate purchase price of approximately $0.8$80.0
million $2.2consisting of approximately $32.0 million in cash and assumed
liabilities and the assumptionissuance of approximately $0.35.3 million shares of long-term debt, which was paid at closing. Skyline Antenna Management managesTower
Class A Common Stock. Gearon is engaged in site acquisition, development,
construction and facility management of wireless network communications
facilities on behalf of its customers and owns or has sublease agreements onunder construction
approximately 200 antenna sites, primarily in40 tower sites. Following consummation, the northeast region of the United States.
Equity and Debt Financings
February Public Offerings: In February 1996, American consummated an
offering of 5,514,707Tower Subsidiary
granted options to acquire up to 1,200,000 shares of Class A Common Stock at
an offeringexercise price of $27
per share, including 4,501,337 shares sold by American$13.00 to employees of Gearon.
In January 1998, the Tower Subsidiary consummated the acquisition of OPM-
USA-INC. (OPM), a company which owned approximately 90 towers at the time of
acquisition. In addition, OPM is in the process of developing an additional
160 towers that are expected to be constructed during the next 12 to 18
months. The purchase price, which is variable and 1,013,370 shares soldbased on the number of
towers completed and the forward cash flow of the completed OPM towers, could
aggregate up to $105.0 million, of which approximately $21.3 million was paid
at the closing. The Tower Subsidiary had also agreed to provide the financing
to OPM to enable it to construct the 160 towers in an aggregate amount not to
exceed $37.0 million (less advances as of consummation aggregating
approximately $5.8 million).
In January 1998, the Company transferred to the Tower Subsidiary 14
communications sites currently used by the selling stockholders. Proceeds to American,Company and various third parties
(with an ARS net book value of underwriters' discountapproximately $4.2 million), and associated costs, were approximately $114.5 million. Concurrent with the stock offering, American sold $175,000,000 principal amountCompany
and the Tower Subsidiary entered into leases or subleases of space on the
transferred towers. Two additional communications sites will be transferred
and leases entered into following acquisition by the Company of the American
Notes at a discount of $1,419,250 to yield 9.125%. Proceeds of the debt offering
to American, net of the underwriters' discountsites from
third parties.
4
Equity and associated costs, were
approximately $167.5 million.
June Private Offering: In June 1996, American consummated an offering
exempt from registration under the Securities Act of 137,500 shares of 7%
Convertible Exchangeable Preferred Stock, $1,000 liquidation preference. Net
proceeds to American from the offering were approximately $132.8 million. The
Convertible Preferred Stock is convertible into shares of Class A Common Stock
at a conversion price of $42.50, subject to adjustment for certain dilutive
stock issuances, and exchangeable at American's option after June 30, 1997 for
the Convertible Exchange Debentures which are convertible into Class A Common
Stock on the same terms as the Convertible Preferred Stock.Debt Financings
January 1997 Private Offering: In January 1997, American consummated an
offering exempt from registration under the Securities Act ofsold 2,000,000
shares of 11 3/8% Cumulative Exchangeable Preferred Stock.Stock, $100 liquidation
preference per share (the Cumulative Exchangeable Preferred Stock). Net
proceeds to American from the offering were approximately $192.4$192.1 million. The Cumulative
Exchangeable Preferred Stock is exchangeable at American's option for the
Exchange Debentures. American has the option, on or prior to January 15, 2002,
to pay dividends on the Cumulative Exchangeable Preferred Stock (and/or
interest on the Exchange Debentures) in the form of additional shares of
Exchangeable Preferred Stock (or Exchange Debentures). The Cumulative
Exchangeable Preferred Stock and Exchange Debentures are redeemable for cash
at any time after January 15, 2002 at the option of American, and American is
required to redeem all of the Cumulative Exchangeable Preferred Stock
outstanding on January 15, 2009.
5
Credit Agreements: In January 1997, American entered into two credit
agreements (the American Credit Agreement) pursuant to which American may
borrow a maximum combined principal amount of $900.0 million, of which $150.0
million iswas available only to finance the repurchase of certain note
obligations of EZ which will bewere assumed by the Company in connection with the EZ
Merger.Merger (the EZ Note commitment) and has since been cancelled. In November 1996,October 1997,
the Tower Subsidiary entered into the 1997 ATS Credit Agreement, which
replaced the previously existing credit agreement. All amounts outstanding
under the previous agreement were repaid with proceeds from the 1997 ATS
Credit Agreement. The 1997 ATS Credit Agreement provides the Tower Subsidiary
with a credit$250.0 million loan commitment based on ATS maintaining certain
operational ratios and an additional $150.0 million loan at the discretion of
ATS, which is available through June 2005.
In order to facilitate future growth and, in particular, to finance its
construction program, ATS is in the process of negotiating an amended and
restated loan agreement (the Tower
Credit Agreement) pursuant to which Tower may borrow a maximum principal amount
of $90.0 million,with its senior lenders, pursuant to which the
initial funding occurred in December
1996.
1997 Station Acquisitions:
Baltimore: In February 1997,existing maximum borrowing of the Company acquired the assets of WWMX-FM and
WOCT-FM for approximately $60.0 million and $30.0 million, respectively. The
Company had been programming and marketing the stations pursuant to an LMA
beginning in November 1996.
Boston, Worcester: In January 1997, the Company acquired the assets of
WAAF-FM and WWTM-AM in Worcester, Massachusetts for approximately $24.8 million.
The Company had been programming and marketing the stations pursuant to an LMA
beginning in August 1996.
Dayton: In February 1997, the Company acquired the assets of WXEG-FM for
approximately $3.6 million. The Company had previously loaned approximately $3.6Operating Subsidiaries would be increased
from $400.0 million to the owner of the station. In December 1995, the Company entered into
an agreement$900.0 million, subject to compliance with Steven B. Dodge, Chairman of the Boardcertain
financial ratios, and Chief Executive
Officer of the Company, relatingATS would be able to this station pursuant to which Mr. Dodge had
agreed to provide financing to a newly organized company which acquired the
station in December 1995. Pursuant to the agreement, the Company acquired Mr.
Dodge's approximately $2.2 million loan (including accrued interest) which had
been assumed by the new owner, along with his right to acquire the station. The
Company also loanedborrow an additional approximately $1.4$150.0
million, subject to the new ownercompliance with certain less restrictive ratios.
Borrowings under an amended loan agreement would also be available to finance
acquisitions. There can be no assurance that such negotiations will result in
the acquisitionexecution of the station. The acquisition was financed with
proceeds from the loans. The Company had been programming and marketing the
station pursuantdefinitive loan agreements on terms satisfactory to an LMA beginning in April 1996.ATS.
PENDING TRANSACTIONS
CBS Merger: In FebruarySeptember 1997, Company acquired the assets of WLQT-FM and WBTT-FM
(formerly WDOL-FM) for approximately $12.0 million. The Company had previously
loaned approximately $12.0 million to the owner of the stations. The acquisition
was financed with proceeds from the loan. The Company had been programming and
marketing the stations pursuant to an LMA beginning in April 1996.
Rochester: In February 1997, the Company consummated the transactions
contemplated by a series of agreements pursuant to which the Company acquired
the assets of WVOR-FM, WPXY-FM, WHAM-AM and WHTK-AM for approximately $31.5
million, including working capital. The Company had previously loaned
approximately $28.5 million to the owner of the stations. The acquisition was
financed with proceeds from the loan, a $2.0 million escrow deposit and
available cash. In accordance with a October 1996 consent decree with the
Antitrust Division of the U.S. Department of Justice and the Attorney General of
the State of New York, the Company is required to divest WHAM-AM and WVOR- FM,
within a certain period of time. See Pending Transactions - Rochester and
Cincinnati.
Sacramento: In February 1997, the Company consummated an agreement to
exchange the Philadelphia station which it acquired as part of the Marlin
Transaction for KSFM-FM and KMJI-AM serving Sacramento, California. The Company
also sold the Detroit station acquired as part of the Marlin transaction to the
owner of the Sacramento stations for approximately $20.0 million. See Recent
Transactions -Philadelphia and Detroit and Pending Transactions - Sacramento.
In March 1997, the Company acquired the assets of KXOA-AM/FM and KQPT-FM in
Sacramento, California for approximately $50.0 million. The Company began
programming and marketing the stations pursuant to an LMA beginning in August
1996. See Pending Transactions - Sacramento.
6
San Jose: In February 1997, the Company acquired the assets of KBAY-FM and
KKSJ-AM for approximately $31.0 million. The Company had been programming and
marketing the stations pursuant to an LMA beginning in August 1996.
West Palm Beach: In March 1997, the Company consummated an agreement to
exchange the assets of KSTE-AM in Sacramento, California plus approximately
$33.0 million in cash for the assets of WEAT-FM, WEAT-AM and WOLL-FM in West
Palm Beach, Florida. The party to the exchange agreement began programming and
marketing KSTE-AM pursuant to an LMA and the Company began programming and
marketing the West Palm stations pursuant to an LMA beginning in August 1996.
Under current FCC regulations, the Company is permitted to own five FM stations
in West Palm Beach; accordingly, it will be required to dispose of one station
in West Palm Beach.
Pending Transactions
Charlotte, Kansas City, Philadelphia, Pittsburgh, New Orleans, Sacramento,
Seattle, and St. Louis:
In August 1996, the Company entered into a merger agreement
(aswith CBS which was amended and restated in September 1996) with EZDecember 1997 pursuant to which EZ will be merged directly with and
into the
Company . Pursuant to the merger agreement,will become a wholly-owned subsidiary of CBS and each holder of EZARS
Common Stock, at the effective time of the CBS Merger, will receive (i) $11.75for each
share of ARS Common Stock held by such holder, $44.00 per share in cash and
(ii) 0.9one share of ATS Common Stock of the same class as the ARS Common Stock to be
surrendered. The balance of the shares of the Company's Class
A Common Stock. Based on the numberATS owned by ARS will be distributed
to holders of shares of EZ Common Stock outstanding at
December 31, 1996, the Company will pay approximately $107.4 million in cash and
issue approximately 8,228,400 shares of the Company's Class A Common Stock
(excluding options to purchase an aggregateARS common stock and will be transferred to
holders of 514,400 sharesARS Convertible Preferred Stock upon conversion thereof. The CBS
Merger has been approved by the ARS common stockholders and did not require
approval of the Company's
Class A Common Stock which will be assumed pursuant to the EZ Merger). EZ
currently owns and/or operates twenty-six radio stations in eight markets as
follows: WSOC- FM and WSSS-FM in Charlotte, North Carolina; KFKF-FM, KBEQ-FM and
KOWW-AM in Kansas City, Missouri; WIOQ-FM and WUSL-FM in Philadelphia,
Pennsylvania; WBZZ-FM and WZPT-FM in Pittsburgh, Pennsylvania; WRNO-FM, WEZB-FM
and WBYU-AM in New Orleans, Louisiana; KNCI- FM, KRAK-FM and KHTK-AM in
Sacramento, California; KZOK-FM, KMPS-AM/FM, KBKS-FM, KRPM-AM and KYCW-FM in
Seattle, Washington and KYKY-FM, KEZK-FM, KFNS-AM and KSD- AM/FM in St. Louis,
Missouri. As a result of existing FCC regulations and the Sacramento stations
either owned by the Company or under agreement to purchase or sell by the
Company, upon consummationCBS stockholders. Consummation of the EZCBS Merger, the Company will be required to
sell one radio station in Sacramento, KSSJ-FM, (in addition to KXOA-FM and
KSTE-AM). See West Palm Beach and Sacramento below. Termination of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) waiting period
with respect to the EZ Merger has occurred. Subject to the receipt of FCC
approval, the Company expects to consummate the EZ Merger in the second quarter
of 1997.
EZ is
a party to several pending transactions which are expected to be
consummated subsequent to the EZ Merger and the applicable regulatory approvals.
EZ is a party to an asset exchange agreement, pursuant to which EZ will exchange
the New Orleans stations for KBKS-FM and KRPM-AM in Seattle and $7.5 million. In
December 1996, EZ entered into an agreement pursuant to which it will exchange
its Philadelphia stations for stations in Charlotte, North Carolina, (WRFX-FM,
WPEG-FM, WBAV-AM/FM and WFNZ-AM) and purchase WNKS-FM in Charlotte for $10.0
million. Pursuant to FCC and HSR Act requirements, EZ then entered into an
exchange agreement pursuant to which it will exchange WRFX-FM for WDSY-AM/FM in
Pittsburgh and $20.0 million. In December 1996, EZ entered into an agreement to
sell KMPS-AM in Seattle for approximately $2.0 million. In November 1996, the
Company entered into an agreement to sell the assets of KSD-AM in St. Louis for
approximately $10.0 million and the buyer began programming and marketing the
station pursuant to an LMA in January 1997. All of such transactions are subject
to receipt of FCC approval and, in certain cases,conditioned on, among other things, the expiration or earlier termination of
the HSR Act waiting period and will be consummatedapproval of the Federal Communications
Commission (FCC) of the transfer of control of ARS's radio broadcasting
licenses. Subject to satisfaction of such conditions, the CBS Merger is
expected to occur in the second
or third quarterSpring of 1997.
Austin:1998.
Pending Radio Transactions:
Portsmouth: In February 1997, the Company executed its optionMarch 1998, entered into an agreement to acquiresell the assets of
KKMJ-FM, KAMX-FM (formerly KPTY-FM)WQSO-FM and KJCE-AMWZNN-AM serving Rochester, New Hampshire and WERZ-FM and WMYF-AM,
serving Exeter, New Hampshire for approximately $28.7$6.0 million. In August 1995, the Company paid a deposit of $3.0 million for a
two-year option to acquire the assets of these stations which will be credited
toward the purchase price. The Company has been programming and marketing the
stations pursuant to an LMA beginning in September 1995. The HSR Act waiting
period was terminated early and subjectSubject to the
receipt of FCC approval, the acquisition is expected to be consummated in the first half of 1997.
7
Buffalo: In August 1995, the Company entered into an agreement to acquire
the assets of WBLK-FM for approximately $8.0 million and then assigned its
purchase right and agreed to make loans to finance the purchase to PBRB. PBRB
consummated the acquisition in March 1996 utilizing the proceeds of the loan and
the Company began programming and marketing the station pursuant to an LMA
beginning in March 1996. The Company intends to exercise its option to acquire
WBLK-FM (which acquisition may take the form of a merger with PBRB). Subject to
the receipt of FCC approval, and the expiration or earlier termination of the
HSR Act waiting period, the acquisition or merger is expected to be consummated
in the second or third quarter of 1997.
Cincinnati : In January 1997, the Company entered into and consummated a
merger agreement pursuant to which it became a party to an agreement to acquire
the assets of WGRR-FM for approximately $30.0 million. The Company began
programming and marketing the station pursuant to an LMA beginning in March
1997. American issued approximately 18,300 shares of Class A Common Stock
pursuant to such merger. The HSR Act waiting period was terminated early and FCC
approval has been received. The acquisitiontransaction is expected to be consummated in the
second quarter of 1997.
Fresno:1998.
Portland, Sacramento, San Francisco and San Jose: In July 1996,April 1997, the Company
entered into an asset exchange agreement pursuant to purchasewhich it will acquire
KINK-FM, serving Portland, Oregon, KUFX-FM
5
(formerly KBRG-FM), serving Fremont/San Francisco, California, $2.0 million in
a promissory note to ARS due September 30, 1998 or at the assetstime of KOQO-AM/certain
earlier events, and 150,000 shares of common stock of Latin Communications,
Inc., in exchange for KBRG-FM (formerly KBAY-FM), serving San Jose, and KRRE-
FM (formerly KSSJ-FM), serving Sacramento. The agreement also provides for approximately $6.0 million.the
exchange of KINK-FM for KBRG-FM in the event regulatory approval for the
exchange of KUFX-FM and KRRE-FM cannot be obtained. The Justice Department has
approved the exchange of KRRE-FM for KUFX-FM. The transaction is expected to
be consummated in the second quarter of 1998. The Company began programming
and marketing the stationsKINK-FM and KUFX-FM pursuant to an LMA beginningagreement in August
1996. A petitionJanuary
1998. At the same time the purchaser of KBRG-FM began programming and
marketing KBRG-FM pursuant to deny the assignment of the FCC licenses of these stations
was filed with the FCC in September 1996. American and the seller have filed
oppositions to the petition to deny and believe that it is without merit and
will not further affect or substantially delay consummation. Subject to the
receipt of FCC approvals,an LMA agreement.
Sacramento: In March 1998, the Company expects to consummate this acquisition in
the second quarter of 1997.
Omaha: In October 1996, the Company enteredenter into an agreement, as amended,
to sell KGOR-FM and KFAB-AM and Business Music Service for approximately $38.0
million. The carrying values of these assets have been adjusted from the
original purchase price allocation to reflect the anticipated net proceeds from
the sale and accordingly, no gain or loss will be recognized on the transaction.
Omaha net revenues of $3,504,000 and operating expenses of approximately
$2,486,000 are included in the accompanying statement of operations for the year
ended December 31, 1996. FCC approval has been received and the HSR Act waiting
period was terminated early. The Company expects to consummate the sale in the
first half of 1997.
Rochester: In February 1997, the Company entered into an agreement to sell
WCMF-AM for approximately $650,000. Net revenues and operating expenses included
in the accompanying statement of operations for the years ended December 31,
1994, 1995 and 1996 were not material. Subject to the receipt of FCC approval,
the Company expects to consummate the sale in the second quarter of 1997.
In October 1995, American entered into a joint sales agreement with the
owner of an FM station in Rochester under which the Company, inasset
exchange for a
fixed payment, had the right to sell advertising for the station and to retain
all such advertising revenue. American also acquired an assignable option to
purchase the station for approximately $5.0 million. In connection with the
consent decree described in Rochester and Cincinnati below, American assigned
this purchase option to the third party described below and the joint sales
agreement was canceled in February 1997. See Rochester and Cincinnati below.
In February 1997, the Company entered into an agreement to acquire the
assets of WAQB-FM, a newly licensed Class A FM radio station, for approximately
$3.5 million. FCC approval has been received and the Company expects to
consummate the acquisition in the first half of 1997.
Rochester and Cincinnati: In December 1996, the Company entered into an
agreement to exchange the assets of WHAM-AM, WVOR-FM and WHTK-AM, together with
$16.0 million for the assets of WKRQ-FM in Cincinnati, Ohio. (See 1997 Station
Acquisitions -Rochester). In connection therewith, the party to this agreement
began programming and marketing the Rochester stations pursuant to an LMA
beginning in February 1997. The Company began programming and marketing WKRQ-FM
pursuant to an LMA beginning in March 1997. FCC approval has been received and
pursuant to certain consent decrees entered into by both parties, the Antitrust
Division of the U.S. Department of Justice has approved this transaction. The
Company expects to consummate the exchange in the first half of 1997.
8
Sacramento: In October 1996, the Company entered into an agreement to sell
KXOA-FM for approximately $27.5 million in cash. The Company began programming
and marketing the stations pursuant to an LMA beginning in August 1996, which,
was terminated in January 1997 when the party to the agreement began programming
and marketing the station pursuant to an LMA. The HSR Act waiting period was
terminated early and subject to the receipt of FCC approval,
the Company expects
to consummate the saleCompany's KRAK-FM would exchange FCC frequencies with another radio
station also located in the first half of 1997.
In December 1996, the Company entered into an agreement to sell KMJI-AMSacramento market for approximately $1.5$4.4 million.
FCC approval has been receivedSan Jose and the Company
expects to consummate the sale in the first half of 1997.
San Jose:Monterey: In March 1997, the Company entered into a merger
agreement pursuant to which the Company will acquire the assets of KEZR-FM
serving San Jose and KLUE-FM serving Monterey, California in exchange for
approximately 723,000 shares of Class A Common Stock valued at approximately
$20.0 million and $4.0 million in cash. In June 1997, the Company and the
seller each received a Civil Investigative Demand from the Antitrust Division
of the Department of Justice requesting certain documentary materials
regarding the merger and the purchase, sale, trade or other transfer of radio
stations in San Jose, California. Subject to the receipt of FCC approval and
the expiration or earlier
terminationresolution of the HSR Act waiting period,matters raised by the Company expectsAntitrust Division described above,
the acquisition is expected to consummate the
mergerbe consummated in the firstsecond half of 1997.1998.
San Jose: In MarchOctober 1997, the Company entered into an agreement to sell
KKSJ-AMKSJO-FM for approximately $3.2$30.0 million. Subject to the receipt of FCC
approval, the Company
expectstransaction is expected to consummate the salebe consummated in the second quarterfirst half of
1997.
West Palm Beach:1998.
St. Louis: In March 1996,September 1997, the Company loaned PBRB $7.2 millionentered into an agreement to financesell
the acquisitionassets of WMBX-FM (formerly WHLG-FM) and WSTU-AM. The Company
has an option to acquire, and a right of first refusal with respect to,KFNS-AM serving the stations. In November 1996, PBRB sold WSTU-AM to a third party. The Company
intends to exercise its option to acquire WMBX-FM and WPBZ-FM (which
acquisitions may take the form of a merger of PBRB into the Company).St. Louis, Missouri market for approximately
$3.8 million. Subject to the receipt of FCC approval, and the expiration or earlier terminationtransaction is
expected to be consummated in the second quarter of 1998.
Temple: In May 1997, the Company entered into an agreement to acquire radio
station KKIK-FM, licensed to Temple, Texas (in the Austin area) for
approximately $3.7 million. Subject to the approval of the HSR
Act waiting periods, such acquisitions areFCC, the
transaction is expected to occurbe consummated in the thirdsecond quarter of 1997 utilizing proceeds from the WMBX-FM and WPBZ-FM loans in the
aggregate principal amount of approximately $17.3 million and $2.75 million in
cash.1998.
West Palm Beach: In December 1996,July 1997, the Company acquiredentered into an optionagreement to
purchase another FM
stationacquire WTPX-FM for approximately $11.0 million. The Company also agreedbegan programming
and marketing the station pursuant to loan upan LMA in June 1997. In October 1997,
the Company entered into an agreement to $150,000terminate these agreements.
In October 1997, the Company entered into an agreement to the party to this option agreement.sell WEAT-AM
serving West Palm Beach, Florida for approximately $1.5 million. Subject to certain conditions,
including
the receipt of FCC approval, the Company expectstransaction is expected to exercise its
option and consummate the acquisitionbe consummated in
the thirdsecond quarter of 1997.1998.
Pending Tower Subsidiary:Subsidiary Transactions:
In FebruaryDecember 1997, the Tower Subsidiary entered into agreementsa merger agreement with
three entitiesAmerican Tower Corporation (ATC) pursuant to which are affiliatedATC will merge with one anotherand
into ATS which will be the surviving corporation. Pursuant to the ATC merger,
ATS expects to issue an aggregate of approximately 31.1 million shares of ATS
Class A Common Stock (including shares issuable upon exercise of options to
acquire towerATC common stock which will become options to acquire ATS Class A
Common Stock). ATC is engaged in the business of acquiring, developing, and
leasing wireless communications sites to companies using or providing cellular
telephone, paging, microwave and a tower site management businessspecialized mobile radio services and is
located in Southern California for
approximately $32.1 million.31 states, primarily in the western, eastern and southern United
States. Consummation of the transaction is conditioned on,subject to, among other things, the
expiration or earlier termination of the HSR Act waiting period. Subject to such expiration or termination, the acquisitions areperiod, and is
expected to be consummatedoccur in the second quarterSpring of 1997.1998.
6
In December 1996,January 1998, the Tower Subsidiary entered into an agreement to purchase
the assets relating to a teleport business serving the Washington, D.C. area
for a purchase price of approximately $30.5 million, subject to receipt of FCC
approval. The facility is located in northern Virginia, inside of the
Washington Beltway, on ten acres.
In February 1998, the Tower Subsidiary entered into an agreement to acquire
a tower in Sacramento, California for approximately $1.2 million.
In March 1998, ATS entered into a letter of intent to acquire certain tower sites and tower site management agreements, located
primarilya company
which is in Northern California, forthe process of constructing approximately $42.0 million.40 towers in the Tampa,
Florida area, of which seven are presently operational. The Tower
Subsidiary also agreedpurchase price
will be equal to loanten times the sellers approximately $1.35 million.
Consummation"Current Run Rate Cash Flow" at the time of
the transaction is conditioned on, among other things,
negotiation and execution of definitive purchase and sale agreements and the
expiration or earlier termination of the HSR Act waiting period. Subject to such
expiration or termination, the acquisitionclosing which is expected to be consummatedoccur in the second quarterSpring of 1997.1999. The Companypurchase price
is also pursuingpayable in shares of Class A Common Stock (valued at market prices shortly
prior to closing) and, at the acquisitionselection of tower propertiesthe seller, cash in an amount not to
exceed 49% of the purchase price. "Current Run Rate Cash Flow" means twelve
(12) times the excess of net revenues over direct operating expenses for the
month preceding closing. ATS is obligated to advance construction funds to the
seller in an aggregate amount not to exceed $12.0 million in the form of a
secured note (guaranteed by the stockholders on a nonrecourse basis and
additional radio stations in new and existing markets, nonesecured by the stock of the seller), of which have
definitive purchase agreements.
9
Operating Philosophy
American's objective isapproximately $2.1 million has
been advanced to operate leading radio station groups in each of
its markets as measured by audience ratings and revenue share. Management
believes that station groups create the opportunity to develop leadership
positions within American's markets, which significantly improve its stations'
appeal to advertisers and their revenue and profit potential. American believes
that group, rather than individual, station results present a more meaningful
measure of performance because a significant percentage of revenues in most of
its markets is earned by companies owning multiple stations. Consistent with
such belief, American seeks to enhance the overall performance of its groups
through means such as complementary programming and joint marketing of its
individual stations.
To maintaindate or improve its position in each market, American combines
extensive research with an assessment of its competitors' vulnerabilities in
order to identify specific audience opportunities within each market. American
then tailors the programming, marketing and promotion of each station to
maximize its appeal to its target audience. Management seeks to create a
distinct and marketable personality for each of its stations in order to enhance
audience share and listener loyalty, and to protect against vulnerability to
other format competition. To help achieve this objective, American employs and
promotes distinctive, high-profile on-air personalities in many of its stations.
American's radio stations employ a number of programming formats, each of
which is designed to appeal to a specific target audience in each local market.
American's portfolio of stations is diversified in terms of format, target
audience and geographic location. Management believes this diversification helps
to insulate its performance from potential local economic downturns, competitive
attacks and changes in listening preferences. American's station groups are, in
many instances, composed of stations in different phases of development.
Management believes this configuration enables it to maximize the growth
potential of those station groups, while reducing the risks associated with
launching new formats and undertaking other means of improving under-performing
properties.
Management employs an operating philosophy designed to achieve market
leadership which includes: (i) owning multiple stations and establishing program
formats within its individual markets that target specific diverse demographics,
(ii) developing and maintaining popular programming to attract a large share of
the target audience, (iii) promoting its radio stations frequently to develop
high awareness among its target listeners, (iv) leveraging the skills of
experienced general managers with strong local market knowledge, and (v)
developing well trained client-oriented local sales professionals.
Strategic Programming of Station Groups: American customizes the
programming of its groups to maximize their combined audience share and revenue
potential. American does not utilize a predetermined formula to target
demographic niches; instead, American believes that each market has individual
characteristics and should be evaluated independently.
In certain cases, American utilizes stations to serve a demographic group
by operating stations with formats that target similar or complementary
audiences. For example, in Boston, American owns two AM stations with
complementary formats (Talk and Sports/Talk) and overlapping demographics (Men
35- 54). Management believes that if two of its stations which target similar
audiences can achieve a large enough percentage of that audience, it will be ableadvanced in April 1998.
Unless otherwise noted, consummation of these pending transactions is
expected to secure a higher percentage of the advertising directed to that audience
than its comparative market share of that audience.
Popular Programming: American tailors the programming, marketing and
promotion of each station to maximize its appeal to that station's target
audience and to create a distinct and marketable personality for each station.
An important element of this approach is American's strong preference for
employing and promoting high profile and marketable on-air personalities,
especiallyoccur in the morning drive day part, which is 6-10 a.m. In order to adjust
to developing trends and identify new opportunities, American conducts frequent
market research to provide its stations with the information necessary to refine
and improve their programming and assess the vulnerabilitiesfirst half of competitors.
10
Aggressive Station Promotion: American's stations typically engage in
significant local promotional activities, including extensive community
involvement. American's stations also typically advertise on local television,
utilize billboards and print media, participate in telemarketing and direct
mailings and sponsor local contests, concerts and events. In Boston, WBMX-FM
sponsors events such as "MIX Fest", WRKO-AM sponsors "Taste of Boston" and
WEEI-AM sponsors "The Hot Dog Safari". In Hartford, WZMX-FM sponsors an annual
"penny pitch" charity event designed to raise funds for the Hartford Children's
Hospital. See Community Involvement. American has also invested in database
marketing programs with the objective of developing more personal contact with
listeners.
Strong Local Management and Sales Effort: In each of its markets, American
employs a highly experienced general manager who is responsible for the
performance of the stations in his or her market. The general managers of
American's stations have an average of six years experience as general managers
and an average of more than twenty years experience in the radio industry. A
portion of each general manager's compensation is dependent on the financial
results of the stations in his or her markets, aligning the manager's goals with
those of American. As incentive compensation, American's general managers and
executive officers have been granted options to purchase shares of common stock
which are subject to vesting provisions over a five-year period. Since a
significant portion of American's revenues are generated from local advertising,
American also focuses on developing a high quality, client-oriented local sales
force at each radio station. Such a sales force allows American to establish and
maintain direct relationships with advertisers and capture significant
advertising dollars.
Acquisition Strategy
American intends to continue to pursue the acquisition of additional radio
stations in new and existing markets in order to achieve, among other things,
increased size and greater geographic diversification. American expects to
concentrate these efforts in markets ranked in the top 60 (with an emphasis on
markets ranked 10 through 50) in terms of radio advertising revenues where
management believes it can achieve a substantial market position. When
evaluating acquisition opportunities in new markets, American also assesses the
potential to achieve a leading position in audience share and to generate strong
cash flow growth through improved programming, marketing, sales and operating
efficiencies. While American intends to continue to focus its principal
acquisition efforts on radio stations, it also intends to continue to expand its
ownership and operation of communications towers and to explore the syndication
of radio programming. American intends to pursue acquisitions opportunistically
and to evaluate both market and station characteristics.
Market Selection Considerations: American intends to make acquisitions in
markets that provide the opportunity to obtain a leadership position in both
audience share and revenue share. In assessing its potential to achieve this
leadership, American evaluates the existence of under-served audience segments
and competitors with perceived vulnerabilities. In addition, American considers
the potential to acquire two or more FM stations in the market. American
believes the potential to acquire two or more FM stations is essential to its
ability to achieve leading audience shares, broad acceptance with advertisers,
and sustainable growth in profitability. American will also consider the
acquisition of AM stations which it believes have profit potential and whose
ownership will enhance American's overall appeal to advertisers.
American seeks to acquire stations in markets that have already witnessed
or are poised for significant group activity. American also closely examines the
state of the economy in its potential markets, specifically the size, historical
growth rates and projected future growth rates of the market's radio advertising
revenue, population and retail sales.
11
Station Selection Considerations: Within markets meeting the above
criteria, American intends to acquire stations in varying stages of development,
based primarily on management's evaluation of the target station's facilities,
including the relative strength and market coverage of its signal, and its past
and current operating performance. When entering a new market, American
generally plans to employ a "core station" strategy, acquiring a
well-established and profitable station, thereby reducing the risk of entering a
new market. Having established its presence in a new market, American may then
continue its selective acquisition of under-performing stations which generally
represent greater growth potential than well-established and profitable
stations. By applying its turnaround expertise, and leveraging the core
station's management and market presence, American believes that it will be able
to promote the development of under-performing stations and thereby enhance
asset value.
Purchase Price Considerations: American has never applied a fixed formula
to determine the purchase price of radio stations. In determining the purchase
price for an acquisition, management places emphasis on multiples of projected
station broadcast cash flow rather than historical measures. This is because
American frequently considers acquisitions of radio stations requiring
significant reconfiguration which have nominal or negative historical station
broadcast cash flow.
American believes that its acquisition strategy, if properly implemented,
could have a number of benefits, including the following: (i) diversification of
revenues and broadcast cash flow across a greater number of stations and
markets, (ii) more efficient utilization of its senior management team, (iii)
enhanced appeal to top industry management talent, and (iv) increased overall
scale which should broaden the range of and facilitate American's capital
raising activities.
Advertising Sales
Virtually all of the Company's revenues are generated from the sale of
local and national advertising for broadcast on its radio stations. In each of
1994, 1995 and 1996, approximately 77% and 23% of the Company's net revenues
were generated from local and national advertising, respectively. The Company
believes that radio is one of the most efficient and cost effective means for
advertisers to reach specific demographic groups. Advertising rates charged by
radio stations are based primarily on (i) a station's share of the audience in
the demographic groups targeted by advertisers, (ii) the number of stations in
the market competing for the same demographic groups and (iii) the supply of and
demand for radio advertising time. Rates are generally highest during morning
and afternoon commuting hours.
Depending on the format of a particular station, there are a predetermined
number of advertisements that are broadcast each hour. The Company determines
the number of advertisements broadcast hourly that can maximize available
revenue dollars without jeopardizing listening levels. The Company's revenues
vary throughout the year. The Company's first calendar quarter historically
produces the lowest revenues for the year, while each of the other quarters
produces roughly equivalent revenues. Although the number of advertisements
broadcast during a given time period may vary, the total number of
advertisements broadcast on a particular station generally does not vary
significantly from year to year. As is typical of the radio broadcasting
industry, American's stations respond to changing demands for advertising
inventory by varying prices rather than by varying the target inventory level
for a particular station. Most changes in revenues are therefore the result of
pricing changes rather than changes in the available inventory.
Local and most regional advertising sales are made by a station's sales
staff. To achieve greater control over advertising dollars, the Company's sales
force focuses on establishing direct relationships with local advertisers.
National sales are made by firms specializing in such sales and are compensated
on a commission-only basis. The majority of advertising contracts run for only a
few weeks.
12
Advertising sales in connection with its sports network generated
approximately 8% of the Company's revenues during 1996. The Company believes
that sports broadcasting, absent unusual circumstances, is a stable source of
advertising revenues. There is less competition for the sports listener, since
only one radio station can offer a particular game. In addition, due to the
higher degree of audience predictability, sports advertisers tend to sign
contracts which are generally longer term and more stable than the Company's
other advertisers. American's sports network also benefits from a dedicated and
experienced sales force that has specialized expertise in sports advertising.
The Company believes its strong multi-station combinations give it
significant advantages in the competition for advertising dollars. A duopoly in
a market better positions American to access a significant share of a given
demographic segment, making its stations more attractive to advertisers seeking
to reach that segment. In addition, management believes the larger size of the
American organization attracts a higher quality sales force, a key asset for the
profitability of a radio station.
Competition1998.
COMPETITION
Radio Broadcasting
The financial success of each of the Company's radio stations is dependent,
to a significant degree, upon its audience ratings and its share of the
overall radio advertising revenue within its geographic market and the
popularity of its programming within that market and, to a lesser extent, on
the economic health of the geographic market in which it operates. Radio
broadcasting is a highly competitive business. Each of the Company's radio
stations competecompetes for audience share and advertising revenue directly with
other media, such as billboards, newspapers, television, magazines, direct
mail, compact discs and music videos. With the elimination of restrictions on
the number of radio stations which may be owned nationally by a single
operator and the liberalization of local ownership restrictionrestrictions effected by
the Telecommunications Act of 1996, the radio industry is experiencing a
concentration of ownership, as a result of which, competition may intensify as
a limited number of larger companies with greater resources emerge.emerges. See
Federal Regulation of Radio Broadcasting below.
The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the
delivery of audio programming by cable television systems and by digital audio
broadcasting (DAB). DAB may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and
national audiences. The radio broadcasting industry historically has grown in
terms of total revenues despite the introduction of new technologies for the
delivery of entertainment and information, such as television broadcasting,
cable television, audio tapes and compact discs. Another possible competitor
to traditional radio is In Band On Channel (IBOC) digital radio. IBOC could
provide multi-channel, multi-format digital radio services in the same
bandwidth currently occupied by traditional FM radio services.
See Federal Regulation of
Radio Broadcasting below.
In addition to management experience, factors that may materially influence
a station's competitiveness include the station's rank in its market, its
authorized transmission power, general radio signal strength, audience
characteristics, local program acceptance and the number of characteristics of other
stations in the market area. The Company attempts to improve its competitive
position in each market by devoting extensive research to its stations'
programming, implementing advertising campaigns aimed at the demographic
groups for which its stations program and managing its sales efforts to
attract a larger share of advertising dollars.
Employees7
Tower Subsidiary
ATS competes for antennae site customers with wireless carriers that own and
operate their own tower networks and lease tower space to other carriers, site
development companies that acquire space on existing towers for wireless
providers and manage new tower construction, other national independent tower
companies and traditional local independent tower operators. Wireless service
providers that own and operate their own tower networks generally are
substantially larger and have greater financial resources than ATS. ATS
believes that tower location and capacity, price, quality of service and
density within a geographic market historically have been and will continue to
be the most significant competitive factors affecting owners, operators and
managers of communications sites.
ATS competes for acquisition and new tower construction site opportunities
with wireless service providers, site developers and other independent tower
operating companies, as well as financial institutions. ATS believes that
competition for acquisitions and tower construction sites will increase and
that additional competitors will enter the tower market, certain of which may
have greater financial resources than ATS.
EMPLOYEES
As of December 31, 1996,1997, American employed 1,9312,655 employees (1,237(1,910 full time
and 694745 part time persons). American has three agreements with the American
Federation of Television and Radio Artists (AFTRA) covering various on-air
personnel at four of its Boston stations, and at two of its Hartford stations.stations and two
of its Pittsburgh stations which expired on May 31, 1997 and are currently in
negotiation. American also has agreements with the International Brotherhood
of Electrical Workers, AFL- CIOAFL-CIO (IBEW) in Boston, expiring on April 30, 1997Cincinnati, and in Fresno
which expired on March 1, 1997, and is currently in negotiation. American
considers its relations with its employees, AFTRA, and IBEW to be
satisfactory.
13
Community Involvement
American considers its community involvement to be of considerable
importance, and, to that end, each of its stations participates in many
community programs, fund raisers and activities that benefit a wide variety of
organizations. Charitable organizations that have been the beneficiaries of
American's telethons, marathons, walkathons, swimathons, parades, food banks,
fairs and festivals include, among others, the American Cancer Society, American
Heart Association, Big Brothers, Big Sisters, Red Cross, United Way, Salvation
Army, Jimmy Fund (Dana Farber Cancer Institute), St. Jude's Hospital and many
other organizations.REGULATORY MATTERS
Federal Regulation of Radio Broadcasting
The radio broadcasting industry is subject to extensive and changing
regulatory oversight, governing, among other things, technical operations,
ownership and business and employment practices, and certain types of program
content (including indecent and obscene program material).
The ownership, operation and sale of radio broadcast stations (including
those licensed to American) are subject to the jurisdiction of the FCC, which
acts under authority granted by the Communications Act.Act of 1934, as amended
(Communications Act). The Communications Act prohibits the assignment of an
FCC license or anya transfer of control of an FCC licensee without the prior
written approval of the FCC. In determining whether to grant requests for
consents to such assignments or transfers, and in determining whether to grant
or renew a radio broadcast license, the FCC considers a number of factors
pertaining to the licensee (and proposed licensee) including compliance with
alien ownership restrictions and rules governing the multiple ownership and
cross-ownership of broadcast and other media properties, the "character" of
the applicant and those persons or entities holding "attributable" interests
in the applicant and compliance with the Anti-Drug Abuse Act of 1988. Among
other things, the FCC assigns frequency bands for radio broadcast stations;
issues, renews, revokes and modifies radio broadcast station licenses;
regulates transmitting equipment used by radio broadcast stations; and adopts
and implements regulations and policies that directly or indirectly affect the
ownership, operation, program content and employment and business practices of
radio broadcast stations. The FCC also has the power to impose penalties for
violations of its rules and the Communications Act.
On February 8, 1996, the President signed the Telecommunications Act of 1996
which substantially amended the Communications Act. The Telecommunications
Act, among other things, eliminated the national radio broadcast ownership
restrictions in the FCC's broadcast ownership regulations and raised the ceiling onincreased the
number of radio broadcast stations that a single entity may own in a local
radio market. The precise number of stations that may be commonly owned in a
particular local market depends upon the number of commercial radio stations
serving the localthat market.
The following is a brief summary of certain provisions of the
Communications Act and specific FCC rules and policies.8
Reference should be made to the Communications Act, the FCC's rules and the
public notices and rulings of the FCC for further information concerning the
nature and extent of federal regulation of radio broadcast stations.
License Renewal-Under present FCC rules, radio broadcast licenses are
granted for maximum terms of seven years and upon application may be renewed for
additional terms. The Telecommunications Act now permits the FCC to grant radio
broadcast licenses for terms up to eight years. The FCC has begun a rule making
proceeding in which it has proposed to extend the license term for radio
broadcast stations to the full eight year term permitted by the
Telecommunications Act. Broadcast licenses may be renewed through an application
toCommunications Site Business
Federal Regulations. Both the FCC and licensees are entitled to renewal expectancies. The
Communications Act authorizes the filingFAA regulate towers used for
wireless communications radio and television antenna. Such regulations control
the siting, lighting, marking and maintenance of petitions to deny a license renewal
application during specified periods aftertowers and may, depending on
the renewal application has been
filed. Interested parties, including memberscharacteristics of the public,tower, require registration of tower facilities and
issuance of determinations of no hazard. Wireless communications devices
operating on towers are separately regulated and independently licensed by the
FCC based upon the regulation of the particular frequency used. In addition,
the FCC also separately licenses and regulates television and radio stations
broadcasting from towers. Depending on the height and location, proposals to
construct new antenna structures or to modify existing antenna structures are
reviewed by the FAA to ensure that the structure will not present a hazard to
aircraft, and such a review is a prerequisite to FCC authorization of
communication devices placed on a tower. Tower owners also may file petitions
asbear the
responsibility for notifying the FAA of any tower lighting failures. ATS
generally indemnifies its customers against any failure to comply with
applicable standards. Failure to comply with applicable requirements may lead
to civil penalties.
The introduction and development of digital television also may affect ATS
and some of its largest customers. In addition, the structural and power
requirements for DTV transmission facilities may necessitate the relocation of
many currently co-located FM antennae. The construction and reconstruction of
this substantial number of antenna structures presents a means to raise issues concerning the renewal applicant's qualifications.
