Pages
26
WKYS has the highest advertising rates among stations in the market with a similar format. The Station's management believes that its superior service and established market position will allow WKYS to continue to be the market leader in the establishment of rates.
The Washington market is attractive because of its strong economy, which is relatively resistant to economic downturns. The Washington radio market is expected to grow steadily over the coming years at a rate of 8.7% annually.
The Washington metropolitan area is the ninth largest radio market in the United States with radio revenues of $117.7 million in 1986. One of the reasons advertisers find Washington radio an especially attractive advertising medium is because there are no billboards permitted in the District of Columbia. Thus, radio gains much of the advertising directed at drivers that otherwise would be placed on billboards in other markets.
Washington, D.C. has the highest FM share of listening of the top 10 metro markets according to Spring '87 Arbitron.
-3
27
OFFERING PROCEDURES
NBC will only consider all cash proposals from prospective buyers for the stock of the Station. A prospective buyer must be a bona fide minority person or group who will be able to provide NBC with a tax certificate and with a description of its financial qualifications. To help potential qualified buyers with financing arrangements to acquire the Station, NBC will make available up to $10 million in subordinated seller debt. The subordinated seller debt would have a maturity of up to five-years and would accrue interest semi- annually at a rate of 10% per annum. NBC will require that its subordinated seller debt be subject to a restricted payments test and other convenants as appropriate. To qualify for such subordinated seller debt, NBC will also require that a potential purchaser contribute a significant amount of the purchase price of the Station in the form of cash equity. NBC expressly reserves the right, without given reasons therefor, to determine whether a prospective buyer is qualified.
The offering procedures will be conducted in two phases. Phase I is the information review phase and Phase II the due diligence phase. As part of Phase I, this Memorandum describes the business and affairs of the Station. If, after reviewing the Memorandum, a prospective purchaser wishes to proceed with an in-depth review of the Station, such prospective purchaser should contact the designated representatives of Kidder, Peabody. At that time, subject to the procedures set forth below, Kidder, Peabody will provide a prospective purchaser with the appropriate supplementary information, as requested. If, after reviewing this information, a prospective purchaser wishes
-4-
28
to continue in the review process, such interest should be communicated in writing to Kidder, Peabody.
From the universe of interested parties who have responded, Kidder, Peabody will promptly notify those potential purchasers who have been selected to participate in Phase II of the review process. Selection will be based upon the following criteria:
(i) receipt of satisfactory written expression of interest, including the consideration to be received by NBC for the Station; (ii) receipt of a list outlining the principal due diligence items that the potential purchaser will need answered before submitting a definitive proposal; and (iii) satisfactory demonstration of the potential purchaser's ability to complete a transaction based upon finanacial, business, regulatory and other factors.
Once discussions among Kidder, Peabody and interested parties have led to a determination of interest at the appropriate range of values, the selected groups will be given access to management, facilities and other information to complete their Phase II due diligence investigation.
During Phase II, we will distribute a Stock Purchase Agreement to qualified purchasers for their review and comment. Kidder, Peabody will keep all potential purchasers informed as to the timing of Phase I and II on an equal basis.
-5
29
Kidder, Peabody is acting as NBC's exclusive financial advisor and agent in this transaction, and potential purchasers should channel all data and other requests through Kidder, Peabody so that such requests can be handled in a consistent manner. NBC will be paying Kidder, Peabody a fee in connection with the sale of the Station. With the exception of this arrangement, neither NBC nor Kidder, Peabody will be responsible for the fees of any broker or third party in connection with the proposed transaction.
NBC expressly reserves the right, without giving reasons therefor, at any time and in any respect, to amend or terminate these procedures, to terminate discussions with any or all prospective purchasers, to reject any or all proposals, or to negotiate with any party with respect to a transaction.