The FCC may not consider applications for the channel by other parties until it
first has decided to deny renewalpotentially
significant state and local regulatory obstacle to the incumbent. Before denying renewal to an
incumbent, the FCC must allow the licenseecommunications site
industry. As a hearing on the licensee's alleged
failure to satisfy the statutory standard. The Communications Act now prohibits
the FCC from considering whether another licensee would be preferable until it
first has determined that the incumbent does not qualify for renewal. In the
vast majority of casesresult, the FCC has renewed incumbent operators'
14
station licenses. Also, during certain periods when a renewal application is
pending,solicited comments on whether, and in what
circumstances, the transferabilityFCC should preempt state and local zoning and land use laws
and ordinances regulating the placement and construction of the applicant's license may be restricted.
Certain of EZ's stations have license renewal applications pending and this
could affect the timing of the consummation of the EZ Merger. American is not
aware of any facts or circumstances that would prevent it from obtaining renewal
of the radio broadcast licenses that it holds.communications
sites. There can be no assurance however, that each of American's licenses will necessarily be renewed.
Ownership Matters. The FCC's broadcast multiple ownership rules restrict
the number of radio broadcast stations one personas to whether or entity may own, operate or
control in a local market. The Telecommunications Act raised the limitation on
the number of radio broadcast stations that a single entity may own in a given
local market, as follows:
(i) In radio markets with 14 or fewer commercial radio stations, one
person or entity may hold attributable interests in up to five radio
stations, no more than three of whichwhen any such federal
preemptive regulations may be promulgated or, if adopted, what form they might
take, whether they would be more or less restrictive than existing state and
local regulations, or whether the constitutionality of such regulation, if
challenged, would be upheld.
Local Regulations. Local regulations include city and other local
ordinances, zoning restrictions and restrictive covenants imposed by local
authorities. These regulations vary greatly, but typically require tower
owners to obtain approval from local officials or community standards
organizations prior to tower construction. Local regulations can delay or
prevent new tower construction or site upgrade projects, thereby limiting
ATS's ability to respond to customer demand. In addition, such regulations
increase costs associated with new tower construction. There can be no
assurance that existing regulatory policies will not adversely affect the
timing or cost of new tower construction or that additional regulations will
not be adopted which increase such delays or result in any one service (i.e.,
AMadditional costs to
ATS. Such factors could have a material adverse effect on ATS's financial
condition or FM), as long asresults of operations.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances and
regulations, an owner of real estate or a lessee conducting operations thereon
may become liable for the commonly owned stations amountcosts of investigation, removal or remediation of
soil and groundwater contaminated by certain hazardous substances or wastes.
Certain of such laws impose cleanup responsibility and liability without
regard to no more
than 50%whether the owner or operator of the commercial radio stations in that market;
(ii) In radio markets with between 15real estate or operations
thereon knew of or was responsible for the contamination, and 29 commercial radio stations, one
personwhether or entity may hold attributable interests in upnot
operations at the property have been discontinued or title to six radio
stations, no more than fourthe property has
been transferred. The owner or operator of whichcontaminated real estate also may
be subject to common law claims by third parties based on damages and costs
resulting from off-site migration of the contamination. In connection with its
former and current ownership or operation of its properties, American and, in
any one service;
(iii)In radio markets with between 30 and 44 commercial radio stations,
one person or entity may hold attributable interest in up to seven
radio stations, no more than four of whichparticular, ATS may be potentially liable for environmental costs such as
those discussed above.
9
American believes it and ATS are in compliance in all material respects with
all applicable material environmental laws. ATS has not received any one service;written
notice from any governmental authority or third party asserting, and
(iv) In radio markets with 45 or more commercial radio stations, one person
or entity may hold attributable interests in up to eight radio
stations, no more than five of which may be in any one service.
The FCC rules also generally restrict the common ownership, operation or
control of (i) a radio broadcast station and a television broadcast station
serving the same local market, and (ii) a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
American, absent waivers, would not be permitted to acquire an attributable
interest in any daily newspaper or television broadcast station (other than a
low-power television station) in a local market where it then owned any radio
broadcast station. American is not
otherwise aware of, any reason why these cross-ownership
rules would require any changematerial environmental non-compliance, liability or
claim relating to hazardous substances or wastes or material environmental
laws. However, no assurance can be given (i) that there are no undetected
environmental conditions for which ATS might be liable in American's current ownership of radio
broadcast stations.
Programming and Operation: The Communications Act requires broadcasters to
serve the "public interest". A broadcast licensee is required to present
programming in response to community problems, needs and interest and to
maintain certain records demonstrating its responsiveness. The FCC will
generally consider complaints from listeners concerning a broadcast station's
programming when it evaluates the licensee's renewal application, but such
complaints may be filed and considered at any time. Stations also must follow
various FCC rulesfuture or (ii)
that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, sponsorship identification, the
broadcast of contests and lotteries and technical operation (including limits on
human exposure to radio frequency energy). From time to time, complaints may be
filed against American's stations alleging violations of these or other rules.
A complaint is pending against a station licensed to American alleging
violation of the political broadcasting rules by discriminatory political sales
practices. American believes that these complaintsfuture regulatory action, as well as compliance with future environmental
laws, will not either separately
or in the aggregate, result in either monetary forfeitures ofrequire ATS to incur costs that could have a material nature
or any other regulatory action which might have a materially adverse
effect on American's stations or FCC licenses.
15
In addition, licensees must developATS's financial condition and implement programs designed to
promote equal employment opportunities and must submit reports to the FCC on
these matters annually and in connection with the licensee's renewal
application. The FCC has begun a rule making proceeding to revise its equal
employment opportunity rules. At this time, however, American cannot predict
what changes, if any, the FCC will implement, or the effectresults of those changes on
American's current equal employment opportunity programs.
Local Marketing Agreements: In recent years, a number of radio stations,
including certain of American's stations, have entered into what are referred to
as "local marketing agreements" (LMAs), "time brokerage agreements" (TBAs) or
joint sales and service agreements. These agreements take various forms.
Separately owned and licensed stations may agree to function cooperatively with
respect to certain other matters, subject to compliance with the antitrust laws
and the FCC's rules and policies, including the requirement that the licensee of
each station maintain independent control over the programming and other
operations of its own station. A radio broadcast station that brokers time on
another radio broadcast station or engages in a TBA or LMA with a radio
broadcast station in the same market will be considered to have an attributable
ownership interest in the brokered radio station for purposes of the FCC's
multiple ownership rules, if the arrangement covers more than 15% of the
brokered station's weekly broadcast hours.
Failure to observe these or other FCC rules and policies may result in the
imposition of various sanctions, including admonishment, fines, the grant of
"short" (less than the full) renewal terms or, for particularly egregious
violations, the denial of a license renewal application, the revocation of FCC
licenses or the denial of FCC consent to acquire additional broadcast
properties.
Digital Audio Broadcasting: The FCC recently has allocated spectrum to a
new technology, digital audio broadcasting (DAB), to deliver satellite-based
audio programming to a national or regional audience and is considering
regulations for a DAB service. DAB may provide a medium for the delivery by
satellite or terrestrial means of multiple new audio programming formats with
compact disc quality sound to local and national audiences. Another form of DAB,
known as In-Band On Channel (IBOC) DAB could provide DAB in the present FM radio
band. Thus far, the FCC has not granted the pending requests for authorizations
to offer satellite radio, nor has it adopted regulations for the proposed
satellite radio service. A rule making proceeding is pending before the FCC to
adopt DAB regulations, however. There are currently several pending satellite
DAB applications, and the FCC has begun rulemaking to establish services and
operational standards for satellite DAB. The FCC has granted at least one
applicant a waiver to begin satellite construction. Implementation of DAB or
IBOC would provide an additional audio programming service that could compete
with American's radio stations for listeners, but the effect upon American
cannot be predicted.
Future Changes: The Congress and the FCC have under consideration, and may
in the future consider and adopt, new laws, regulations and policies regarding a
wide variety of matters that could, directly or indirectly: (i) affect the
operation, ownership and profitability of American and its radio stations; (ii)
result in the loss of audience share and advertising revenue of American's radio
stations; and (iii) affect the ability of American to acquire additional radio
stations or finance such acquisitions. Such matters include, but are not limited
to, for example, changes to the license renewal process; proposals to impose
spectrum use or other governmentally-imposed fees upon licensees; proposals to
repeal or modify some or all of the FCC's multiple ownership rules and/or
policies; proposals to restrict or prohibit the advertising of beer, wine and
other alcoholic beverages on radio and television; changes in the FCC's cross-
interest, multiple ownership, alien ownership and cross-ownership rules and
policies; changes to broadcast technical requirements; proposals to limit the
tax deductibility of advertising expenses by advertisers; and proposals to
auction the right to use the broadcast spectrum to the highest bidder, instead
of granting broadcast licenses and subsequent license renewals free of charge.
American cannot predict what other matters may be considered in the future,
nor can it judge in advance what impact, if any, the implementation of any of
these proposals or changes might have on its business.
16
Executive Officers of the Registrant
Steven B. Dodge has been Chairman of the Board, President and Chief
Executive Officer since the founding of the Company. Mr. Dodge was the founder
in 1988 of Atlantic Radio, L.P. Prior to forming Atlantic Radio L.P., Mr. Dodge
served as Chairman and Chief Executive Officer of American Cablesystems
Corporation, a cable television company he founded in 1978 and operated as a
privately-held company until 1986 when it completed a public offering in which
its stock was priced at $14.50 per share. American Cablesystems was merged into
Continental Cablevision, Inc. in 1988 in a transaction valued at more than $750
million, or $46.50 per share. Mr. Dodge serves as a director of American Media,
Inc. Mr. Dodge is 51 years old.
Joseph L. Winn has been the Treasurer, Chief Financial Officer and a
director since the founding of the Company. In addition to serving as Chief
Financial Officer of the Company, Mr. Winn was Co-Chief Operating Officer
responsible for Boston operations until May 1994 when Mr. Gehron joined
American. Mr. Winn served as Chief Financial Officer and a director of the
general partner of Atlantic Radio L.P. since its organization. He also served as
Executive Vice President of the general partner of Atlantic Radio L.P. from its
organization until June 1992, and as its President from June 1992 until the
organization of American. Prior to joining Atlantic Radio, L.P., Mr. Winn served
as Senior Vice President and Corporate Controller of American Cablesystems since
joining that company in 1983. Mr. Winn is 45 years old.
John R. Gehron joined American in May 1994 as a director and Co-Chief
Operating Officer and served as a director from then until February 16, 1995.
With more than twenty years of radio experience, Mr. Gehron began his career as
a program director in Philadelphia, New York and Chicago before he joined
Capital Cities/ABC in 1983 as Vice President-General Manager of WLS-AM/FM in
Chicago. In 1987, Mr. Gehron joined CBS and launched WODS-FM in Boston, bringing
the station rank from fifteen to first within three years. Mr. Gehron joined
Pyramid Broadcasting in 1989 as Vice President-General Manager for WNUA-FM in
Chicago which, under his aegis, established a national standard for the "smooth
jazz" format and became a major factor in the Chicago market. Mr. Gehron is 50
years old.
David Pearlman has been Co-Chief Operating Officer since the founding of
the Company, and served as a director from then until February 16, 1995. Mr.
Pearlman organized Multi Market Communications, Inc. in 1990. Mr. Pearlman has
over 24 years of radio experience that includes 14 years at Westinghouse where,
in a capacity of vice president/general manager, he launched an all news format
on WMAQ-AM in Chicago and negotiated the country's first FM sports rights
agreement in Houston at KODA-FM, which station became one of Westinghouse's top
performing radio stations under his management. Mr. Pearlman was the first three
time winner of Westinghouse's Winner's Circle Award, signifying management
excellence. In addition, Mr. Pearlman was the president and chief executive
officer of First City Broadcasting, a privately owned radio operating group that
experienced significant performance gains in key markets under his leadership.
Mr. Pearlman is 46 years old.
Don Bouloukos joined American in August 1996 and became Co-Chief Operating
Officer in September 1996. Prior to joining American, Mr. Bouloukos served as
president of Capital Cities/ABC owned radio stations for more than ten years,
having previously been Vice President-Operations for ABC owned radio stations.
Mr. Bouloukos, as Vice President-Operations for ABC, had been responsible for
the daily operations for the station group, which consisted of twelve stations.
In 1980, Mr. Bouloukos served as Vice President and General Manager of
WLS-AM/FM, the ABC owned station in Chicago and headed the AM station there
since 1970. With 24 years of radio experience, Mr. Bouloukos began his career at
WFYR in Chicago before joining WLS-AM/FM. Mr. Bouloukos is 48 years old.
Upon consummation the the EZ Merger, Alan Box is expected to be elected to
the office of Executive Vice President. Alan Box joined EZ in 1974 as the
General Manager of EZ's Washington, D.C. area radio station. He became Executive
Vice president and General Manager and a director of EZ in 1979, President of EZ
in 1985 and Chief Executive Officer of EZ in 1995. He serves as a director of
the George Mason Bankshares and the George Mason Bank. Previously, Mr. Box
served as the Chairman of the NAB Digital Audio Broadcast Task Force and as a
director of the NAB. Currently, Mr. Box is the Chairman of the NAB's Futures
Committee. Mr. Box is 45 years old.
17
operations.
ITEM 2. PROPERTIES.
American's corporate headquarters are located in leased facilities at 116
Huntington Avenue, Boston, Massachusetts.
The properties used by American's radio stations and owned by the Tower
Subsidiary consist of office and studio facilities, towers, and tower and
transmitter sites. Station studio and sales offices are generally located in a
downtown or business district. Antennas are located on either an American-owned
or leased tower.towers. Transmitter and tower sites are generally located to provide
maximum market coverage. American believes that owning its tower and
transmitter sites is an important goal for the Company inasmuch as such
ownership provides a station with the stabilizing benefits of predictable cash
flow and lower fixed operating costs.
American owns many of its towers, transmitter sites and studio facilities.
Certain office and studio facilities, towers and tower and transmitter sites
are also leased by American under leases that expire in three to twenty-five
years, most of which are renewable. American does not anticipate any
difficulties in renewing its leases, where required, or in leasing additional
space, if required, and it believes that its properties are adequate for its
operations.
American owns substantially all of the equipment it uses, including its
transmitting antennas, transmitters, studio equipment and general office
equipment.
American believes that its properties are in good condition and suitable for
its operations; however, American continually reviews opportunities to upgrade
its properties. Substantially all of the property and assets currently
owned and leased by the Tower subsidiary are pledged as security for the lenders
under the Tower Credit Agreement. See Notes to Consolidated Financial Statements of American for
additional information regarding the Company's credit agreements and the
minimum annual rental commitments of American.
ATS's interests in its communications sites are comprised of a variety of
fee interests, leasehold interests created by long-term lease agreements and
private easements, as well as easements, licenses or rights-of-way granted by
government entities. In rural areas, a communications site typically consists
of a three to five acre tract which supports towers, equipment shelters and
guy wires to stabilize the structure. Less than 2,500 square feet are required
for a self-supporting tower structure of the kind typically used in
metropolitan areas. Land leases generally have twenty (20) to twenty-five (25)
year terms, with three five-year renewals, or are for five-year terms with
automatic renewals unless ATS otherwise specifies. Some land leases provide
"trade-out" arrangements whereby ATS allows the landlord to use tower space in
lieu of paying all or part of the land rent. Pursuant to its loan agreement,
the senior lenders have liens on substantially all of the fee interests,
leasehold interests and other assets of the Operating Subsidiary which owns,
directly or, in certain cases, through subsidiaries all of the assets of the
consolidated group.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, American becomes involved in various claims and lawsuits
that are incidental to its business. In the opinion of American's management,
there are no legal or regulatory proceedings pending against American which
could have a material impact on financial position, the results of operations
or liquidity.
10
In February 1998, various letters alleging that WEGQ-FM, Lawrence,
Massachusetts, caused blanketing interference were filed at the FCC against
the station's pending license renewal application. American is investigating
the complaint and preparing a response. In March 1998, a letter complaining
about the programming of WPXY-FM, Rochester, New York, was filed with the FCC
against the station's renewal application. American has filed an opposition to
the programming complaint. The FCC has indicated that it considers the
complaints against both stations to be informal objections.
On August 13, 1997, a petition to deny alleging multiple ownership
violations, assertion of excessive control by American, and lack of candor
with respect to radio stations in the West Palm Beach market was filed against
American's application to acquire WTPX-FM, Jupiter, Florida, which was
submitted to the FCC in File No. BALH-970703GM (the WTPX-FM Application). On
September 16, 1997, American and the seller jointly requested the dismissal of
the WTPX-FM Application. The FCC granted the request without prejudice to
whatever further action, if any, the Commission may deem appropriate with
respect to the matters raised in the petition, and dismissed the petition as
moot. American is reviewing the allegations to ensure compliance with
applicable law.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSHOLDERS.
On December 19, 1997, holders of Class A Special MeetingCommon Stock, par value $.01 per
share, and Class B Common Stock, par value $.01 per share (collectively, the
Common Stock) of Stockholders was held on December 17, 1996 to consider
and act upon the following matters. The resultsAmerican, owning of record shares representing in excess of
50% of the stockholdercombined voting werepower of all the outstanding Common Stock as follows:
1. To approveof
December 19, 1997, consented in writing pursuant to Sections 228 and adopt251 of
the Delaware General Corporation Law to (i) the approval and adoption of the
Amended and Restated Agreement and Plan of Merger, by and among American, CBS
and R Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of CBS (CBS Sub), dated as of December 18, 1997 (Amended Agreement), pursuant
to which CBS Sub will merge with and into American and American will become a
subsidiary of CBS, and the transactions contemplated thereby and (ii) the
approval and adoption of the Agreement and Plan of Merger with EZ
Communications, Inc.between American and
ATS Merger Corporation, a Delaware corporation and wholly-owned subsidiary of
American, dated as of August 5, 1996, as amendedDecember 18, 1997 (the Tower Merger Agreement), which
provides for the merger (the Tower Merger) of ATS Merger Corporation with and
restated as of September 27, 1996.
Votes Cast For Votes Cast Against Votes Withheld Non-Vote
56,404,280 45,830 12,341 117,081
2. To approve an amendmentinto American, and the transactions contemplated thereby.
Because the stockholders having given their written consent to the Company's Restated Certificateapproval
and adoption of Incorporation, as amended, to increase the authorized numberAmended Agreement and Tower Merger Agreement own shares
representing in excess of shares50% of Preferred Stock andthe voting power of the outstanding American
Common Stock, their written consent is sufficient to permit, amongapprove and adopt the
Amended Agreement and the Tower Merger Agreement under the Delaware General
Corporation Law without regard to the consent/vote of any other things,
the consummationstockholder of
American. For this reason, American will not call a meeting of the
above merger.
Votes Cast For Votes Cast Against Votes Withheld Non-Vote
55,255,805 1,320,252 3,475 0
18stockholders to vote on the Amended Agreement or the Tower Merger Agreement
nor will American ask the holders of American Common Stock for a proxy
relating thereto.
11
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Shares of the Company's Class A Common Stock, par value $.01 per share (the
"ClassClass A Shares" )Shares) were quoted on the Nasdaq National Market System under the
symbol "AMRD" from the consummation of the Common Stock initial public
offering in June 1995 through February 4, 1997. On February 5, 1997, the
Company began trading on the New York Stock Exchange under the symbol "AFM".
The following table sets forth, for the calendar quarters indicated, the high
and low closing sales prices of the Class A Shares while quoted on the New
York Stock Exchange and the Nasdaq National Market System, as reported in
published financial sources. There is no public trading market for the
Company's Class B Common Stock, par value $.01 per share (the "ClassClass B Shares")Shares),
or the Company's Class C Common Stock, par value $.01 per share (the "ClassClass C
Shares")Shares).
1996: High Low
First Quarter ...................................$ 34 1/2 $ 25
Second Quarter .................................. 43 1/2 30 1/4
Third Quarter ................................... 43 33
Fourth Quarter .................................. 37 3/4 23 7/8
1995: High Low
Second Quarter (commencing June 9, 1995).........$ 26 $ 18 1/4
Third Quarter ................................... 29 3/4 23
Fourth Quarter ..................................
HIGH LOW
-------- ---------
1997:
First Quarter.......................................... $36 1/4 $28 1/4
Second Quarter......................................... 39 7/8 25 3/4
Third Quarter.......................................... 51 7/8 38 13/16
Fourth Quarter......................................... 53 5/16 47 5/8
HIGH LOW
-------- ---------
1996:
First Quarter.......................................... $34 1/2 $25
Second Quarter......................................... 43 1/2 30 1/4
Third Quarter.......................................... 43 33
Fourth Quarter......................................... 37 3/4 23 7/8
HIGH LOW
-------- ---------
1995:
Second Quarter (commencing June 9, 1995)............... $26 $18 1/4
Third Quarter.......................................... 29 3/4 23
Fourth Quarter......................................... 28 1/2 19 1/2
As of March 1, 1997,22, 1998, there were 380317 holders of record (which number does
not include the number of stockholders whose shares are held of record by a
broker or clearing agency but does include each such brokerage house or
clearing agency as one record holder) of the Class A Shares; 6246 holders of
record of the Class B sharesshares; and one holder of record of the Class C shares.
The Company has not paid dividends on its shares of Common Stock, and the
payment of dividends on Common Stock is restricted by the terms of the
American Credit Agreement, and the Indenture under which the 9% Senior
Subordinated Notes were issued in February 1996.1996 and the 9.75% EZ Senior
Subordinated Notes. It is not anticipated that any dividends will be paid on
any shares of any class of the Company's Common Stock in the foreseeable
future.
1912
ITEM 6. SELECTED COMBINED FINANCIAL DATA OF AMERICAN AND THE
PREDECESSOR ENTITIESENTITIES.
The following Selected Combined Financial Data have been derived from the
consolidated financial statements of American and its predecessor entities. On
November 1, 1993, American commenced operations following the merger of four
radio broadcasting entities: Stoner Broadcasting Systems, Inc., Atlantic
Radio, L.P., Multi Market Communications, Inc. and Boston AM Radio Corporation
(collectively, the Predecessor Entities.Entities). The following financial data present
the combined operating results and financial position of the Predecessor
Entities for the periods prior to the date of the Combination (November 1,
1993) for 1992 and the ten months ended October 31, 1993 as if such entities had
combined effective January 1, 1992October 31, 1993 or, if later, the commencement of
operations of certain Predecessor Entities. The information as of December 31,
1994, 1995, 1996 and 19961997 and for each of the years then ended is based on the
historical American consolidated financial statements. This selected financial
data should be read in connection with such financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Form 10-K.
SELECTED COMBINED FINANCIAL DATA(1)
AMERICAN RADIO SYSTEMS CORPORATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SELECTED COMBINED
FINANCIAL DATA
American Radio Systems Corporation
(In thousands, except per share data)
Combined Predecessor Entities (1) American (1) Combined (1) American
---------------------------------PREDECESSOR
ENTITIES(2) AMERICAN(2) COMBINED(2) AMERICAN
----------- ------------ ------------ ---------
Two
Ten Months Months Year
Year Ended Ended Ended Ended
Statement of December---------------------------------------
TWO
TEN MONTHS MONTHS YEAR
ENDED ENDED ENDED YEARS ENDED DECEMBER 31,
OctoberOCTOBER 31, DecemberDECEMBER 31, DecemberDECEMBER 31, Years Ended December 31,
Operations Data: 1992 (2)---------------------------------------
1993 1993 1993 (2) 1994 (2) 1995 (2) 1996 (2)
-------- ---- ----1997
----------- ------------ ------------ -------- -------- -------- ------------------
STATEMENT OF OPERATIONS
DATA:
Net revenues $ 46,306 $ 45,010revenues............ $45,010 $ 8,943 $ 53,953$53,953 $ 68,034 $ 97,772 $178,019 Station operating
expenses 36,698 37,058 6,493 43,551 50,129 66,448 120,004
Net local marketing
agreement expense 600 8,128
Depreciation and
amortization 4,465 5,900 1,415 7,315 9,920 12,364 17,810$ 374,118
Operating income
(loss) 1,486................. (845) 91 (754) 5,756 14,452 27,031 Interest expense- net 4,370 5,517 801 6,318 7,051 10,062 16,762
Gains (losses) on sale of
assets, net (964) 3,133 3,133 2,278 11,544 (308)55,033
Income (loss) before
extraordinary losses (4,233)losses... (4,877) (447) (5,324) (73) 9,105 5,135 (7,649)
Extraordinary losseslosses-
net.................... (1,160) (817) (2,333)
Net income (loss)
(4,233)applicable to common
stockholders........... (4,877) (447) (5,324) (1,233) 8,288(3,120) 7,473 162 Income(41,146)
Basic income (loss)
before extraordinary
losses per common
shareshare.................. $ (.08) $ (.21) $ .70 $ .01 $ (1.42)
Diluted income (loss)
before extraordinary
losses per common
share.................. $ (.08) $ (.21) $ .65 $ .01 $ (1.42)
======= ======== ======== ======== ========
Balance Sheet Data:==========
BALANCE SHEET DATA:
Working capital $ 354capital......... $ 1,331 $ 8,496 $ 16,342 $ 22,045 $ 34,986 $ 72,464
Total assets 56,872assets............ 64,236 63,424 158,121 248,796 796,303 2,054,205
Long-term debt,
including current
portion and deferred
interest 51,491interest............... 59,610 57,355 130,590 152,504 330,672
(1) The information for the Combined Predecessor Entities includes the results of operations of the following entities for the
following periods: Stoner and Atlantic - the year ended December 31, 1992 and ten months ended October 31, 1993; Multi Market -
the fiscal year ended August 31, 1992 (included in calendar year 1992) and the sum of (a) eight-twelfths of the fiscal year
ended August 31, 1993, and (b) the historical results for the two months ended October 31, 1993 (included in the ten months
ended October 31, 1993); and Boston AM - the one- month period ended December 31, 1992 (in calendar year 1992) and the ten
months ended October 31, 1993 (in that period). In addition, the 1993 financial information combines the Predecessor Entities
for the ten months ended October 31, 1993 and historical American financial statements for the two month period ended December
31, 1993.
(2) Year-to-year comparisons are significantly affected by the timing of acquisitions and dispositions of radio stations, which
have been numerous during the periods shown. See "Business" for a description of the acquisitions and dispositions made in
1996.
924,154
Redeemable Preferred
Stock.................. 215,550
20- --------
(1) Year-to-year comparisons are significantly affected by the timing of
acquisitions and dispositions of radio stations, which have been numerous
during the periods shown. See "Business" for a description of the
acquisitions and dispositions made in 1997.
(2) The information for the Combined Predecessor Entities includes the results
of operations of the following entities for the following periods: Stoner
and Atlantic--the ten months ended October 31, 1993; Multi Market--the sum
of (a) eight-twelfths of the fiscal year ended August 31, 1993, and (b)
the historical results for the two months ended October 31, 1993 (included
in the ten months ended October 31, 1993); and Boston AM--the ten months
ended October 31, 1993 (in that period). In addition, the 1993 financial
information combines the Predecessor Entities for the ten months ended
October 31, 1993 and historical American financial statements for the two
month period ended December 31, 1993.
13
SELECTED FINANCIAL DATA OF PREDECESSOR ENTITIES
The following Selected Financial Data for each of Stoner, Atlantic, Multi
Market and Boston AM presented below is derived from those respective
companies' financial statements which have been audited by independent
accountants.
SBS HOLDING, INC. AND SUBSIDIARY (STONER)
(IN THOUSANDS)
SBS Holding, Inc. and Subsidiary (Stoner)
(In thousands)
Ten Months
Year Ended Ended
December 27 OctoberTEN MONTHS
ENDED
OCTOBER 31,
1992 (a) 1993
(a)
------------ ---------------------
Statement of Operations Data :STATEMENT OF OPERATIONS DATA:
Net revenues $ 21,072 $ 20,797
Operating expenses 15,488 14,874
Depreciation and amortization 1,208 1,711
Corporate general and administrative expenses 2,355 1,883
-------- --------
Operating income 2,021 2,329
Interest expense, net 863 1,500
Gain (loss) on sale of assets, net (504) 3,133
Provision for income taxes 382 1,690
Cumulative effect ofrevenues........................................................ $20,797
Income before change in accounting principles (b) 155
-------- --------principle(a)..................... 2,272
Net income $ 272 $income.......................................................... 2,117
======== ========
Balance Sheet Data :=======
BALANCE SHEET DATA:
Working capital $ 2,333capital..................................................... $ 3,868
Total assets 16,083assets........................................................ 30,692
Long-term debt, including current portion 17,300 27,000
(a) Year-to-year comparisons are significantly affected by the timing of
acquisitions and dispositions of radio stations and, with respect to
the ten months ended Octoberportion........................... 27,000
- --------
(a) Includes cumulative effect of adopting Statement of Financial Accounting
Standards (FAS) No. 109, Accounting for Income Taxes, ($155).
ATLANTIC RADIO, L.P. AND SUBSIDIARIES
(IN THOUSANDS)
TEN MONTHS
ENDED
OCTOBER 31,
1993
seasonality.
(b) Includes cumulative effect of adopting Statement of Financial
Accounting Standards (FAS) No. 109, Accounting for Income Taxes, ($155)
in 1993.
21
Atlantic Radio, L.P. and Subsidiaries
(In thousands)
Ten Months
Year Ended Ended
December 27 October 31,
1992 (a) 1993 (a)
------------ ---------------------
Statement of Operations Data :STATEMENT OF OPERATIONS DATA:
Net revenues $ 22,416 $ 18,643
Operating expenses 19,103 16,252
Depreciation and amortization 2,591 3,414
Corporate general and administrative expenses 638 835
-------- --------
Operating income (loss) 84 (1,858)
Interest expense, net 3,086 2,972
Loss on sale of assets, net (460) (b)
-------- --------revenues........................................................ $18,643
Net loss $ (3,462) $loss............................................................ (4,830)
======== ========
Balance Sheet Data :=======
BALANCE SHEET DATA:
Working capital (deficiency) $ (269)........................................ $ 1,174
Total assets 27,253assets........................................................ 21,767
Long-term debt, including current portion 25,456 23,779
(a) Year-to-year comparisons are significantly affected by the timing of
acquisitions and dispositions of radio stations and, with respect to
the ten months ended Octoberportion........................... 23,779
14
MULTI MARKET COMMUNICATIONS, INC.
(IN THOUSANDS)
TWO MONTHS
YEAR ENDED ENDED
AUGUST 31, OCTOBER 31,
1993 seasonality.
(b) Relates to sale of two radio stations in Rochester, New York to Stoner.
22
Multi Market Communications, Inc.
(In thousands)
Two Months
Year Ended Year Ended Ended
August 31, August 31, October 31,
1992 1993 1993 (a)1993(A)
---------- ----------- -----------
Statement of Operations Data :STATEMENT OF OPERATIONS DATA:
Net revenues $ 2,565revenues............................................. $ 3,355 $ 510
Operating expenses 1,891 2,880 452
Depreciation and amortization 649 652 54
Corporate general and administrative expenses 664 146 82
------- ------- -------
Operating loss (639) (323) (78)
Interest expense, net 349 326 44
Other non-operating income (expense) (3) 52 7
Extraordinary gain 359 (b)
------- ------- -------Loss before extraordinary gain(b)........................ (597) (115)
Net loss $ (991) $loss................................................. (238) $ (115)
======= =======
=======
Balance Sheet Data :BALANCE SHEET DATA:
Working capital (deficiency) $(2,631)............................. $(3,664) $(3,727)
Total assets 6,888assets............................................. 6,532 6,423
Long-term debt, including current portion 4,332 4,250 4,200
(a) Comparison of the fiscal yearsportion................ 4,250 4,200
- --------
(a) Comparison of the fiscal year ended August 31 on a pro rata basis to the
two months ended October 31, 1993 is significantly affected due to
seasonality.
(b) Represents gain on the forgiveness of debt.
23
Boston AM Radio Corporation
(In thousands)
Period December 1, Ten Months
1992 Ended
to December 31, 1992 October 31, 1993(a)
-------------------- ------------------
Statement1993 is significantly affected due to
seasonality.
(b) Represents gain on the forgiveness of Operations Data :
Net revenues $ 253 $ 2,823
Operating expenses 216 3,560
Depreciation and amortization 17 286
------- -------
Operating income (loss) 20 (1,023)
Interest expense, net 72 784
------- -------
Net loss $ (52) $(1,807)
======= =======
Balance Sheet Data :
Working capital $ 921 $ 16
Total assets 6,648 5,354
Long-term debt, including current portion
and deferred interest 4,403debt.
BOSTON AM RADIO CORPORATION
(IN THOUSANDS)
TEN MONTHS
ENDED
OCTOBER 31,
1993(A)
-----------
STATEMENT OF OPERATIONS DATA:
Net revenues....................................................... $ 2,823
Net loss........................................................... (1,807)
=======
BALANCE SHEET DATA:
Working capital.................................................... $ 16
Total assets....................................................... 5,354
Long-term debt, including current portion and deferred interest.... 4,631
- --------
(a) Comparison of the fiscal year ended December 31 on a pro rata basis to the
ten months ended October 31, 1993 is significantly affected due to
seasonality.
2415
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company desires to take advantage of the new "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The Company's Report on Form
10-K contains "forward-looking statements" including statements concerning
projections, plans, objectives, future events or performance and underlying
assumptions and other statements which are other than statements of historical
fact. The Company wishes to caution readers that the following important
factors, among others, may have affected and could in the future affect the
Company's actual results and could cause the Company's actual results for
subsequent periods to differ materially from those expressed in any forward-lookingforward-
looking statement made by or on behalf of the Company: (a) the Company's
ability to meet debt service requirements; (b) the Company's ability to
compete successfully with other radio broadcasters; (c) the possibility of
adverse governmental action or regulatory restrictions from those
administering the Antitrustantitrust laws, the FCC or other governmental authorities;
(d) the availability of funds under its credit agreements to fund acquisitions
for the foreseeable future, or, if such funds are inadequate, the ability of
the Company to obtain new or additional debt or equity financing and the
potential dilutive effect of any such equity financing and (e) the Company's
ability to successfully operate existing and any subsequently acquired
stations and towers, particularly with the increasing number and geographic
diversity of its operations.
GeneralGENERAL
The Company's financial results are dependent on a number of factors,
including the general strength of the local and national economies, population
growth, ability to provide popular programming, local market competition,
relative efficiency of radio broadcasting compared to other advertising media,
signal strength and government regulation and policies. The primary operating
expenses involved in owning and operating radio stations are employee
salaries, depreciation and amortization, programming, expenses, solicitation of
advertising and promotion expenses.
During the years ended December 31, 1995promotion. The Company's tower segment revenues and 1994, noneoperating
expenses do not exceed 6% of the Company's markets represented more than 15% of the Company's station operating income
(i.e., net operating revenue less station operating expenses before depreciationconsolidated totals for all periods
presented and amortization), other than the Boston market. For the years ended December
31, 1994 and 1995 the Boston market accounted for an aggregate of approximately
27% of the Company's station operating income. As a consequence of the numerous
acquisitions consummated by the Company in 1996, the Boston markets significance
in relation to the Company's consolidated financial results has declined and
other markets, particularly the Hartford market, have emerged as significant
contributors to station operating income. For the year ended December 31, 1996,
both the Boston and Hartford market individually accounted for an aggregate of
approximately 20% of the Company's station operating income. While historically,
radio revenues in the Boston and Hartford markets have remained relatively
stable, an adverse change in the radio market or the station's relative market
position could have a significant impact on the Company's operating results as a
whole. The relative significance of the Boston and Hartford markets is expected
to decline in 1997 and thereafter, as the Company reports the full impact of
operating results of 1996 and subsequent station acquisitions.are not discussed separately.
The Company's revenues are affected primarily by the advertising rates the
Company's stations are able to charge. These 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 quarterly reports by independent
national rating services. Because audience ratings in the local market are
crucial to a station's financial success, the Company endeavors to develop
strong listener loyalty. The Company believes that the diversification of
formats on its radio stations helps the Company to insulate itself from the
effects of changes in musical tastes of the public onfor any particular format.
25
General - (continued)
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format
of a particular radio 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, stations often utilize trade or barter agreements to generate
advertising time sales in exchange for goods or services used in the operation
of the stations, instead of cash. The Company minimizes its use of trade
agreements and historically has sold over 93% of its advertising time for
cash.
Most advertising contracts are short-term and generally run only for a few
weeks. In each of 1994, 1995, 1996 and 1996,1997, approximately 77% of the Company's
revenue was generated from local advertising, which is sold primarily by each
station's sales staff. To generate national advertising sales, the Company
engages an independent advertising sales representative that specializes in
national sales for each of its stations.
The Company's first calendar quarter historically produces the lowest
revenues for the year, while each of the other quarters produces higher and
roughly equivalent revenues.
The 1995 major league baseball labor dispute adversely impacted the
Company's 1995 and 1994 financial performance. The Company has contractual
commitments to pay fees in connection with the exclusive rights to broadcast the
games of the Boston Red Sox (1996 and 1997 seasons) and the Boston Celtics
(through the 1998-99 seasons). The fees payable by American under these
arrangements currently aggregate more than $6.0 million annually through 1997;
$2.4 million in 1998 and $2.0 million in 1999 and are payable on a pro rata
basis for games played. During 1994, the major league baseball labor dispute
caused the Company to lose more than $1.5 million of booked advertising business
(plus, the Company believes, an indeterminate amount of other potential
advertising revenue) with a corresponding reduction in expenses of approximately
$1.0 million, representing mostly rights fees. Historically, the majority of a
total season's advertising is placed during the six months prior to the start of
the regular season. With respect to the 1995 Boston Red Sox season, the Company
continued to place advertising in anticipation of a resolution of the dispute in
time for the start of the regular season. However, in light of the uncertainties
as to the timing and nature of such resolution, and despite an aggressive
effort, placed advertising in 1995 was approximately $3.0 million less than
placed 1994 advertising (not giving effect to a $1.5 million loss in 1994 caused
by the labor dispute). The Company, over a period of several months, discussed
with the Boston Red Sox a reduction in the approximately $4.0 million of rights
fees payable for the full 1995 season (which would have been $3.5 million based
on the shortened season). Those discussions resulted in an amendment to the
agreement providing for a reduction in the 1995 fees to approximately $2.9
million, an extension of the agreement for one year to include the 1997 season
and a prepayment by American for such extension and of such season's fees of
$0.7 million. Due to the absence of a collective bargaining agreement between
the owners and the players, there can be no assurance that there may not be
future labor disputes that could adversely affect the Company's subsequent
financial performance.
2616
Results of OperationsRESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
As of December 31, 1996, the Company owned and/or operated forty-eight FM
and twenty-three AM stations. As of December 31, 1995, the Company owned
and/or operated fifteen FM and nine AM stations. The Company also entered into LMA's as
follows: September 1995 - KKMJ-FM, KAMX-FM and KJCE- FM in Austin; March 1996 -
WBLK-FM in Buffalo; April 1996 - WSJZ-FM in Buffalo, WLQT-FM, WBTT-FM and
WXEG-FM in Dayton and KSTE-AM in Sacramento; May 1996 - KSFM-FM KMJI-FM in
Sacramento, KMXB-FM, KMZQ-FM, KXTE-FM, KXNT-FM in Las Vegas; July - KSSJ-FM in
Sacramento; August 1996 - KNAX-FM, KVSR-FM, KOQO-AM/FM in Fresno, KBAY-FM and
KKSJ- AM in San Jose, KXOA-AM/FM and KQPT-FM in Sacramento, WEAT-AM/FM, WOLL-FM
in West Palm Beach and WAAF-FM and WWTM-AM in the Boston area; and November 1996
- - WWMX-FM and WOCT-FM in Baltimore. The Company sold KGGO-FM, KHKI-FM and
KDMI-AM in Des Moines in January 1995, WHWK-FM and WNBF-AM in Binghamton, New
York in March 1995, and WNEZ-AM in Hartford in December 1996. During 1996, the Tower
Subsidiary also continued to increase the number of tower sites and management
agreements with several acquisitions. These transactions have significantly
affected operations for the year ended December 31, 1996 as compared to the
year ended December 31, 1995. See the Notes to the Consolidated Financial
Statements for a description of the 1996 and 1995 station acquisitions.
Net revenues were $178.0 million for the year ended December 31, 1996
compared to $97.8 million in 1995, an increase of $80.2 million or 82.0%. This
increase was attributable to revenue growth in certain of the Company's
existing markets and more importantly the impact of the 1996 station
acquisitions. In addition, the 1995 major league baseball labor dispute
adversely impacted the Company's 1995 financial performance.
Operating expenses excluding net local marketing agreement expenses,
depreciation and amortization and corporate general and administrative
expenses were $120.0 million for the year ended December 31, 1996 compared to
$66.4 million in 1995, an increase of $53.6 million or 80.7%. This increase
was due to the impact of increased costs associated with the Company's revenue
growth.
Net local marketing agreement (LMA) expense was $8.1 million for the year
ended December 31, 1996 compared to $0.6 million in 1995, an increase of $7.5
million. The increase is related to the impact of 1996 station acquisitions as
the Company enters into LMA agreements prior to the consummation of many of
its acquisitions and dispositions. Net LMA expenses consist of fees paid or
earned by the Company under agreements which permit an entity to program and
market stations prior to their acquisition. Local marketing agreement expenses
for the year ended December 31, 1996 are presented net of approximately $2.3
million of revenues earned under such agreements.
Depreciation and amortization was $17.8 million and $12.4 million for the
years ended December 31, 1996 and December 31, 1995, respectively, an increase
of $5.4 million or 43.5%. This increase was primarily attributable to the
impact of increased expenses associated with the increase in depreciable and
amortizable assets resulting from 1996 station acquisitions.
27
Results of Operations - (continued):
Corporate general and administrative expense increased to $5.0 million for
the year ended December 31, 1996 from $3.9 million for the year ended December
31, 1995, an increase of $1.1 million or 28.2%. This increase was primarily
attributable to the higher personnel costs associated with supporting the
Company's greater number of stations.
Interest expense was $22.3 million for the year ended December 31, 1996
compared to $12.5 million for the 1995 period, an increase of $9.8 million or
78.4%. The increase is related to higher borrowing levels during 1996,
including the Senior Subordinated Notes issued in early 1996, and to a lesser
extent borrowings under the 1995 Credit Agreement.
Interest income was $5.5 million for the year ended December 31, 1996
compared to $2.4 million for the year ended December 31, 1995, an increase of
$3.1 million. The increase is attributable to interest income earned on
certain station investment notes and higher investable cash balances in 1996.
Gain (loss) on the sales of assets and other, net in 1996 was primarily
attributable to the loss of the sale of WNEZ-FM and to a lesser extent losses
on the sales of assets associated with the integration of certain station
facilities. The gain on sale of assets for 1995 represents gains on the sale
of radio broadcasting properties in Binghamton, New York ($3.9 million) and
Des Moines, Iowa ($7.7 million).
Provision for income taxes for the year ended December 31, 1996 was $4.8
million compared to $6.8 million for year ended December 31, 1995. The
effective tax rate for the year ended December 31, 1996 was
17
approximately 48.4% compared to 42.9% in 1995. The higher rate in 1996 is due
to the effect of permanent differences, principally amortization of non-deductiblenon-
deductible goodwill on acquisitions consummated through mergers.
Redeemable common and preferred stock dividends for the year ended December
31, 1996 were $5.0 million as compared to $0.8 million for the year ended
December 31, 1995. The 1996 dividends are attributable to the Convertible
Preferred Stock issued in late June 1996. The 1995 dividends were attributable
to the Series C Common Stock which was retired in June 1995 with proceeds from
the Company's initial public offering.
Net income applicable to common stockholders was $0.2 million for the year
ended December 31, 1996 compared to $7.5 million for the year ended December
31, 1995, a decrease of $7.3 million as a result of the factors discussed
above.
Broadcast cash flow (i.e., operating income before net LMA expenses,
depreciation and amortization and corporate general and administrative
expense) was $58.0 million for the year ended December 31, 1996 compared to
$31.3 million for the year ended December 31, 1995, a $26.7 million or 85.3 %85.3%
increase. Broadcast cash flow margins were 32.6% in 1996 compared to 32.0% in
1995.
Year Ended December 31, 19951997 Compared to Year Ended December 31, 19941996
As of December 31, 1995,1997, the Company owned and/or operated fifteenseventy-six FM
and ninetwenty-five AM stations. The Company acquired WRCH-FMSee the Notes to the Consolidated Financial
Statements for a description of the 1997 station acquisitions and
WNEZ-AM in Hartford in June
1994; WJYE-FMdispositions. During 1997, the Tower Subsidiary also continued to increase the
number of tower sites and WECK-AM in Buffalo and WQSR-FM and WBMD-AM in Baltimore in
September 1994; WIRK-FM and WBZT-AM in West Palm Beach in October 1994, WEGQ-FM
in Boston in January 1995, and WKGR-FM in West Palm Beach in July 1995. The
Company also entered into LMA'smanagement agreements with KKMJ-FM, KAMX-FM and KJCE-FM in September
1995. The Company sold WDJX-AM/FM in Louisville in May 1994; KGGO- FM, KHKI-FM
and KDMI-AM in Des Moines in January 1995 and WHWK-FM and WNBF-AM in Binghamton,
New York in March 1995.several acquisitions.
These transactions have significantly affected operations for the year ended
December 31, 19951997 as compared to the year ended December 31, 1994.
28
Results of Operations - (continued):1996.
Net Revenuesrevenues were $374.1 million for the year ended December 31, 1995 were $97.8 million1997
compared to $68.0$178.0 million in 1994, a $29.8for 1996, an increase of $196.1 million or 43.8% increase.110.2%.
This increase was principally attributable to acquisitions and also to revenue growth at substantially allin some of the Company's
radio stations, but was partially reduced
by a loss in revenue of one of American's Boston radio stations attributableexisting markets and, to a labor disputemore substantial extent, the impact of the EZ
Merger in major league baseball. See ---General above.1997 and acquisitions that occurred in the latter half of 1996 and
during 1997.
Operating expenses excluding net LMA expense,local marketing agreement expenses,
depreciation and amortization and corporate general and administrative
expenses were $66.5$241.8 million for the year ended December 31, 1995 and $50.11997 compared to
$120.0 million for the same period in 1994, a $16.41996, an increase of $121.8 million or
32.7%
increase.101.5%. This increase was due to station acquisitions as well asthe impact of increased sales commissions resulting fromcosts associated with
the Company's revenue growth.growth and acquisitions.
Net local marketing agreement expenses were $2.3 million for the year ended
December 31, 1997 compared to $8.1 million for 1996, a decrease of $5.8
million. Local marketing agreement expenses for the year ended December 31,
1997 and 1996 are presented net of approximately $4.1 million and $2.3
million, respectively, of revenues earned under such agreements. The change in
the balances for each period are based on the timing of pending station
acquisitions and dispositions.
Depreciation and amortization was $12.4$64.7 million and $9.9$17.8 million for 1995the
year ended December 31, 1997 and 1994,1996, respectively, a $2.5 million or 25.3% increase.an increase of $46.9
million. This increase was primarily attributable to intangiblethe impact of increased
expenses associated with the increase in depreciable and amortizable assets
relatedresulting from the 1996 and 1997 acquisitions.
Merger costs were $2.0 million for the year ended December 31, 1997 and
result from costs incurred to 1994 station acquisitions
which occurred primarilydate in connection with the third and fourth quarterspending sale of
1994.radio properties to CBS.
Corporate general and administrative expenses increased $1.7 million to $3.9$8.2 million for
1995the year ended December 31, 1997 from $2.2$5.0 million in 1994for the year ended December
31, 1996, an increase of $3.2 million or 77.3%64.0%. TheThis increase was due
primarily
attributable to the higher personnel costs associated with supporting the
Company's increasedgreater number of stations.stations and tower properties.
18
Interest expense was $12.5$59.7 million for 1995the year ended December 31, 1997
compared to $7.3$22.3 million for 1994, a $5.2the 1996 period, an increase of $37.4 million or
71.2% increase. This167.7%. The increase is related to increased
borrowings usedhigher borrowing levels under the Company's
credit agreements in 1997 as compared to fund station1996 which resulted from the 1996 and
1997 acquisitions.
Interest income was $2.4 million for the year ended December 31, 19951997
compared to $5.5 million for the year ended December 31, 1996, a decrease of
$3.1 million. The decrease is attributable to lower investable cash balances
in 1997 and higher interest income earned on certain station investment notes
in 1996 as compared to 1997.
Loss on the sale of assets and other, net was $5.7 million and $0.3 million
for the year ended December 31, 1997 and 1996, respectively. The 1997 loss was
primarily attributed to the loss on the termination of an acquisition in West
Palm Beach, FL somewhat offset by gains on certain asset and station sales.
The loss in 1996 was primarily attributable to the loss on the sale of a
station in Hartford, CT and to a lesser extent, losses on the sales of assets
associated with the integration of certain station facilities.
The income tax benefit for the year ended December 31, 1997 was $0.5 million
as compared to a provision of $4.8 million for year ended December 31, 1996.
The effective tax rate for the year ended December 31, 1997 was approximately
5.1% compared to 48.4% in 1996. The effective rate in 1997 is due to the
effect of permanent differences, principally amortization of non-deductible
goodwill.
Extraordinary losses for the year ended December 31, 1997 were $2.3 million,
net of a $1.5 million tax benefit. The extraordinary losses were a result from
the write-off of certain deferred financing costs pursuant to the
extinguishment of debt under the Company's previous credit agreements.
Preferred stock dividends for the year ended December 31, 1997 were $31.2
million compared to $5.0 million for the 1996 period. The dividends for the
1997 period include $9.6 million of dividends attributable to the Convertible
Preferred Stock issued in late June 1996 and $21.6 million of dividends
attributable to the Cumulative Exchangeable Preferred Stock issued in late
January 1997. The dividends for the 1996 dividends are attributable to the
Convertible Preferred Stock.
Net loss applicable to common stockholders was $41.1 million for the year
ended December 31, 1997 compared to net income applicable to common
stockholders of $0.2 million for the year ended December 31, 1994, an increase of
$2.2 million. The increase is attributable to interest income earned on certain
station investment notes and higher investable cash balances in 1995.
Gain on sale of assets for 1995 was $11.5 million compared to $2.3 million
for 1994, an increase of $ 9.2 million. The 1995 gain represents two station
sales: Binghamton ($4.0 million) and Des Moines ($7.6 million); only one
station, Louisville, was sold in 1994.
Income tax provision for 1995 was $6.8 million compared to $0.6 million for
1994, a $6.2 million or 1,033.3 % increase. The increase is a result of
significantly improved profitability in 1995. The effective tax rate in 1994 was
approximately 115.1% as compared to 42.9% in 1995. The higher effective rate in
1994 is due to the non-deductibility of amortization of certain intangible
assets in 1994 as a percentage of income before taxes compared to 1995.
Extraordinary loss for 1994 was $1.2 million, net of a $0.6 million tax
benefit compared to $0.8 million, net of a $0.6 million tax benefit for 1995.
Both extraordinary losses were the result of certain deferred financing costs
being written off pursuant to the extinguishment of debt outstanding under the
1993 and 1994 Credit Agreements.
Redeemable common and preferred stock dividends for 1995 were $0.8 million
as compared to $1.9 million for 1994, a 57.9% decrease. The primary reasons for
this decrease were the exchange of Preferred Stock to Common Stock in September
1994 and the retirement of Series C Common Stock in June 1995 which accompanied
the initial public offering of the Company's Class A Common Stock. (See the
Notes to the Consolidated Financial Statements).
Net income applicable to common stockholders was $7.5 million for 1995
compared to a net loss applicable to common stockholders of $3.1 million for
1994, an increase of $10.6 million1996, as a result
of the factors discussed above.
Broadcast cash flow (i.e., operating income before net LMA expense,
depreciation and amortization and corporate general and administrative expense)
was $31.3$132.3 million for 1995the year ended December 31, 1997
compared to $17.9$58.0 million for 1994,the year ended December 31, 1996, a $13.4$74.3
million or 74.9 %128.1% increase. Broadcast cash flow margins were 32.0 %35.4% in 19951997
compared to 26.3%32.6% in 1994.
29
Liquidity and Capital Resources1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from its acquisition-related activities,
debt service, working capital, capital expenditures and dividend payments.
Historically, the Company has met its operational liquidity needs with
internally generated funds and has financed the acquisition of radio
broadcasting properties and tower related properties, including related
working capital needs, with a combination of bank borrowings and proceeds from
the sale of the Company's equity and debt securities. For the year ended
December 31, 19961997 cash flows provided by operating activities was $15.7were $43.3
million, as compared to $15.7 million for the year ended December 31, 1996 and
$9.7 million for the year ended December 31, 1995 and $2.01995.
Cash flows used for investing activities were $645.1 million for the year
ended December 31, 1994.
The change is primarily attributable1997 as compared to working capital investments related to
station acquisition and growth.
Cash flows used for investing activities were $421.9 million for the year ended
December 31, 1996 as compared toand $81.2 million for the year ended December 31, 1995 and $92.91995. The
increase is attributable to the increased acquisition activity in 1997 from
year to year.
19
Cash provided by financing activities was $608.0 million for the year ended
December 31, 1994. The variations
from year1997 as compared to year related to varying station acquisition activity.
Cash provided by financing activities was $412.8 million for the year ended December
31, 1996 as compared toand $72.2 million for the year ended December 31, 1995 and $ 89.6 for the year ended December 31, 1994.1995. The increase in 1996 was1997
is due to the equity and debt offeringsexchangeable preferred stock offering described below offset by repaymentand the
impact of borrowings under the 1995 Credit Agreement.
Offerings:Company's credit agreements.
Offering: In January 1997, the Company consummated a private offering of
2,000,000 shares of 11 3/8% Cumulative Exchangeable Preferred Stock, $100
liquidation preference per share (Exchangeable Preferred Stock).Stock. Net proceeds to
the Company from the offering were approximately $192.4$192.1 million. Proceeds of
the offering were used initially to repay indebtedness and thereafter to fund
acquisitions. Dividends on the Cumulative Exchangeable Preferred Stock are
cumulative at an annual rate of 11 3/8% (equivalent to $11.375 per share) and
are payable quarterly in cash, or, at the Company's election, or on or prior to
January 15, 2002, with the issuance of additional shares. The Cumulative
Exchangeable Preferred Stock possesses mandatory redemption features and will behas
been classified accordingly in the financial statements.
See the Notes to the Consolidated Financial Statements
for a description of the Exchangeable Preferred Stock.
In June 1996, the Company consummated a private offering of 2,750,000
Depositary Shares, each representing a one-twentieth of a share of Convertible
Exchangeable Preferred Stock, $1,000 liquidation preference (Convertible
Preferred Stock). Net proceeds to the Company from the offering were
approximately $132.8 million and were used to fund acquisitions. Dividends on
the Convertible Preferred Stock are cumulative at an annual rate of 7%
(equivalent to $3.50 per depositary share) and are payable quarterly in cash.
Approximately $5.0 million of accrued dividends had been paid as of December 31,
1996. See the Notes to the Consolidated Financial Statements for a description
of the Convertible Preferred Stock.
In February 1996, the Company completed an equity offering and a debt
offering. Pursuant to the equity offering, which consisted of 5,514,707 shares
of its Class A Common Stock at a price of $27 per share, including 4,000,000
shares sold by the Company, 1,013,370 shares sold by selling shareholders, and
an additional 501,337 shares sold by the Company pursuant to the exercise of the
underwriters' over-allotment option. Proceeds to the Company, net of
underwriters' discount and associated costs, were approximately $114.5 million
and were utilized to repay existing debt and fund acquisitions.
Pursuant to the debt offering, the Company sold $175.0 million of 9% Senior
Subordinated Notes at a discount of approximately $1.4 million yielding 9.125%.
Interest on the Senior Subordinated Notes is payable semi-annually on February 1
and August 1 and the Notes mature on February 1, 2006. The Company, may at its
option, redeem, in whole or in part, the Senior Subordinated Notes beginning
February 1, 2001, initially at 104.5% of principal amount declining annually to
100.0% in 2004 and thereafter. The Company is also required to redeem the Senior
Subordinated Notes upon the occurrence of certain events. The Senior
Subordinated Notes are subordinate in right of payment to the prior payment in
full of indebtedness outstanding under the 1997 Credit Agreement and contain
certain covenants including, but not limited to, limitations on sales of assets,
dividend payments, future indebtedness and issuance of preferred stock, and
changes in control (as defined) require an offer to purchase the Senior
Subordinated Notes. The Senior Subordinated Notes are guaranteed by all
Restricted Subsidiaries (as defined). Proceeds
30
Liquidity and Capital Resources - (continued):
to the Company, net of underwriters' discount and associated costs were
approximately $167.5 million, and were utilized to repay existing debt and fund
acquisitions.
Credit Agreements: As of December 31, 1996,1997, the Company had approximately
$330.7$924.2 million of total long-term debt (including the current portion thereof)
outstanding. This included approximately $151.5$593.5 million of borrowings
outstanding under the 1995 Credit Agreement.Company's and the Tower Subsidiary's credit agreements
and $325.0 million outstanding under Senior Subordinated Notes. In January
1997, the Company entered into new credit agreements with a syndicate of banks
(the 1997 Credit Agreement) which replaced the $300.0 million 1995previous Credit
Agreement. The 1997 Credit Agreement consists of two separate lending
agreements, providing for facilities consisting of a $550.0 million reducing
revolver credit facility, a $200.0 million revolving credit converting to a
term loan facility and a $150.0 million term loan facility, which was
available only to repurchase, if required, certain note obligations of EZ
Communications, Inc. (EZ) which will bewere assumed by the Company in connection with the merger of EZ intoMerger. As
described below, the Company (EZ Merger). The
termswas not required to repurchase any of the 1997 Credit Agreement are described9.75%
Notes, and therefore such commitment was canceled in the Notes to the
Consolidated Financial Statements.May 1997.
In connection with theOctober 1997, Credit Agreement,
in January 1997, the Company recorded an extraordinary loss of approximately
$2.6 million, which will be recorded net of the applicable income tax benefit,
representing the write-off of deferred financing fees associated with the
previous agreement.
In November 1996, the Tower Subsidiary entered into athe 1997 ATS Credit
Agreement, which replaced the previously existing credit agreement. All
amounts outstanding under the previous agreement (Towerwere repaid with proceeds
from the 1997 ATS Credit Agreement) thatAgreement. The 1997 ATS Credit Agreement provides the
Tower Subsidiary with a $70.0$250.0 million loan commitment based on ATS
maintaining certain operational ratios and an incremental $20.0additional $150.0 million loan
contingent upon Tower
obtaining additional equity. The termsat the discretion of ATS, which is available through June 2005. In order to
facilitate future growth and, in particular, to finance its construction
program, ATS is in the process of negotiating an amended and restated loan
agreement with its senior lenders, pursuant to which the existing maximum
borrowing of the Tower Credit Agreement are
describedOperating Subsidiaries would be increased from $400.0 million
to $900.0 million, subject to compliance with certain financial ratios, and
ATS would be able to borrow an additional $150.0 million, subject to
compliance with certain less restrictive ratios. Borrowings under an amended
loan agreement would also be available to finance acquisitions. There can be
no assurance that such negotiations will result in the Notesextension of definitive
loan agreements on terms satisfactory to ATS. In connection with the
Consolidated Financial Statements.refinancing, the Company expects to recognize an extraordinary loss of
approximately $1.4 million, net of a tax benefit of $0.9 million, during the
second quarter of 1998.
In order to finance acquisitions of radio stations, tower related properties
and for general corporate purposes, the Company has borrowed and expects to
continue to borrow under its credit agreements. As part of the EZ Merger, the
Company will assumeassumed EZ's obligations with respect to $150.0 million principal
amount of the 9.75% EZ Senior Subordinated Notes and repayrepaid all borrowings under the EZ credit
facility with borrowings from the 1997 Credit Agreement. TheAs required by the
closing of the EZ Merger, the Company will bewas required to offer to purchase the
9.75% EZ Senior Subordinated Notes at 101% of their principal amount. Such offer expired in May
1997 and, no such notes were tendered for repurchase.
Tower Separation: Based on a $16.00 per share price, the Tower Separation
will result in a taxable gain to ARS, of which approximately $20.0 million
will be borne by ARS and the remaining obligation (currently estimated at
approximately $113.0 to $153.0 million) will be required to be paid by ATS
pursuant to provisions of the Merger Agreement. This liability is expected to
be paid with borrowings under ATS' loan agreement or proceeds from equity
financings and the timing of such payments is dependent upon the timing of the
merger consummation. Such estimated tax liability would increase or decrease
by approximately $14.8 million for each $1.00 per share increase or decrease
in the fair market value of the ATS Common Stock.
20
The Merger Agreement also provides for closing date balance sheet
adjustments based upon the working capital and specified debt levels
(including the liquidation preference of the ARS Cumulative Preferred Stock)
of ARS at the effective time of the Merger which may result in payments to be
made by either ARS or ATS to the other party following the closing date of the
Merger. ATS will benefit from or bear the cost of such adjustments. Since the
amounts of working capital and debt are dependent upon future operations and
events, including without limitation cash flow from operations, capital
expenditures, and expenses of the Merger and the Tower Separation, neither ARS
nor ATS is able to state with any degree of certainty what payments, if any,
will be owed following the closing date by either ARS or ATS to the other
party.
ATS Stock Purchase Agreement: On January 22, 1998, the Tower Subsidiary
consummated the transactions contemplated by the stock purchase agreement (ATS
Stock Purchase Agreement), dated as of January 8, 1998, with Steven B. Dodge,
Chairman of the Board, President and Chief Executive Officer of ARS and ATS,
and certain other officers and directors of ARS (or their affiliates or family
members or family trusts), pursuant to which those persons purchased 8.0
million shares of ATS Common Stock at a purchase price of $10.00 per share for
an aggregate purchase price of $80.0 million, including 4.0 million shares by
Mr. Dodge for $40.0 million. Payment of the purchase price was in the form of
cash aggregating approximately $30.6 million and in the form of notes
aggregating approximately $49.4 million due on the earlier of the consummation
of the CBS Merger or, in the event the CBS Merger Agreement is terminated,
December 31, 2000. The notes bear interest at the six-month London Interbank
Rate, from time to time, plus 1.5% per annum, and are secured by shares of ARS
Common Stock having a fair market value of not less than 175% of the principal
amount of and accrued and unpaid interest on the notes. The notes are
prepayable at any time at the option of the obligor and will borrow any funds required to do so
underbe due and
payable, at the 1997 Credit Agreement.option of the Tower Subsidiary, in the event of certain
defaults as described in the agreement.
A substantial portion of the Company's cash flow from operations is required
for debt service. The Company believes that
cash flow from operations will be sufficient to meet debt service requirements
for interest and scheduled payments of principal under the credit agreements and
the Senior Subordinated Notes and the EZ Senior Subordinated Notes. However, the Company's leverage could make it vulnerable to
a downturn in the operating performance of its radio stations, tower
properties or a downturn in economic conditions.
The Company believes that its cash flows from operations will be sufficient
to meet anyits quarterly dividend,dividends, debt service requirements for interest and
scheduled payments of principal under the 1997 Credit AgreementAgreements and its other
debt obligations. If such cash flow is not sufficient to meet such debt
service requirements, the Company may be required to sell equity securities,
refinance its obligations or dispose of one or more of its properties in order
to make such scheduled payments. There can be no assurance that the Company
would be able to effect any of such transactions on favorable terms.
The Company's working capital needs fluctuate throughout the year due to
industry-wide seasonality and its broadcast of sporting events at different
times during the year. The Company historically has had sufficient cash from
its operations to meet its working capital needs, apart from needs generated
by newly acquired properties, and believes that it has sufficient financial
resources available to it, including borrowing under the credit agreements, to
finance operations for the foreseeable future.
The Company has entered into numerous station and tower acquisition and
related agreements (see the Notes to the Consolidated Financial Statements).
The consummation of eachmany of these agreements is subject to, among other
things, FCC approval and in some cases expiration or earlier termination of
the Hart-Scott
RodinoHSR Act waiting period and the negotiation of definitive agreements.
Unless otherwise noted, the Company intends to effect all of the transactions
as soon as the necessary approvals are obtained. The Company intends to
finance the acquisitions with available cash, borrowings under the 1997 Credit Agreement,credit
agreements, and, in certain cases, issuance of equity securities.
ARS and ATS made approximately $24.1 million and $20.6 million,
respectively, in capital expenditures for the year ended December 31,
Liquidity1997,
principally related to tower construction and Capital Resources - (continued):office consolidations. The
Company expects capital expenditures in 19971998 to be approximately $20.0$29.0 million
and $133.0 million for ARS and ATS, respectively, consisting principally of
tower construction, office consolidations and ongoing technical
21
improvements. To the extent that funds generated from operations, or available
cash, are insufficient to finance non-recurring capital expenditures, the CompanyARS and
ATS would seek to borrow the necessary funds under their respective credit
agreements.
YEAR 2000
The Company is aware of the 1997 Credit Agreement.
Inflationissues associated with the Year 2000 as it
relates to information systems. The Year 2000 is not expected to have a
material impact on the Company's current information systems because its
software is either already Year 2000 compliant or required changes are not
expected to be material. Based on the nature of the Company's business, the
Company anticipates it is not likely to experience material business
interruption due to the impact of Year 2000 compliance on its customers and
vendors. As a result, the Company does not anticipate that incremental
expenditures to address Year 2000 compliance will be material to the Company's
liquidity, financial position or results of operations over the next few
years.
INFLATION
The impact of inflation on the Company's operations has not been significant
to date. However, there can be no assurance that a high rate of inflation in
the future would not have an adverse effect on the Company's operating
results.
Recent Accounting PronouncementRECENT ACCOUNTING PRONOUNCEMENTS
In MarchJune 1997, the Financial Accounting Standards BoardFASB released StatementFAS No. 130 "Reporting Comprehensive Income"
(FAS 130), and FAS No. 131 "Disclosures about Segments of Financial Accounting Standards No. 128 "Earnings Per Share"an Enterprise and
Related Information" (FAS 128), which131). These pronouncements will be effective in
1998. FAS 130 establishes standards for fiscal 1997. FAS 128reporting comprehensive income items
and will require the Company to restateprovide a separate statement of comprehensive
income; reported financial statement amounts previously reported as earnings per share to comply withwill be affected by this
adoption. FAS 131 established standards for reporting information about the
requirements of the new standard; whileoperating segments in a company's annual report and interim reports and will
require the Company isto adopt this standard in 1998.
In February 1998, the FASB released SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits," (FAS 132) which the Company
will be required to adopt in 1998. FAS 132 will require additional disclosure
concerning changes in the process of
evaluating the impact of FAS 128, it doesCompany's pension obligations and assets and
eliminates certain other disclosures no longer considered useful. Adoption
will not expect that adoption will have a
dilutiveany effect on previously reported earnings per share.
32
results of operations or financial
position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements of American Radio Systems
Corporation are filed herein.
American Radio Systems Corporation and Subsidiaries
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 19951996 and 19961997
Consolidated Statements of Operations for each of the three years in
the period ended December 31, 19961997
Consolidated Statements of Stockholders' Equity (Deficiency) for each
of the three years in the period ended December 31, 19961997
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 19961997
Notes to Consolidated Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information called for by this Item is notNot applicable.
3322
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
"ElectionAMERICAN
Set forth below are the name and age of Directors"each director, his principal
occupation and "Additional Information"business experience during the past five years and the names of
other companies of which he serves as a director as of March 30, 1998.
PRINCIPAL OCCUPATIONS AND BUSINESS EXPERIENCE DURING
DIRECTOR THE PAST FIVE YEARS
-------- ----------------------------------------------------
Steven B. Dodge ........ Mr. Dodge has been Chairman of the Board, President
Age 52 and Chief Executive Officer since the founding of the
Company on November 1, 1993. Mr. Dodge was the
founder in 1988 of Atlantic Radio, L.P. (Atlantic),
one of the predecessors of the Company, and served as
Chief Executive Officer of the general partner of
Atlantic. Prior to forming Atlantic, Mr. Dodge served
as Chairman and Chief Executive Officer of American
Cablesystems Corporation, a cable television company
he founded in 1978 and which was merged into
Continental Cablevision, Inc. in 1988. Mr. Dodge
serves as a director of American Media, Inc. and the
National Association of Broadcasters (the NAB).
Thomas H. Stoner ....... Mr. Stoner has been Chairman of the Executive
Age 63 Committee and the Compensation Committee of the Board
since the founding of the Company. Mr. Stoner founded
Stoner Broadcasting Systems, Inc. (Stoner) in 1965.
Stoner, which was one of the predecessors of
American, operated radio stations for over 25 years
in large, medium and small markets. Mr. Stoner is a
director of Gaylord Container Corporation and a
trustee of the Chesapeake Bay Foundation.
Alan L. Box ............ Mr. Box has served as a director and Executive Vice
Age 46 President since the consummation of the merger of EZ
Communications, Inc. into American (EZ Merger). In
1974, he was the General Manager of EZ's Washington,
D.C. area radio station. He became Executive Vice
President and General Manager and a director of EZ in
1979, President of EZ in 1985 and Chief Executive
Officer of EZ in 1995. He serves as a director of
George Mason Bankshares Inc. and George Mason Bank.
Previously, Mr. Box served as the Chairman of the NAB
Digital Audio Broadcast Task Force and as a director
of the NAB.
Joseph L. Winn ......... Mr. Winn has been the Treasurer, Chief Financial
Age 46 Officer and a director since the founding of the
Company. In addition to serving as Chief Financial
Officer of the Company, Mr. Winn was Co-Chief
Operating Officer responsible for Boston operations
until May 1994 when Mr. Gehron joined American. Mr.
Winn served as Chief Financial Officer and a director
of the general partner of Atlantic since its
organization. He also served as Executive Vice
President of the general partner of Atlantic from its
organization until June 1992, and as its President
from June 1992 until the organization of American.
Atlantic was one of the predecessors of the Company.
Prior to joining Atlantic, Mr. Winn served as Senior
Vice President and Corporate Controller of American
Cablesystems since joining that company in 1983.
Charlton H. Buckley..... Charlton H. Buckley was elected a director in August
Age 60 1996. Mr. Buckley is the founder, President and Chief
Executive Officer of Henry Broadcasting Company
(HBC). Mr. Buckley is also President and 100% owner
of Steele Park Resort, Inc., which owns and operates
a resort on Lake Berryessa in California's Napa
Valley, and is a co-founder of World Asphalt Company,
a manufacturer of roofing products located in
Sacramento, CA. Mr. Buckley has been involved in the
radio broadcast industry since 1983 when HBC acquired
its first stations in Portland, Oregon. Prior to that
time, Mr. Buckley was involved in the construction
business.
23
PRINCIPAL OCCUPATIONS AND BUSINESS EXPERIENCE DURING
DIRECTOR THE PAST FIVE YEARS
-------- ----------------------------------------------------
Arnold L. Chavkin ...... Mr. Chavkin has been a director since the founding of
Age 46 the Company. Mr. Chavkin is a general partner of
Chase Capital Partners (CCP), previously known as
Chemical Venture Partners (CVP), which is a general
partner of Chase Equity Associates (CEA), one of
American's shareholders, and previously a principal
shareholder of Multi Market Communications, Inc.
(Multi-Market), one of the predecessors of the
Company. Mr. Chavkin has been a General Partner of
CCP and CVP since January 1992 and has served as the
President of Chemical Investments, Inc. since March
1991. Mr. Chavkin is also a director of R&B Falcon
Drilling Company, Bell Sports Corporation, and
Wireless One, Inc. Prior to joining Chemical
Investments, Inc., Mr. Chavkin was a specialist in
investment and merchant banking at Chemical Bank for
six years.
James H. Duncan, Jr. ... Mr. Duncan has been a director since the founding of
Age 50 the Company. Mr. Duncan is the founder, Chief
Executive Officer and a 50% shareholder of Duncan's
American Radio, Inc., which publishes the Duncan
Guide and other reports and publications about the
radio broadcasting industry. Mr. Duncan had served as
a director of Stoner from 1983 until the merger with
the Company in 1993. Mr. Duncan had also served as a
director of Price Communications Corporation from
1992 to 1994, and as a director of Emmis Broadcasting
Corporation from 1985 to 1992.
Arthur C. Kellar........ Mr. Kellar has served as a director since the
Age 75 consummation of the EZ Merger. He was the founder of
EZ and served as a director of EZ since 1967,
Chairman of the Board since 1968 and President from
1967 until 1985. From the period 1956 through 1978,
Mr. Kellar was the President and principal
stockholder of O.K. Broadcasting, Inc., which owned
and operated WEEL-AM, a radio station located in
Fairfax, Virginia. Mr. Kellar currently serves as a
director of George Mason Bankshares, Inc.
Charles D. Peebler, Mr. Peebler was elected a director in May 1994. He is
Jr. ................... president of True North Communications, Inc. Mr.
Age 61 Peebler served as a director of Stoner for more than
twelve years, from 1976 to 1988. Mr. Peebler also
serves as a director of Ultrafem Inc. and American
Tool Companies, Inc.
Lance R. Primis ........ Mr. Primis was elected a director in April 1997. From
Age 51 1992 until December 1996, he served as the president
and chief operating officer of The New York Times
Company, a major newspaper and information company.
Prior to that time, he was the president and general
manager of The New York Times newspaper. Mr. Primis
serves as a director of several companies including,
the Advertising Council, the Audit Bureau of
Circulations, Partnership For A Drug-Free America,
International Herald Tribune and The New York
Partnership.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Proxy Statement fordirectors,
executive officers and persons who own more than ten percent of a registered
class of the 1996 Annual MeetingCompany's equity securities, to file reports of Stockholders to be filedownership on Form
3 and changes in ownership on Form 4 or 5 with the SecuritiesCommission. Such officers,
directors and Exchange Commissionten-percent stockholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) reports they file. Based
solely on its review of the copies of such forms received by it, or before Aprilwritten
representation from certain reporting persons that they were not required to
file a Form 5, the Company believes that, during the fiscal year ended
December 31, 1996, its officers, directors and ten-percent stockholders
complied with all Section 16(a) filing requirements applicable to such
individuals, except that (1) Mr. Bouloukos failed to report the exercise of
options on December 18 and 19, 1997; this omission was corrected by reporting
these events on
24
his Form 5 for 1997; (2) Mr. Gehron failed to report (i) a purchase of 1,200
shares of Class A Common Stock on November 13, 1996 and (ii) the acquisition
of 450 shares of Class A Common Stock pursuant to the consummation of the
merger of the EZ Merger into the Company, resulting from his involuntary
exchange of shares of EZ stock for shares of the Company's common stock; these
omissions were corrected by reporting these events on his Form 5 for 1997; and
(3) Mr. Dodge failed to report (i) the acquisition by his adult son of 135
shares of Class A Common Stock pursuant to the consummation of the EZ Merger,
resulting from his sons' involuntary exchange of shares of EZ stock for shares
of the Company's common stock, (ii) Mr. Dodge's gift of 43 shares of Class A
Common Stock on June 30, 1997, are hereby
incorporated(iii) his adult son's purchase of 50 shares of
Class A Common Stock on October 17, 1997, and (iv) his son's sale of 15 shares
of Class A Common Stock on January 9, 1998; these omissions were corrected by
reference herein.reporting these events on his Form 5 for 1997. Mr. Dodge disclaims any
beneficial ownership with respect to the above transactions regarding his
adult son.
ITEM 11. EXECUTIVE COMPENSATION
"ElectionThe following table summarizes the annual and long-term compensation for the
years ended December 31, 1995, 1996 and 1997 of Directors"American's Chief Executive
Officer and "Executive Compensation"each of the other executive officers whose salary and bonus
exceeded $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------- -------------------------
SHARES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS(2) COMPENSATION
------------------ ---- --------- ------ ------------ ---------- ------------
Steven B. Dodge......... 1995 $252,625
Chairman of the Board, 1996 $297,250 50,000 40,000 4,910(3)
President and Chief 1997 $502,338 100,000 1,716(3)
Executive Officer
Joseph L. Winn(4)....... 1995 $227,859 65,000
Treasurer and Chief 1996 $257,250 42,500 20,000 11,456(5)
Financial Officer 1997 $352,329 40,000 35,000 12,876(5)
Don P. Bouloukos........ 1996 $ 81,504(6) $100,000(6) 200,000(6) 3,420(5)
Co-Chief Operating 1997 $352,332 50,000 432,218(10) 16,741(5)
Officer
John R. Gehron.......... 1995 $227,544 40,000
Co-Chief Operating 1996 $247,250 20,000 $ 75,000(7) 10,000 13,500(8)
Officer
1997 $352,297 20,000 20,000 1,662(3)
David Pearlman.......... 1995 $222,745 85,000
Co-Chief Operating 1996 $257,250 42,500 $364,000(9) 20,000 11,520(5)
Officer
1997 $352,340 20,000 25,000 20,314(5)
- --------
(1) Includes Company's matching 401(k) plan contributions.
(2) For information regarding the Stock Option Plan, see the Notes to
Consolidated Financial Statements.
(3) Includes group term life insurance and parking expenses paid by the
Company.
(4) Mr. Winn also served as Co-Chief Operating Officer until Mr. Gehron
joined American in May 1994.
(5) Includes group term life insurance, automobile lease and parking expenses
paid by the Company.
(6) For the period September 3, 1996 through December 31, 1996. Mr. Bouloukos
was granted options in August 1996 to purchase an aggregate of 200,000
shares at $33.33 per share; such options were terminated by agreement and
Mr. Bouloukos was granted new options to purchase 200,000 shares of Class
A Common Stock at $27.25 per share, the closing price of the Class A
Common Stock on Nasdaq on December 31, 1996. In 1996, Mr. Bouloukos also
received a $100,000 demand loan at a variable interest rate (prime). In
1997, the loan was forgiven and included as compensation.
25
(7) For period from May 16, 1994 through December 31, 1994. In 1994, Mr.
Gehron also received a $75,000 demand loan at a variable interest rate
(prime) at the time he joined American. In 1996, the loan was forgiven
and included as compensation.
(8) Includes group term life insurance, personal travel, relocation expenses
paid by the Company.
(9) Includes compensation associated with May 13, 1996 option exercise of
14,000 shares of Class B Common Stock.
(10) Includes compensation associated with December 31, 1997 option exercise
of 18,000 shares of Class A Common Stock.
DIRECTOR COMPENSATION
Mr. Stoner is party to an agreement with American pursuant to which he is
entitled to annual compensation at the rate of $50,000 and to a nonaccountable
expense allowance of $50,000 until the earlier of (a) October 31, 1998 or (b)
his death. The following directors receive an annual committee fee as
indicated: Mr. Stoner ($4,000), Mr. Duncan ($5,000), Mr. Peebler ($5,000), Mr.
Buckley ($6,000). Directors are also eligible to receive grants of options
under American's Amended and Restated 1993 Stock Option Plan (the Stock Option
Plan) and have received such grants in the Company's
Proxy Statementpast for their service. See Item 12
for information about grants of options to directors. During the last fiscal
year, all of the above named directors were each granted options under the
Plan to purchase 5,000 Shares of Class A Common Stock at $28.25 per share
(with the exception of Messrs. Kellar and Primis who received grants at
$29.00). Each of the foregoing options is exercisable in 20% cumulative annual
increments commencing one year from the date of the grant and expires at the
end of ten years.
STOCK OPTION INFORMATION
The following table sets forth certain information relating to option grants
pursuant to the Stock Option Plan in the year ended December 31, 1997 to the
individuals named in the Summary Compensation Table above.
OPTION GRANTS IN FISCAL YEAR 1997
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SHARES OF APPRECIATION
UNDERLYING EXERCISE FOR OPTION TERMS(B)
OPTIONS PRICE EXPIRATION --------------------
NAME GRANTED(A) PER SHARE DATE 5% 10%
---- ---------- ------------- ---------- ---------- ---------
Steven B. Dodge....... 100,000 $28.25-31.075 1/1/07 $1,773,779 4,545,788
Joseph L. Winn........ 35,000 $28.25 1/1/07 621,820 1,575,813
Don P. Bouloukos...... -- -- -- -- --
John R. Gehron........ 20,000 $28.25 1/1/07 355,325 900,464
David Pearlman........ 25,000 $28.25 1/1/07 444,157 1,125,581
- --------
(a) All options granted to Mr. Dodge and 26,930 shares to Mr. Winn were
granted for Class B Common Stock (all other 1997 grants were for Class A
Common Stock) pursuant to the Stock Option Plan. The options become
exercisable in 20% cumulative annual increments commencing one year from
the grant dates. Options issued to Steven B. Dodge at $31.075 were issued
at 110% of the fair market value at the date of grant.
(b) Potential Realizable Value is based on the assumed growth rates for the
1996 Annual Meetingten-year option term, as applicable. A 5% per year appreciation in stock
price from $28.25 per share yields $46.02 per share and from $31.08 per
share yields $50.62 per share. A 10% per year appreciation in stock price
from $28.25 per share yields $73.27 per share and from $31.08 per share
yields $80.60 per share. The actual value, if any, an executive may
realize will depend on the excess of Stockholdersthe stock price over the exercise
price on the date the option is exercised, and there is no assurance the
value realized by an executive will be at or near the amounts reflected in
this table.
26
The following table sets forth certain information with respect to be filed with the
Securitiesunexercised options to purchase Class A and Exchange CommissionB Common Stock granted under the
Stock Option Plan to the individuals named in the Summary Compensation Table
above.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1997 DECEMBER 31, 1997(A)
-------------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(A) UNEXERCISABLE
---- -------------- --------------- -------------- -------------
Steven B. Dodge......... 98,000 192,000 $4,187,625 $6,025,727
Joseph L. Winn.......... 154,000 126,000 $7,127,125 $4,624,125
Don P. Bouloukos........ 22,000 160,000 $ 573,375 $4,170,000
John R. Gehron.......... 114,000 116,000 $5,257,625 $4,774,250
David Pearlman.......... 160,000 126,000 $7,157,750 $4,652,625
- --------
(a)Based on or before April 30,the last sale price of the Class A Common Stock on NYSE on
December 31, 1997 are hereby
incorporated by reference herein. Such incorporation by reference shall not be
deemed to specifically incorporate by reference the information referred to in
Item 402(a)(8) of Regulation S-K.$53.31.
27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
"Principal Stockholders"The following table provides information as of March 22, 1998, with respect
to the shares of American Common Stock beneficially owned by (i) each person
known by American to own more than 5% of the outstanding American Common
Stock, (ii) each director of American, (iii) each executive officer required
to be identified in the Company's Proxy Statement forSummary Compensation Table of American, and (iv) by
all directors and executive officers of American as a group. The number of
shares beneficially owned by each director or executive officer is determined
according to the 1996
Annual Meetingrules of Stockholders to be filed with the Securities and Exchange Commission (the
Commission), and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which the individual or entity has sole or shared
voting power or investment power and also any shares which the individual or
entity has the right to acquire within sixty days of March 22, 1998 through
the exercise of an option, conversion feature or similar right. Except as
noted below, each holder has sole voting and investment power with respect to
all shares of American Common Stock listed as owned by such person or entity.
SHARES OF ARS COMMON STOCK BENEFICIALLY OWNED
-------------------------------------------------------
PERCENT OF PERCENT OF
PERCENT OF PERCENT OF COMMON TOTAL VOTING
NUMBER CLASS A CLASS B STOCK POWER
--------- ---------- ---------- ---------- ------------
DIRECTORS AND EXECUTIVE
OFFICERS
Steven B. Dodge(1)...... 2,287,946 * 60.33 7.71 36.00
Thomas H. Stoner(2)..... 915,967 * 26.18 3.10 15.33
Don P. Bouloukos(3)..... 182,000 * -- * *
Alan L. Box(4).......... 418,428 1.68 -- 1.41 *
John R. Gehron(5)....... 237,650 * 5.67 * 3.44
David Pearlman(6)....... 289,520 * 6.95 * 4.23
Joseph L. Winn(7)....... 192,048 * 5.13 * 3.07
Charlton H. Buckley(8).. 1,662,557 6.72 -- 5.63 2.79
Arnold Chavkin/CEA(9)... 1,323,429 * -- 4.48 *
James H. Duncan,
Jr.(10)................ 15,278 * * * *
Arthur C. Kellar(11).... 2,069,257 8.33 -- 6.99 3.46
Charles D. Peebler,
Jr.(12)................ 10,200 * * * *
Lance R. Primis(13)..... 1,000 * -- * *
All executive officers
and directors as a
group
(13 persons)(14)....... 9,605,280 18.00 88.17 31.24 62.21
FIVE PERCENT
STOCKHOLDERS
Baron Capital Group,
Inc.(15)............... 5,879,770 23.76 -- 19.91 9.85
Wellington Management
Company LLP(16)........ 1,929,676 7.80 -- 6.53 3.23
Massachusetts Financial
Services Company(17)... 3,157,679 12.76 -- 10.69 5.29
Lehman Brothers Holding
Inc.(18)............... 2,050,000 8.28 -- 6.94 3.43
FMR Corp.(19)........... 1,716,690 6.94 -- 5.81 2.88
- --------
* Less than 1%.
(1) Mr. Dodge is Chairman of the Board, President and Chief Executive Officer
of American. His address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 75,950 shares of ARS Class A Common Stock owned by Mr.