-6-
30
[Top Row Test Missing]
INCOME STATEMENT (Dollars in Thousands)
National Time Sales 1981 1982 1983 1984 1985 1986 1987(EX1) $1,535 $2,214 $2,545 $3,576 $3,338 $2,763 $3,227
Local Time Sales 1981 1982 1983 1984 1985 1986 1987(EX1) 3,270 4,598 5,659 6,436 6,879 6,816 8,138
Sport Sales 1981 1982 1983 1984 1985 1986 1987(EX1) -- -- -- -- -- -- -- TOTAL TIME SALES 1981 1982 1983 1984 1985 1986 1987(EX1) 4,805 6,812 8,204 10,012 10,217 9,599 11,365
Network Compensation 1981 1982 1983 1984 1985 1986 1987(EX1) 29 -- -- -- -- -- --
Barter Sales 1981 1982 1983 1984 1985 1986 1987(EX1) 52 59 129 153 126 131 154
Other Income 1981 1982 1983 1984 1985 1986 1987(EX1) 2 2 (1) 1 -- -- --
GROSS REVENUE 1981 1982 1983 1984 1985 1986 1987(EX1) 4,888 6,873 8,332 10,166 10,343 9,730 11,519
Agency Commissions 1981 1982 1983 1984 1985 1986 1987(EX1) 698 994 1,212 1,468 1,469 1,391 1,611
Rep Commissions 1981 1982 1983 1984 1985 1986 1987(EX1) 193 281 332 426 368 310 365
NET REVENUE 1981 1982 1983 1984 1985 1986 1987(EX1) 3,997 5,598 6,788 8,272 8,506 8,029 9,543
News Cost 1981 1982 1983 1984 1985 1986 1987(EX1) 120 172 196 216 256 293 362
Community Programs 1981 1982 1983 1984 1985 1986 1987(EX1) 38 35 31 37 55 56 58
Entertainment + Sports Programs 1981 1982 1983 1984 1985 1986 1987(EX1) 307 415 460 577 639 818 859
Program + Operations Depts 1981 1982 1983 1984 1985 1986 1987(EX1) 106 101 127 136 178 195 218
Barter Programs 1981 1982 1983 1984 1985 1986 1987(EX1) 6 6 42 47 36 30 56
Music License Fees 1981 1982 1983 1984 1985 1986 1987(EX1) 107 142 180 214 236 242 288
TOTAL PROGRAM EXPENSES 1981 1982 1983 1984 1985 1986 1987(EX1) 684 871 1,036 1,227 1,400 1,634 1,841
Technical - Labor 1981 1982 1983 1984 1985 1986 1987(EX1) 505 540 638 778 589 490 468
Technical - Depreciation 1981 1982 1983 1984 1985 1986 1987(EX1) 37 74 111 139 155 163 166
Technical - Other 1981 1982 1983 1984 1985 1986 1987(EX1) 68 92 218 196 228 220 212
Less Network Originations 1981 1982 1983 1984 1985 1986 1987(EX1) -- -- -- -- -- -- --
TOTAL TECHNICAL EXPENSES 1981 1982 1983 1984 1985 1986 1987(EX1) 610 706 967 1,113 972 873 846
Sales Department 1981 1982 1983 1984 1985 1986 1987(EX1) 564 676 801 845 937 950 1,066
Advertising + Promotion 1981 1982 1983 1984 1985 1986 1987(EX1) 213 272 274 306 362 407 498
Barter Advertising 1981 1982 1983 1984 1985 1986 1987(EX1) 36 36 56 68 54 38 43
TOTAL MARKETING EXPENSES 1981 1982 1983 1984 1985 1986 1987(EX1) 813 984 1,131 1,219 1,353 1,395 1,607
G+A - Station 1981 1982 1983 1984 1985 1986 1987(EX1) 428 510 425 454 616 670 687
G+A - Barter Expenses - Other 1981 1982 1983 1984 1985 1986 1987(EX1) 25 18 23 37 41 47 54
TOTAL G&A EXPENSES 1981 1982 1983 1984 1985 1986 1987(EX1) 453 528 448 491 657 717 741
Total Station Expenses 1981 1982 1983 1984 1985 1986 1987(EX1) 2,560 3,089 3,582 4,050 4,382 4,619 5,035
OPERATING PROFIT 1981 1982 1983 1984 1985 1986 1987(EX1) 1,437 2,509 3,206 4,222 4,124 3,410 4,508
G+A - Division 1981 1982 1983 1984 1985 1986 1987(EX1) 347 164 150 158 189 220 189
G+A - Staff 1981 1982 1983 1984 1985 1986 1987(EX1) 112 168 180 216 275 335 132
Division and Staff Expense 1981 1982 1983 1984 1985 1986 1987(EX1) 459 332 330 374 464 555 321
PRETAX PROFIT 1981 1982 1983 1984 1985 1986 1987(EX1) 978 2,177 2,876 3,848 3,660 2,855 4,187
Capital Expenditures 1981 1982 1983 1984 1985 1986 1987(EX1) 272 964 137 41 158 37 0
(1) Based on actual unaudited results through June 30, 1987.