Dodge. Does not include 60,000 shares of ARS Class B Common Stock
purchasable under an option granted on October 1, 1994, 24,000 shares ARS
Class B Common Stock purchasable under an option granted on January 18,
1996 and 80,000 shares of ARS Class B Common Stock purchasable under an
option granted on January 2, 1997; includes 90,000 shares as to which the
October option, 16,000 shares as to which the January 18 option and
20,000 shares as to which the January 2 option are exercisable. Includes
an aggregate of 25,050 shares of ARS Class A Common Stock and 20,832
shares of ARS Class B Common Stock owned by three trusts for the benefit
of Mr. Dodge's children and 3,000 shares of ARS Class A Common Stock
owned by Mr. Dodge's wife. Mr. Dodge disclaims beneficial
28
ownership in all shares owned by such trusts and his wife. Does not include
170 shares of ARS Class A Common Stock held by Thomas S. Dodge, an adult
child of Mr. Dodge, with respect to which Mr. Dodge disclaims beneficial
ownership.
(2) Mr. Stoner is Chairman of the Executive Committee of the ARS Board. His
address is 116 Huntington Avenue, Boston, Massachusetts 02116. Does not
include 4,000 shares of ARS Class A Common Stock purchasable under an
option granted on January 2, 1997. Includes 1,000 shares purchasable under
the January option and 23,811 shares of ARS Class B Common Stock owned by
his wife, an aggregate of 261,998 shares of ARS Class B Common Stock owned
by trusts of which he and/or beforecertain other persons are trustees and a
charitable foundation, of which Mr. Stoner serves as an officer. Mr.
Stoner disclaims beneficial ownership of 162,128 shares of ARS Class B
Common Stock owned by such trusts. Does not include 61,454 shares of ARS
Class B Common Stock and 10,125 shares of ARS Class A Common Stock owned
by Mr. Stoner's adult children.
(3) Mr. Bouloukos is Co-Chief Operating Officer of American. His address is
116 Huntington Avenue, Boston, Massachusetts 02116. Includes 182,000
shares of ARS Class A Common Stock purchasable under an option granted on
December 31, 1996.
(4) Mr. Box is a director and Executive Vice President of American. His
address is 116 Huntington Avenue, Boston, Massachusetts 02116. Does not
include 80,000 shares of ARS Class A Common Stock purchasable under an
option granted on April 22, 1997. Includes 20,000 shares of ARS Class A
Common Stock as to which the April option is exercisable and an aggregate
of 84,010 shares of ARS Class A Common Stock purchasable under options
originally granted by EZ on June 30, 1993 and May 26, 1996.
(5) Mr. Gehron is Co-Chief Operating Officer of American. His address is 116
Huntington Avenue, Boston, Massachusetts 02116. Includes 7,650 shares of
ARS Class A Common Stock owned by Mr. Gehron. Includes 160,000 shares of
ARS Class B Common Stock purchasable under an option granted on May 23,
1994, 40,000 shares of ARS Class B Common Stock purchasable under an
option granted on February 15, 1995, 10,000 shares of ARS Class B Common
Stock purchasable under an option granted on January 18, 1996 and 20,000
shares of ARS Class A Common Stock purchasable under an option granted on
January 2, 1997.
(6) Mr. Pearlman is Co-Chief Operating Officer of American. His address is 116
Huntington Avenue, Boston, Massachusetts 02116. Includes 3,000 shares of
ARS Class A Common Stock owned individually by Mr. Pearlman and 520 shares
of ARS Class A Common Stock held for the benefit of his children. Includes
156,000 shares of ARS Class B Common Stock purchasable under an option
granted on December 16, 1993, 50,000 shares of ARS Class B Common Stock
purchasable under an option granted on February 15, 1995, 5,000 shares of
ARS Class B Common Stock purchasable under an option granted on May 18,
1995, 30,000 shares of ARS Class B Common Stock purchasable under an
option granted on June 15, 1995, 20,000 shares of ARS Class B Common Stock
purchasable under an option granted on January 18, 1996 and 25,000 shares
of ARS Class A Common Stock purchasable under an option granted on January
2, 1997.
(7) Mr. Winn is a director, Treasurer and Chief Financial Officer of American.
His address is 116 Huntington Avenue, Boston, Massachusetts 02116.
Includes 2,000 shares of ARS Class A Common Stock and 7,948 shares of ARS
Class B Common Stock owned individually by Mr. Winn and 100 shares of ARS
Class A Common Stock held for the benefit of his children. Does not
include 32,000 shares of ARS Class B Common Stock purchasable under an
option granted on December 16, 1993, 24,000 shares of ARS Class B Common
Stock purchasable under an option granted on February 15, 1995, 2,000
shares of ARS Class B Common Stock purchasable under an option granted on
May 18, 1995, 12,000 shares of ARS Class B Common Stock purchasable under
an option granted on January 18, 1996 and 21,544 shares of ARS Class B
Common Stock and 6,456 shares of ARS Class A Common Stock purchasable
under options granted on January 2, 1997; includes 128,000 shares as to
which the December option, 36,000 shares as to which the February option,
3,000 at to which the May option, 8,000 shares as to which the January 18
option and 5,386 shares and 1,614 shares as to which the January 2 option
are exercisable.
(8) Mr. Buckley is a director of American. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Does not include 4,000 shares of ARS
Class A Common Stock purchasable under an option granted on January 2,
1997. Does not include 6,053 shares of ARS Class A Common Stock which are
held by an
29
adult child of Mr. Buckley and in which Mr. Buckley disclaims beneficial
ownership. Includes 1,000 shares purchasable under the January option.
(9) Mr. Chavkin is a director of American. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Mr. Chavkin, as a general partner of
CCP, which is the general partner of CEA, may be deemed to own
beneficially shares held by CEA. Mr. Chavkin disclaims such beneficial
ownership. CEA is the sole holder of ARS Class C Common Stock and owns
26,911 shares of ARS Class A Common Stock. The address of CCP and CEA is
380 Madison Avenue, 12th Floor, New York, New York 10017. Does not
include 4,000 shares of ARS Class A Common Stock purchasable under an
option granted on January 2, 1997. Includes 1,000 shares purchasable
under the January option.
(10) Mr. Duncan is a director of American. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Does not include 2,000 shares of ARS
Class B Common Stock purchasable under an option granted on December 16,
1993, 1,600 shares of ARS Class B Common Stock purchasable under an
option granted on February 15, 1995, 1,800 shares of ARS Class B Common
Stock purchasable under an option granted on January 18, 1996 and 4,000
shares of ARS Class A Common Stock purchasable under an option granted on
January 2, 1997; includes 4,000 shares as to which the December option,
1,600 shares as to which the February option, 1,200 shares as to which
the January 18 option and 1,000 shares as to which the January 2 option
are exercisable. Includes (a) 500 shares of ARS Class A Common Stock and
6,578 shares of ARS Class B Common Stock owned directly and (b) 400
shares of ARS Class A Common Stock owned as follows: (i) 200 shares of
ARS Class A Common Stock held by Mr. Duncan's spouse, (ii) 100 shares of
ARS Class A Common Stock held by one of his daughters, and (iii) 100
shares of ARS Class A Common Stock held by his spouse for his stepson.
Mr. Duncan has disclaimed beneficial ownership of these shares.
(11) Mr. Kellar is a director of American. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Mr. Kellar owns 1,984,247 shares of
ARS Class A Common Stock. Does not include 4,000 shares of ARS Class A
Common Stock purchasable under an option granted April 15, 1997. Includes
1,000 shares of ARS Class A Common Stock as to which the April grant is
exercisable and an aggregate of 84,010 shares of ARS Class A Common Stock
purchasable under options originally granted by EZ on June 30, 1993 and
May 26, 1996.
(12) Mr. Peebler is a director of American. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Includes 2,000 shares of ARS Class A
Common Stock owned by Mr. Peebler. Does not include 4,000 shares of ARS
Class B Common Stock purchasable under an option granted February 15,
1995, 1,800 shares of ARS Class B Common Stock purchasable under an
option granted on January 18, 1996 and 4,000 shares of ARS Class A Common
Stock purchasable under an option granted January 2, 1997; includes 6,000
shares as to which the February option, 1,200 shares as to which the
January 18 option and 1,000 shares as to which the January 2 option are
exercisable.
(13) Mr. Primis is a director of American. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Does not include 4,000 shares of ARS
Class A Common Stock purchasable under an option granted April 15, 1997.
Includes 1,000 shares purchasable under the January option.
(14) Includes all shares stated to be owned in the preceding notes.
(15) The address of Baron Capital Group, Inc. (Baron) is 767 Fifth Avenue, New
York, New York 10153. Based on Baron's Amendment No. 3 Schedule 13D dated
February 27, 1998, Mr. Baron, the president of Baron, has sole voting
power over 180,000 shares of ARS Class A Common Stock, shared voting
power over 1,910,350 shares of ARS Class A Common Stock, sole dispositive
power over 180,000 shares of ARS Class A Common Stock and shared
dispositive power over 1,910,350 shares of ARS Class A Common Stock. Mr.
Baron disclaims beneficial ownership of 5,879,770 shares of ARS Class A
Common Stock.
(16) The address of Wellington Management Company LLP (Wellington) is 75 State
Street, Boston, Massachusetts 02109. Based on its Schedule 13G (Amendment
No. 2) dated August 8, 1997, Wellington has shared voting power over
985,313 shares of ARS Class A Common Stock and shared dispositive power
over 1,929,676 shares of ARS Class A Common Stock.
(17) The address of Massachusetts Financial Services Company (MFS) is hereby incorporated by reference
herein.500
Boylston Street, Boston, Massachusetts 02116-3741. Based on its Schedule
13G (Amendment No. 2) dated February 11, 1998, MFS has sole voting power
over 3,132,749 shares of ARS Class A Common Stock and sole dispositive
power over 3,157,679 shares of ARS Class A Common Stock.
30
(18) The address of Lehman Brothers Holding Inc. (Lehman) is 3 World Financial
Center, 24th Floor, New York, New York 10285. Based on its Schedule 13G
dated February 25, 1998, Lehman has shared voting power over 2,050,000
shares of ARS Class A Common Stock and shared dispositive power over
2,050,000 shares of ARS Class A Common Stock.
(19) The address of FMR Corp. (FMR) is 82 Devonshire Street, Boston,
Massachusetts 02109. Based on its Amendment No. 2 to its Schedule 13G
dated February 9, 1998, FMR has sole voting power over 206,790 shares of
ARS Class A Common Stock and sole dispositive power over 1,716,690 shares
of ARS Class A Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
"Other Transactions"The Chase Manhattan Bank (Chase) is a co-syndication agent and a lender with
an approximately 9% combined participation under American's prior credit
agreements in 1995, 1996 and 1997 respectively. Chase is an affiliate of CCP,
the general partner of CEA; Mr. Chavkin, a director, is a general partner of
CCP. For the years ended December 31, 1995, 1996 and 1997, Chase's share of
interest and fees paid by American pursuant to the provisions of such credit
facilities were $1,688,500, $533,000 and $2,711,000, respectively. Chase
Securities Inc. is an affiliate of Chase, and was an underwriter in the Company's Proxy Statementpublic
offering of American's 9% Senior Subordinated Notes in February 1996.
In January 1998, ATS consummated the transactions contemplated by the ATS
Stock Purchase Agreement, dated as of January 8, 1998, with Steven B. Dodge,
Chairman of the Board and Chief Executive Officer of ARS and ATS, and certain
other officers and directors of ARS (or their affiliates, members of their
families or family trusts), pursuant to which those persons purchased 8.0
million shares of ATS Common Stock at a purchase price of $10.00 per share for
an aggregate purchase price of $80.0 million, including 4.0 million shares by
Mr. Dodge for $40.0 million.
Mr. Bouloukos, a Co-Chief Operating Officer, and the 1996
Annual Meeting of StockholdersCompany were parties to
a demand loan agreement pursuant to which the Company loaned to Mr. Bouloukos
$100,000 at a variable interest rate (prime) at the time he joined the Company
in August 1996. In 1997, the loan was forgiven and included in compensation.
Management believes that the above transactions were on terms, and the
Company intends to continue its policy that all future transactions between it
and its officers, directors principal stockholders and affiliates will be filed withon
terms, not less favorable to the Securities and Exchange
Commission on or before April 30, 1997 is hereby incorporated by reference
herein.
34Company than those which could be obtained
from unaffiliated third parties.
31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report(A) DOCUMENTS FILED AS PART OF THIS REPORT
(1) Financial Statements
The consolidated financial statements of the Company are filed as part of
this Form 10-K and are set forth on pages F-1 to F-49 as detailed in Item 8.
(b) Reports on(B) REPORTS ON FORM 8-K FILED IN THE FOURTH QUARTER OF 1997.
1. Form 8-K filed in the fourth quarter of 1996.(Items 5 and 7) on October 16, 1997
2. Form 8-K/A (Amendment 2)(Items 5 and 7) on October 2, 1996:
Item 7 - Financial Statements24, 1997
3. Form 8-K (Items 5 and Pro Forma Financial
Information for the Company and The Ten Eighty Corporation.
(c) Exhibits - See Exhibit Index beginning7) on page (i)December 23, 1997
(C) EXHIBITS--SEE EXHIBIT INDEX BEGINNING ON PAGE (I).
(d) Consolidated financial statement schedule(D) CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II - ValuationII--Valuation and Qualifying Accounts - seeAccounts--See page S-1.
All other schedules have been omitted because the required information
either is not applicable or is shown in or determinable from the financial
statements or notes thereto.
3532
SIGNATURES
Pursuant to the requirements of SectionPURSUANT TO THE REQUIREMENTS OF SECTION 13 or 15(d) of the Securities
Exchange Act ofOR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 28th day of
March, 1997.
AMERICAN RADIO SYSTEMS CORPORATION
By:THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON THE 30TH DAY OF
MARCH, 1998.
American Radio Systems Corporation
/s/ STEVEN B. DODGE Steven B. Dodge
Chief Executive Officer, Director,
President andBy: _________________________________
STEVEN B. DODGECHIEF EXECUTIVE
OFFICER, DIRECTOR,PRESIDENT AND
CHAIRMAN OF THE BOARD
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Steven B. Dodge Chairman of the March 30, 1998
- ------------------------------------- Board, Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/Chief
STEVEN B. DODGE Chairman of the Board, Chief Executive Officer,
President and
Director
/s/ Joseph L. Winn Chief Financial March 30, 1998
- ------------------------------------- Officer
JOSEPH L. WINN Chief Financial Officer and Director
/s/ Alan L. Box Executive Vice March 30, 1998
- ------------------------------------- President
ALAN L. BOX and Director
/s/ Justin D. Benincasa Vice President and March 30, 1998
- ------------------------------------- Corporate
JUSTIN D. BENINCASA Vice President and Corporate Controller
/S//s/ Thomas H. Stoner Director March 30, 1998
- -------------------------------------
THOMAS H. STONER
/s/ Arthur C. Kellar Director /S/March 30, 1998
- -------------------------------------
ARTHUR C. KELLAR
/s/ Charlton H. Buckley Director March 30, 1998
- -------------------------------------
CHARLTON H. BUCKLEY
33
SIGNATURE TITLE DATE
/s/ Arnold L. Chavkin Director March 30, 1998
- -------------------------------------
ARNOLD L. CHAVKIN
/s/ James H. Duncan, Jr. Director /S/March 30, 1998
- -------------------------------------
JAMES H. DUNCAN, JR.
/s/ Charles D. Peebler, Jr. Director /S/March 30, 1998
- -------------------------------------
CHARLES D. PEEBLER, JR.
/s/ Lance R. Primis Director /S/ DONALD B. HEBB, JR. Director
/S/ CHARLTON H. BUCKLEY Director
36March 30, 1998
- -------------------------------------
LANCE R. PRIMIS
34
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
AmericanofAmerican Radio Systems
Corporation:
We have audited the accompanying conso1idatedconsolidated balance sheets of American
Radio Systems Corporation and subsidiaries as of December 31, 19951996 and 1996,1997,
and the related consolidated statements of operations, stockholders' equity
(deficiency) and cash flows for each of the three years in the period ended
December 31, 1996.1997. Our audits also included the financial statement schedule
listed in the index at Item 14. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on thesethe financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of American Radio Systems
Corporation and subsidiaries as of December 31, 19951996 and 1996,1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 19961997 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 25, 1997March 6, 1998(Except for Note 3 as to which the date is March 27, 1998)
F-1
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31,
--------------------
1995 1996
------ ------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,889 $ 10,447
Accounts receivable (less allowance for doubtful
accounts of $2,532 and $4,560 in 1995 and 1996,
respectively) 24,389 51,897
Employee and other related-party receivables 151 249
Prepaid expenses and other assets 2,130 3,354
Note receivable--other 1,108
Deferred income taxes 1,162 3,370
-------- --------
Total current assets 32,829 69,317
-------- --------
PROPERTY AND EQUIPMENT--Net 31,786 90,247
-------- --------
OTHER ASSETS:
Station investment note receivable--related party
(less valuation allowance of $500 in 1995 and
1996) 500 743
Station investment notes receivable 48,597 69,177
Intangible assets--net:
Goodwill 66,464 232,149
FCC licenses 45,023 233,558
Other intangible assets 15,864 27,553
Deposits and other long-term assets 7,733 26,064
Net assets held under exchange agreement 47,495
-------- --------
Total other assets 184,181 636,739
-------- --------
TOTAL $248,796 $796,303
========(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 10,447 $ 16,643
Accounts receivable (less allowance for doubtful
accounts of $4,560 in 1996 and $7,703 in 1997,
respectively)..................................... 51,897 90,468
Employee and other related-party receivables....... 249 144
Prepaid expenses and other assets.................. 3,354 5,009
Current portion of investment notes receivable
(less valuation allowance of $6,750 in 1997)...... 2,250
Deferred income taxes.............................. 3,370 6,428
-------- ----------
Total current assets........................... 69,317 120,942
-------- ----------
PROPERTY AND EQUIPMENT--Net.......................... 90,247 250,189
-------- ----------
OTHER ASSETS:
Restricted cash.................................... 22,141
Investment note receivable-related party (less
valuation allowance of $500 in 1996).............. 743
Investment notes receivable........................ 69,177 36,812
Intangible assets--net:
Goodwill......................................... 232,908 353,897
FCC licenses..................................... 233,558 1,112,273
Other intangible assets.......................... 26,794 38,884
Unallocated purchase price, net.................. 108,192
Deposits and other long-term assets................ 26,064 10,875
Net assets held under exchange agreement........... 47,495
-------- ----------
Total other assets............................. 636,739 1,683,074
-------- ----------
TOTAL................................................ $796,303 $2,054,205
======== ==========
See notes to consolidated financial statements.
F-2
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
DecemberDECEMBER 31, -----------------------
1995DECEMBER 31,
1996 -------- -------1997
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 355debt............... $ 561 $ 450
Accounts payable 3,004payable................................... 7,085 9,687
Accrued compensation 1,318compensation............................... 3,027 3,456
Accrued expenses 5,593expenses................................... 16,355 20,708
Accrued interest 514interest................................... 7,303 --------- ---------14,177
-------- ----------
Total current liabilities 10,784liabilities...................... 34,331 --------- ---------48,478
-------- ----------
DEFERRED INCOME TAXES 7,899TAXES................................ 33,205 --------- ---------196,028
-------- ----------
OTHER LONG-TERM LIABILITIES 1,929LIABILITIES.......................... 2,149 --------- ---------8,954
-------- ----------
LONG-TERM DEBT 152,149DEBT....................................... 330,111 --------- ---------923,704
-------- ----------
MINORITY INTEREST IN SUBSIDIARIES.................... 344 --------- ---------626
-------- ----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK:
Cumulative Exchangeable Preferred Stock, $0.01 par
value; 10,000,000 shares authorized; 2,105,602
shares issued and outstanding; liquidation
preference $100 per share......................... 215,550
-------- ----------
STOCKHOLDERS' EQUITYEQUITY:
Preferred Stock; $0.01 par value; 10,000,000 shares
authorized;authorized: Convertible Exchangeable Preferred
Stock; 137,500 shares issued and outstanding
(represented by 2,750,000 depositary shares);
liquidation preference $1,000 per shareshare........... 1 1
Class A Common Stock; $.01 par value; 100,000,000
shares authorized; 6,645,86215,101,022 and 15,101,02224,708,096
shares issued and outstanding, respectively 66respectively....... 151 247
Class B Common Stock; $.01 par value; 15,000,000
shares authorized,
5,919,601authorized; 4,658,096 and 4,658,0963,508,639 shares
issued and outstanding, respectively 59respectively.............. 47 35
Class C Common Stock; $.01 par value; 6,000,000
shares authorized; 1,795,518 and 1,295,518 shares issued and
outstanding,
respectively 18outstanding....................................... 13 13
Additional paid-in capital 70,928capital......................... 390,731 671,211
Unearned compensation (391)compensation.............................. (297) (202)
Retained earnings 5,793(accumulated deficit)............ 5,955 --------- ---------
Total 76,473(9,982)
-------- ----------
Total.......................................... 396,601 661,323
-------- ----------
Less:
Treasury stock, at cost, 18,449 and 19,019 shares
at December 31, 19951996 and 1996December 31, 1997,
respectively.................................... (438) (438)
--------- ---------(458)
-------- ----------
Total stockholders' equity 76,035equity..................... 396,163 --------- ---------
TOTAL $ 248,796 $ 796,303
========= =========660,865
-------- ----------
TOTAL................................................ $796,303 $2,054,205
======== ==========
See notes to consolidated financial statements.
F-3
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended
DecemberYEARS ENDED DECEMBER 31,
---------------------------------
1994----------------------------
1995 1996 1997
-------- -------- -----------------
NET REVENUES $ 68,034REVENUES.................................... $ 97,772 $178,019 $374,118
-------- -------- --------
OPERATING EXPENSES:
Operating expenses excluding depreciation and
amortization, net local marketing agreement
and corporate general and administrative
expenses 50,129expenses..................................... 66,448 120,004 241,836
Net local marketing agreement expensesexpenses........ 600 8,128 2,314
Depreciation and amortization 9,920amortization................. 12,364 17,810 64,743
Merger expenses............................... 1,985
Corporate general and administrative 2,229administrative.......... 3,908 5,046 8,207
-------- -------- --------
Total expenses 62,278expenses.............................. 83,320 150,988 319,085
-------- -------- --------
OPERATING INCOME 5,756INCOME................................ 14,452 27,031 55,033
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (7,276)expense.............................. (12,497) (22,287) (59,749)
Interest income and other, net 225net................ 2,435 5,525 2,364
Gains (losses) on sale of assets and other,
net 2,278net.......................................... 11,544 (308) Provision for loss on station investment note
receivable (500)(5,713)
-------- -------- --------
Total other income (expense) (5,273)................ 1,482 (17,070) (63,098)
-------- -------- --------
INCOME (LOSS) FROM OPERATIONS BEFORE
EXTRAORDINARY ITEMSLOSSES AND INCOME TAXES 483TAXES.......... 15,934 9,961 (8,065)
INCOME TAX PROVISION (556) (6,829) (4,826)(BENEFIT) PROVISION.................. 6,829 4,826 (416)
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSSES (73)LOSSES....... 9,105 5,135 (7,649)
EXTRAORDINARY LOSSES ON EXTINGUISHMENT OF DEBT,
NET OF INCOME TAX BENEFIT OF $597 IN 1994 AND $614 INand $1,476 in
1995 (1,160)and 1997, respectively.................... (817) (2,333)
-------- -------- --------
NET INCOME (LOSS) (1,233)............................... 8,288 5,135 (9,982)
REDEEMABLE COMMON AND PREFERRED
STOCK DIVIDENDS (1,887)DIVIDENDS................................ (815) (4,973) (31,164)
-------- -------- --------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $ (3,120)STOCKHOLDERS--BASIC..................... $ 7,473 $ 162 $(41,146)
======== ======= =======
PRIMARY AND FULLY======== ========
BASIC PER SHARE AMOUNTS:
Before extraordinary items.................... $ 0.70 $ 0.01 $ (1.42)
Extraordinary items........................... (0.07) -- (0.09)
-------- -------- --------
Net income (loss)............................. $ 0.63 $ 0.01 $ (1.51)
======== ======== ========
DILUTED PER COMMON
SHARE AMOUNTS:
Income (loss) beforeBefore extraordinary lossesitems.................... $ (.21) .650.65 $ .010.01 $ (1.42)
Extraordinary losses (.12) (.06)items........................... (0.06) -- (0.09)
-------- ------- --------------- --------
Net income (loss)............................. $ (.33) .590.59 $ .010.01 $ (1.51)
======== ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON======== ========
SHARES OUTSTANDING 9,338 12,646FOR BASIC................................ 11,838 19,550 27,290
SHARES FOR DILUTED.............................. 12,585 20,510 27,290
======== ======= =============== ========
See notes to consolidated financial statements.
F-4
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-5
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS)
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(In thousands)
Convertible
Exchangeable SeriesCONVERTIBLE
EXCHANGEABLE SERIES A SeriesSERIES B SeriesSERIES D ClassCLASS A
Class B
Preferred Stock Common Stock Common Stock Common Stock Common Stock Common Stock
--------------- ---------------- ---------------- --------------- ---------------- ---------------
Shares Shares Shares Shares Shares Shares
Out- Out- Out- Out- Out- Out-
standing Amount standing Amount standing Amount standing Amount standing Amount standing Amount
--------PREFERRED STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
------------------ ------------------ ------------------ ------------------ ------------------
SHARES SHARES SHARES SHARES SHARES
OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT
----------- ------ -------------------- ------ ------------------- ------ -------------------- ------ --------- ------ ------------------- ------
BALANCE, JanuaryJANUARY 1,
1994 2,9921995.................. 3,631 $36 374 $ 30 152 $ 2
Issuance of Common Stock,
net of issuance costs
of $129................ 473 4 222 2 317 $ 3
Conversion of long-term
debt to Series A Common
Stock.................. 75 1
Issuance of stock in
exchange for note
receivable............. 28
Conversion of preferred
stock to Series A
Common Stock........... 63 1
Dividends payable.......
Distributions on
redeemable stock.......
Distributions paid......
Acquisition of treasury
stock................
Issuance of warrants....
Accretion of Series A
redeemable stock to
fair value.............
Net loss................
--------- ------ --------- ------ --------- ------
BALANCE,
DECEMBER 31, 1994....... 3,631 36 374 4 317 3
Repayment of note
receivable.............receivable............
Stock options granted
below fair market
value..................value.................
Reclassification of
Series A, B and C
redeemable stock.......stock......
Two-for-one stock
exchange...............exchange.............. 3,631 36 374 4 317 3
Distributions on
redeemable stock.......stock......
Reversal of dividends
payable................payable...............
Conversion to Class A
Common Stock.......... (1,275) (13) (539) (5) 1,813 $ 18
Conversion to Class B
Common Stock.......... (5,637) (56) (95) (1)
5,731 $ 57
Conversion to Class C
Common Stock.......... (298) (3) (748) (8)
Shares allocated to
treasury...............treasury.............. (52)
Issuance of Class A
Common Stock, net of
issuance costs of
$8,303.................$8,303................ 4,770 47
Exercise of Common
Stock Option and
Warrant.....Warrant............... 1
Conversion of Senior
Series C Common Stock
to Class B and Class C
Common Stock......... 268 3Stock..........
Acquisition of treasury
stock......... (18)stock.................
Amortization of
unearned
compensation..........
Conversion of Class B
Common Stock to Class
A Common Stock...........Stock........ 61 1 (61) (1)
Retirement of treasury
stock..................stock.................
Net income..............income.............
Reclassification of
capital deficiency
account................
---------account...............
------ ------------ ---- --- ---- --- ------ --------- ------ --------- ------ --------- ----------
BALANCE, DECEMBER 31,
1995.....1995.................. 0 0 0 0 0 0 6,645 66
5,920 59
Dividends payable.......payable......
Distributions paid......paid.....
Issuance of Class A
Common Stock, net of
issuance cost of
$7,034.................$7,034................ 4,501 45
Shareholder conversion
in conjunction with
issuance of Class A
Common Stock...........Stock.......... 838 8 (338) (3)
Issuance of Preferred
Stock, net of issuance
cost of $4,725........ 138 $ 1
Issuance of Class A
Common Stock for
Skyline, Bridan Tower,
and Henry Mergers......Mergers..... 2,165 22
Conversion of Class B
Common Stock to Class
A Common Stock.........Stock........ 952 10 (952) (10)
Exercise of common
stock options.......... 28 1options.........
Amortization of
unearned
compensation..compensation..........
Net income..............
---------income.............
--- --- ------ ------------ ---- --- ---- --- ------ --------- ------ --------- ------ --------- ------ --------- ----------
BALANCE, DECEMBER 31,
1996.......1996.................. 138 1 0 0 0 0 0 0 15,101 151
Dividends payable......
Distributions paid.....
Issuance of Class A
Common Stock ......... 8,362 83
Issuance of Preferred
Stock, net of issuance
costs of $7,750.......
Conversion of Class B
Common Stock To Class
A Common Stock........ 1,193 12
Exercise of common
stock Options......... 53 1
Tax benefit of stock
options...............
Acquisition of treasury
stock................. (1)
Amortization of
unearned
Compensation..........
Net loss...............
--- --- ------ --- ---- --- ---- --- ------ ----
BALANCE, DECEMBER 31,
1997.................. 138 $ 1 0 $ 0 0 $ 0 0 $ 0 15,101 $ 151 4,658 $ 47
=========24,708 $247
=== === ====== ============ ==== === ==== === ====== ========= ====== ========= ====== ========= ====== ========= ======
See notes to consolidated financial statements.
F-5
Class====
See notes to consolidated financial statements.
F-6
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)--(CONTINUED)
(IN THOUSANDS)
CLASS B CLASS C
Common Stock Note Treasury Stock CapitalCOMMON STOCK COMMON STOCK NOTE TREASURY STOCK CAPITAL
- ------------------- ------------------ Receivable -------------- Additional Deficiency Retained Redeemable
Shares from Unearned Paid-in Upon Earnings Stock Dividends
Outstanding Amount Stockholder Shares Amount Compensation Capital Combination (Deficit) Dividends Payable TotalRECEIVABLE ---------------- ADDITIONAL DEFICIENCY RETAINED
SHARES SHARES FROM UNEARNED PAID-IN UPON EARNINGS DIVIDENDS
OUTSTANDING AMOUNT OUTSTANDING AMOUNT STOCKHOLDER SHARES AMOUNT COMPENSATION CAPITAL COMBINATION (DEFICIT) PAYABLE
- ----------- ------ ----------- ------ ----------------- ------- ------- ------------ ------------------- ----------- --------- --------- ------- -------------
$(500) (26) $ (21,709)(340) $ (447) $ (255) $ (22,379)
$ 18,046 18,055
1,349 25 1,375
$ (500) 500
1,138 1,139
(265)18,357 $(21,709) $(1,680) $ 265
(1,536) 230 (1,306)
(351) (351)
(26)$ (340) 340
523 523
(1,387) (1,387)
(1,233) (1,233)
----------- ------ ------ --------- ----------- --------- --------- ------- -------------
(500) (26) (340) 18,357 (21,709) (1,680) $ 0 265 (5,564)
=========
500
500
$ (473)$(473) 473
3,121
3,121
(26) (43)
(815)
(815)
265 (265)
5,731 $57 1,046 $ 11$11
70,355 70,402
79 1 11
12268 3 671 6
9(18) (18) (438) 438
82
82(61) (1)
52 340 (340)
8,288
8,288
(21,709) 21,709
- ----------- ------ -------------- ----- --- ----- ------ ------ ------------ --------- ----------- --------- ------- ------------------ -------- -------- ------- -------
5,920 59 1,796 18 0 (18) (438) (391) 70,928 $ 0 5,793 0
76,035
===================
(4,973) 4,973
(4,973)
(4,973)
114,457
114,502(338) (3) (500) (5)
132,774
72,131
(952) (10)
28 1 441
94
5,135
------ --- ----- --- ----- ------ ------- ----- -------- ------- -------
4,658 47 1,296 13 0 (18) (438) (297) 390,731 5,955 0
(25,210) (5,955) 15,613
(15,613)
311,213
(7,750)
(1,193) (12)
44 0 930
1,297
(1) (20)
95
(9,982)
------ --- ----- --- ----- ------ ------- ----- -------- ------- -------
3,509 $35 1,296 $13 0 $ (19) $ (458) $(202) $671,211 $(9,982) $ 0
====== === ===== === ===== ====== ======= ===== ======== ======= =======
TOTAL
- ---------
$ (5,564)
500
3,121
(815)
70,402
12
9
82
8,288
- ---------
76,035
(4,973)
114,502
132,775
72,131 72,153
441
442
94
94
5,135 5,135
- ----------- ------ ----------- ------ ------ ------------ ---------
396,163
(15,552)
(15,613)
311,296
(7,750)
0
930
1,298
(20)
95
(9,982)
- ---------
------- -------------
1,296 $ 13 $ 0 $ (18)$ (438) $ (297) $ 390,731 $ 5,955 $ 0 $ 396,163
=========== ====== =========== ====== ====== ============$660,865
========= ========= ======= =============
See notes to consolidated financial statements.
F-6F-7
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended
DecemberYEARS ENDED DECEMBER 31,
-----------------------------------
1994-------------------------------
1995 1996 ----------1997
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,233)............................ $ 8,288 $ 5,135 $ (9,982)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Barter revenues (4,369)revenues.............................. (4,678) (7,989) (13,137)
Barter expenses 4,011expenses.............................. 4,626 6,973 12,052
Depreciation and amortization 9,920amortization................ 12,364 17,810 64,744
Amortization of deferred financing costs 265costs..... 278 868 1,475
Amortization of debt discountdiscount................ 84 100
Amortization of debt premium................. (574)
Provision for losses on accounts
receivable 721receivable.................................. 1,387 2,977 4,608
Provision for loss on station investment note
receivable 500receivable.................................. 6,750
Extraordinary losses, net 1,160net.................... 817 2,333
Deferred taxes 388taxes............................... 3,490 940 (5,481)
Accretion of note discount (34)discount................... (53) (42)
Recovery of allowance on investment note
receivable.................................. (500)
(Gain) loss on sale of station and other,
net (2,278)net......................................... (11,544) 248 Unearned compensation(404)
Loss on broadcasting contract................ 1,670
Stock compensation........................... 82 94 95
Minority interest in net earnings of
subsidiaries and investments................ 584
Change in assets and liabilities, net of
effects of mergers and acquisitions:
Accounts receivable (8,142)receivable......................... (6,030) (27,872) (15,433)
Prepaid expenses and other assets (399)assets........... (919) (1,202) (783)
Restricted cash............................. (703)
Accounts payable and accrued expenses 1,989expenses....... 2,609 10,846 (5,844)
Accrued interest (333)interest............................ (993) 6,789 1,738
--------- --------- ---------
Cash provided by operating activities 2,166activities...... 9,724 15,659 43,308
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property, and equipment
and intangible assets (5,754)assets....................... (5,926) (25,109) (45,730)
Proceeds from asset and radio station sales 5,620sales.. 15,302 1,087 Proceeds from repayment86,551
Repayment of station investment notes receivablereceivable..... 3,000 1,350 1,243
Payments for purchase of tower propertiesproperties.... (7,300) (9,797) (181,333)
Payments for purchase of radio stations (87,291)stations...... (31,013) (312,591) (500,824)
Payments for station investment notes receivable and
related intangible assets (5,000)assets................... (48,597) (56,522) (11,371)
Deposits and other long-term assets (484)assets.......... (6,649) (20,303) 6,391
--------- --------- ---------
Cash used for investing activities (92,909)activities......... (81,183) (421,885) (645,073)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under the Credit Agreements 83,500Agreements....... 225,000 154,000 Repayment790,500
Repayments under the Credit Agreements (7,000)Agreements....... (202,500) (151,500) (351,000)
Borrowings under other obligations........... 750
Repayment of other obligations (2,448)obligations............... (1,288) (454) (1,227)
Net proceeds from debt offering - netoffering--net of
discountdiscount.................................... 173,581
Net proceeds from stock offerings and
options..................................... 69,882 247,474 193,165
Additions to deferred financing costs (1,742)costs........ (3,896) (5,344) (8,195)
Redemption of Series C Senior Common StockStock... (14,580)
Dividends paid (351)paid............................... (4,973) (15,613)
Distribution to minority shareholder......... (419)
Purchase of treasury stockstock................... (438)
Net proceeds from stock offerings and exercise of
options 17,560 69,882 247,474
--------- --------- ---------
Cash provided by financing activities 89,519activities...... 72,180 412,784 607,961
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,224)EQUIVALENTS......... 721 6,558 6,196
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,392YEAR.. 3,168 3,889 10,447
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,168YEAR........ $ 3,889 $ 10,447 $ 16,643
========= ========= =========
See notes to consolidated financial statements.
F-7F-8
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Summary of Significant Accounting PoliciesBUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
American Radio Systems Corporation and subsidiaries (collectively, American,
ARS or the Company) is a national broadcasting company formed in 1993 to
acquire, develop and operate radio stations and communications towers
throughout the United States. In July 1995,As of December 31, 1997 the Company organizedowned and/or
operated approximately 100 radio stations in 21 markets and owned and/or
operated approximately 760 wireless communication sites.
American Tower Systems Inc.
(theCorporation and subsidiaries (formerly American Tower
Systems Holding Corporation) (collectively, the Tower Subsidiary, ATS or
Tower) is a wholly-owned subsidiary of ARS. ATS was incorporated in July 1995
for the purpose of acquiring, developing, marketing, managing and operating
wireless communications towerstower sites throughout the United States, for use by
American'scommunications related businesses, wireless communications providers, and
television and radio stations, other radio operators and other communication related
businesses. Asbroadcasters. ATS' primary business is the leasing of
December 31, 1996 the Company owned and/or operated 71
stations in 14 markets (23 AM and 48 FM) and owned and operated over 200antennae sites on multi-tenant towers and rooftop towers.
The Company commenced operationsrooftops, primarily for its own
towers and, to a lesser extent, for unaffiliated communications site owners.
In support of its rental business, ATS also offers its customers network
development services, including site acquisition, zoning, antennae
installation, site construction and network design. These services are offered
on November 1, 1993, followinga time and materials or fixed fee basis or incorporated into build to suit
construction contracts. ATS is also engaged in the tax-free combinationvideo, voice and data
transmission business, which it currently conducts in the New York City to
Washington D.C. corridor and in Texas.
Pending Sale of four parties (the Combination); Stoner Broadcasting
System Holding, Inc. (Stoner), Atlantic Radio L.P. (Atlantic), Multi Market
Communications, Inc. (Multi Market)Operations and Boston AM RadioTower Separation--In September 1997,
ARS entered into a merger agreement with a subsidiary of CBS Corporation
(Boston AM)
(collectively, the Predecessor Entities). The Combination(formerly Westinghouse Electric Corporation) (CBS) which was accounted for as a
purchase,amended and
the Company has recorded the net assets of each of the Predecessor
Entities at their historical carrying values.
In order to simplify its corporate structure,restated in December 1995, American
merged American Radio Systems, Inc. (ARSI), its wholly owned1997 (the Merger Agreement) pursuant to which the CBS
subsidiary which
had owned all of the radio stations,will merge with and into American. American Radio
Systems License Corp. (ARSLC) isARS. Each holder of ARS common stock at
the effective time of the merger will receive (i) $44.00 per share in cash,
and (ii) one share, of the same class, of Tower common stock owned by ARS (the
Tower Separation). As a wholly ownedresult of the Tower Separation, Tower will cease to be
a subsidiary of, or otherwise be affiliated with, ARS and will thereafter
operate as an independent publicly held company. ARS and Tower will enter into
certain agreements pursuant to the Company
which holds substantially all of the FCC licenses utilized by the Company's
broadcasting properties. Pursuant to a management agreement between ARSLC and
American, American pays a management fee to ARSLC equal to its operating
expenses (primarily amortization and taxes).
Concurrent with the initial public offering discussed in Note 8, the
Company amended its Articles of Incorporation, which providedMerger Agreement providing for, among other
things, the orderly separation of ARS and Tower, the transfer of lease
obligations to Tower of leased space on certain towers owned or leased by ARS
to Tower, and the allocation of certain tax liabilities between ARS and Tower.
The Tower Separation will result in a two-for-one exchangetaxable gain to ARS, of each share Series A, Bwhich $20.0
million will be borne by ARS and Dthe remaining obligation (currently estimated
at approximately $113.0 to $153.0 million) will be paid by Tower pursuant to
provisions of the Merger Agreement (the Merger Tax Liability). The Merger Tax
Liability is based on an assumed fair market value of the Tower Common Stock
of $16.00 per share. Such estimated Merger Tax Liability would increase or
decrease by $14.8 million for two shareseach $1.00 per share increase or decrease in the
fair market value of Class A, B, or CATS Common Stock (the 1995 Recapitalization)Stock. (See Note 10).
The accompanying financial statements give retroactive effectMerger has been approved by stockholders of ARS who hold sufficient
voting power to approve such action. Consummation of the Merger is subject to,
among other things, the expiration or earlier termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (HSR Act) and the approval by the Federal Communications Commission
(FCC) of the transfer of control of ARS' FCC licenses with respect to its
radio stations to CBS. Subject to the two-for-one
stock exchange.satisfaction of such conditions, the
Merger is expected to be consummated in the spring of 1998.
Basis of Presentation and Principles of Consolidation--The accompanying
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Investments in affiliates, owned more than 20 percent but not in
excess of 50 percent, are accounted for using the equity method, when less
than a controlling interest is held. The Company also consolidates its 50.1%
interest and its 70.0% interest in atwo other limited liability communications
tower partnership,companies, with the other partner'scompanies' investment reflected as minority
interest in the accompanying balance
F-9
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
sheet. Equity in earnings (loss) of affiliates not consolidated and the
minority interest in earnings (loss) of consolidated affiliates is reported as
a component of gains on sales of assets and other, net in the accompanying
consolidated statement of operations. There were no such amounts for the years
ended December 31, 1994 and 1995 and 1996; such amounts wereapproximated $362,000 for the
year ended December 31, 1997.
Information with respect to the Company's radio and tower segments is
presented within these notes to consolidated financial statements, principally
Note 14. The Company believes that the tower segment should not materialbe accounted
for as a discontinued operation based upon the Company's belief that a
measurement date will not occur until such time as the Merger is granted
regulatory approval. Further, in 1996.the event the Merger is not consummated, the
Company's board of directors will determine, based on the facts and
circumstances then existing, whether the distribution of Tower to the
Company's stockholders will be in their best interests. Accordingly, the tower
segment has not been reported as a discontinued operation in the accompanying
consolidated financial statements.
Revenue Recognition--Revenues are recognized when advertisements are
broadcast and transmitting services are provided. Revenues under leaseTower and management contractssublease revenues
are recognized when earned. The Company's revenues vary
throughoutEscalation clauses and other incentives present in
lease agreements are recognized on a straight-line basis over the year. The Company's first calendar quarter historically produces
the lowest revenues for the year, while eachterm of the
other quarters produces
roughly equivalent revenues.leases. Management fee, consulting and video revenues are recognized as such
services are provided.
Corporate General and Administrative Expense--Corporate general and
administrative expense consists of corporate overhead costs not specifically
allocable to any of the Company's individual business properties.
F-8
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Business and Summary of Significant Accounting Policies--(Continued)
Barter Transactions--Revenue from the stations' exchange of advertising time
for goods and services is recorded as the advertising is broadcast at the fair
market value of goods or services received or to be received. The value of the
goods and services is charged to expense when used. Net barter receivables are
included in accounts receivable.
Barter transactions were approximately as follows for the years ended
December 31 (in thousands):
1994 1995 1996
---- ---- ----
Barter revenues $4,369 $4,678 $7,989
Barter expenses 4,011 4,626 6,973
Net barter receivables 327 248 811
Barter fixed asset additions 89 131 22
Net barter liability assumed in
acquisitions 431
1995 1996 1997
------ ------ -------
Barter revenues..................................... $4,678 $7,989 $13,137
Barter expenses..................................... 4,626 6,973 12,052
Net barter receivables.............................. 248 811 1,457
Barter fixed asset additions........................ 131 22 202
Net barter asset (liability) assumed in acquisi-
tions.............................................. (431) 42
Net Local Marketing Agreement Expense--Net local marketing agreement (LMA)
expenses consist of fees paid by or earned by American under agreements which
permit an entity to program and market stations prior to their acquisition.
The Company enters into such agreements prior to the consummation of many of
its acquisitions or dispositions. LMA expenses for the yearyears ended December
31, 1996 and 1997 are presented net of approximately $2,333,000 and
$4,138,000, respectively, of revenue earned under such agreements with third
parties.
Concentration of Credit Risk--The Company extends credit to customers on an
unsecured basis in the normal course of business. No individual industry or
industry segment is significant to the Company's customer base. The Company
has policies governing the extension of credit and collection of amounts due
from customers.
Derivative Financial Instruments--The Company uses derivative financial
instruments as a means of managing interest-rate risk associated with current
debt or anticipated debt transactions that have a high
F-10
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
probability of being executed. Derivative financial instruments used include
interest rate swap agreements and interest rate cap agreements. These
instruments are matched with either fixed or variable rate debt and, when
matched, are recorded on a settlement basis as an adjustment to interest
expense. Premiums paid to purchase interest rate cap agreements are amortized
as an adjustment of interest expense over the life of the contract. Gains and losses on terminated contracts are
deferred and recognized over the shorter of the remaining term of the terminated
contract or the term of the related liability. Derivative
financial instruments are not held for trading purposes. (See Notes 3 and 13)12).
Impairment of Long-Lived Assets--During 1996, the Company adopted FAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" (FAS 121), which addresses the accounting for the
impairmentAssets--Recoverability of long-lived assets certain identifiable intangibles and goodwill.
Management reviews long-lived assets and the related intangibles whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Long-lived assets to be held and used are recorded at cost.
Recoverability of these assets is
determined by periodically comparing the forecasted undiscounted net cash
flows of the operations to which the assets relate to the carrying amount,
including associated intangible assets of such operations. If itThrough December
31, 1997, no impairments requiring adjustment have occurred.
Stock-Based Compensation--Compensation related to equity grants or awards to
employees is determined thatmeasured using the Company will be unable to recoverintrinsic value method prescribed by
Accounting Principles Board Opinion No. 25 (See Note 8).
Income (Loss) Per Common Share--In the carrying amountfourth quarter of such assets, then intangible assets are written down first, followed by the
other long-lived assets, to fair value. Fair value is determined based on
appraised values or discounted cash flows, depending upon the nature of the
assets. The impact of the adoption of FAS 121 on the Company's results of
operations, liquidity and financial position was not material.
F-9
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Business and Summary of Significant Accounting Policies--(Continued)
Stock-Based Compensation--During 1996,1997, the Company
adopted Statement of Financial Accounting Standards No. 128, (FAS 128)
Earnings Per Share. Prior to the disclosure
only provisionsfourth quarter of FAS No. 123 "Accounting for Stock-Based Compensation" (FAS
123). FAS 123 addresses1997, the financial accounting and reporting standards for
stock-based employee compensation plans. FAS 123 gives an entityCompany computed
income (loss) per common share using the choice of
recognizing related compensation expense by either applying the new fair value
method or the intrinsic value approach describedmethods outlined in Accounting
Principles Board (APB) Opinion No. 25,15, Earnings Per Share, and its interpretations.
Basic income (loss) per common share is computed using the former standard. The Company has continued to useweighted average
number of common shares outstanding during each year. Diluted income (loss)
per common share reflects the measurement prescribed by APB No. 25, and, accordingly, the impacteffect of the adoption had no effect onCompany's outstanding options
(using the Company's resultstreasury stock method) and assumes conversion of operations, liquidity or
financial position. The Company has provided supplemental disclosurepreferred stock
except where such items would be antidilutive.
A reconciliation of the impactdenominator for the basic and diluted per share
calculations is as follows:
1995 1996 1997
------ ------ ------
Shares for basic computation.......................... 11,838 19,550 27,290
Effect of stock options............................... 747 960 --
Assumed conversion of redeemable common and preferred
stock................................................ -- -- --
------ ------ ------
Shares for diluted computation........................ 12,585 20,510 27,290
====== ====== ======
Shares of applyingredeemable common and preferred stock convertible into common
stock have been excluded from the fair value method. (See Note 8).diluted computation as they are anti-
dilutive. Had such shares been included, shares for diluted computation would
have been increased by 410,000, 1,662,000 and 3,235,000 in 1995, 1996 and
1997, respectively. In addition, because such shares are anti-dilutive, no
adjustment has been made to reconcile from income (loss) for the basic
computation to that for the diluted computation. No effect has been given to
stock options in 1997 as they are anti-dilutive for that year. Had such
options been included, shares for diluted computation would have been
increased by 1,388,000.
Property and Equipment and Intangible Assets--Property and equipment are
recorded at cost, or at estimated fair value in the case of acquired
properties. Cost includes expenditures for radio properties, communications
sites and depreciationrelated assets and the net amount of interest cost associated with
significant capital additions. Approximately $120,000 and $921,000 of interest
was capitalized for the years ended December 31, 1996 and 1997, respectively.
Depreciation is provided using the straight-line method over estimated useful
lives ranging from three to thirty-twofifteen years. The
consolidated financial statements reflect the preliminary allocation of certain
purchase prices as the appraisals for certain acquisitions have not yet been
finalized.
Non-competition and consulting agreements, Federal Communications
Commission (FCC)FCC licenses, favorable
transmitter sites, goodwill, and various other intangibles, acquired in
connection with the Company's acquisitions of the various radio stations and
communications sites, are being amortized over their estimated useful lives,
ranging from one to forty years, using the straight-line method. FCC licenses
and goodwill are generally amortized over a fifteen to forty year
F-11
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
period. Other intangible assets consist principally of deferred financing
costs, broadcast affiliation agreements, favorable studio and office space
leases and costs incurred on pending acquisitions. Accumulated amortization of
goodwill aggregated approximately $2,176,000$6,369,000 and $6,369,000$17,318,000 at December 31,
19951996 and 1996,1997, respectively. Accumulated amortization of FCC licenses
aggregated approximately $2,390,000$7,628,000 and $7,628,000$42,876,000 at December 31, 19951996 and
1996,1997, respectively. Accumulated amortization of other intangible assets
aggregated approximately $14,696,000$14,112,000 and $14,112,000$18,698,000 at December 31, 19951996 and
1997, respectively. Accumulated amortization of the unallocated purchase price
aggregated approximately $356,000 and $3,726,000 at December 31, 1996 respectively,and
1997, respectively.
The consolidated financial statements reflect the preliminary allocation of
certain purchase prices as the appraisals for certain acquisitions have not
yet been finalized. The Company is currently conducting studies to determine
certain purchase price allocations of Tower acquisitions and expects that upon
final allocation the average estimated useful life will approximate fifteen
years. The final allocation of purchase price is not expected to have a
material effect on the Company's results of operations, liquidity or financial
position.
Property and equipment and intangible assets includeincluded approximately $61,123,000$108.6
million and $84.0 million of assets related to radio stations held for sale or
under exchange agreements (excluding the Merger Agreement) as of December 31,
1996 excludingand 1997, respectively. The following summary presents the results of
operations (excluding depreciation and amortization, net assetslocal marketing
agreement and corporate general and administrative expenses) relating to these
stations that are included in the accompanying consolidated financial
statements for each respective period.
YEAR ENDED
DECEMBER 31,
---------------
1996 1997
------- -------
Net operating revenues..................................... $15,795 $22,271
Net operating expenses..................................... 10,663 15,742
Restricted Cash--Restricted cash represents cash held under exchange agreement. (See Notes 10, 11
and 14).
Note Receivable--Other--In connection with the sale of a Syracuse, New
York radio station, the Company held a note receivable. The note had a face
amount of $1,000,000 and was collected in full along with interest in October
1996.
Station Investment Note Receivable--Related Party-- At December 31, 1994,
the Company held a $5,000,000 note (the Acquisition Note) from a related party,
Back Bay Broadcasters, Inc. (Back Bay),escrow pursuant to
transactions discussedcertain exchange agreements. Such agreements may be terminated at the
Company's option, in Notes 8 and 12. The Acquisition Note had a stated interest rate of 10% but was
discountedwhich event such cash held in escrow is required to reflect a market interest rate of 16% and was due in 2001.
Further, during 1994,be
utilized to reduce borrowings under the Company provided a $500,000 valuation allowance to
reflect management's estimate of the value of the underlying collateral for the
Acquisition Note.
In May 1995, American sold the Acquisition Note, and its related rights and
privileges (the Back Bay Note Sale) for (a) $3,000,000 in cash, (b) 4.99% of the
common stock of Back Bay, and (c) a 10% Convertible Subordinated Debenture of
Back Bay in the principal amount of $1,000,000 which is convertible into 20% of
the common stock of Back Bay. This note matures in 2002 and is carried at its
expected net realizable value of $500,000. There is no readily determinable
market value for the common stock of Back Bay; therefore, the Company is unable
to assign any value to this asset or its related rights
F-10
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Business and Summary of Significant Accounting Policies--(Continued)
and privileges. As part of the agreement, the Company also obtained an
assignable right of first refusal with respect to the sale of assets or stock
(or other equity securities) of Back Bay and an assignable option, exercisable
at any time after August 31, 1998, to purchase all of the assets of Back Bay. As
of December 31, 1996, Back Bay owned three radio stations: WBNW-AM, Boston (sale
pending), and certain other Rhode Island stations. As part of American's
arrangement to purchase KBBT-FM in Portland, Oregon, the Company granted the
seller of such station the right to exercise its purchase option to acquire
WBNW- AM. In December 1996, such seller and Back Bay entered into a purchase and
sale agreement with respect to WBNW-AM. In August 1996, American advanced an
additional $243,000 to Back Bay in exchange for a note bearing interest at 10%
per annum and maturing in 2002. (See Note 14).
StationCompany's credit agreement.
Investment Notes Receivable--In connection with certain transactions
discussed in Notes 9, 10 11 and 12,11, the Company has loaned funds at varying rates
of interest to certain entities which own radio stations and tower properties
that the Company is obligated, or has options, to purchase. These notes as amended, have
varying interest rates ranging from 6% to 12% and are collateralized by
substantially all of the assets of the related radio stations. Significant Estimates--InIn connection
with the OPM acquisition and the Gearon acquisition described in Note 11, the
Company entered into certain note agreements prior to consummation of these
acquisitions.
The Company agreed to advance OPM an amount not to exceed $37.0 million, of
which approximately $5.8 million (including accrued interest) was advanced as
of December 31, 1997. The note bore interest at prime rate plus 3%, was
unsecured and was an assumed liability upon closing of the OPM acquisition.
The Company also agreed to advance Gearon an amount not to exceed $10.0
million prior to closing, of which approximately $5.0 million was advanced as
of December 31, 1997. The note bore interest at 7.25% per annum, was unsecured
and was paid upon closing of the Gearon acquisition.
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 amounts reported in the
F-12
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
financial statements and accompanying notes. In the process of preparing its
consolidated financial statements, the Company estimates the appropriate
carrying value of certain assets and liabilities which are not readily
apparent from other sources. The primary estimates underlying the Company's
financial statements include allowances for potential bad debts on accounts
and notes receivable, the useful lives of its assets such as property and
intangibles, fair values of financial instruments, the realizable value of its
tax assets and accruals for health insurance and other matters. Management
bases its estimates on certain assumptions, which they believe are reasonable
in the circumstances, and while actual results could differ from those
estimates, management does not believe that any change in those assumptions in
the near term would have a material effect on its financial position, results
of operations or liquidity.
Income Taxes--Deferred taxes are provided to reflect temporary differences
in bases between book and tax assets and liabilities, and net operating loss
carryforwards. Deferred tax assets and liabilities are measured using
currently enacted tax rates. (See Note 6).
Retirement Plans--The Company has a 401(k) plan covering substantially all
employees, subject to certain minimum age and length-of-employment
requirements. Under the plan, the Company matches 30% of participants'
contributions up to 5% of compensation. The Company contributed approximately
$225,000, $299,000 and $866,000 to the plan for the years ended December 31,
1995, 1996, and 1997, respectively.
Recent Accounting Pronouncements--In June 1997, the FASB released FAS No.
130 "Reporting Comprehensive Income" (FAS 130), and FAS No. 131 "Disclosures
about Segments of an Enterprise and Related Information" (FAS 131). These
pronouncements will be effective in 1998. FAS 130 establishes standards for
reporting comprehensive income items and will require the Company to provide a
separate statement of comprehensive income; reported financial statements
amounts will be affected by this adoption. FAS 131 established standards for
reporting information about the operating segments in its annual report and
interim reports and will require the Company to adopt this standard in 1998.
In February 1998, the FASB released SFAS No. 132, (FAS 132) "Employer's
Disclosures about Pensions and Other Postretirement Benefits," which the
Company will be required to adopt in 1998. FAS 132 will require additional
disclosure concerning changes in the Company's pension obligations and assets
and eliminates certain other disclosures no longer considered useful. Adoption
will not have any effect on reported results of operations or financial
position.
Cash Flow Information--For purposes of the statements of cash flows, the
Company considers all highly liquid, short-term investments with remaining
maturities of three months or less when purchased to be cash and cash
equivalents.
Cash payments for interest expense aggregated approximately $7,018,000,
$9,890,000,
$14,329,000 and $14,329,000$57,863,000 for the years ended December 31, 1994, 1995, 1996, and
1996,1997, respectively.
Cash payments for income taxes aggregated approximately $1,600,000,
$1,808,000,
$3,086,000 and $3,086,000$2,800,000 for the years ended December 31, 1994, 1995, 1996, and
1996,1997, respectively.
Significant noncashnon-cash investing and financing transactions, apart from the
barter transactions discussed above, are as follows:
For the year ended December 31, 1994:
o Capital lease obligations of approximately $550,000 were incurred
when the Company entered into leases for new office furniture and
equipment.
o The Company issued warrants to acquire approximately 79,000
shares of common stock with a cost aggregating $523,000 in
exchange for the acquisition of certain intangible assets. (See
Notes 8 and 12).
F-11
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Business and Summary of Significant Accounting Policies--(Continued)
o Additional Series A Common Stock was issued upon the conversion
of $1,350,000 of long-term debt, $1,138,000 of Preferred Stock
(of which $138,000 represented Deferred Yield Distributions), and
receipt of a $500,000 note receivable. (See Notes 7, 8 and 12).
o Leasehold improvements totaling approximately $937,000 were
provided to the Company in connection with certain building lease
incentives.
For the years ended December 31, 1994 and 1995:
o
Accrued and unpaid Common Deferred Yield Distributions on the Series C
Common Stock aggregated $1,536,000 and $815,000,
respectively.$815,000. (See Note 7).
For the year ended December 31, 1995:
oF-13
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
In connection with the WEGQ-FM acquisition (see Note 10),of a radio station, the Company issued
a $500,000 note to the previous owner.
o
Capital lease obligations of approximately $201,000 were incurred for
office furniture and equipment.
o
In connection with the Company's initial public offering of its Class A
Common Stock (the Initial Public Offering), the Company exchanged
approximately 939,000 shares of Senior Series Common Stock for
approximately 268,000 shares of Class B Common Stock and approximately
671,000 shares of Class C Common Stock. (See Note 7)8).
o
The Company's obligation to repurchase the shares of the beneficiaries of
a Predecessor Entity's Employee Stock Ownership Plan was canceled as a
result of the Initial Public Offering and pursuant to a vote by the Board
of Directors effective September 30, 1995. (See Note 7).
For the year ended December 31, 1996:
o In connection with radio station and tower acquisitions, the Company
assumed approximately $4,437,000 in liabilities and issued shares of Class
A Common Stock with an agreed upon value of approximately $72,153,000. (See
Note 10)9).
o
Capital lease obligations of approximately $390,000 were incurred for
office furniture and equipment. (See Note 3).
F-12
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Business and Summary of Significant Accounting Policies--(Continued)
Retirement Plans--The Company has a 401(k) plan covering substantially all
employees, subject to certain minimum age and length-of-employment requirements.
UnderFor the plan, the Company matches 30% of participants' contributions up to 5%
of compensation. The Company contributed approximately $164,000, $225,000 and
$299,000 to the plan for the yearsyear ended December 31, 1994, 1995,1997:
In connection with radio station and 1996,
respectively.
Income (Loss) Pertower acquisitions, the Company
assumed approximately $227,413,000 in liabilities and issued shares of
Class A Common Share--For the periods prior to the initial public
offering, income (loss) per common shareStock with a value of approximately $310,300,000. The
Company received approximately $69,277,000 of restricted cash as
consideration for disposed radio stations and approximately $42,848,000 of
this restricted cash was based on the weighted average
numberused as consideration for radio station
acquisitions. The Company also exchanged approximately $44,352,000 in
investment notes as consideration towards radio station and tower
acquisitions. (See Note 9).
The Company issued 105,602 additional shares of common shares outstanding during each period adjustedCumulative Exchangeable
Preferred Stock as dividend payments in kind. (See Note 7).
Capital lease obligations of approximately $40,000 were incurred for
stock
options and warrants issued at prices below the initial public offering price,
without regard to the anti-dilutive effect of such options and warrants. Such
stock options and warrants have been included in the calculation of income
(loss) per common share as if they were outstanding for the entire period prior
to the offering (using the treasury stock method and the initial public offering
price)office equipment. (See Note 3). For the years ended December 31, 1995 and 1996, income per common share
is based on the number of common shares outstanding as adjusted for dilutive
stock options and warrants. Fully diluted earnings (loss) per share amounts are
not reported separately as the effects are not dilutive.
Reclassifications--Certain reclassifications have been made to the prior
year financial statements to conform with the 19961997 presentation.
2. Property and EquipmentPROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31 (in
thousands):
1995 1996
------- -------
Land and improvements $ 4,731 $14,835
Buildings and improvements 12,036 28,733
Broadcast equipment 11,452 37,256
Office equipment, furniture, fixtures and other
equipment 2,974 8,635
Assets under capital lease obligations 849 1,259
Construction in progress 1,982 8,903
------- -------
Total 34,024 99,621
Less accumulated depreciation and amortization 2,238 9,374
------- -------
Property and equipment--net $31,786 $90,247
=======
1996 1997
------- --------
Land and improvements................................... $14,835 $ 27,330
Buildings and improvements.............................. 21,842 60,982
Towers.................................................. 6,891 48,340
Broadcast equipment..................................... 37,256 95,376
Office equipment, furniture, fixtures and other
equipment.............................................. 8,635 23,613
Assets under capital lease obligations.................. 1,259 1,311
Construction in progress................................ 8,903 13,072
------- --------
Total................................................... 99,621 270,024
Less accumulated depreciation and amortization.......... (9,374) (19,835)
------- --------
Property and equipment--net............................. $90,247 $250,189
======= ========
Accumulated amortization for the assets under capital leases aggregated
approximately $511,000$659,000 and $659,000$847,000 at December 31, 19951996 and 1996,1997,
respectively.
F-13F-14
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)(CONTINUED)
3. Long-Term DebtLONG-TERM DEBT
Outstanding amounts under the Company's long-term debt arrangements
consisted of the following as of December 31 (in thousands):
1995 1996
-------- --------
Credit Agreements $151,500 $151,500
Tower Credit Agreement 2,500
Senior Subordinated Notes 173,665
Tower Note Payable-Other 1,558
Other obligations 1,004 1,449
-------- --------
Total 152,504 330,672
Less current maturities 355 561
-------- --------
Long-term debt $152,149
1996 1997
-------- --------
Credit Agreements......................................... $151,500 $505,000
Tower Credit Agreements................................... 2,500 88,500
Senior Subordinated Notes................................. 173,665 327,691
Tower Note Payable--Other................................. 1,558 1,467
Other Obligations......................................... 1,449 1,496
-------- --------
Total..................................................... 330,672 924,154
Less current maturities................................... 561 450
-------- --------
Long-term debt............................................ $330,111 $923,704
======== ========
Credit Agreements--In January 1997, the Company entered into two new credit
agreements with a syndicate of banks (the(collectively, the 1997 Credit
Agreement), which replaced the previously existing credit agreement. All
amounts outstanding under the previous agreement were repaid with proceeds
from the 1997 Credit Agreement; the following discussion, with the exception
of information regarding interest rates, is based upon the terms and
conditions of the 1997 Credit Agreement. Collectively, the previous credit
agreement and the 1997 Credit Agreement are referred to as the Credit
Agreements.
The 1997 Credit Agreement consists of two separate lending agreements,
providing for facilities consisting of a $550.0 million reducing revolver
credit facility which is available through December 31, 2004, a $200.0 million
revolving credit converting to a term loan facility maturing December 31,
2004, and a $150.0 million term loan facility, maturing December 31, 2004,
available only to repurchase, if required,in connection with certain note obligations of EZ Communications,
Inc. which will be assumed byCommunications;
the Company in connection with the merger
discussed in Note 11.$150.0 million facility was not needed, and has expired unused.
Amounts outstanding under the Credit Agreements bear interest based upon a
variable base rate adjusted for a margin which is determined by reference to
certain financial ratios of the Company, generally related to leverage. Until
such time as the Company requests that rates be fixed or capped, rates are
determined, at the option of the Company, by reference to either the
Eurodollar rate plus certain percentages, or an alternate base rate (as
defined) plus certain percentages. The weighted average interest rates under
the Credit Agreements were approximately 9.4 %8.0% and 8.0%7.4% for the years ended
December 31, 19951996 and 1997, respectively.
There was $74.8 million and $48.0 million available under the Credit
Agreements at December 31, 1996 and 1997, respectively. In connection with the
Credit Agreements, the Company is obligated to pay commitment fees based on a
percentage of the unused portion of the available commitments (the fee varies
depending upon which facility is affected and the Company's leverage ratio).
Commitment fees paid related to the Credit Agreements were approximately
$24,500, $1,113,000 and $1,113,000$1,111,000 in 1995, 1996 and 1996,1997, respectively.
The 1997 Credit Agreement contains certain financial and operational
covenants and other restrictions with which the Company must comply,
including, among others, limitations on certain acquisitions, additional
indebtedness, capital expenditures, and payment of cash dividends and stock
repurchases. In addition, restrictions are placed upon the use of borrowings
under the 1997 Credit Agreement and the Company must maintain certain
financial ratios, principally related to leverage. Borrowings under the 1997
Credit Agreement are collateralized by a first security interest in the
capital stock of the Company's Restricted Subsidiaries (as defined in the 1997
Credit Agreement), all FCC licenses, and all financial instruments (including
the station investment note receivables) and material agreements. The
Company's Restricted Subsidiaries have guaranteed the obligations of the
Company under the 1997 Credit Agreement.
F-14F-15
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)(CONTINUED)
3. Long-Term Debt--(Continued)
Extraordinary Losses--In 1994,LONG-TERM DEBT--(CONTINUED)
Tower Credit Agreements--In October 1997, ATS entered into a new loan
agreement with a syndicate of banks (the 1997 Tower Credit Agreement), which
replaced the Company replaced its thenpreviously existing credit facilityagreement. American Tower Systems
(Delaware), Inc. (ATSI) and in connection with repayment of borrowingsAmerican Tower Systems, L.P. (ATSLP)
(collectively, the Operating Subsidiaries), are co-borrowers under that
facility, recognized an extraordinary loss of $1,160,000, net of a tax benefit
of $597,000, representing the write-off of deferred financing fees for the old
facility. In 1995, the Company again replaced its then existing credit facility,
and, in connection with repayment of borrowings under that facility, recognized
an extraordinary loss of $817,000, net of a tax benefit of $614,000,
representing the write-off of deferred financing fees for the old facility.
Following closing of the 1997
Tower Credit Agreement in January 1997 and repayment ofAgreement. All amounts outstanding under the previous agreement
were repaid with proceeds from the Company recognized an
extraordinary loss of approximately $2.6 million, which will be recorded net1997 Tower Credit Agreement. The following
discussion, with the exception of the applicable tax benefit, representinginformation regarding interest rates and
availability under the write-offagreements, is based on the terms and conditions of deferred financing
fees associated withthe
1997 Tower Credit Agreement. Collectively, the previous agreement.
1996credit agreement and
the 1997 Tower Credit Agreement--During November 1996,Agreement are referred to as the Tower Subsidiary
entered into a credit agreement (the 1996Credit
Agreements.
The 1997 Tower Credit Agreement), thatAgreement provides the Tower SubsidiaryATS with a $70.0$250.0 million loan
commitment based on TowerATS maintaining certain financialoperational ratios, and an
incremental $20.0additional $150.0 million loan contingent on Tower obtaining additional equity fromat the Company. There was
$67.5 million available under the 1996discretion of ATS. The 1997 Tower Credit
Agreement at December 31,
1996. The facility may be borrowed, repaid (up to a minimum $2.5 million
balance) and re-borrowedreborrowed without reducing the
availability until April 15, 2000;June 2005, except as specified in the 1997 Tower Credit
Agreement; thereafter, availability decreases in an amount equal to 50% of
the Excess Cash Flow (asexcess cash flow, as defined in the 19961997 Tower Credit Agreement)Agreement, for the
fiscal year immediately preceding the calculation date. In addition, the 19961997
Tower Credit Agreement requires certain commitment reductions in the event of sale of
the Tower Subsidiary's capitalATS's common stock or debt instruments, and/or permitted asset sales, as
defined in the 19961997 Tower Credit Agreement.
Outstanding amounts under the 1996 Tower Credit AgreementAgreements bear interest at
a
variable base rateeither LIBOR (5.72% as of December 31, 1997 and 5.78% as of December 31, 1996)
plus a variable margin based on certain of Tower's financial
ratios. Interest rates under the 1996 Tower Credit Agreement are determined, at
the option of Tower, at either the LIBOR Rate plus certain percentages1.0% to 2.25% or the Base Rate, (asas defined in the 1996 Tower Credit Agreement)Agreements,
plus certain
percentages.0.00% to 1.00%. The spread over the LIBOR Rate and the Base Rate varies from time
to time, depending upon Tower'sthe Tower Subsidiary's financial leverage. Under
certain circumstances, the Tower Subsidiary may request that rates be fixed or
capped. For the yearyears ended December 31, 1996 and 1997, the weighted average
interest rate of the 1996 Tower Credit AgreementAgreements was 8.75%. and 7.54%,
respectively.
There was $67.5 million and $32.7 million available under the Tower Credit
Agreements at December 31, 1996 and 1997, respectively. The Tower Subsidiary
pays quarterly commitment fees which vary, dependingranging from .375% to .50%, based on the Tower Subsidiary'sATS's
financial leverage and on the aggregate unused portion of the totalaggregated
commitment. Commitment fees paid forrelated to the 1996 Tower Credit AgreementAgreements
aggregated approximately $24,000 during 1996.and $416,000 for the years ended December 31,
1996 and 1997, respectively.
The 19961997 Tower Credit Agreement contains certain financial and operational
covenants and other restrictions with which the Tower Subsidiary must comply,
whether or not any borrowings are outstanding, thereunder, including among others,
maintenance of certain financial ratios, limitations on certain acquisitions,
additional indebtedness and capital expenditures, andas well as restrictions on
cash distributions unless certain financial tests are met, as
well as restrictions onand the use of
borrowings and requirements to maintain
certain financial ratios.borrowings. The obligations of the Tower SubsidiaryATS under the 19961997 Tower Credit Agreement are
collateralized by a first priority security interest in substantially all of
the assets of ATSI. The Tower Subsidiary has pledged all of its stock to the
banks as security for ATS's obligations under the 1997 Tower Subsidiary.
F-15
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Long-Term Debt--(Continued)Credit Agreement.
ATS is in the process of negotiating an amended and restated loan agreement
with its senior lenders, pursuant to which the existing maximum borrowing of
the Operating Subsidiaries would be increased from $400.0 million to $900.0
million, subject to compliance with certain financial ratios, and ATS would be
able to borrow an additional $150.0 million, subject to compliance with
certain less restrictive ratios. Borrowings under an amended loan agreement
would also be available to finance acquisitions. In connection with the
refinancing, the Company expects to recognize an extraordinary loss of
approximately $1.4 million, net of a tax benefit of $0.9 million, during the
second quarter of 1998.
Senior Subordinated Notes--In February 1996, the Company sold $175,000,000
of 9% Senior Subordinated Notes due 2006 (the Subordinated Notes) at a
discount of $1,419,000 to yield 9.125% (the Debt Offering). Proceeds to the
Company, net of underwriters' discount and associated costs, were
approximately $167.5 million.
F-16
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT--(CONTINUED)
As of December 31, 1996,1997, the Subordinated Notes aggregated approximately
$173,665,000$173,765,000 net of an unamortized discount of approximately $1,335,000.$1,235,000.
Interest is payable semi-annually on February 1 and August 1 with the face
amount of the Subordinated Notes due on February 1, 2006. The Subordinated
Notes are redeemable at the option of the Company, in whole or in part at any
time on or after February 1, 2001 and prior to maturity, at the following
redemption prices (expressed as percentages of principal amount) plus accrued
and unpaid interest, if any, to but excluding the redemption date, if redeemed
during the 12 month period beginning February 1 of the years indicated: 2001 -2001--
104.5%; 2002 - 103.0%2002--103.0%; 2003 - 101.5%2003--101.5%; 2004 and thereafter - 100.0%thereafter--100.0%.
Notwithstanding the foregoing, at any time prior to February 1, 1999, the
Company may redeem up to $58.3 million principal amount of the Subordinated
Notes from the net proceeds of a public equity offering (as defined in the
Subordinated Notes indenture) at a redemption price equal to 109.0% of the
principal amount thereof plus accrued and unpaid interest, if any, to the
Redemption Date, provided that at least $116.7 million principal amount of the
Subordinated Notes remain outstanding immediately after the occurrence of any
such redemption. The Subordinated Notes are subordinate in right of payment to
the prior payment in full of all obligations under the 1997 Credit Agreement.
The Subordinated Notes contain certain covenants including, but not limited
to, limitations on sales of assets, dividend payments, future indebtedness and
issuance of preferred stock, and require an offer to purchase inwithin 15 days
after the eventoccurrence of a Change of Control (as defined). the outstanding
subordinated Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase. A
Change of Control will occur upon the consummation of the CBS Merger. Proceeds
from the Debt Offering and the equity offering discussed in Note 8, were used
to repay outstanding borrowings under the Credit Agreements.
Tower Note Payable-Other--A corporation which is under majority controlAs part of the Tower Subsidiary has a note securedEZ Merger, the Company assumed EZ's obligations with respect
to $150.0 million principal amount of the EZ 9.75% Senior Subordinated Notes
(the 9.75% Notes) and repaid all borrowings under the EZ credit facility with
borrowings from the 1997 Credit Agreement. As required by the minority shareholder's interestclosing of the
EZ Merger, the Company offered to repurchase the 9.75% Notes; such offer
commenced in April 1997 and expired in May 1997, with no such notes being
tendered for purchase. As of December 31, 1997, the corporation.9.75% Notes aggregated
approximately $153,926,000 net of an unamortized premium of approximately
$3,926,000. Interest rates under this noteis payable semi-annually on June 1 and December 1 with
the face amount of the Subordinated Notes due on February 1, 2006. The 9.75%
Notes are determined,redeemable at the option of the corporation,Company, in whole or in part at eitherany
time on or after December 1, 2000 at a redemption price of 104.875% of the
greaterprincipal amount, plus accrued and unpaid interest, if any, to the date of
redemption. The redemption price reduces over three years to a redemption
price of 100% of the principal amount in 2003 and thereafter. Notwithstanding
the foregoing, at any time prior to December 1, 1998, the Company may redeem
up to $50.0 million of the original aggregate principal amount of the 9.75%
Note with the net proceeds of one public offering of common stock at 109.75%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of redemption, as long as at least $100.0 million of the
original aggregate amount of the 9.75% Notes remain outstanding. The 9.75%
Notes are general unsecured obligations of the Company and rank pari passu in
right of payment to all obligations under the 1997 Credit Agreement. The 9.75%
Notes are guaranteed by the restricted subsidiaries as described in Note 16.
The 9.75% Notes contain certain covenants including, but not limited to,
limitations on sales of assets, dividend payments, future indebtedness and
issuance of preferred stock, and require an offer to purchase within 15 days
after the occurrence of a floating rateChange of Control (as defined indefined) the note agreement),outstanding 9.75%
Notes at a purchase price equal to 101% of the Federal Home Loan Bankprincipal amount thereof, plus
accrued and unpaid interest, if any, to the date of Boston rate plus 2.35%, or the Treasury Fixed Rate plus 3%. As of December 31, 1996, the effective interest
rate on borrowings under this note was 8.02%. The note is payable in monthly
principal and interest payments through 2008.
Other obligations--In connection with various transactions, the Company
assumed or incurred certain other obligations. These obligations, as well as
lease obligations, bear interest at rates ranging from 8% to 13% and are payable
in various monthly or annual installments through 2007.
Future principal payments required under the Company's long-term debt
arrangements at December 31, 1996 are as follows (in thousands):
Year Ending December 31,
1997 .................................. $ 561
1998 .................................. 442
1999 .................................. 248
2000 .................................. 247
2001 ..................... ............ 36,659
Thereafter through 2008 ............... 292,515
-------
Total ................................. $330,672
========
F-16
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1 Long-Term Debt--(Continued)purchase.
Derivative Positions--Under the terms of the Credit Agreements, the Company
is required, under certain conditions, to enter into interest rate protection
agreements. At December 31, 1995, the Company had entered into nine swap
agreements under which the interest rate was fixed with respect to $75 million
of notional principal amount at rates between 4.5% and 8.1% and five cap
agreements pursuant to which it had capped another $41.0 million of notional
principal amount at rates between 5% and 10%. These swap and cap agreements were
to expire at varying dates between March 1996, and May 2000. During 1996, the
Company amended and or canceled certain of these agreements. At December 31,
1996, the Company maintainsARS maintained two swap agreements, expiring
in September 2000, under which the interest rate is fixed with respect to
$35.5 million of notional principal amount at approximately 7% and 10%. At
December 31, 1997, the Company maintained two swap agreements, one expiring in
March 2000, under which the interest rate is fixed with respect to $30.8
million
F-17
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT--(CONTINUED)
of notional principal amount at approximately 6.3%, and one expiring in March
2002, under which the interest rate is fixed with respect to $9.0 million of
notional principal amount at approximately 6.8%. The Company maintained swap
agreements, expiring in September 2001, under which the interest rate is fixed
with respect to $35.5 million of notional principal amount at approximately
7.2% and 10.0%. The Company maintained a swap agreement, expiring in March
2002, under which the interest rate is fixed with respect to $37.0 million
notional principal amount from March 2000 up to September 2001 and $72.6
million notional principal amount thereafter at approximately 6.8%. The
Company also maintained a cap agreement, expiring in April 2000, under which
the interest rate is fixed with respect to $119.7 million of notional
principal amount at approximately 9.5%. The Company intends to enter into new
agreements, at least to the extent necessary to comply with the requirements
of the 1997 Credit Agreement (50% of the total variable interest rate
indebtedness of the Company must bear fixed interest). The Company's exposure
under these agreements is limited to the impact of variable interest rate
fluctuations and the periodic settlement of amounts due under these agreements
if the other parties fail to perform. (See Note 13)12).
Under the terms of the 1997 Tower Credit Agreement, ATSI is required, under
certain conditions, to enter into interest rate protection agreements. There
were no such agreements outstanding at December 31, 1996. As of December 31,
1997, ATSI maintained a swap agreement, expiring in January 2001, under which
the interest rate is fixed with respect to $7.3 million of notional principal
amount at approximately 6.4%. ATSI also maintained two cap agreements; one
expiring in July 2000, under which the interest rate is fixed with respect to
$21.6 million of notional principal amount at approximately 9.5%, and one
expiring in November 1999, under which the interest rate is fixed with respect
to $7.0 million of notional principal amount at approximately 8.5%. ATSI's
exposure under these agreements is limited to the impact of variable interest
rate fluctuations and the periodic settlement of amounts due under these
agreements if the other parties fail to perform.
Tower Note Payable--Other--A limited liability company, which is under
majority control of the Tower Subsidiary, has a note secured by the minority
shareholder's interest in the limited liability company. Interest rates under
this note are determined, at the option of the limited liability company, at
either the Floating Rate (as defined in the note agreement) or the Federal
Home Loan BankBoston rate plus 2.25%. As of December 31, 1996 and 1997, the
effective interest rate on borrowings under this note was 8.02%. The note is
payable in equal monthly principal payments with interest through 2006.
Other Obligations--In connection with various acquisitions, the Company has
assumed certain long-term obligations of the acquired entities. Substantially
all of these obligations were repaid during 1997, with the remaining unpaid
obligation payable in monthly installments through 2014. In 1997, the Company
also agreed to borrow $750,000 from a lessor to fund leasehold improvements.
The unsecured note is payable through 2012 and bears interest at an effective
rate of 10.0%.
Future principal payments required under the Company's long-term debt
arrangements at December 31, 1997 are as follows (in thousands):
YEAR ENDING DECEMBER 31:
------------------------
1998............................................................ $ 450
1999............................................................ 271
2000............................................................ 260
2001............................................................ 169
2002............................................................ 183
Thereafter through 2015......................................... 922,821
--------
Total......................................................... $924,154
========
F-18
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT--(CONTINUED)
Extraordinary Losses--In 1995, the Company replaced its then existing credit
facility, and, in connection with repayment of borrowings under that facility,
recognized an extraordinary loss of $817,000, net of a tax benefit of
$614,000, representing the write-off of deferred financing fees for the old
facility. Following the closing of the 1997 Credit Agreement in January 1997
and repayment of amounts outstanding under the previous agreement, the Company
recognized an extraordinary loss of approximately $1.6 million, net of a tax
benefit of $1.0 million, representing the write-off of deferred financing fees
associated with the previous agreement.
Following the closing of the 1997 Tower Credit Agreement in October 1997,
the Tower Subsidiary incurred an extraordinary loss of approximately
$1,156,000 (approximately $694,000 net of the applicable income tax benefit)
representing the write-off of deferred financing fees associated with the
previous agreement.
4. Commitments and ContingenciesCOMMITMENTS AND CONTINGENCIES
Broadcast Rights--At December 31, 1996,1997, the Company was committed to the
purchase of broadcast rights for various sports events, and other programming,
including on-air talent, aggregating approximately $8,775,000.$42,120,000. This
programming is not yet available for broadcast. As of December 31, 1996,1997,
aggregate payments related to these commitments during the next five years and
thereafter are as follows (in thousands):
Year Ending December 31
1997...........................................................$ 2,829
1998........................................................... 2,736
1999........................................................... 2,287
2000........................................................... 423
2001........................................................... 405
Thereafter through 2004........................................ 95
-------
Total..........................................................$ 8,775
YEAR ENDING DECEMBER 31:
------------------------
1998............................................................. $13,822
1999............................................................. 12,809
2000............................................................. 10,795
2001............................................................. 4,634
2002............................................................. 60
-------
Total.......................................................... $42,120
=======
Leases--The Company leases various offices, studios, and broadcast and other
equipment under operating leases that expire over various terms. Most leases
contain renewal options with specified increases in lease payments in the
event of renewal by the Company.
Future minimum rental payments required under non-cancelable operating
leases in effect at December 31, 19961997 are approximately as follows (in
thousands):
Year Ending December 31
1997...........................................................$ 4,762
1998........................................................... 4,267
1999........................................................... 3,843
2000........................................................... 3,425
2001........................................................... 3,521
Thereafter through 2019........................................ 9,412
-------
Total..........................................................$29,230
YEAR ENDING DECEMBER 31:
------------------------
1998............................................................. $10,472
1999............................................................. 9,622
2000............................................................. 8,809
2001............................................................. 6,763
2002............................................................. 5,692
Thereafter through 2041.......................................... 28,180
-------
Total.......................................................... $69,538
=======
Aggregate rent expense under operating leases for the years ended December
31, 1994, 1995, 1996 and 19961997 approximated $1,314,000, $1,769,000, $4,374,000 and $4,374,000,$9,695,000,
respectively.
F-17
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Commitments and Contingencies--(Continued)
The Company and the Tower Subsidiary obtain a portion of their revenues from
leasing tower and transmitting facilities and sub-carrier rights to other
broadcasters and communications companies under various
F-19
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
operating leases. The Tower Subsidiary sub-leases rented space on
communications towers to its customers, under substantially the same terms and
conditions, including cancellation rights, as those found in its own lease
contracts. Most leases allow cancellation at will or under certain technical
circumstances. The leases expire over various terms and provide for renewal
options and increases in lease payments in the event such leases are renewed.
Future minimum lease revenues for non-cancelable operating leases in effect
at December 31, 19961997 are approximately as follows (in thousands):
Year Ending December 31
1997...........................................................$ 2,027
1998........................................................... 1,574
1999........................................................... 1,235
2000........................................................... 960
2001........................................................... 564
Thereafter through 2006........................................ 4,670
--------
Total..........................................................$ 11,030
YEAR ENDING DECEMBER 31:
------------------------
1998............................................................ $ 22,261
1999............................................................ 17,908
2000............................................................ 15,418
2001............................................................ 12,875
2002............................................................ 8,435
Thereafter through 2022......................................... 28,545
--------
Total......................................................... $105,442
========
Total rental revenues under these leases approximated $199,000, $448,000, $676,000 and
$676,000$1,194,000 for the years ended December 31, 1994, 1995, 1996 and 1996,1997, respectively.
Total rental revenues under the Company's sub-leases approximated $468,000 and
$978,000 for the yearyears ended December 31, 1996.1996 and 1997, respectively.
Audience Rating and Other Service and Employment Contracts--The Company has
entered into various non-cancelable audience rating and other service and
employment contracts that expire over the next five years. Most of these
audience rating and other service agreements are subject to escalation clauses
and may be renewed for successive periods ranging from one to five years on
terms similar to current agreements, except for specified increases in
payments. Management believes that, in the normal course of business, these
contracts will be renewed or replaced by similar contracts.
Future minimum payments required under these contracts at December 31, 19961997
are as follows (in thousands):
Year Ending December 31
1997...........................................................$ 3,579
1998........................................................... 3,365
1999........................................................... 865
2000........................................................... 308
2001........................................................... 66
--------
Total..........................................................$ 8,183
========
YEAR ENDING DECEMBER 31:
------------------------
1998................................................................ $ 8,086
1999................................................................ 6,971
2000................................................................ 4,527
2001................................................................ 2,298
2002................................................................ 1,289
Thereafter through 2012............................................. 3,808
-------
Total............................................................... $26,979
=======
Total expense under these contracts for the years ended December 31, 1994,
1995,
1996 and 19961997 approximated $1,577,000, $2,426,000, $4,117,000 and $ 4,117,000,$11,438,000,
respectively.
SeeAcquisition Commitments--See Notes 1110 and 1211 for information with respect to
station acquisition and Tower Subsidiary acquisition commitments.
F-18F-20
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)(CONTINUED)
4. Commitments and Contingencies--(Continued)COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Litigation--In the normal course of business, the Company is subject to
certain suits and other matters. Management believes that the eventual
resolution of any pending matters, either individually or in the aggregate,
will not have a material effect on the Company's financial position, results
of operations or liquidity.
5. Related-Party TransactionsRELATED-PARTY TRANSACTIONS
An individual, who is a stockholder of the Company and was a limited partner
and creditor of two of the Predecessor Entities, is a partner in a law firm
which represents the Company, and certain associates of this firm serve as
assistant secretaries to the Company. Legal fees and other expenses incurred
for services rendered by this firm to the Company approximated $473,000, $772,000,
$2,038,000 and $2,038,000$1,969,000 for the years ended December 31, 1994, 1995, 1996 and
1996,1997, respectively.
An affiliate of Chase Equity Associates (CEA), a stockholder of the Company,
is a co-syndication agent and an approximate 14%9%, 9% and 9% participant under prior
credit agreements in 1994, 1995 and 1996, respectively.agreements. A company director is also a general partner of CEA. For
the years ended December 31, 1994, 1995, 1996 and 1996,1997, the stockholder affiliate's
share of interest and fees paid by the Company pursuant to the provisions of
the Credit Agreements were $1,200,000, $1,688,500, $553,000 and $553,000,$2,711,000, respectively.
See Notes 8 and 1210 for other related-party transactions.
6. Income TaxesINCOME TAXES
The income tax provision (benefit) from continuing operations was comprised
of the following for the years ended December 31 (in thousands):
1994 1995 1996
---- ---- ----
Current:
Federal $1,851 $2,910
State 612 854
Deferred:
Federal $ 169 4,023 905
State 387 343 157
------ ------ ------
Income tax provision $ 556 $6,829 $4,826
====== ====== ======
The income tax provision for the year ended December 31, 1996 includes
approximately $244,000 relating to the exercise of certain options, the tax
benefit of which was recorded as a component of additional paid-in capital.
F-19
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Income Taxes --(Continued)
1995 1996 1997
------ ------ -------
Current:
Federal........................................... $1,851 $2,721 $ 3,030
State............................................. 612 799 738
Deferred:
Federal........................................... 4,023 905 (4,697)
State............................................. 343 157 (784)
Benefit from disposition of stock options (recorded
to additional paid-in capital)..................... 244 1,297
------ ------ -------
Income tax provision (benefit)...................... $6,829 $4,826 $ (416)
====== ====== =======
A reconciliation between the U.S. statutory rate from continuing operations
and the effective rate is as follows for the years ended December 31:
1994 1995 1996
---- ---- ----
Statutory tax rate 34% 34% 34%
State taxes, net of federal benefit 35 6 6
Goodwill amortization 17 1 6
Amortization of intangibles 13 1
Meals and entertainment 15 1 3
Other--net 1 1 (2)
--- -- --
Effective tax rate 115% 43% 48%
1995 1996 1997
---- ---- ----
Statutory tax rate......................................... 34% 34 % (34)%
State taxes, net of federal benefit........................ 6 6 (6)
Goodwill amortization...................................... 1 6 26
Amortization of intangibles................................ 1 5
Meals and entertainment.................................... 1 3 7
Valuation allowance........................................ (13)
Non-deductible merger costs................................ 10
Other--net................................................. 1 (2)
--- --- ---
Effective tax rate......................................... 43% 48 % (5)%
=== === ===
== ==
F-21
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES--(CONTINUED)
Significant components of the Company's deferred tax assets and liabilities,
computed using currently enacted tax rates, are as follows at December 31 (in
thousands):
1995 1996 ---- ----1997
-------- ---------
Current Assets:assets:
Allowances and accruals made for financial reporting
purposes which are currently nondeductible $ 1,162nondeductible............. $ 3,370 $ 4,076
Net operating loss carry forward........................ 75
Net operating loss carry-back........................... 2,277
-------- ---------
Total current assets.................................. $ 3,370 $ 6,428
======== =================
Long-term items:
Assets:
Allowances made for financial reporting purposes which
are currently nondeductiblenondeductible.......................... $ 200277 $ 2772,868
Net operating loss carry-forwards 1,507carry-forwards..................... 1,010 717
Valuation allowance (1,267)allowance................................... (1,010)
Liabilities:
Property and equipment and intangible assets-principallyassets-
principally due to tax
basis differences and the use of accelerated depreciation and amortization methods for tax
purposes (8,339)purposes............................................. (33,482) (199,613)
-------- -----------------
Net long-term deferred tax liabilities $ (7,899)liabilities.................. $(33,205) $(196,028)
======== =================
At December 31, 19961997, the Company has net operating loss carry-forwards
available to reduce future taxable income of $2,886,000$2,260,000 for federal and state
purposes. These loss carry-forwards expire through 2009. Because of uncertainty
regarding eventual recovery of these assets, a valuation allowance was provided
against the carrying amount. During 1996,1997, as a
result of increases in taxable income and certain tax planning strategies,
certain of these assets were realized and approximately $257,000 of the entire valuation allowance of
$1,010,000 was removed.
F-20
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Redeemable StockREDEEMABLE STOCK
Activity related to the classes of redeemable stock for the yearsyear ended
December 31, 1994 and 1995 is as follows after giving retroactive adjustment
for the two-for-one stock exchange (in thousands):
Preferred SeriesSERIES C SeriesSERIES A
Shares Amount Shares Amount Shares Amount---------------- --------------
SHARES AMOUNT SHARES AMOUNT
------ -------- ------ ------ ------ ------ -------------
Balance, January 1, 1994 71 $ 1,0251995...................... 1,714 $ 12,230 434 $ 2,532
Distributions accrued in kind 113 1,886
Conversion of preferred
stock (71) (1,138)
Treasury share repurchases (52) (340)
Accretion to fair value 1,240
Distributions paid (351)
-------- -------- ------ -------- ----- -------
Balance, December 31, 1994 $ 0 0 1,714 13,765 382 $ 3,432
======== ========
Reclassification against additional paid-in
capitalcapital.................................... (382) (3,432)
Distributions accrued in kindkind............... 815
Distributions paidpaid.......................... (2,580)
Conversion to Common StockStock.................. (939)
Share redemptionredemption............................ (775) (12,000)
------ ------- ----- -------- ---- -------
Balance, December 31, 19951995.................... 0 $ 0 0 $ 0
====== ======= ===== ======== ==== =======
Preferred Stock-- The holder of the Preferred Stock was entitled to
quarterly cash distributions (the Yield Distributions) equal to 10% of the
stock's initial "preferred distribution amount" compounded on a daily basis. All
of the outstanding Preferred Stock, including approximately $138,000 of deferred
yield that was not distributed to the holder, was converted to approximately
126,000 shares of Series A Common Stock in September 1994.
Senior Common Stock--Holders of the Senior Series C Common Stock (the Senior
Common Stock) were entitled to quarterly cash distributions (the Common Yield
Distributions) equal to 10% of the stock's initial "preferred distribution
amount", compounded on a daily basis.
The Company paid out distributions
aggregating approximately $351,000 in December 1994.
Upon consummation of the Initial Public Offering, the Company paid the
liquidation preference of the Senior Common Stock of $7.00 per share plus
accrued and unpaid Common Yield Distributions (approximately $14.6 million). As
part of such transaction, the Company exchanged 0.54789 shares of Series B
Common Stock for each outstanding share of Senior Common Stock.F-22
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. REDEEMABLE STOCK--(CONTINUED)
Series A Common Stock--Repurchase Obligation to ESOP Stockholders--The
Company was obligated to repurchase shares of Class A Common Stock held by an
employee stock ownership plan (ESOP) of a Predecessor Entity. During 1994 and
1995, the
Company repurchased at fair market value approximately 52,000 and
18,000 shares, respectively.shares.
As a result of the Initial Public Offering, the Board of Directors of the
Company voted effective September 30, 1995 to amend the ESOP to eliminate the
right of beneficiaries to require the Company to purchase their shares.
Pursuant to this amendment, the Company reclassified the long-term portion of
its obligation of approximately $3.4 million to additional paid-in capital.
The Board of Directors also voted effective December 31, 1995 to terminate the
ESOP. During 1996, the Company applied for a favorable determination letter
from the IRS with respect to termination of the plan, which was received in
March 1997. F-21The Company is in the process of terminating the ESOP.
Accordingly, the ESOP has distributed approximately 315,000 shares of Class A
Common Stock to participants through February 1998. Upon distribution of
approximately 13,000 remaining shares, the ESOP will be terminated.
Cumulative Exchangeable Preferred Stock: In January 1997, the Company
consummated a private offering of 2,000,000 shares of its 11 3/8% Cumulative
Exchangeable Preferred Stock (Exchangeable Preferred Stock) to a group of
qualified institutional investors. The Company utilized the net proceeds,
which approximated $192.1 million, to repay amounts outstanding under the 1997
Credit Agreement and to fund acquisitions. Shares of Exchangeable Preferred
Stock are exchangeable, at the Company's option, in whole but not in part, on
any dividend payment date commencing April 15, 1997 into the Company's 11 3/8%
Subordinated Exchange Debentures due 2009 (Exchange Debentures). As discussed
below, the Exchangeable Preferred Stock possesses mandatory redemption
features and is classified as such in the Company's consolidated financial
statements.
Dividends on the Exchangeable Preferred Stock are cumulative at an annual
rate of 11 3/8% (equivalent to $11.375 per share), accruing from the date of
original issuance (January 30, 1997) and are payable quarterly in arrears on
April 15, July 15, October 15, and January 15, commencing April 15, 1997. The
Company's ability to pay dividends is restricted under the terms of the
Subordinated Notes and is prohibited during the existence of a default under
the Company's 1997 Credit Agreement or the Subordinated Note Indenture. The
Company has the right, on or prior to January 15, 2002, to pay dividends
through the issuance of additional shares of Exchangeable Preferred Stock. The
Company met all tests and approximately 105,602 additional shares were issued
and $5,990,000 of accrued dividends were paid through December 31, 1997.
The Exchangeable Preferred Stock is redeemable at the option of the Company,
for cash at any time after January 15, 2002, initially at 105.688% of the
liquidation preference, declining ratably immediately after January 15, 2007,
plus accrued and unpaid dividends of the date of the redemption. In addition,
prior to January 15, 2000, the Company may, at its option, use the net cash
proceeds of an offering to redeem up to 35% of the outstanding Exchangeable
Preferred Stock at 111.375% of the liquidation preference, plus accumulated
and unpaid dividends to the date of redemption; provided that after any such
redemption, there must be at least $130.0 million aggregate liquidation
preference of the Exchangeable Preferred Stock outstanding. The Company is
required, subject to certain conditions, to redeem all Exchangeable Preferred
Stock outstanding on January 15, 2009, at a redemption price to 100% of the
liquidation preference, plus accumulated and unpaid dividends to the date of
redemption. Within 15 days after the occurrence of a Change in Control, the
Company, will be required, subject to certain conditions, to offer to purchase
all of the then outstanding shares at a price equal to 101% of the liquidation
preference, plus accumulated and unpaid dividends to the date of redemption. A
Change of Control will occur upon the consummation of the CBS Merger. During
the first quarter of 1998, the Company paid the holders of the Exchangeable
Preferred Stock consent fees aggregating $2.1 million in connection with
certain amendments to the holders' Exchangeable Preferred Stock agreements.
F-23
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)(CONTINUED)
8. Stockholders' Equity (Deficiency)
Authorized Shares--In December 1996, the American stockholders voted to
approve an increase in the authorized share amounts for certain classes of
capital stock. Such amounts are reflected on the accompanying consolidated
balance sheet. The number of shares that were authorized prior to this increase
consisted of 1,000,000 shares of PreferredSTOCKHOLDERS' EQUITY
Common Stock 25,000,000 shares ofClasses--The Class A Common Stock 10,000,000 shares ofand Class B Common Stock
entitle the holder to one and 6,000,000 shares often votes, respectively, per share. The Class C
Common Stock.Stock is nonvoting.
Convertible Exchangeable Preferred Stock Offering--The outstanding
Convertible Exchangeable Preferred Stock (Convertible Preferred Stock)
of the
Company at December 31, 1996 consistedconsists of 137,500 shares (2,750,000 Depositary Shares, each Depositary Share
represents ownership of one-twentieth of a share of Convertible Preferred
Stock). Proceeds to the Company of the sale of these shares in June 1996, net
of underwriters' discount and associated costs, were approximately $132.8
million. Proceeds from the offering were used to fund acquisitions. Shares of
Convertible Preferred Stock are convertible at the option of the holder at any
time, unless previously redeemed or exchanged, into shares of Class A Common
Stock, par value $.01 per share, of the Company at a conversion price of
$42.50 per share of Class A Common Stock (equivalent to a conversion rate of
1.1765 shares of Class A Common Stock per Depositary Share), subject to
adjustment in certain events.
The Convertible Preferred Stock is redeemable, in whole or in part, at the
option of the Company, for cash at any time after July 15, 1999, initially at
$1,049 per share ($52.45 per Depositary Share), declining ratably immediately
after July 15 of each year thereafter to a redemption price of $1,000 per
share ($50 per Depositary Share) after July 15, 2006, plus in each case
accrued and unpaid dividends. The Convertible Preferred Stock will be
exchangeable, subject to certain conditions, at the option of the Company, in
whole but not in part, on any dividend payment date commencing June 30, 1997
for the Company's 7% Convertible Subordinated Debentures due 2011 (the
Exchange Debentures) at a rate of $1,000 principal amount of Exchange
Debentures for each share of Convertible Preferred Stock ($50 principal amount
for each Depositary Share).
Dividends on the Convertible Preferred Stock are cumulative at an annual
rate of 7% (equivalent to $3.50 per Depositary Share), accruing from the date
of original issuance (June 25, 1996) and are payable quarterly in arrears on
March 31, June 30, September 30, and December 31, commencing September 30,
1996. The Company's ability to pay dividends is restricted under the terms of
the Subordinated Notes (see Note 3) and is prohibited during the existence of
a default under the Company's Credit Agreements or the Subordinated Notes. The
Company met all tests and approximately $5.0 million$9,625,000 of accrued dividends had
been paid through December 31, 1996.1997.
Common Stock Offerings--In February 1996, the Company consummated an
offering of approximately 5,515,000 shares of Class A Common Stock at an
offering price of $27 per share, consisting of 4,000,000 shares initially sold
by the Company, approximately 1,013,000 shares sold by selling shareholders
and approximately 501,000 shares sold by the Company pursuant to the exercise
of the underwriters' over-allotment option. Proceeds to the Company, net of
underwriters' discount and associated costs, were approximately $114.5 million
and were utilized to repay existing debt and fund acquisitions.
F-22
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Stockholders' Equity (Deficiency) --(Continued)
In June 1995, the Company consummated the Initial Public Offeringan initial public offering of
5,500,000 shares of the Company's Class A Common Stock ($.01 par value) at a
price of $16.50 per share. The total shares issued pursuant to the Initial
Public Offering consisted of 4,270,000 shares initially sold by the Company,
730,000 shares by selling shareholders and an additional 500,000 shares sold
by the Company pursuant to the underwriters' over-allotment option. Proceeds
to the Company, net of underwriters' discount and associated costs, were
approximately $70.4 million. The Company used the proceeds to pay theof a liquidation
preference ofassociated with the Company's Senior Common Stock as discussed in Note 7 ($14.6 million),
to reduce indebtedness under the then existing credit agreement ($54.0
million) and to repay certain stockholder notes ($1.0 million). The remaining
proceeds were used to fund current working capital needs.
Concurrent with the Initial Public
Offering, the Company effected the 1995 Recapitalization pursuant to which each
share of Series A, B, and D Common Stock outstanding was exchanged for two
shares of Class A, Class B or Class C Common Stock. The Class A Common Stock and
Class B Common Stock entitle the holder to one and ten votes, respectively, per
share. The Class C Common Stock is nonvoting. The accompanying financial
statements give retroactive effect to the two-for-one stock exchange.F-24
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCKHOLDERS' EQUITY--(CONTINUED)
Capital Deficiency Upon Combination--In connection with accounting for the
Combination, the Predecessor Entities' accumulated deficits or retained
earnings at November 1,formation in 1993 were carried forward into the Company in the
form of a capital deficiency account. The Company has reclassified the balance
of the capital deficiency upon combination against additional paid-in capital
in the accompanying financial statements.
ATS Stock Purchase Agreement--On January 22, 1998, the Tower Subsidiary
consummated the transactions contemplated by the stock purchase agreement (the
ATS Stock Purchase Agreement), dated as of January 8, 1998, with Steven B.
Dodge, Chairman of the Board, President and Chief Executive Officer of ARS and
ATS, and certain other officers and directors of ARS (or their affiliates or
family members or family trusts), pursuant to which those persons purchased
8.0 million shares of ATS Common Stock at a purchase price of $10.00 per share
for an aggregate purchase price of $80.0 million, including 4.0 million shares
by Mr. Dodge for $40.0 million. Payment of the purchase price was in the form
of cash aggregating approximately $30.6 million and in the form of notes
aggregating approximately $49.4 million due on the earlier of the consummation
of the Merger or, in the event the Merger Agreement is terminated, December
31, 2000. The notes bear interest at the six-month London Interbank Rate, from
time to time, plus 1.5% per annum, and are secured by shares of ARS Common
Stock having a fair market value of not less than 175% of the principal amount
of and accrued and unpaid interest on the note. The notes are prepayable at
any time at the option of the obligor and will be due and payable, at the
option of the Tower Subsidiary, in the event of certain defaults as described
in the notes.
ARS Stock Option Plan--The CompanyPlan--ARS has a stock option plan which provides for the
granting of options to employees to acquire up to 2,000,0003,000,000 shares of Class A
and B Common Stock. Exercise prices in the case of incentive stock options are
not less than the fair value of the underlying Class A Common Stock on the
date of grant. Exercise prices in the case of non-qualified stock options are
set at the discretion of the Board of Directors. Options vest ratably over
various periods, generally five years, commencing one year from the date of
grant.
The following table summarizes the option activity for the periods presented
after considering the effect of the two-for-one stock exchange:
Weighted Average
Exercise Prices
Options Per Share
Outstanding as of December 31, 1993 ... 580,000 $ 6.38
Granted ................................ 322,000 $ 7.79
Canceled ............................... (8,000) $ 6.38
Exercised .............................. (2,000) $ 6.38
--------- ---------
Outstanding as of December 31, 1994 ... 892,000 $ 6.88
Granted ................................ 362,000 $ 12.58
Canceled ............................... (4,800) $ 6.38
Exercised .............................. (1,200) $ 6.38
--------- ---------
Outstanding as of December 31, 1995 .... 1,248,000 $ 8.54
Granted/issued(1) ...................... 740,500 $ 29.40
Canceled(1) ............................ (260,600) $ 7.11
Exercised .............................. (28,800) $ 6.84
--------- ---------
Outstanding as of December 31, 1996 .... 1,699,100 $ 14.56
=========activity:
WEIGHTED AVERAGE
EXERCISE PRICES
OPTIONS PER SHARE
--------- ----------------
Outstanding as of December 31, 1993.............. 580,000 $ 6.38
Granted.......................................... 322,000 $ 7.79
Canceled......................................... (8,000) $ 6.38
Exercised........................................ (2,000) $ 6.38
--------- ------
Outstanding as of December 31, 1994.............. 892,000 $ 6.88
Granted.......................................... 362,000 $12.58
Canceled......................................... (4,800) $ 6.38
Exercised........................................ (1,200) $ 6.38
--------- ------
Outstanding as of December 31, 1995.............. 1,248,000 $ 8.54
Granted/issued(1)................................ 740,500 $29.40
Canceled(1)...................................... (260,600) $ 7.11
Exercised........................................ (28,800) $ 6.84
--------- ------
Outstanding as of December 31, 1996.............. 1,699,100 $14.56
Granted/issued................................... 593,000 $28.07
Issued in connection with EZ Merger.............. 362,239 $ 2.70
Canceled......................................... (5,000) $28.25
Exercised........................................ (96,261) $ 9.67
--------- ------
Outstanding as of December 31, 1997.............. 2,553,078 $15.55
========= ======
- --------
(1) Includes 253,000 options which were canceled and reissued at the December
31, 1996 fair market value of $27.25.
F-23F-25
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)(CONTINUED)
8. Stockholders' Equity (Deficiency) --(Continued)STOCKHOLDERS' EQUITY--(CONTINUED)
Options exercisable:
Weighted Average
Exercise Prices
Per Share
December 31, 1994............ 114,000 shares $6.38
December 31, 1995............ 271,200 shares $6.61
December 31, 1996............
WEIGHTED AVERAGE
EXERCISE PRICES
PER SHARE
----------------
December 31, 1995.......................... 271,200 shares $6.61
December 31, 1996.......................... 520,800 shares $7.58
December 31, 1997.......................... 1,155,095 shares $7.91
In February 1995, the Board granted options to employees to acquire 282,000
shares of Class B Common Stock with exercise prices below the fair market
value at the date of grant ($11.50 per share). In addition, the Board, in June
1995, granted options to an employee to acquire 10,000 shares of Class B
Common Stock at an exercise price below fair market value. Fair market value
at date of grant was determined based on advice from the Company's investment
banker. Unearned compensation with respect to these options aggregated
$473,000 and is being amortized over the period that the options vest (five
years). Amortization aggregating $82,000, $94,000 and $94,000 was recorded for
the years ended December 31, 1995, 1996 and 1996,1997, respectively.
The following table sets forth information regarding ARS options outstanding
at December 31, 1996:1997:
Weighted Average
Range of Weighted Average Weighted Average Exercise Price for
Exercise Price Number Currently Exercise Price Remaining Currently
Number of Options Per Share Exercisable Per Share Life Exercisable
- -----------------WEIGHTED WEIGHTED WEIGHTED AVERAGE
RANGE OF NUMBER AVERAGE AVERAGE EXERCISE PRICE FOR
NUMBER EXERCISE PRICE CURRENTLY EXERCISE PRICE REMAINING CURRENTLY
OF OPTIONS PER SHARE EXERCISABLE PER SHARE LIFE EXERCISABLE
---------- -------------- ----------- ------------ ----------- ---- ------------------------- --------- ------------------
538,000504,916 $6.38 322,800 $6.38 2403,933 $ 6.38 316,400 $6.38 - $9.90 126,560 $7.80 31.0 $ 6.38
315,200 $ 6.38-- 9.90 189,120 $ 7.80 357,200 $9.88 - 23.75 71,440 $12.61 4 $12.61
487,500 $25.00 - 39.13 $29.40 5
---------- -------------- --------1.6 $ 7.80
350,600 $ 9.88--23.75 140,240 $12.66 2.2 $12.66
465,700 $25.00--39.13 93,140 $26.16 3.5 $26.16
916,662 $ 1.39--38.81 328,662 $18.98 4.2 $ 2.73
--------- --------------- --------- ------ 1,699,100 $6.38 - $39.13 520,800 $14.56 4--- ------
2,553,078 $ 7.58
========== ============== ========1.39--39.13 1,155,095 $15.55 2.8 $ 7.91
========= =============== ========= ====== === ======
Tower Stock Option Plan--ThePlans--In November 1997, Tower Subsidiaryinstituted the 1997 Stock
Option Plan which provides for the granting of options to employees and
directors to acquire up to 10,000,000 shares of Tower Class A and Class B
Common Stock. The Plan is expected to be amended in connection with the ATC
Merger, described in Note 11, to limit future grants to Class A Common Stock.
No options were granted under this plan during 1997. In January 1998, Tower
granted 2,820,300 options at an exercise price of $10 per share to employees
and directors and subsequently granted 1,200,000 options at an exercise price
of $13 per share to employees of an acquired company. (See Note 10).
ATSI also has a stock option plan which provides for the granting of options
to employees to acquire up to 1,000,000 shares of the common stock of ATSI. In
addition, in connection with the Tower Subsidiary's common stock. During 1996, 550,000Separation approximately 800,000
options were
granted at anto purchase shares of ARS Common stock held by current and future
employees of Tower may be exchanged for Tower options. The ARS options will be
exchanged in a manner that will preserve the spread in such ARS options
between the option exercise price and the fair market value of $5.00 per share. The vesting terms are similarARS Common
Stock and the ratio of the spread to the Company's plan, andexercise price prior to such
conversion.
Exercise prices in the case of incentive stock options to acquireare generally not
less than the Tower Subsidiary's stock are
not convertible to options or stockfair value of the Company. When determining earnings
per share (as discussedunderlying common stock on the date of grant.
Exercise prices in the case of non-qualified stock options are set at the
discretion of the Board of Directors. Options vest ratably over various
periods, generally five years, commencing one year from the date of grant.
There have been no ATSI option grants at exercise prices different from fair
value.
F-26
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCKHOLDERS' EQUITY--(CONTINUED)
The following table summarizes the ATSI option activity for the periods
presented:
WEIGHTED
EXERCISE NUMBER AVERAGE
PRICE CURRENTLY REMAINING
OPTIONS PER SHARE EXERCISABLE LIFE (YEARS)
------- ----------- ----------- ------------
Granted during 1996 and
outstanding at December 31,
1996....................... 550,000 $5.00 160,000 8.71
Granted..................... 172,000 $7.50-$8.00 9.24
Cancelled................... (40,000) $5.00
------- ------- ----
Outstanding as of December
31, 1997................... 682,000 160,000 8.89
======= ======= ====
As described in Note 1),1, the potential dilutive impact of these
options onintrinsic value method is used to determine
compensation associated with stock option grants. No compensation cost has
been recognized to date for grants under the Company's share of Tower's net income is taken into account.Plan.
Pro Forma Disclosure--As described in Note 1, the Company uses the intrinsic
value method to measure compensation expense associated with grants of stock
options or awards to employees. Had the Company used the fair value method to
measure compensation for grants under all plans made in 1995, 1996 and 1996,1997,
reported netbasic income (loss) applicable to common stockholders and net income
(loss) per share would have been $7,257,000 or $0.57$0.61 per share in 1995,
and $(858,000) or $(0.04) per share in 1996.1996, and $(44,272) or $(1.62) per share in
1997. Diluted income per share for 1995 would have been $.58 per share.
The impact"fair value" of each option grant is estimated on the Tower options were not material to the pro forma
disclosures.
For purposesdate of determining the above disclosure required by FAS 123, the fair
value of options on their grant
date was measuredusing using the Black/Scholes option pricing model. Key assumptions used to
apply this pricing model are as follows:
1995 1996
---- ----
Approximate risk-free interest rate 6.0% 6.0%
Expected life of option grants 5 years 5 years
Expected volatility of underlying stock 35.0%
1995 AND 1996 1997
------------- -------
Approximate risk-free interest rate.................. 6.0% 6.0%
Expected life of option grants....................... 5 years 5 years
Expected volatility of underlying stock.............. 35.0% 40.0%
The estimated weighted average fair value of option grants made during 1995,
1996 and 19961997 was $5.47, $11.88 and $11.88,$7.32, respectively, per option.
F-24
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Stockholders' Equity (Deficiency) --(Continued)
Warrants--In connection with the financing necessary to complete the
acquisition of radio station WEEI-AM discussed in Note 12 by Back Bay, the
Company granted CEA, a stockholder, warrants to acquire 79,000 shares of the
Company's Series B Common Stock (which became the right to acquire Class C
Common Stock as part of the 1995 Recapitalization) at an exercise price of $0.05
per share in exchange for providing the initial financing (the Back Bay Note)
and granting the Company certain rights with respect to the agreements between
Back Bay and CEA (including the right to purchase from CEA the Back Bay Note).
The warrants represented approximately 1% of the Company's Common Stock at the
time of issuance. The cost of the warrants was measured as the difference
between the fair value of the Series B Common Stock on the date the warrants
were granted and the exercise price, and was recorded as a cost associated with
acquiring certain assets from Back Bay after Back Bay's acquisition of WEEI-AM
(see Note 12). In connection with the Initial Public Offering , CEA exercised
its warrants.
Reserved Shares--The Company has reserved 400,0001,400,000 shares of Class A Common
Stock and 1,600,000 shares of Class B Common Stock for issuance under the
Company'sARS'
stock option plan (the Plan). In February 1997,The Tower Subsidiary has reserved sufficient
shares under the Board of Directors
adopted, subject to stockholder approval at the Company's annual meeting on May
29, 1997, an amendment to the Plan which will increase the number of shares
available for future grant to 3,000,000, the additional 1,000,000 shares being
shares of Class A Common Stock.
F-25
AMERICAN RADIO SYSTEMS CORPORATIONTower stock option plans.
9. ACQUISITIONS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Station Dispositions
Dispositions-- In December 1996, the Company sold WNEZ-AM serving New
Britain, Connecticut for approximately $710,000, and a loss of approximately
$140,000 was recorded upon disposition.
In January 1995, the Company sold three stations, KGGO-FM, KHKI-FM and
KDMI-AM, serving Des Moines, Iowa. In March 1995, the Company sold two stations,
WHWK-FM and WNBF-AM, serving Binghamton, New York. Gains of approximately $7.6
million and $4.0 million were realized during the year ended December 31, 1995
on the Des Moines and Binghamton dispositions, respectively.
In May 1994, the Company sold two stations, WDJX-AM/FM in Louisville,
Kentucky. Net proceeds from the sale approximated $5,300,000, and a gain of
approximately $2,300,000 was recorded upon disposition.
Summarized financial data related to these dispositions for the three
years ended December 31, 1996 are as follows (in thousands):
1994 1995 1996
---- ---- ----
Net revenues..................................................... $ 7,143 $ 665 $ 58
Operating expenses excluding depreciation and amortization and
corporate general and administrative expenses................. 5,333 4,531 193
10. AcquisitionsDISPOSITIONS
General: The following acquisitions have all been generally accounted for by the
purchase method of accounting, and, accordingly, the operating results of the
acquired entities, to the extent that an LMAa local marketing agreement (LMA) did
not exist, have been included in consolidated operating results since the date
of acquisition. Stations obtained by exchange of similar properties are
recorded at the carrying value of the station given as consideration. The
purchase price has been allocated to the assets acquired, principally
intangible assets, and the liabilities assumed based on their estimated fair
values at the dates of acquisition. The excess of purchase price over the
estimated fair value of the net assets acquired has been recorded as goodwill.
The financial statements reflect the preliminary allocation of certain
purchase prices as the appraisals for certain acquisitions have not yet been
finalized. 1995The Company does not expect the final appraisals will have a
material effect on the financial position, results of operations or liquidity
of the Company.
1997 Station Acquisitions:
Boston: In January 1995,Acquisitions and Dispositions:
EZ Merger: On April 4, 1997, the Company consummated the merger of EZ into
the Company (the EZ Merger). Pursuant to the EZ Merger, the Company acquired
the assets of WEGQ-FM
(formerly WCGY-FM) for approximately $12.0 millioneighteen FM and a $500,000 note payable
to the prior owner. American had begun programming and marketing the station
pursuant to an LMA beginningsix AM stations in September 1994.
West Palm Beach : In July 1995, the Company acquired the assets of WKGR-FM
for approximately $19.0 million and also acquired the right to purchase WPBZ-FM
from the prior owner. As part of that transaction, the Company assigned this
purchase right to Palm Beach Radio Broadcasting, Inc. (PBRB) and loaned PBRB
approximately $9.75 million to purchase WPBZ-FM. The loan, as amended, bears
interest at approximately 7% and is payable over seven years. (See Note 11 for
information with respect to the purchase of WPBZ-FM)
F-26eight markets:
F-27
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Acquisitions --(Continued)(CONTINUED)
9. ACQUISITIONS AND DISPOSITIONS--(CONTINUED)
Seattle, St. Louis, Pittsburgh, Sacramento, Charlotte, Kansas City, New
Orleans and Philadelphia, assumed approximately $222.4 million of long-term
debt (of which approximately $72.7 was paid at closing), paid approximately
$108.9 million in cash and issued approximately 8,344,000 shares of Class A
Common Stock to the EZ stockholders valued at approximately $310.8 million
(excluding approximately 362,000 shares of common stock reserved for options
held by former employees of EZ valued at approximately $12.5 million). The
aggregate purchase price was approximately $830.0 million, including goodwill,
approximately $7.0 million in transaction costs, and assumed liabilities
(including deferred income taxes) of approximately $428.0 million. The EZ
Merger has been accounted for using an effective closing date of April 1,
1997, as the difference between actual and effective closing date on the
results of operations, liquidity and financial position was not material.
As part of the EZ Merger, the Company assumed EZ's obligations with respect
to $150.0 million principal amount of the EZ 9.75% Senior Subordinated Notes
(the 9.75% Notes) and repaid all borrowings under the EZ credit facility with
borrowings from the 1997 Credit Agreement. (See Note 3).
Austin: In March 1997, the Company acquired KAMX-FM, KKMJ-FM, and KJCE-AM
for approximately $28.7 million.
Baltimore: In February 1997, the Company acquired WWMX-FM and WOCT-FM for
approximately $90.0 million.
Boston/Worcester: In January 1997, the Company acquired WAAF-FM and WWTM-AM
for approximately $24.8 million. The Company began programming and marketing
the station pursuant to an LMA agreement in August 1996.
In July 1997, the Company acquired WNFT-AM for approximately $4.5 million.
The Company began programming and marketing the station pursuant to an LMA
agreement in June 1997.
Charlotte and Pittsburgh: In May 1997, the Company, as successor to EZ,
consummated an asset exchange agreement pursuant to which the Company
exchanged WIOQ-FM and WUSL-FM in Philadelphia for WRFX-FM, WPEG-FM, WBAV-FM,
WGIV-AM (formerly WBAV-AM) and WFNZ-AM serving Charlotte, and also consummated
an asset purchase agreement to acquire WNKS-FM serving Charlotte for
approximately $10.0 million.
In February 1997, EZ and the seller entered into a consent decree with the
U.S. Justice Department (the Charlotte Consent Decree). Pursuant to the
Charlotte Consent Decree, and in compliance with the FCC's multiple ownership
rules, EZ agreed to dispose of WRFX-FM, which was transferred to an
independent and insulated trustee upon consummation of the exchange. In August
1997, the Company consummated an asset exchange agreement pursuant to which it
exchanged WRFX-FM for WDSY-FM, serving Pittsburgh, and $20.0 million.
Cincinnati: In January 1997, the Company merged with an unaffiliated
corporation pursuant to which it became a party to an agreement to acquire
WGRR-FM, for approximately $30.5 million. Pursuant to such merger, the Company
issued 18,341 shares of Class A Common Stock valued at approximately $0.5
million. In May 1997, the Company consummated the acquisition of WGRR-FM.
Cincinnati and Rochester: In February 1997, the Company acquired WVOR-FM,
WPXY-FM, WHAM-AM and WHTK-AM for approximately $31.5 million including working
capital. In April 1997, the Company exchanged WVOR-FM, WHAM-AM and WHTK-AM
serving Rochester, together with $16.0 million, for WKRQ-FM serving
Cincinnati.
F-28
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. ACQUISITIONS AND DISPOSITIONS--(CONTINUED)
Dayton: In February 1997, the Company acquired WXEG-FM for approximately
$3.6 million and acquired WLQT-FM and WBBT-FM (formerly WDOL-FM) for
approximately $12.0 million. (See Note 11).
Detroit, Philadelphia, Sacramento: In February 1997, the Company exchanged
WFLN-FM in Philadelphia for KSFM-FM and KMJI-AM serving Sacramento and sold
WQRS-FM in Detroit for approximately $20.0 million. The net assets were
classified as net assets under exchange agreement as of December 31, 1996. See
Sacramento below.
Fresno: In April 1997, the Company acquired KOOR-AM (formerly KOQO-AM) and
KOQO-FM for approximately $6.0 million.
Hartford: In November 1997, the Company acquired for a nominal amount the
New England Weather Service, based in Hartford, Connecticut pursuant to the
exercise of an option which the Company acquired for $1.0 million, in
connection with its acquisition of WTIC-AM and WTIC-FM in May 1996.
Lebanon: In October 1997, the Company acquired WYLX-FM (formerly WMMA-FM)
serving the Lebanon, Ohio market for approximately $3.0 million.
Omaha: In May 1997, the Company sold the assets of KGOR-FM, KFAB-AM and
Business Music Service Inc. for approximately $38.0 million.
Palm Springs: In December 1997, the Company acquired KEZN-FM for
approximately $5.1 million. The Company began programming and marketing the
station pursuant to an LMA agreement in October 1997.
Portsmouth: In September 1997, the Company acquired WQSO-FM (formerly WSRI-
FM), WZNN-AM, WMYF-AM and WEZR-FM for approximately $6.0 million. The Company
began programming and marketing the stations pursuant to an LMA agreement in
July 1997.
Rochester: In April 1997, the Company acquired WZNE-FM (formerly WAQB-FM), a
newly authorized Class A FM station for approximately $3.5 million.
In July 1997, the Company sold the assets of WCMF-AM for approximately $0.7
million.
Sacramento: In March 1997, the Company acquired KXOA-FM, KQPT-AM (formerly
KXOA-AM) and KZZO-FM (formerly KQPT-FM) for approximately $50.0 million. In
October 1996, the Company entered into an agreement to sell KXOA-FM for
approximately $27.5 million. After the expiration of the HSR Act waiting
period, the other party to the agreement began programming and marketing KXOA-
FM pursuant to an LMA in January 1997. As a condition to consummation of the
EZ merger, KXOA-FM was transferred to an independent and insulated trustee
(under a trust for the benefit of the Company) and was held by the trustee
subject to sale pursuant to the foregoing agreement. In June 1997, the trustee
sold KXOA-FM to the ultimate purchaser.
In April 1997, the Company sold KMJI-AM for approximately $1.5 million.
Sacramento and West Palm Beach: In March 1997, the Company consummated an
agreement to exchange KSTE-AM in Sacramento and $33.0 million in cash for
WEAT-FM, WEAT-AM and WOLL-FM serving West Palm Beach. (See Note 11).
San Jose: In February 1997, the Company acquired KBRG-FM (formerly KBAY-FM)
and KKSJ-AM for approximately $31.0 million. (See Note 11).
F-29
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. ACQUISITIONS AND DISPOSITIONS--(CONTINUED)
In September 1997, the Company sold the assets of KKSJ-AM for approximately
$3.2 million. The acquirer began programming and marketing the stations
pursuant to an LMA agreement in June 1997.
Seattle and New Orleans: In April 1997, the Company exchanged WEZB-FM, WRNO-
FM and WBYU-AM, serving New Orleans, and $7.5 million for KBKS-FM (formerly
KCIN-FM) and KRPM-AM serving Seattle.
In June 1997, the Company sold the assets of KMPS-AM for approximately $1.8
million.
St. Louis: In July 1997, the Company sold the assets of KTRS-AM (formerly
KSD-AM) for approximately $10.0 million.
West Palm Beach: In October 1997, the Company sold the assets of WKGR-FM,
WOLL-FM, and WBZT-AM for approximately $29.0 million in cash and a tower site
which was transferred to the Tower Subsidiary.
1996 Station Acquisitions:Acquisitions and Dispositions:
Baltimore: In October 1996, Americanthe Company acquired the assets of WBGR-AM for
approximately $2.8 million.
Buffalo: In August 1996, the Company acquired the assets of WSJZ-FM for
approximately $12.5 million. The Company had been programming and marketing
the station pursuant to an LMA beginning in April 1996.
Fresno: In December 1996, the Company acquired the assets of KNAX-FM and
KVSR-FM (formerly KRBT-FM) for approximately $11.0 million. AmericanThe Company had
been programming and marketing the stations pursuant to an LMA beginning in
August 1996.
Fresno, Omaha, Portland and Sacramento: In July 1996, the transactions
contemplated by aCompany
consummated the merger agreement by and between the Company andof Henry Broadcasting Company (HBC) were consummated.. Pursuant thereto,
the Company acquired KUFO-FM and KUPL-AM (formerly KBBT-AM) in Portland,
Oregon, KYMX-FM and KCTC-AM in Sacramento, California, KGOR-FM and KFAB-AM in
Omaha, Nebraska (See
Note 11 for information with respect to the sale of the Omaha stations), and KSKS-FM, KKDJ-FM, and KMJ-AM in Fresno, California, for an
aggregate purchase price of approximately $110.4 million. The acquisition was financed through a
$5.0 million escrow deposit, the issuance of 1,879,034 shares of Class A Common
Stock valued at approximately $64.0 million, approximately $4.1 million in
available cash, together with the assumption of approximately $37.3 million in
long term debt, which was paid by the Company at closing. As part of a related
transaction with the principal stockholder of HBC, the Company acquired
certain real estate used in the business of HBC for approximately $2.0 million
in cash and obtained a five-year option to acquire certain other real estate
for a purchase price of approximately $1.0 million.
Hartford: In May 1996, the Company consummated the acquisitions ofacquired WTIC-AM and WTIC-FM. In August 1995, the Company had entered into a series of
transactions with the owner of those stations and certain affiliates, pursuant
to which, among other things, the Company agreed to purchase the assets of the
stationsWTIC-FM for
approximately $39.0 million, including approximately $1.1 million of working
capital. The Company also paid $1.0 million for a two-year option to purchase
for $1.00 the New England Weather Service (which provides weather
information to subscribers).which was purchased in 1997.
In August 1995,December 1996, the Company sold WNEZ-AM serving New Britain, Connecticut
for approximately $710,000, and a loss of approximately $140,000 was prevented under the
then current Federal Communications Commission (FCC) regulations from acquiring
these stations, and therefore loaned an aggregate of $35.5 million to the owner
of such stations and an affiliate thereof . Upon receipt of FCC approval in May,
1996, the escrow deposit of $2.0 million, the loans and $1.1 million of
available cash were used to finance the acquisition. The Company also paid $3.5
million to purchase the tower of one of the stations in October 1995.recorded
upon disposition.
Las Vegas: In October 1996, the Company acquired KMZQ-FM and KXTE-FM
(formerly KFBI-FM) for approximately $28.0 million. AmericanThe Company had been
programming and marketing the stations pursuant to an LMA beginning in May
1996. As part of such transaction, Americanthe Company paid an additional $0.2 million
to acquire the seller's right (and obligation) to purchase KXNT-AM (formerly
KVEG-AM) for approximately $1.9 million which purchase, as noted below, was
consummated in September 1996.
In September 1996, the Company acquired the assets of KXNT-AM for
approximately $1.9 million. The Company had been programming and marketing the
station pursuant to an LMA beginning in May 1996.
F-27F-30
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Acquisitions --(Continued)(CONTINUED)
9. ACQUISITIONS AND DISPOSITIONS--(CONTINUED)
In July 1996, the Company acquired the assets of KMXB-FM (formerly KJMZ-FM)
for approximately $8.0 million. The Company had been programming and marketing
the station pursuant to an LMA beginning in May 1996.
In July 1996, the Company acquired the assets of KLUC-FM and KXNO-AM for
approximately $11.0 million.
Philadelphia and Detroit: In May 1996, the Company consummated the
transactions contemplated by a merger agreement with Marlin Broadcasting, Inc.
(Marlin). AmericanThe Company acquired WFLN-FM in Philadelphia, Pennsylvania, WQRS-FM
in Detroit, Michigan and WTMI-FM in Miami, Florida for an aggregate purchase
price of approximately $58.5 million, together with the assumption of
approximately $9.0 million of long-term debt which was paid in full at
closing. The principal stockholder of Marlin immediately thereafter acquired
WTMI-FM from the Company for approximately $18.0 million in cash. Proceeds
from the sale of WTMI-FM were held in an escrow account pursuant to a like-kindlike-
kind exchange agreement and were utilized to partially fund the Portland and
San Jose transaction discussed below. The Company retained certain
Philadelphia real estate and tower assets valued at approximately $1.5
million. In June 1996, the Company entered into an agreement with an
unaffiliated party pursuant to which it will exchangeexchanged the assets of the
Philadelphia station for two stations in Sacramento and sellsold the Detroit
station for approximately $20.0 million in cash. This party began programming
the Philadelphia and Detroit stations under an LMA beginning in June 1996. (See Note
14 - Sacramento). The
net assets and liabilities of the Detroit and Philadelphia stations included
in this exchange agreement arewere carried on the consolidated balance sheet as
of December 31, 1996 as net assets held under exchange agreement.
Portland: In July 1996, the Company acquired the assets of KBBT-FM (formerly
KDBX-FM) for approximately $14.0 million.
The Company also granted the
seller the right to exercise American's option to acquire the assets of WBNW-AM.
(See Notes 1 and 14).
Portland and San Jose: In August 1996, the Company acquired the assets of
KUPL-FM and KKJZ- FMKKJZ-FM in Portland, Oregon and KSJO-FM and KUFX-FMKBAY-FM (formerly
KUFX-FM) in San Jose, California for approximately $103.0 million. The acquisition was partly financed
through $18.0 million in restricted cash (see Philadelphia and Detroit
transaction discussed above)(See Note
11).
Sacramento: In September 1996, the Company acquired the assets of KSSJ-FMKRRE-FM
(formerly KSSJ-FM) for approximately $14.0 million. The Company had been
programming and marketing the station pursuant to an LMA beginning in July
1996. (See Note 11 for
information with respect to the exchange of the station)11).
In July 1996, the Company acquired the assets of KSTE-AM serving Rancho
Cordova, California for approximately $7.25 million. The Company began
programming and marketing the station pursuant to an LMA beginning in April
1996.
(See Note 14 - West Palm Beach for information with respect to the
exchange of the station).1997 Tower Acquisitions:
In November 1996,December 1997, the Tower Subsidiary consummated the acquisition of a
tower site in northern California for approximately $2.0 million.
In October 1997, the Tower Subsidiary acquired a 32.5 percent interest in
a partnership fortwo affiliated entities
operating approximately $325,000. The partnership owns110 tower sites and operates a tower site management business
located principally in Los Angeles,northern California and was formed by the minority partner in
the Needham venture discussed below.for approximately $45.0 million,
including assumed liabilities. In October 1996,connection therewith, the Tower Subsidiary
acquired the assets of tower sites
located in Hampton, Virginia and North Stonington, Connecticut forhad also agreed to loan approximately $1.4 million to the sellers on an
unsecured basis, of which approximately $0.26 million had been advanced and
1.0 million, respectively.
F-28was repaid at the closing.
F-31
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Acquisitions --(Continued)(CONTINUED)
9. ACQUISITIONS AND DISPOSITIONS--(CONTINUED)
In July 1996,October 1997, the Tower Subsidiary acquired tower sites and certain
video, voice and data transport operations for approximately $70.25 million.
The acquired business owned or leased approximately 128 towers, principally in
the Mid-Atlantic region, with the remainder in California and Texas.
In September 1997, the Tower Subsidiary acquired nine tower sites in
Massachusetts and Rhode Island for approximately $7.2 million and land in
Oklahoma for approximately $0.6 million.
In August 1997, the Tower Subsidiary acquired six tower sites in Connecticut
and Rhode Island for approximately $1.5 million.
In July 1997, the Tower Subsidiary acquired the following:
(i) the assets of three affiliated entities which owned and operated
towers and a tower site management business in southern California for an
aggregate purchase price of approximately $33.5 million;
(ii) the assets of one tower site in Washington, D.C. for approximately
$0.9 million;
(iii) the assets of six tower sites in Pennsylvania for approximately
$0.3 million and
(iv) the rights to build five tower sites in Maryland for approximately
$0.5 million.
In May 1997, the Tower Subsidiary acquired 21 tower sites and a tower site
management business in Georgia, North Carolina and South Carolina for
approximately $5.4 million. The agreement also provides for additional
payments by the Tower Subsidiary if the seller is able to arrange for the
purchase or management of tower sites presently owned by an unaffiliated
public utility in South Carolina, which payments could aggregate up to
approximately $1.2 million; management believes that it is unlikely that any
such arrangement will be entered intointo.
In May 1997, the Tower Subsidiary acquired the assets of two affiliated
companies engaged in the business of acquiring and developing tower sites in
various locations in the United States for approximately $13.0 million.
In May 1997, the Tower Subsidiary and an unaffiliated party formed a limited
liability corporation agreement with an unaffiliated party to own and operate acommunication towers which will be
constructed on over 50 tower sitesites in Needham, Massachusetts. In connection therewith, thenorthern California. The Tower
Subsidiary advancedpaid approximately $3.8$0.8 million to the corporation.unaffiliated party and
currently owns a 70% interest in the entity, with the remaining 30% owned by
an unaffiliated party. The Tower Subsidiary has a 50.1%
interest inis obligated to provide additional
financing for the corporation.construction of these and any additional towers it may
approve; the obligation for such 50 tower sites is estimated to be
approximately $5.3 million. The accounts of the limited liability corporation
are included in the consolidated financial statements with the other shareholder'sparty's
investment reflected as minority interest in subsidiary on the consolidated balance sheet.subsidiary.
In April 1996,May 1997, the Tower Subsidiary acquired BDS Communications, Inc. and
BRIDAN Communications Corporationthree tower sites in
Massachusetts for approximately $9.1 million which consisted
of 257,495 shares of the Company's Class A Common Stock valued at approximately
$7.4 million and the assumption of approximately $1.7 million of long-term debt,
of which approximately $1.5 million was paid at closing. BDS Communications owns
three towers in Pennsylvania and BRIDAN Communications manages or has sublease
agreements with respect to approximately forty tower sites located throughout
the Mid-Atlantic region.$0.26 million.
1996 Tower Acquisitions:
In February 1996, the Tower Subsidiary acquired Skyline Communications and
Skyline Antenna Management in exchange for approximately $3.3 million which consistedan aggregate of 26,989 shares of
the Company'sARS Class A Common Stock, valued athaving a fair value of approximately $0.8
million,$774,000, $2.2
million in cash, and the assumption of approximately $0.3 million$300,000 of long-term
debt which was paid at closing. Skyline Communication owned eight towers, six
of which are in West Virginia and the remaining two in northern Virginia.
Skyline Antenna Management manages
or has sublease agreements on approximatelymanaged more than 200 antenna sites, primarily in
the northeast region of the United States.
F-32
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. ACQUISITIONS AND DISPOSITIONS--(CONTINUED)
In April 1996, the Tower Subsidiary acquired BDS Communication, Inc. and
BRIDAN Communications Corporation for 257,495 shares of ARS Class A Common
Stock having a fair value of approximately $7.4 million and $1.9 million in
cash of which approximately $1.5 million was paid at closing. BDS
Communications owned three towers in Pennsylvania and BRIDAN Communications
managed or had sublease agreements on approximately forty tower sites located
throughout the mid-Atlantic region.
In July 1996, the Tower Subsidiary entered into a limited liability company
agreement with an unaffiliated party relating to the ownership and operation
of a tower site in Needham, Massachusetts, whereby the Tower Subsidiary
acquired a 50.1% interest in the company for approximately $3.8 million in
cash. The accounts of the limited liability company are included in the
consolidated financial statements with the other party's investment reflected
as minority interest in subsidiary.
In October 1996, the Tower Subsidiary acquired the assets of tower sites in
Hampton, Virginia and North Stonington, Connecticut for approximately $1.4
million and $1.0 million in cash, respectively.
Unaudited Pro Forma Information:
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions that occurred in 1996 and 1997,
respectively, had occurred as of January 1, 19951996 and 19961997 after giving effect
to certain adjustments, including depreciation and amortization of assets and
interest expense on any debt incurred to fund the acquisitions. These
unaudited pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of what would have occurred had the
acquisitions been made as of January 1, 19951996 and 19961997 or of results which may
occur in the future.
Years ended December 31;
(In thousands, except per share data-unaudited):
1995 1996
---- ----
Net revenues........................................ $ 168,663 $ 211,850
Income before extraordinary items................... 8,584 4,693
Net income.......................................... 7,767 4,693
Net income (loss) applicable to common stockholders. 6,952 (281)
Net income (loss) per common share.................. $ .47 $ (.01)
UNAUDITED
----------------------
YEARS ENDED DECEMBER
31
----------------------
1996 1997
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Net revenues........................................ $ 348,647 $ 433,209
Loss before extraordinary items..................... (28,524) (26,000)
Net loss............................................ (28,524) (28,333)
Net loss applicable to common stockholders.......... (33,497) (59,497)
Basic loss per common share......................... $ (1.16) $ (2.01)
Pending station acquisitions are discussed in Notes 1110 and 12.
F-2911.
10. OTHER TRANSACTIONS
Dayton and Kansas City: In January 1998, the Company consummated an
agreement to exchange WXEG-FM, WBTT-FM, WLQT-FM, WMMX-FM, WTUE-FM and WONE-AM
serving Dayton for WDAF-AM, KOZN-FM (formerly KYYS-FM), KMXV-FM and KUDL-FM
serving Kansas City. The Company began programming and marketing KYYS-FM and
KMXV-FM pursuant to an LMA agreement in September 1997.
Kansas City, Sacramento and St. Louis: In January 1998, the Company acquired
KLOU-FM in St. Louis in exchange for KUDL-FM and WDAF-AM in Kansas City and
approximately $7.0 million. The Company also consummated a related agreement
with the same party, pursuant to which the Company sold KCTC-AM serving
Sacramento for approximately $4.0 million.
F-33
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Pending Transactions
Charlotte, Kansas City, Philadelphia, Pittsburgh, New Orleans, Sacramento,
Seattle,(CONTINUED)
10. OTHER TRANSACTIONS--(CONTINUED)
Riverside/San Bernardino and St. Louis:Sun City: In August 1996,March 1998, the Company entered into a merger
agreement (as amended in September 1996) with EZ Communications, Inc. (EZ)acquired
KFRG-FM, serving the Riverside/San Bernardino market, and KXFG-FM, serving Sun
City, California, for approximately $60.0 million. The Company began
programming and marketing the stations pursuant to which EZ will be merged directly with and intoan LMA agreement in August
1997.
Tower Subsidiary: In January 1998, the Company (the EZ
Merger). PursuantTower Subsidiary consummated an
agreement to acquire all of the merger agreement, each holderoutstanding stock of EZ Common Stock will
receive (i) $11.75Gearon & Co. Inc.
(Gearon), a company based in Atlanta, Georgia, for an aggregate purchase price
of approximately $80.0 million consisting of approximately $32.0 million in
cash and (ii) 0.9assumed liabilities and the issuance of approximately 5.3 million
shares of the Company'sTower Subsidiary Class A Common Stock. BasedStock valued at $9.00 per share.
Gearon is engaged in site acquisition, development, construction and facility
management of wireless network communication facilities on behalf of its
customers and at the time of acquisition owned or had under construction
approximately 40 tower sites. Following consummation, the Tower Subsidiary
granted options to acquire up to 1,200,000 shares of Class A Common Stock at
an exercise price of $13.00 per share to employees of Gearon.
In January 1998, the Tower Subsidiary consummated the acquisition of OPM-
USA-INC. (OPM), a company which owned approximately 90 towers at the time of
acquisition. OPM is in the process of developing an additional 160 towers that
are expected to be constructed during the next 12 to 18 months. The purchase
price, which is variable and based on the number of sharestowers completed and the
forward cash flow of EZ Common Stock outstandingthe completed OPM towers, could aggregate up to $105.0
million, of which approximately $21.3 million was paid at December
31, 1996,the closing. The
Tower Subsidiary had also agreed to provide the financing to OPM to enable it
to construct the 160 towers in an aggregate amount not to exceed $37.0 million
(less advances as of consummation aggregating approximately $5.8 million).
In January 1998, the Tower Subsidiary consummated the acquisition of a
communications site with six towers in Tucson, Arizona for approximately $12.0
million.
In January 1998, the Tower Subsidiary consummated the acquisition of a tower
near Palm Springs, California for approximately $0.75 million.
In January 1998, the Company will pay approximately $107.4 million in cash and issue
approximately 8,228,400 shares of the Company's Class A Common Stock (excluding
options to purchase an aggregate of 514,400 shares of the Company's Class A
Common Stock which will be assumed pursuanttransferred to the EZ Merger). EZTower Subsidiary 14
communications sites currently owns
and/or operates twenty-six radio stations in eight markets as follows: WSOC-FM
and WSSS-FM in Charlotte, North Carolina; KFKF- FM, KBEQ-FM and KOWW-AM in
Kansas City, Missouri; WIOQ-FM and WUSL-FM in Philadelphia, Pennsylvania;
WBZZ-FM and WZPT-FM in Pittsburgh, Pennsylvania; WRNO-FM, WEZB-FM and WBYU-AM in
New Orleans, Louisiana; KNCI-FM, KRAK-FM and KHTK-AM in Sacramento, California;
KZOK-FM, KMPS-AM/FM, KBKS-FM, KRPM-AM and KYCW-FM in Seattle, Washington and
KYKY-FM, KEZK-FM, KFNS-AM and KSD-AM/FM in St. Louis, Missouri. As a result of
existing FCC regulations and the Sacramento stations either ownedused by the Company and various third parties
(with an ARS net book value of approximately $4.2 million), and the Company
and the Tower Subsidiary entered into leases or under agreement to purchase or sellsubleases of space on the
transferred towers. Two additional communications sites will be transferred
and leases entered into following acquisition by the Company upon consummation of the EZ Merger,sites from
third parties.
In February 1998, the CompanyTower Subsidiary acquired 11 communications tower
sites in northern California for approximately $11.8 million.
Tower Separation: The Tower Separation will result in a taxable gain to ARS,
of which $20.0 million will be borne by ARS and the remaining obligation
(currently estimated at approximately $113.0 to 153.0 million) will be
required to sell one radio station in Sacramento,
KSSJ-FM, (in additionbe paid by ATS pursuant to KXOA-FM and KSTE-AM). See West Palm Beach and
Sacramento below. Terminationprovisions of the Hart-Scott-Rodino Antitrust Improvements
ActMerger Agreement.
This liability is expected to be paid with borrowings under ATS' loan
agreement or proceeds from equity financings and the timing of 1976 (HSR Act) waiting period with respectsuch payment is
dependent upon the timing of the consummation of the Merger Agreement. The
estimated Merger Tax Liability shown in the preceding sentence is based on an
assumed fair market value of the ATS Common Stock of approximately $16.00 per
share. Such estimated Merger Tax Liability would increase or decrease by
approximately $14.8 million for each $1.00 per share increase or decrease in
the fair market value of the ATS Common Stock.
F-34
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. OTHER TRANSACTIONS--(CONTINUED)
The Merger Agreement also provides for closing date balance sheet
adjustments based upon the working capital and specified debt levels
(including the liquidation preference of the ARS Cumulative Preferred Stock)
of ARS at the effective time of the Merger which may result in payments to be
made by either ARS or ATS to the EZother party following the closing date of the
Merger. ATS will benefit from or bear the cost of such adjustments. Since the
amounts of working capital and debt are dependent upon future operations and
events, including without limitation cash flow from operations, capital
expenditures, and expenses of the Merger has been
received.and the Tower Separation, neither ARS
nor ATS is able to state with any degree of certainty what payments, if any,
will be owed following the closing date by either ARS or ATS to the other
party.
11. PENDING TRANSACTIONS
Portsmouth: In March 1998, entered into an agreement to sell the assets of
WQSO-FM and WZNN-AM serving Rochester, New Hampshire and WERZ-FM and WMYF-AM,
serving Exeter, New Hampshire for approximately $6.0 million. Subject to the
receipt of FCC approval, the Company expectstransaction is expected to consummate the EZ Mergerbe consummated in the
second quarter of 1997.
EZ is a party to several pending transactions which are expected to be
consummated subsequent to1998.
Portland, Sacramento, San Francisco and San Jose: In April 1997, the EZ Merger and the applicable regulatory approvals.
EZ is a party toCompany
entered into an asset exchange agreement pursuant to which EZit will acquire
KINK-FM, serving Portland, Oregon, KUFX-FM (formerly KBRG-FM), serving
Fremont/San Francisco, California, $2.0 million in a promissory note to ARS
due September 30, 1998, or at the time of certain earlier events, and 150,000
shares of common stock of Latin Communications, Inc., in exchange for KBRG-FM
(formerly KBAY-FM), serving San Jose, and KRRE-FM (formerly KSSJ-FM), serving
Sacramento. The agreement also provides for the New Orleans stationsexchange of KINK-FM for KBKS-FMKBRG-
FM in the event regulatory approval for the exchange of KUFX-FM and KRPM-AMKRRE-FM
cannot be obtained. The Justice Department approved the exchange of KRRE-FM
for KUFX-FM. The transaction is expected to be consummated in Seattlethe second
quarter of 1998. The Company began programming and $7.5 million.marketing KINK-FM and KUFX-
FM pursuant to an LMA agreement in January 1998. At the same time the
purchaser of KBRG-FM began programming and marketing KBRG-FM pursuant to an
LMA. (See Note 9).
Sacramento: In December 1996, EZ enteredMarch 1998, the Company expects to enter into an agreement pursuant to which it will exchange
its Philadelphia stations for stations in Charlotte, North Carolina, (WRFX-FM,
WPEG-FM, WBAV-AM/FM and WFNZ-AM) and purchase WNKS-FM in Charlotte for $10.0
million. Pursuant to FCC and HSR Act requirements, EZ then entered into anasset
exchange agreement pursuant to which, itsubject to the receipt of FCC approval,
the Company's KRAK-FM would exchange FCC frequencies with another radio
station also located in the Sacramento market for approximately $4.4 million.
San Jose and Monterey: In March 1997, the Company entered into a merger
agreement pursuant to which the Company will acquire the assets of KEZR-FM
serving San Jose, California and KLUE-FM serving Monterey, California in
exchange WRFX-FM for WDSY-AM/FMapproximately 723,000 shares of Class A Common Stock valued at
approximately $20.0 million and $4.0 million in Pittsburghcash. In June 1997, the
Company and $20.0 million.the seller each received a Civil Investigative Demand from the
Antitrust Division of the Department of Justice requesting certain documentary
materials regarding the merger and the purchase, sale, or trade or other
transfer of radio stations in San Jose, California. Subject to the receipt of
FCC approval and resolution of the matters raised by the Antitrust Division
described above, the acquisition is expected to be consummated in the second
quarter of 1998. (See Note 9).
San Jose: In December 1996, EZOctober 1997, the Company entered into an agreement to sell
KMPS-AM in SeattleKSJO-FM for approximately $2.0$30.0 million. Subject to the receipt of FCC
approval, the transaction is expected to be consummated in the first half of
1998.
St. Louis: In November 1996,September 1997, the Company entered into an agreement to sell
the assets of KSD-AM inKFNS-AM serving the St. Louis, Missouri market for approximately
$10.0 million and the buyer began programming and marketing the
station pursuant to an LMA in January 1997. All of such transactions are subject
to receipt of FCC approval and in certain cases the expiration or earlier
termination of the HSR Act waiting period, and will be consummated in the second
or third quarter of 1997.
Austin: In February 1997, the Company executed its option to acquire the
assets of KKMJ-FM, KAMX-FM (formerly KPTY-FM) and KJCE-AM for approximately
$28.7$3.8 million. In August 1995, the Company paid a deposit of $3.0 million for a
two-year option to acquire the assets of these stations which will be credited
toward the purchase price. The Company has been programming and marketing the
stations pursuant to an LMA beginning in September 1995. The HSR Act waiting
period was terminated early and subjectSubject to the receipt of FCC approval, the acquisitiontransaction is
expected to be consummated in the first half of 1997.
F-301998.
F-35
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)(CONTINUED)
11. Pending Transactions --(Continued)
Buffalo:PENDING TRANSACTIONS--(CONTINUED)
Temple: In August 1995,May 1997, the Company entered into an agreement to acquire radio
station KKIK-FM, licensed to Temple, Texas (in the assets of WBLK-FMAustin area) for
approximately $8.0 million and then assigned its
purchase right and agreed to make loans to finance the purchase to PBRB. PBRB
consummated the acquisition in March 1996 utilizing the proceeds of the loan and
the Company began programming and marketing the station pursuant to an LMA
beginning in March 1996. The Company intends to exercise its option to acquire
WBLK-FM (which acquisition may take the form of a merger with PBRB).$3.7 million. Subject to the receipt of FCC approval and the expiration or earlier termination of the HSR Act waiting period,FCC, the
acquisition or mergertransaction is expected to be consummated in the second or third quarter of 1997.
Cincinnati :1998.
West Palm Beach: In JanuaryJuly 1997, the Company entered into and consummated a
merger agreement to pursuant to which it become a party to an agreement to
acquire the assets of WGRR-FMWTPX-FM for approximately $30.0$11.0 million. The Company began programming
and marketing the station pursuant to an LMA beginning in MarchJune 1997. American issued approximately 18,300 shares of Class A Common Stock
pursuant to such merger. The HSR Act waiting period was terminated early and
subject to the receipt of FCC approval, the acquisition is expected to be
consummated in the second quarter of 1997.
Fresno: In July 1996,October 1997,
the Company entered into an agreement to purchase the
assets of KOQO-AM/FM for approximately $6.0 million. The Company began
programming and marketing the stations pursuant to an LMA beginning in August
1996. A petition to deny the assignment of the FCC licenses ofterminate these stations
was filed with the FCC in September 1996. American and the seller have filed
oppositions to the petition to deny and believe that it is without merit and
will not further affect or substantially delay consummation. Subject to the
receipt of FCC approvals, the Company expects to consummate this acquisition in
the second quarter of 1997.
Omaha:agreements.
In October 1996, the Company entered into an agreement, as amended,
to sell KGOR-FM and KFAB-AM and Business Music Service for approximately $38.0
million. The carrying values of these assets have been adjusted from the
original purchase price allocation to reflect the anticipated net proceeds from
the sale and accordingly, no gain or loss will be recognized on the transaction.
Omaha net revenues of $3,504,000 and operating expenses of approximately
$2,486,000 are included in the accompanying consolidated statement of operations
for the year ended December 31, 1996. FCC approval has been received and the HSR
Act waiting period was terminated early. The Company expects to consummate the
sale in the first half of 1997.
Rochester: In February 1997, the Company entered into an agreement to sell WCMF-AMWEAT-AM
serving West Palm Beach, Florida for approximately $650,000. Net revenues and operating expenses included
in the accompanying consolidated statement of operations for the years ended
December 31, 1994, 1995 and 1996 were not material.$1.5 million. Subject to
the receipt of FCC approval, the Company expectstransaction is expected to consummate the sale in the second quarter
of 1997.
In October 1995, American entered into a joint sales agreement with the
owner of an FM station in Rochester under which the Company, in exchange for a
fixed payment, had the right to sell advertising for the station and to retain
all such advertising revenues. American also acquired an assignable option to
purchase the station for approximately $5.0 million. In connection with the
consent decree described in Note 12, American assigned this purchase option to a
third party and the joint sales agreement was canceled in February 1997.
In February 1997, the Company entered into an agreement to acquire the
assets of WAQB-FM, a newly licensed Class A FM radio station, for approximately
$3.5 million. FCC approval has been received and the Company expects to
consummate the acquisitionbe consummated in
the first half of 1997.
F-31
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Pending Transactions --(Continued)
Rochester and Cincinnati: In December 1996, the Company entered into an
agreement to exchange the assets of WHAM-AM, WVOR-FM and WHTK-AM, together with
$16.0 million for the assets of WKRQ-FM in Cincinnati, Ohio. (See Note 12 -
Rochester). In connection therewith, the party to this agreement began
programming and marketing the Rochester stations pursuant to an LMA beginning in
February 1997. The Company began programming and marketing WKRQ-FM pursuant to
an LMA beginning in March 1997. FCC approval has been received and pursuant to
certain consent decrees entered into by both parties, the Antitrust Division of
the U.S. Department of Justice has approved this transaction. The Company
expects to consummate the exchange in the first half of 1997.
Sacramento: In October 1996, the Company entered into an agreement to sell
KXOA-FM for approximately $27.5 million in cash. The Company began programming
and marketing the stations pursuant to an LMA beginning in August 1996, which
was terminated in January 1997 when the party to the agreement began programming
and marketing the station pursuant to an LMA. The HSR Act waiting period was
terminated early and subject to the receipt of FCC approval, the Company expects
to consummate the sale in the first half of 1997. (See Note 14).
In December 1996, the Company entered into an agreement to sell KMJI-AM for
approximately $1.5 million. FCC approval has been received and the Company
expects to consummate the sale in the first half of 1997. (See Note 14).
West Palm Beach: In March 1996, the Company loaned PBRB $7.2 million to
finance the acquisition of WMBX-FM (formerly WHLG-FM) and WSTU-AM. The Company
has an option to acquire, and a right of first refusal with respect to, the
stations. In November 1996, PBRB sold WSTU-AM to a third party. The Company
intends to exercise its option to acquire WMBX-FM and WPBZ-FM (which
acquisitions may take the form of a merger of PBRB into the Company). Subject to
the receipt of FCC approval and the expiration or earlier termination of the HSR
Act waiting periods, such acquisitions are expected to occur in the third
quarter of 1997 utilizing proceeds from the WMBX-FM and WPBZ-FM loans in the
aggregate principal amount of approximately $17.3 million and $2.75 million in
cash.
In December 1996, the Company acquired an option to purchase another FM
station for approximately $11.0 million. The Company also agreed to loan up to
$150,000 to the party to this option agreement. Subject to certain conditions,
including the receipt of FCC approval, the Company expects to exercise its
option and consummate the acquisition in the third quarter of 1997.1998.
Tower Subsidiary: In FebruaryDecember 1997, the Tower Subsidiary entered into agreementsa
merger agreement with three entitiesAmerican Tower Corporation (ATC) pursuant to which are affiliatedATC
will merge with one anotherand into ATS, which will be the surviving corporation.
Pursuant to the merger, ATS expects to issue an aggregate of approximately
31.1 million shares of ATS Class A common stock (including shares issuable
upon exercise of options to acquire towerATC common stock which will become options
to acquire ATS Class A common stock). ATC is engaged in the business of
acquiring, developing, and leasing wireless communications sites to companies
using or providing cellular telephone, paging, microwave and a tower site management businessspecialized
mobile radio services and is located in Southern California for
approximately $32.1 million.31 states primarily in the western,
eastern and southern United States. Consummation of the transaction is conditioned on,subject
to, among other things, the expiration or earlier termination of the HSR Act
waiting period. Subject to such expiration or termination, the acquisitions areperiod, and is expected to be consummatedoccur in the second quarterspring of 1997.1998.
In December 1996,January 1998, the Tower Subsidiary entered into an agreement to purchase
the assets relating to a letterteleport business serving the Washington, D.C. area
for a purchase price of intentapproximately $30.5 million, subject to acquire certain tower sites and tower site management agreements,receipt of FCC
approval. The facility is located primarily in Northern California, for approximately $42.0 million. Thenorthern Virginia, inside of the
Washington Beltway, on ten acres.
In February 1998, the Tower Subsidiary also agreed to advance the sellers amounts not to exceed $1.35
million. The advances will be unsecured and due in full at the earlier of
thirty-six months from the date at which the Tower subsidiary terminates
acquisition discussions or June 30, 2000. Consummation of the transaction is
conditioned on, among other things, negotiation and execution of definitive
purchase and sale agreements and the expiration or earlier termination of the
HSR Act waiting period. Subject to such expiration or termination, the
acquisition is expected to be consummated in the second quarter of 1997.
F-32
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Other Transactions
Cumulative Exchangeable Preferred Stock: In January 1997, the Company
consummated a private offering of 2,000,000 shares of its 11 3/8% Cumulative
Exchangeable Preferred Stock (Exchangeable Preferred Stock) to a group of
qualified institutional investors. The Company utilized the net proceeds, which
approximated $192.4 million, to repay amounts outstanding under the 1997 Credit
Agreement and to fund acquisitions. Shares of Exchangeable Preferred Stock are
exchangeable, at the Company's option, in whole but not in part, on any dividend
payment date commencing April 15, 1997 into the Company's 11 3/8% Subordinated
Exchange Debentures due 2009 (Exchange Debentures). As discussed below, the
Exchangeable Preferred Stock possesses mandatory redemption features and will be
classified as such in the Company's consolidated financial statements.
Dividends on the Exchangeable Preferred Stock are cumulative at an annual
rate of 11 3/8% (equivalent to $11.375 per share), accruing from the date of
original issuance (January 30, 1997) and are payable quarterly in arrears on
April 15, July 15, October 15, and January 15, commencing April 15, 1997. The
Company's ability to pay dividends is restricted under the terms of the
Subordinated Notes and is prohibited during the existence of a default under the
Company's 1997 Credit Agreement or the Subordinated Note Indenture. The Company
has the right, on or prior to January 15, 2002, to pay dividends through the
issuance of additional shares of Exchangeable Preferred Stock.
The Exchangeable Preferred Stock is redeemable at the option of the
Company, for cash at any time after January 15, 2002, initially at 105.688% of
the liquidation preference, declining ratably immediately after January 15,
2007, plus accrued and unpaid dividends of the date of the redemption. In
addition, prior to January 15, 2000, the Company may, at its option, use the net
cash proceeds of an offering to redeem up to 35% of the outstanding Exchangeable
Preferred Stock at 111.375% of the liquidation preference, plus accumulated and
unpaid dividends to the date of redemption; provided that, any such redemption,
there must be at least $130.0 million aggregate liquidation preference of the
Exchangeable Preferred Stock outstanding. The Company is required, subject to
certain conditions, to redeem all Exchangeable Preferred Stock outstanding on
January 15, 2009, at a redemption price to 100% of the liquidation preference,
plus accumulated and unpaid dividends to the date of redemption. Upon the
occurrence of a change in control, the Company, will be required to, subject to
certain conditions, offer to purchase all of the then outstanding shares at a
price equal to 101% of the liquidation preference, plus accumulated and unpaid
dividends to the date of redemption.
1997 Station Acquisitions:
Baltimore: In February 1997, the Company acquired the assets of WWMX-FM and
WOCT-FM for approximately $60.0 million and $30.0 million, respectively. The
Company had been programming and marketing the stations pursuant to an LMA
beginning in November 1996.
Boston, Worcester: In January 1997, the Company acquired the assets of
WAAF-FM and WWTM- AM in Worcester, Massachusetts for approximately $24.8
million. The Company had been programming and marketing the stations pursuant to
an LMA beginning in August 1996.
F-33
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Other Transactions --(Continued)
Dayton: In February 1997, the Company acquired the assets of WXEG-FM for
approximately $3.6 million. The Company had previously loaned approximately $3.6
million to the owner of the station. In December 1995, the Company entered into an agreement with Steven B. Dodge, Chairman of the Board and Chief Executive
Officer of the Company, relating to this station pursuant to which Mr. Dodge had
agreed to provide financing to a newly organized company which acquired the
station in December 1995. Pursuant to the agreement, the Company acquired Mr.
Dodge's approximately $2.2 million loan (including accrued interest) which had
been assumed by the new owner, along with his right to acquire
the station. The
Company also loaned an additional approximately $1.4 million to the new owner to
finance the acquisition of the station. The acquisition was financed with
proceeds from the loans. The Company had been programming and marketing the
station pursuant to an LMA beginninga tower in April 1996.
In February 1997, the Company acquired the assets of WLQT-FM and WBTT-FM
(formerly WDOL- FM)Sacramento, California for approximately $12.0$1.2 million.
The Company had previously
loaned approximately $12.0 million tois also pursuing the owneracquisitions of the stations. The acquisition
was financed with proceeds from the loan. The Company had been programmingradio and marketing the stations pursuant to an LMA beginningtower properties
and tower businesses in April 1996.
Rochester: In February 1997, the Company consummated the transactions
contemplated by a series ofnew and existing locations, although there are no
definitive purchase agreements pursuant to which the Company acquired
the assets of WVOR-FM, WPXY-FM, WHAM- AM and WHTK-AM for approximately $31.5
million, including working capital. The Company had previously loaned
approximately $28.5 million to the owner of the stations. The acquisition was
financed with proceeds from the loan, a $2.0 million escrow deposit and
available cash. In accordance with a October 1996 consent decree with the
Antitrust Division of the U.S. Department of Justice and the Attorney General of
the State of New York, the Company is required to divest WHAM-AM and WVOR- FM,
within a certain period of time. See Note 11 - Rochester and Cincinnati.
San Jose: In February 1997, the Company acquired the assets of KBAY-FM and
KKSJ-AM for approximately $31.0 million. (See Note 14). The Company had been
programming and marketing the stations pursuant to an LMA beginning in August
1996.
Back Bay Transactions: During 1994, the Company entered into a series of
agreements (the Back Bay Transaction) with Back Bay and CEA, as a result of
which, among other things, (a) Back Bay acquired the radio station then
operating under the call letters WEEI-AM from Boston Celtics Communications
Limited Partnership (BCCLP), (b) the Company acquired the rights to broadcast
all of the Boston Celtics basketball games through the 1998-99 season, and (c)
Back Bay assigned all of its sports and other programming agreements, including
those relating to syndicated personalities, to the Company's WHDH-AM station,
which assumed the obligations under those agreements and changed its call
letters to WEEI-AM.
Back Bay purchased WEEI-AM on June 30, 1994, financing for which was
provided by CEA in the form of a $5,000,000 loan (see Note 1). CEA received a
16% Secured Note due 2001 (the Acquisition Note) together with rights
representing a 75% share in the appreciation in the value of Back Bay (the
"Acquisition Appreciation Right"). The Acquisition Appreciation Right is
exercisable upon the earliest of February 28, 1999, or certain defined
circumstances.
As part of those arrangements, the Company had the right, but not the
obligation, to purchase from CEA the Acquisition Note and the Acquisition
Appreciation Right for a purchase price equal to the sum of (i) principal and
accrued and unpaid interest on the Acquisition Note, and (ii) the value of the
Acquisition Appreciation Right, except that during the first year of its
existence, the Acquisition Appreciation Right was deemed to have no value. The
Company also issued to CEA the warrants described in Note 8.
F-34
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Other Transactions --(Continued)
In September 1994, (a) the Company exercised its right to purchase from CEA
the Acquisition Note and the Acquisition Appreciation Right for an aggregate of
$5,000,000 in cash; (b) the interest rate on the Acquisition Note was reduced by
the Company to 10% per annum; (c) the Company and Back Bay entered into certain
collateral arrangements including a sublease of the Company's office space, a
service agreement and certain arrangements with respect to broadcasts of certain
sporting events; and (d) Back Bay purchased 55,556 shares of Series A Common
Stock in exchange for a 10% Secured Note due 2001 in the principal amount of
$500,000 (the New Back Bay Note) and rights representing an additional 10%
participation in any increase in the value of Back Bay (the New Appreciation
Right).
For financial reporting purposes, the Company has determined that the costs
associated with acquiring the sports and other programming agreements as well as
the radio call letters "WEEI" consists of the warrants to CEA to provide the
initial financing to Back Bay and the present value of the reduction in the Back
Bay Note's annual interest rate from 16% to 10%. Such costs have been allocated
to various intangible assets based upon an independent appraiser's report and
are being amortized on a basis consistent with the Company's other intangible
assets.
The Company and the stockholders of Back Bay also entered into a put/call
agreement (the Put/Call Agreement') pursuant to which the Company was granted
the assignable right to purchase at any time prior to January 1, 2005, and the
Back Bay stockholders have the right to any time after March 15, 1997 and prior
to January 1, 2005 to require the Company to purchase all , but not less than
all, of the capital stock of Back Bay. Exercise by either the Company or the
Back Bay stockholders of their respective rights under the Put/Call Agreement
is, however, conditioned upon the Company being legally entitled to own Back
Bay's radio stations. At December 31, 1995 then existing FCC regulations
prohibited the Company from purchasing the stations. This prohibition was
eliminated pursuant to the passing of the Telecommunications Act in February
1996. The purchase price for the stock of Back Bay under Put/Call Agreement is
based on a formula similar to that relating to the Acquisition Appreciation
Right. (See Notes 1 and 14 for information concerning the purchase by Back Bay
of the Acquisition Note and the New Back Bay Note).
F-35
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATEDthereto.
12. FAIR VALUE OF FINANCIAL STATEMENTS--(Continued)
13. Fair Value of Financial InstrumentsINSTRUMENTS
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented
herein are based on pertinent information available to management as of
December 31, 19951996 and 1996.1997. Although management is not aware of any factors
that would significantly affect the estimated fair value amounts, such amounts
have not been comprehensively revalued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein. (See Note 1).
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash, cash equivalents, accounts receivable, accounts payable, accrued
expenses and other short-term obligations--These carrying amounts approximate
fair value because of the short-term nature of these financial instruments.
F-36
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)
Notes receivable--The fair value of notes receivable is estimated based on
discounted cash flows using current interest rates at which similar loans to
borrowers with similar credit ratings would be made or if the loan is
collateral dependent, management's estimate of the fair value of the
collateral. The carrying amount of these notes aggregated $50,205,000$69,920,000 and
$69,920,000$39,312,000 at December 31, 19951996 and 1996,1997, respectively, and approximate their
fair value.
Deposits on station purchases--The fair value is not practicable to
estimate.
Long-term debt--The fair values of long-term debt are estimated based on
current market rates and instruments with the same risk and maturities. The
fair value of long-term debt approximated the carrying value at December 31,
19951996 and 1996.1997.
Interest rate protection agreements--The fair values of these agreements are
obtained from dealer quotes. These values represent the estimated amount the
Company would receive or pay to terminate the agreements taking into
consideration the current interest rates. The Company would expect to pay the
fair value of these agreements of approximately $1.9$1.5 million and $1.5$2.7 million
as of December 31, 19951996 and 1996,1997, respectively. (See Note 3).
F-36
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED13. QUARTERLY FINANCIAL STATEMENTS--(Continued)
14. Events Subsequent to Independent Auditors' Report (Unaudited)
Subsequent to February 25, 1997, the Company has agreed to acquire (or
is in the process of negotiating agreements to acquire) the following additional
radio properties:
Sacramento: In February 1997, the Company consummated an agreement to
exchange the Philadelphia station which it acquired as partDATA (UNAUDITED)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- --------- --------- ---------
IN THOUSANDS, EXCEPT PER SHARE DATA
1997
Net revenues.................... $ 54,237 $ 100,108 $ 106,167 $ 113,606
Operating income................ 2,220 18,556 15,929 18,328
Net income (loss) before
extraordinary item............. (2,725) 2,421 (324) (7,021)
Net income (loss) before
dividends...................... (4,364) 2,421 (324) (7,715)
Basic and diluted loss per share
before extraordinary
losses(1)(2)................... $ (.42) $ (.20) $ (.30) $ (.52)
1996
Net revenues.................... $ 23,315 $ 37,777 $ 52,490 $ 64,437
Operating income................ 1,793 6,757 7,403 11,078
Net income (loss) before
dividends...................... (456) 2,210 934 2,447
Basic income (loss) per
share(1)(2).................... $ (.03) $ .11 $ (.07) $ .00
Diluted income (loss) per
share(1)(2).................... $ (.03) $ .10 $ (.07) $ .00
- --------
(1) The sum of the Marlin
Transaction for KSFM-FM and KMJI-AM serving Sacramento, California. The Company
also soldquarter's earnings per share does not equal the Detroit station acquired as part of the Marlin transactionyear-to-
date earnings per share due to the
owner of the Sacramento stations for approximately $20.0 million. (See Notes 10
and 11).
In March 1997, the Company acquired the assets of KXOA-AM/FM and KQPT-FMchanges in Sacramento, California for approximately $50.0 million. The Company began
programming and marketing the stations pursuant to an LMA beginning in August
1996.average share calculations. (See
Note 11-Sacramento)1).
San Jose: In March 1997, the Company entered into a merger agreement
pursuant(2) Income (loss) per share has been retroactively restated to which the Company will acquire the assets of KEZR-FM and KLUE-FM
serving Monterey, California in exchange for approximately 723,000 shares of
Class A Common Stock valued at approximately $20.0 million and $4.0 million in
cash. Subjectconform to the receipt of FCC approval and the expiration or earlier
termination of the HSR Act waiting period, the Company expects to consummate the
merger in the first half of 1997.
In March 1997, the Company entered into an agreement to sell KKSJ-AM for
approximately $3.2 million. Subject to the receipt of FCC approval, the Company
expects to consummate the sale in the second quarter of 1997.
West Palm Beach: In March 1997, the Company consummated an agreement to
exchange the assets of KSTE-AM in Sacramento, California plus approximately
$33.0 million in cash for the assets of WEAT-FM, WEAT-AM and WOLL-FM in West
Palm Beach, Florida. The party to the exchange agreement began programming and
marketing KSTE-AM pursuant to an LMA and the Company began programming and
marketing the West Palm stations pursuant to an LMA beginning in August 1996.
Under current FCC regulations, the Company is permitted to own five FM stations
in West Palm Beach; accordingly, it will be required to dispose of one station
in West Palm Beach.
Back Bay Transactions: In March 1997, Back Bay consummated the sale of
WBNW-AM and utilized a portion of the proceeds to repay the Company all amounts,
including accrued interest, that were outstanding under the note agreements
described in Notes 1 and 12.
The Company is also pursuing the acquisitions of tower properties and
additional radio stations in new and existing markets, none of which have
definitive purchase agreements.FAS
128. (See Note 1).
F-37
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Quarterly Financial Data (Unaudited)
First Second Third Fourth
In thousands, except per share data: Quarter Quarter Quarter Quarter
1996
Net revenues (2) $ 23,315 $ 37,777 $ 52,490 $ 64,437
Operating income 1,793 6,757 7,403 11,078
Net income (loss) before dividends (456) 2,210 934 2,447
Income (loss) per share (1) $ (.03) $ .10 $ (.07) $ .00
1995
Net revenues $ 19,842 $ 24,672 $ 25,109 $ 28,149
Operating income 672 3,698 4,637 5,445
Income before extraordinary item 5,207 675 1,435 1,788
Net income before dividends 5,207 675 1,435 971
Income per share before
extraordinary item (1) $.50 $.03 $.09 $.11
(1) The sum of the quarter's earnings per share does not equal the
year-to-date earnings per share due to changes in average share
calculations. (See Note 1).
(2) 1996 second quarter revenues from LMA agreements aggregating $.3
million were subsequently reclassified to net LMA expense in the third
quarter. The reclassification had no effect on other reported amounts
presented herein.
F-38
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees(CONTINUED)
14. SUBSIDIARY GUARANTEES
The Company's payment obligations under the 9.00% Senior Subordinated Notes
(9.00% Notes) and the 9.75% Notes are fully and unconditionally guaranteed on
a joint and several basis (collectively, the "Subsidiary Guarantees")Subsidiary Guarantees), on a
senior basis (in the case of the 9.75% Notes) and a senior subordinated basis
(in the case of the 9.00% Notes) by all of its present and any future
Restricted Subsidiaries (collectively, "Restricted Guarantors")Restricted Guarantors). The Restricted
Subsidiaries have also unconditionally guaranteed, and any future Restricted
Subsidiaries will be required to guarantee, on a joint and several basis
(collectively, the "SeniorSenior Subsidiary Guarantees")Guarantees), all obligations of the
Company under the 1997 Credit Agreements.Agreement. The Tower Subsidiary has not
guaranteed obligations under the Credit Agreements or either series of the
Senior Subordinated Notes.
(See Note 1).
The Subordinated9.00% Notes and the Subsidiary Guarantees are subordinated to all Senior
Debt (as defined) of the Company including indebtedness under the 1997 Credit
AgreementsAgreement and the Senior Subsidiary Guarantees.Guarantees and 9.75% Notes related
guarantees. The indenture governing each series of the Senior Subordinated
Notes contains limitations on the amount of indebtedness (including Senior
Debt) which the Company may incur.
With the intent that the Subsidiary Guarantees not constitute fraudulent
transfers or conveyances under applicable state or federal law, the obligation
of each guarantor under its Subsidiary Guarantee is also limited to the
maximum amount as will, after giving effect to any rights to contribution of
such guarantor pursuant to any agreement providing for an equitable
contribution among such guarantor and other affiliates of the Company of
payments made by guarantees by such parties, result in the obligations of such
guarantor in respect of such maximum amount not constituting a fraudulent
conveyance.
The following condensed consolidating financial data illustrates the
composition of the combined guarantors. The Company believes that separate
complete financial statements of the respective guarantors would not provide
additional material information which would be useful in assessing the
financial composition of the guarantors. No single guarantor has any
significant legal restrictions on the ability of investors or creditors to
obtain access to its assets in event of default on the Subsidiary Guarantee,
other than in the case of the 9.00% Notes or its subordination to senior indebtednessSenior Debt
described above.
Investments in subsidiaries are accounted for by the parent on the equity
method for purposes of the unaudited supplemental consolidating presentation.
Earnings (losses) of subsidiaries are therefore reflected in the parent's
investment accounts and earnings. The principal elimination entries eliminate
investments in subsidiaries and intercompany balances and transactions.
F-39For purposes of FAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," the Company's radio segment consists of the Parent, its Divisions
and the Guarantor Subsidiaries. The Company's tower segment consists of the
Non-Guarantor Subsidiary.
F-38
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
Condensed Consolidating Balance Sheet
December 31, 1996
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary Eliminations TotalsNON-
PARENT AND GUARANTOR GUARANTOR CONSOLIDATED
ITS DIVISIONS SUBSIDIARIES SUBSIDIARY ELIMINATIONS TOTALS
------------- ------------ ----------------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents.......... $ 10,470 $ 1,578 $ 4,595 $ 16,643
Accounts receivable,
net.................. 52,130 35,099 3,239 90,468
Prepaid expenses and
other assets......... 5,615 998 790 7,403
Deferred income
taxes................ 4,006 2,359 63 6,428
---------- ---------- -------- ----------- ----------
Total current
assets............. 72,221 40,034 8,687 120,942
PROPERTY AND EQUIPMENT,
NET: 86,054 46,517 117,618 250,189
OTHER ASSETS:
Restricted cash....... 22,141 22,141
Investment in and
advances to
subsidiaries......... 1,164,380 $(1,164,380) 0
Investment notes
receivable........... 25,497 615 10,700 36,812
Goodwill--net......... 333,002 20,895 353,897
FCC licenses--net..... 1 1,112,272 1,112,273
Other intangible
assets--net.......... 28,301 2,159 8,424 38,884
Unallocated purchase
price--net........... 108,192 108,192
Deposits and other
long-term assets..... 9,140 1,735 10,875
---------- ---------- -------- ----------- ----------
Total other assets.. 1,582,462 1,135,941 129,051 (1,164,380) 1,683,074
---------- ---------- -------- ----------- ----------
TOTAL................... $1,740,737 $1,222,492 $255,356 $(1,164,380) $2,054,205
========== ========== ======== =========== ==========
F-39
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
NON-
PARENT AND GUARANTOR GUARANTOR CONSOLIDATED
ITS DIVISIONS SUBSIDIARIES SUBSIDIARY ELIMINATIONS TOTALS
------------- ------------ ---------- ------------ ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt....... $ 340 $ 110 $ 450
Accounts payable and
accrued expenses..... 11,729 $ 25,403 10,896 48,028
---------- ---------- -------- ----------- ----------
Total current
liabilities........ 12,069 25,403 11,006 48,478
NON-CURRENT LIABILITIES:
Deferred income
taxes................ 9,740 185,870 418 196,028
Other long-term
liabilities.......... 8,875 46 33 8,954
Long-term debt........ 833,638 90,066 923,704
---------- ---------- -------- ----------- ----------
Total non-current
liabilities........ 852,253 185,916 90,517 1,128,686
MINORITY INTEREST IN
SUBSIDIARIES........... 626 626
REDEEMABLE PREFERRED
STOCK.................. 215,550 215,550
STOCKHOLDERS' EQUITY:
Preferred stock....... 1 1
Common stock.......... 295 356 (356) 295
Additional paid-in
capital.............. 671,211 1,002,769 155,711 $(1,158,480) 671,211
Unearned
compensation......... (202) (202)
Retained earnings
(accumulated
deficit)............. (9,982) 8,404 (2,860) (5,544) (9,982)
Treasury stock........ (458) (458)
---------- ---------- -------- ----------- ----------
Total stockholders'
equity............. 660,865 1,011,173 153,207 (1,164,380) 660,865
---------- ---------- -------- ----------- ----------
TOTAL................... $1,740,737 $1,222,492 $255,356 $(1,164,380) $2,054,205
========== ========== ======== =========== ==========
F-40
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
PARENT AND GUARANTOR NON-GUARANTOR CONSOLIDATED
ITS DIVISIONS SUBSIDIARIES SUBSIDIARY(A) ELIMINATIONS TOTALS
------------- ------------ ------------- ------------ ------------
Net broadcast revenues.. $231,438 $125,582 $ (22) $356,998
Tower revenues.......... $17,508 (388) 17,120
License fees charged to
Parent................. (17,320) 17,320 0
-------- -------- ------- ------- --------
Total net revenues...... 214,118 142,902 17,508 (410) 374,118
Operating expenses
excluding depreciation
and amortization, net
local marketing
agreement and corporate
general and
administrative
expenses............... 156,524 75,473 8,713 1,126 241,836
Net local marketing
agreement expense...... 1,590 724 2,314
Depreciation and
amortization........... 17,924 40,493 6,326 64,743
Merger expenses......... 1,985 1,985
Corporate general and
administrative......... 8,207 1,536 (1,536) 8,207
-------- -------- ------- ------- --------
Operating income
(loss)................. 27,888 26,212 933 0 55,033
Other income (expense):
Interest expense...... (56,710) (3,039) (59,749)
Interest income and
other, net........... 2,114 250 2,364
Gains (losses) on sale
of assets and other,
net.................. (5,519) (1) (193) (5,713)
Equity in income
(loss) of
subsidiaries......... 5,526 (5,526) 0
-------- -------- ------- ------- --------
Income (loss) before
income taxes........... (26,701) 26,211 (2,049) (5,526) (8,065)
Income tax provision
(benefit).............. (18,358) 18,415 (473) (416)
-------- -------- ------- ------- --------
Income (loss) before
extraordinary item..... (8,343) 7,796 (1,576) (5,526) (7,649)
Extraordinary loss on
extinguishment of
debt--net of tax
benefit................ (1,639) (694) (2,333)
-------- -------- ------- ------- --------
Net income (loss)....... $ (9,982) $ 7,796 $(2,270) $(5,526) $ (9,982)
======== ======== ======= ======= ========
F-41
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
PARENT AND GUARANTOR NON-GUARANTOR CONSOLIDATED
ITS DIVISIONS SUBSIDIARIES SUBSIDIARY ELIMINATIONS TOTALS
------------- ------------ ------------- ------------ ------------
Cash flows provided by
operating activities... $ (13,257) $46,930 $ 9,635 $ 43,308
Investing Activities:
Payments for purchase
of property,
equipment and
intangible assets.... (22,664) (23,066) (45,730)
Proceeds from asset
and radio station
sales................ 86,551 86,551
Repayment of
investment note
receivables.......... 1,243 1,243
Payments for purchase
of tower properties.. (181,333) (181,333)
Payments for purchase
of radio stations.... (500,824) (500,824)
Payments for
investment notes
receivable and
related intangible
assets............... (410) (10,961) (11,371)
Deposits and other
long-term assets..... 7,537 (1,146) 6,391
--------- ------- --------- ---- ---------
Cash flows used for
investing activities... (428,567) (216,506) (645,073)
--------- ------- --------- ---- ---------
Financing Activities:
Borrowings under the
Credit Agreements.... 639,500 151,000 790,500
Repayments under the
Credit Agreements.... (286,000) (65,000) (351,000)
Borrowing under other
obligations.......... 750 750
Repayments under other
obligations.......... (868) (359) (1,227)
Additions to deferred
financing costs...... (5,642) (2,553) (8,195)
Dividends paid........ (15,613) (15,613)
Net proceeds from
equity offerings and
options.............. 193,165 193,165
Distributions to
minority interest.... (419) (419)
Investment in and
advances to
subsidiaries......... (81,072) (45,352) 126,424
--------- ------- --------- ---- ---------
Cash flows from
financing activities... 444,220 (45,352) 209,093 607,961
--------- ------- --------- ---- ---------
Increase in cash and
cash equivalents....... 2,396 1,578 2,222 6,196
Cash and cash
equivalents, beginning
of year................ 8,074 2,373 10,447
--------- ------- --------- ---- ---------
Cash and cash
equivalents, end of
year................... $ 10,470 $ 1,578 $ 4,595 $ 0 $ 16,643
========= ======= ========= ==== =========
F-42
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
NON-
PARENT AND GUARANTOR GUARANTOR CONSOLIDATED
ITS DIVISIONS SUBSIDIARIES SUBSIDIARY ELIMINATIONS TOTALS
------------- ------------ ---------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents.......... $ 8,074 $ 2,373 $ 10,447
Accounts receivable,
netnet.................. 49,565 $ 2,095 237 51,897
Prepaid expenses and
other current assetsassets......... 3,509 14 80 3,603
Deferred income
taxestaxes................ 3,202 168 3,370
------------------ -------- ------- --------- ---------- ---------- ------------------
Total current
assetsassets............. 64,350 2,277 2,690 69,317
PROPERTY AND EQUIPMENT,
NETNET.................... 67,267 3,271 19,709 90,247
OTHER ASSETS:
Investment in and
advances to
subsidiariessubsidiaries......... 314,983 $ (314,983)$(314,983) 0
Station investmentInvestment notes
receivablereceivable........... 69,920 69,920
Goodwill - net 200,449Goodwill--net......... 201,208 20,457 11,243 232,149232,908
FCC licenses - netlicenses--net..... 233,558 233,558
Other intangible
assets - net 24,178assets--net.......... 23,419 327 3,048 27,55326,794
Deposits and other
long-term assetsassets..... 25,589 48 427 26,064
Net assets held under
exchange agreementagreement... 47,495 47,495
------------------ -------- ------- --------- ---------- ---------- ------------------
Total other assetsassets.. 635,119 301,885 14,718 (314,983) 636,739
------------------ -------- ------- --------- ---------- ---------- ----------
TOTAL ASSETS $ 766,736 $ 307,433 $ 37,117 $ (314,983) $ 796,303
==========--------
TOTAL................... $766,736 $307,433 $37,117 $(314,983) $796,303
======== ======== ======= ========= ========== ========== ==========
F-40========
F-43
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
AMERICAN RADIO SYSTEMS CORPORATIONPARENT AND GUARANTOR NON-GUARANTOR CONSOLIDATED
ITS DIVISIONS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Balance Sheet
December 31, 1996
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary Eliminations TotalsSUBSIDIARY ELIMINATIONS TOTALS
------------- ------------ ------------- ------------ ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debtdebt....... $ 444 $ 117 $ 561
Accounts payable and
accrued expensesexpenses..... 31,087 $ 656 2,027 33,770
------------------ -------- ------- --------- ---------- ---------- ------------------
Total current
liabilitiesliabilities........ 31,531 656 2,144 34,331
NON-CURRENT LIABILITIES
Deferred income
taxestaxes................ 11,405 21,521 279 33,205
Other long-term
liabilitiesliabilities.......... 2,129 20 2,149
Long-term debtdebt........ 325,693 4,418 330,111
------------------ -------- ------- --------- --------- ---------- ------------------
Total non-current
liabilitiesliabilities........ 339,227 21,521 4,717 365,465
MINORITY INTEREST IN
SUBSIDIARYSUBSIDIARIES........... (185) 529 344
STOCKHOLDERS' EQUITYEQUITY:
Preferred Stockstock....... 1 1
Common Stockstock.......... 211 500 $ (500) 211
Additional paid-in
capitalcapital.............. 390,731 284,649 29,817 (314,466) 390,731
Unearned
compensationcompensation......... (297) (297)
Retained earningsearnings..... 5,955 607 (590) (17) 5,955
Treasury stockstock........ (438) (438)
------------------ -------- ------- --------- --------- ---------- ------------------
Total stockholders'
equityequity............. 396,163 285,256 29,727 (314,983) 396,163
------------------ -------- ------- --------- --------- ---------- ----------
TOTAL LIABILITIES--------
TOTAL................... $766,736 $307,433 $37,117 $(314,983) $796,303
======== ======== ======= ========= ========
F-44
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
PARENT AND STOCKHOLDERS'
EQUITY $ 766,736 $ 307,433 $ 37,117 $ (314,983) $ 796,303
========== ========= ========= ========== ==========
F-41
AMERICAN RADIO SYSTEMS CORPORATION ANDGUARANTOR NON-GUARANTOR CONSOLIDATED
ITS DIVISIONS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 1996
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary Eliminations TotalsSUBSIDIARY(A) ELIMINATIONS TOTALS
------------- ------------ ------------- ------------ ------------
Net broadcast revenues $ 170,322 $ 4,252 $ 174,574revenues.. $170,322 $4,252 $174,574
Tower revenuesrevenues.......... 618 $ 2,897$2,897 $ (70) 3,445
License fees charged to
ParentParent................. (7,655) 7,655 0
---------- --------- --------- ---------- ------------------ ------ ------ ----- --------
Total net revenuesrevenues...... 163,285 11,907 2,897 (70) 178,019
Operating expenses
excluding
depreciation and
amortization, net
local marketing
agreement and
corporate general and
administrative
expensesexpenses............. 115,219 2,662 2,193 (70)1,363 760 120,004
Net local marketing
agreement expenseexpense.... 10,461 (2,333) 8,128
Depreciation and
amortizationamortization......... 9,873 6,947 990 17,810
Corporate general and
administrativeadministrative....... 5,046 830 (830) 5,046
---------- --------- --------- ---------- ------------------ ------ ------ ----- --------
Operating income
(loss)................. 22,686 4,631 (286) 0 27,031
Other income (expense):
Interest expenseexpense...... (22,287) (22,287)
Interest income and
other, netnet........... 5,489 36 5,525
Gains (losses) on sale
of assets and other,
netnet.................. (123) (185) (308)
Equity in income
(loss) of
subsidiaries, net of
income taxes recorded at the
subsidiary levelsubsidiaries......... 127 (127) 0
---------- --------- --------- ---------- ------------------ ------ ------ ----- --------
Income (loss) before
income taxestaxes........... 5,892 4,631 (435) (127) 9,961
Provision for income taxesIncome tax provision.. 757 4,024 45 4,826
---------- --------- --------- ---------- ------------------ ------ ------ ----- --------
Net income (loss)....... $ 5,135 $ 607 $ (480) $ (127)$(127) $ 5,135
========== ========= ========= ========== ==========
F-42======== ====== ====== ===== ========
F-45
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
AMERICAN RADIO SYSTEMS CORPORATIONPARENT AND GUARANTOR NON-GUARANTOR CONSOLIDATED
ITS DIVISIONS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 1996
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary Eliminations TotalsSUBSIDIARY ELIMINATIONS TOTALS
------------- ------------ ------------- ------------ ------------
Cash flows provided fromby
operating activitiesactivities... $ 8,138 $ 5,292 $ 2,229 $ 15,659
---------- --------- --------- ---------- ----------
Investing Activities:
Payments for purchase
of property,
and
equipment and
intangible assetsassets.... (15,782) (9,327) (25,109)
Proceeds from asset
and radio station
salessales................ 1,087 1,087
Proceeds for repaymentRepayment of station
investment notes
receivablesreceivable........... 1,350 1,350
Payments for purchase
of tower propertiesproperties.. (9,797) (9,797)
Payments for purchase
of radio stationsstations.... (312,591) (312,591)
Payments for station
investment notes
receivable and
related intangible
assetsassets............... (56,522) (56,522)
Deposits and other
long-term assetsassets..... (20,303) (20,303)
---------- --------- ------- -------- --- --------- ---------- ----------
Cash flows used byfor
investing activitiesactivities... (402,761) (19,124) (421,885)
---------- --------- ------- -------- --- --------- ---------- ----------
Financing Activities:
Borrowings under the
Credit AgreementsAgreements.... 151,500 2,500 154,000
Repayment ofRepayments under the
Credit AgreementsAgreements.... (151,500) (151,500)
Repayment ofRepayments under other
obligationsobligations.......... (403) (51) (454)
Net proceeds from debt
offering - netoffering--net of
discountdiscount............. 173,581 173,581
Additions to deferred
financing costscosts...... (5,344) (5,344)
Dividends paidpaid........ (4,973) (4,973)
Net proceeds from
equity offerings and
exercise of optionsoptions.............. 247,474 247,474
Investment in and
advances to
subsidiariessubsidiaries......... (11,515) (5,292) 16,807 0
---------- --------- ------- -------- --- --------- ---------- ----------
Cash flows from
financing activitiesactivities... 398,820 (5,292) 19,256 412,784
---------- --------- ------- -------- --- --------- ---------- ----------
Increase in cash and
cash equivalentsequivalents....... 4,197 2,361 6,558
Cash and cash
equivalents,
at beginning of yearyear...... 3,877 12 3,889
---------- --------- ------- -------- --- --------- ---------- ----------
Cash and cash
equivalents, at end of
yearyear................... $ 8,074 $ 0 $ 2,373 $ 0 $ 10,447
========== ========= ========= ========== ==========
F-43======= ======== === =========
F-46
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
AMERICAN RADIO SYSTEMS CORPORATIONPARENT AND SUBSIDIARIES
NOTES TOGUARANTOR NON-GUARANTOR CONSOLIDATED
FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Balance Sheet
December 31, 1995
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary Eliminations TotalsITS DIVISIONS SUBSIDIARY SUBSIDIARY ELIMINATIONS TOTALS
------------- ------------ ------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,877 $ 12 $ 3,889
Accounts receivable, net 24,352 37 24,389
Prepaid expenses and other current assets 2,277 4 2,281
Note receivable-other 1,108 1,108
Deferred income taxes 1,162 1,162
---------- --------- --------- ---------- ----------
Total current assets 32,776 53 32,829
PROPERTY AND EQUIPMENT, NET 28,027 3,759 31,786
OTHER ASSETS:
Investment in and advances to
subsidiaries 48,792 $ (48,792) 0
Station investment notes receivable 49,097 49,097
Goodwill 66,464 66,464
FCC licenses $45,023 45,023
Other intangible assets, net 15,831 33 15,864
Deposits and other long-term assets 7,715 18 7,733
---------- --------- --------- ---------- ----------
Total other assets 187,899 45,023 51 (48,792) 184,181
---------- --------- --------- ---------- ----------
TOTAL ASSETS $ 248,702 $ 45,023 $ 3,863 $ (48,792) $ 248,796
========== ========= ========= ========== ==========
F-44
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Balance Sheet
December 31, 1995
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary Eliminations Totals
------------- ------------ ------------- ------------ ------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 355 $ 355
Accounts payable and accrued expenses 9,821 $ 94 9,915
Accrued interest 514 514
---------- --------- --------- ---------- ----------
Total current liabilities 10,690 94 10,784
NON-CURRENT LIABILITIES
Deferred income taxes 7,899 7,899
Other long-term liabilities 1,929 1,929
Long-term debt 152,149 152,149
---------- --------- --------- ---------- ----------
Total non-current liabilities 161,977 161,977
STOCKHOLDERS' EQUITY
Common Stock 143 143
Additional paid-in capital 70,928 $45,023 3,879 $ (48,902) 70,928
Retained earnings 5,793 (110) 110 5,793
Unearned compensation (391) (391)
Treasury stock (438) (438)
---------- --------- --------- ---------- ----------
Total stockholders' equity 76,035 45,023 3,769 (48,792) 76,035
---------- --------- --------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY $ 248,702 $ 45,023 $ 3,863 $ (48,792) $ 248,796
========== ========= ========= ========== ==========
F-45
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Statement of Operations
For the year ended December 31, 1995
Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary Eliminations Totals
------------- ------------ ------------- ------------ ------------
Net broadcast revenuesrevenues.. $ 97,609 $ 97,609
Tower revenuesrevenues.......... $ 163 163
License fees charged to
Parent $Parent................. (484) $ 484$484 0
---------- --------- --------- ---------- ------------------ ---- ----- ---- --------
Total net revenuesrevenues...... 97,125 484 163 97,772
Operating expenses
excluding
depreciation and
amortization, net
local marketing
agreement and
corporate general and
administrative
expensesexpenses............. 66,148 10 29060 230 66,448
Net local marketing
agreement expenseexpense.... 600 600
Depreciation and
amortizationamortization......... 11,833 474 57 12,364
Corporate general and
administrativeadministrative....... 3,908 230 (230) 3,908
---------- --------- --------- ---------- ------------------ ---- ----- ---- --------
Operating income
(loss)................. 14,636 0 (184) 14,452
Other income (expense):
Interest expenseexpense...... (12,497) (12,497)
Interest income and
other, netnet........... 2,435 2,435
Gains on sale of
assets and other,
netnet.................. 11,544 11,544
Equity in (loss) of
subsidiaries, net of income
taxes recorded at the subsidiary levelsubsidiaries......... (110) $ 110$110 0
---------- --------- --------- ---------- ------------------ ---- ----- ---- --------
Income (loss) before
extraordinary item and
income taxes........... 16,008 (184) 110 15,934
income taxes
BenefitIncome tax (provision)
for income taxesbenefit................ (6,903) 74 (6,829)
---------- --------- --------- ---------- ------------------ ---- ----- ---- --------
Income (loss) before
extraordinary itemitem..... 9,105 (110) 110 9,105
Extraordinary loss on
extinguishment of
debt, net
of income tax benefit of $614debt................... (817) (817)
---------- --------- --------- ---------- ------------------ ---- ----- ---- --------
Net income (loss)....... $ 8,288 $ 0 $ (110) $ 110$(110) $110 $ 8,288
========== ========= ========= ========== ==========
F-46======== ==== ===== ==== ========
F-47
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSIDIARY GUARANTEES--(CONTINUED)
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
AMERICAN RADIO SYSTEMS CORPORATIONPARENT AND SUBSIDIARIES
NOTES TOGUARANTOR NON-GUARANTOR CONSOLIDATED
FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 1995
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary Eliminations TotalsITS DIVISIONS SUBSIDIARY SUBSIDIARY ELIMINATIONS TOTALS
------------- ---------------------- ------------- ------------ ------------
Cash flows provided fromby
operating activitiesactivities... $ 9,577 $ - $ 147 $ 9,724
---------- --------- ---------- ------------- ---
Investing Activities:
Payments for purchase
of property,
and (5,926) (5,926)
equipment and
intangible assetsassets.... (5,926) (5,926)
Proceeds from asset
and radio station
salessales................ 15,302 15,302
Payments for purchase
of tower propertiesproperties.. (3,218) (4,082) (7,300)
Payments for purchase
of radio stationsstations.... (31,013) (31,013)
Payment for station investment
notes receivable and
related intangible
assetsassets............... (48,597) (48,597)
Proceeds from repaymentsRepayments of
investment notes
receivablereceivable........... 3,000 3,000
Deposits and other
long-term assetsassets..... (6,649) (6,649)
---------- --------- --- ------- --- --------- ---------- ----------
Cash flows used byfor
investing activitiesactivities... (77,101) (4,082) (81,183)
---------- --------- ------------- ------- --- ---------
Financing Activities
Borrowings under the
Credit AgreementsAgreements.... 225,000 225,000
RepaymentRepayments under the
Credit AgreementsAgreements.... (202,500) (202,500)
Repayment ofRepayments under other
obligationsobligations.......... (1,288) (1,288)
Additions to deferred
financing costscosts...... (3,896) (3,896)
Redemption of Series C
Common StockStock......... (14,580) (14,580)
Purchase of treasury
stockstock................ (438) (438)
Net proceeds from
equity offering and
exercise of optionsoptions.. 69,882 69,882
Investment in and
advances to
subsidiariessubsidiaries......... (3,947) 3,947 ---------- -------- ----------0
--------- --- ------- --- ---------
Cash flows from
financing activitiesactivities... 68,233 3,947 72,180
---------- -------- ------------------- --- ------- --- ---------
Increase in cash and
cash equivalentsequivalents....... 709 12 721
Cash and cash
equivalents, at beginning
of yearyear................ 3,168 3,168
---------- --------- --- ------- --- --------- ---------- ----------
Cash and cash
equivalents, at end of
yearyear................... $ 3,877 $ 0 $ 12 $ 0 $ 3,889
========== ========= ========= ========== ==========
F-47=== ======= === =========
F-48
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
AMERICAN RADIO SYSTEMS CORPORATIONCOLUMN A COLUMN B COLUMN C--ADDITIONS COLUMN D COLUMN E
-------- -------- ------------------- -------- --------
BALANCE AT CHARGED TO COSTS CHARGED TO OTHER BALANCE AT END OF
DESCRIPTION BEGINNING OF PERIOD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 1994
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary(a) Eliminations TotalsEXPENSES ACCOUNTS(1) DEDUCTIONS(2) PERIOD
----------- ------------------- ---------------- ---------------- ------------- ------------ ------------- ------------ -----------------------------
Net broadcast revenues $ 68,034 $ 68,034
License fees charged to Parent $ 858 (858) 0
---------- --------- --------- ---------- ----------
Total net revenues 858 67,176 68,034
Operating expenses excluding
depreciation and amortization and
corporate general and administrative
expenses 3 50,126 50,129
Depreciation and amortization 855 9,065 9,920
Corporate general and administrative 2,229 2,229
---------- --------- --------- ---------- ----------
Operating income 5,756 5,756
Other income (expense):
Interest expense $ (100) 0 (7,176) (7,276)
Interest income and other, net 225 225
Gains on sale of assets and other 2,278 2,278
Provision for loss on station
investment note receivable (500) (500)
Equity in (loss) of subsidiaries, net of
income taxes recorded at the
subsidiary level (1,133) $ 1,133 0
---------- --------- --------- ---------- ----------
Income (loss) before income taxes and
extraordinary item (1,233) 583 1,133 483
Provision for income taxes (556) (556)
---------- --------- --------- ---------- ----------
Income (loss) before extraordinary item (1,233) 27 1,133 (73)
Extraordinary loss on extinguishment
of debt, net of income tax
benefit of $597 (1,160) (1,160)
---------- --------- --------- ---------- ----------
Net income (loss) $ (1,233) $ 0 $ (1,133) $ 1,133 $ (1,233)
========== ========= ========= ========== ==========
(a) Includes American Radio Systems, Inc. (ARSI), a wholly owned subsidiary of
the Company until December 1995, which was the borrower.
F-48
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Subsidiary Guarantees --(Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 1994
(Dollars in thousands)
Parent and Guarantor Non-guarantor Consolidated
its Divisions Subsidiaries Subsidiary(a) Eliminations Totals
------------- ------------ ------------- ------------ ------------
Cash flows provided from operating activities $ 2,166 $ 2,166
---------- --------- --------- ---------- ----------
Investing Activities:
Payments for purchase of property and
equipment and intangible assets (5,754) (5,754)
Proceeds from asset and radio station sales 5,620 5,620
Payments for purchase of radio stations (87,291) (87,291)
Payments for station investment notes
receivable and related intangible assets (5,000) (5,000)
Deposits and other long-term assets (484) (484)
---------- --------- --------- ---------- ----------
Cash flows used by investing activities (92,909) (92,909)
---------- --------- --------- ---------- ----------
Financing Activities:
Borrowings under the Credit Agreements 83,500 83,500
Repayment under the Credit Agreements (7,000) (7,000)
Repayment of other obligations (2,448) (2,448)
Addition to deferred financing costs (1,742) (1,742)
Dividends paid (351) (351)
Net Proceeds from stock offerings 17,560 17,560
---------- --------- --------- ---------- ----------
Cash flows from financing activities 89,519 89,519
---------- --------- --------- ---------- ----------
Decrease in cash and cash equivalents (1,224) (1,224)
Cash and cash equivalents at beginning of year 4,392 4,392
---------- --------- --------- ---------- ----------
Cash and cash equivalents at end of year $ 0 $ 0 $ 3,168 $ 0 $ 3,168
========== ========= ========= ========== ==========
(a) Includes American Radio Systems, Inc. (ARSI), a wholly owned subsidiary
of the Company until December 1995, which was the borrower.
F-49
AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
For the Years Ended December 31, 1994, 1995 and 1996
(In thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Description Balance at Charged to Costs Deductions (1) Balance at End of
Beginning of Period and Expenses Period
Allowance for
Doubtful Accounts
19941995.................. $1,503 $1,387 $ 1,180 $ 721 $ 398 $ 1,503
========= ======== ======= =========
1995 $ 1,503 $ 1,3870 $ 358 $2,532
====== ====== ==== ====== ======
1996.................. $2,532 $2,977 $ 2,532
========= ======== ======= =========
1996 $ 2,532 $ 2,9770 $ 949 $ 4,560
========= ======== ======= =========
$4,560
====== ====== ==== ====== ======
1997.................. $4,560 $5,050 $983 $2,890 $7,703
====== ====== ==== ====== ======
Note Receivable
Valuation Allowance
1994 $ 0 $ 500 $ 0 $ 500
========= ========= ====== =========
19951995.................. $ 500 $ 0 $ 0 $ 0 $ 500
========= ========= ====== =========
1996====== ==== ====== ======
1996.................. $ 500 $ 0 $ 0 $ 0 $ 500
========= ========= ====== =============== ==== ====== ======
1997.................. $ 500 $6,750 $ 0 $ 500 $6,750
====== ====== ==== ====== ======
- --------
(1) Account balances as a result of station acquisitions & dispositions
(2) Uncollectible accounts written off, net of recoveries
S-1
INDEX TO EXHIBITS
Listed below are the exhibits which are filed as part of this Form 10-K
(according to the number assigned to them in Item 601 of Regulation S-K). Each
exhibit marked by a (*) is incorporated by reference to American's Definitive
Proxy filed on February 17, 1998. See Form S-4 Registration Statement of
American Tower Systems Corporation (File No. 333-46025) as declared effective
by the Securities and Exchange Commission on February 17, 1998. Exhibit
numbers in parenthesis refer to the exhibit number in the Definitive Proxy.
INDEX TO EXHIBITS
Exhibit
No. Description of DocumentEXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
2.1 Amended and Restated Merger Agreement, by and among the
Company, American Merger Corporation and EZ
Communications, Inc. dated as of August 5, 1996 and as
amended and restated as of September 27, 1996.............. Incorporated herein by reference to Appendix I of
the Prospectus which is a part of the Company's
Registration Statement on Form S-4 filed with the
SEC on October 31, 1996 (File No. 333-15231)
10.93 Asset Purchase Agreement, dated November 19, 1996 by the
Company and New Generation Broadcasting, Inc............... Filed herewith as Exhibit 10.93
10.94 Construction Loan Agreement, dated December 11, 1996 by
the Company and Jupiter Radio Partners..................... Filed herewith as Exhibit 10.94
10.95 Security Agreement, dated December 11, 1996 by the
Company and Jupiter Radio Partners......................... Filed herewith as Exhibit 10.95
10.96 Assignment and Pledge Agreement, dated December 11, 1996
by the Company and Jupiter Radio Partners.................. Filed herewith as Exhibit 10.96
10.97 Asset Purchase Agreement, dated December 12, 1996 by Radio
Systems of Philadelphia, Inc. and Vista Broadcasting, Inc.. Filed herewith as Exhibit 10.97
10.98 Asset Purchase Agreement, dated December 17, 1996 by the
Company and Brighton Broadcasting, Inc..................... Filed herewith as Exhibit 10.98
10.99 Asset Exchange Agreement, dated December 23, 1996 by the
Company and Citicasters Co................................ Filed herewith as Exhibit 10.99
10.100 Assignment, Assumption and Consent, dated December 24,
1996 by the Company, Brown Organization, and
Entertainment Communications, Inc. ........................ Filed herewith as Exhibit 10.100
10.101 Time Brokerage Agreement, dated December 24, 1996, by
the Company and Entertainment Communications, Inc.......... Filed herewith as Exhibit 10.101
10.102 Agreement and Plan of Merger, dated
January 2,as of November 21, 1997, by the
Company and
Tsunami Communications of Cincinnati,
Inc........................................................ Filed herewith as Exhibit 10.102
10.103 Agreement to Amend, dated January 10, 1997 by the Company,
Tsunami Communications of Cincinnati,among American Tower Systems
Corporation (ATS), American Tower
Systems, Inc., WGRR
Limited Partnershipa Delaware
corporation (ATSI), Gearon & Co., Incorporated herein by
Inc., a Georgia corporation (Gearon) reference to Exhibit 2.2
and J. Michael Gearon, Jr. (the from the Dalton Group, Inc.............. Filed herewith as Exhibit 10.103
10.104 Asset Purchase Agreement, dated January 22, 1997 by the
Company WGRR Limited Partnership and The Dalton
Group, Inc................................................. Filed herewith as Exhibit 10.104
10.105 Asset Purchase Agreement, dated February 3, 1997 by the
Company and Amaturo Group of Texas, Ltd.................... Filed herewith as Exhibit 10.105
10.106 Time Brokerage Agreement, dated February 14, 1996 by the
Company and Citicasters Co................................. Filed herewith as Exhibit 10.106
(i)
INDEX TO EXHIBITS
ExhibitForm 8-K filed on
Gearon Stockholder)................. December 23, 1997.
2.2 Amendment No. Description of Document
10.107 Agreement of Sale, dated February 14, 1997 by the Company,
American Radio Systems License Corp. and Kimtron, Inc...... Filed herewith as Exhibit 10.107
10.108 Time Brokerage Agreement, dated February 28, 1997 by the
Company and Citicasters Co................................. Filed herewith as Exhibit 10.108
10.1091 to Agreement and
Plan of Merger, dated March 3, 1997 byas of January
22, 1998, among ATS, American Tower
Systems (Delaware), Inc., a Delaware
corporation (formerly known as
American Tower Systems, Inc.),
Gearon and the CompanyGearon Stockholder... (*2.2)
2.3 Agreement and Alta Broadcasting Company, Inc................. Filed herewithPlan of Merger, dated
as Exhibit 10.109
10.110 Assignment of Option to Purchase Radio Station WNVE(FM)
and Consent, dated December 23, 1996, by the Company,
Citicasters Co., and The Great Lakes Wireless Talking
Machine Limited Liability Company.......................... Filed herewith as Exhibit 10.110
10.111 Credit Agreements dated January 24 ,12, 1997, by and
among the
Company, the Bank of new YorkATS and the Lenders named
therein....................................................American Tower Incorporated herein by
Corporation, a Delaware reference to Exhibit 99.1 and 99.22.1
corporation......................... from the Form 8-K filed on
February 10, 1997
10.112 OptionDecember 23, 1997.
10.1 Asset Purchase Agreement, dated September 20, 1996as
of October 4, 1997, by and between
ATSI and Tucson Communications Incorporated herein by
Company, L.P, a California limited reference to Exhibit 10.1
partnership......................... from the CompanyForm 10-Q on
November 14, 1997.
10.2 Amended and Jupiter Radio Partners......................... Filed herewith as Exhibit 10.112
10.113Restated Loan Agreement,
dated as of October 15, 1997, by and
among ATSI, Toronto Dominion
(Texas), Inc., as Administrative Incorporated herein by
Agent and the Banks parties reference to Exhibit 10.17
thereto............................. from the Form 10-Q filed on
November 22, 199614, 1997.
10.3 First Amendment to Amended and
Restated Loan Agreement Agreement,
dated as of December 31, 1997, by
and among American Tower Systems, Inc.,ATSI, Toronto Dominion
(Texas), Inc., as Administrative
Agent and the Banks parties
thereto............................................thereto............................. (*10.3)
10.4 Assumption Agreement, dated as of
January , 1998, by and among ATS,
ATSI, American Tower Systems, L.P.,
a Delaware limited partnership,
Toronto Dominion (Texas), Inc., as
Administrative Agent and the Banks
parties thereto..................... (*10.4)
10.5 American Tower Systems Corporation
1997 Stock Option Plan, dated as of
November 5, 1997, as amended........ (*10.26)
i
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
10.6 Amended and Restated Agreement and
Plan of Merger, dated as of December
18, 1997, by and among the Company,
CBS Corporation (formerly,
Westinghouse Electric Corporation), a
Pennsylvania corporation (CBS), and R Incorporated herein by
Acquisition Corp., a Delaware reference to Exhibit 2.3
corporation (CBS Sub)................ from the Form 8-K filed on
January 23, 1998.
10.7 First Amendment, dated as of December
19, 1997, to Amended and Restated
Agreement and Plan of Merger, dated
December 18, 1997, by and among the Incorporated herein by
Company, CBS and CBS Sub............. reference to Exhibit 2.4
from the Form 8-K filed on
January 23, 1998.
10.8 American Tower Systems Corporation
Stock Purchase Agreement, dated as of
January 8, 1998, by and among ATS and Incorporated herein by
the Purchasers....................... reference to Exhibit 10.2
from the Form 8-K filed on
January 23, 1998.
10.9 Employment Agreement, dated as of
January 22, 1998, by and between ATSI
and J. Michael Gearon, Jr. .......... (*10.28)
10.10 Asset Purchase Agreement, dated as of
January 23, 1988, by and among ATSI,
Midcontinent Media, Inc., a South
Dakota corporation (Midcontinent),
Midcontinent Teleport Co., a South
Dakota corporation and a wholly-owned
subsidiary of Midcontinent (MTC), Wit
Communications, Inc., (WIT) a
Delaware corporation and a wholly-
owned subsidiary of MTC, and
Washington International Teleport,
Inc., a Delaware corporation and a
wholly-owned subsidiary of WIT....... (*10.29)
11 Statement Re Computation of Per Share Filed herewith as Exhibit
10.113
10.114 Asset Purchase Agreement, dated February 5, 1997 by the
Company and Meridian Sales and Services Company............Earnings............................. 11
12 Statement Re Computation of Ratio of
Earnings to Combined Fixed Charges Filed herewith as Exhibit
10.114
11 Schedule re computation of earnings per share.................. Filed herewith as Exhibit 11
12 Ratio of earnings to fixed charges............................. Filed herewith as Exhibitand Preferred Stock Dividends........ 12
21 Subsidiaries of Registrant.....................................the Company.......... Filed herewith as Exhibit
21
23 Independent Auditors' Consent..................................Consent........ Filed herewith as Exhibit
23
2727.1 Financial Data schedule........................................Schedule.............. Filed herewith.asherewith as Exhibit
2727.1
27.2 Financial Data Schedule--Restated.... Filed herewith as Exhibit
27.2
27.3 Financial Data Schedule--Restated.... Filed herewith as Exhibit
27.3
Exhibits 2.110.1 through 10.11410.10 do not contain schedules and exhibits noted
within the agreements. This additional information is available upon
request from the Company.
(ii)
ii