SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report August 24, 2000 Commission File No. 333-76649
(Date of earliest event reported)
SALEM COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0121400
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4880 SANTA ROSA ROAD, SUITE 300
CAMARILLO, CALIFORNIA 93012
(Address of principal executive offices)
(805) 987-0400
Registrant's telephone number, including area code
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 24, 2000, Salem Communications Corporation, (the "Company"),
completed its acquisition of certain assets of eight radio stations from
affiliates of Clear Channel, Inc. ("Clear Channel") and AMFM, Inc. ("AMFM"),
pursuant to the terms of an Asset Purchase Agreement dated March 5, 2000, by and
among the Company and affiliates of Clear Channel and AMFM. The Company
completed the acquisition by acquiring certain assets of the radio stations
KALC-FM (Denver, Colorado), KXMX-FM and KEZY-AM (Anaheim, California); WKNR-AM
and WRMR-AM (Cleveland, Ohio); WYGY-FM and WBOB-AM (Cincinnati, Ohio); and
KDGE-FM (Dallas, Texas) through four subsidiaries wholly-owned, directly or
indirectly, by the Company. The acquired assets consist principally of FCC
licenses and other intangible assets used in the radio broadcasting business and
will continue to be utilized by the Company's subsidiaries for such purposes.
The acquired assets were purchased for $185.6 million in cash, which
purchase price was determined through arms-length negotiation. The acquisition
was financed through cash on hand, borrowings and the sale of certain assets,
including the FCC license, of radio station KLTX-AM, Los Angeles, CA. Such
borrowings included a $58 million borrowing under a short-term credit facility
provided by ING (U.S.) Capital, LLC as Agent, and an additional $110.8 million
borrowing under the Company's existing credit facility provided by The Bank of
New York as Administrative Agent, which existing credit facility was amended to
(i) permit up to $225 million in borrowing, (ii) replace the Company with its
wholly-owned subsidiary Salem Communications Holding Corporation as borrower,
and (iii) amend or waive certain provisions of the existing credit facility.
Subsequent to the initial transaction, the Company announced two related
transactions.
On August 29, 2000, the Company announced that it entered into an asset
exchange agreement with Sunburst Dallas, LP ("Sunburst"). The Company will
exchange KDGE-FM, Dallas, Texas for KLTY-FM, Dallas, Texas. The two companies
signed a local marketing agreement ("LMA") to begin operating the stations on
October 1, 2000. The LMA allows Salem to operate KLTY-FM, and Sunburst to
operate KDGE-FM, before the transaction has closed.
On September 18, 2000, the Company announced a definitive agreement with
Emmis Communications ("Emmis") to sell KALC-FM, Denver, Colorado for
approximately $100 million in cash. Emmis began operating the station under an
LMA on October 15, 2000.
The two above transactions in conjunction with the initial asset purchase
and related financing transactions including the sale of KLTX-AM are referred to
herein as the Transaction.
ITEM 5. OTHER EVENTS.
In order to facilitate the closing and financing of the asset acquisition,
the Company formed three new wholly-owned subsidiaries, Salem Communications
Holding Corporation ("HoldCo"), Salem Communications Acquisition Corporation
("AcquisitionCo") and SCA License Corporation ("SCA"), each a Delaware
corporation. HoldCo and AcquisitionCo are direct subsidiaries of the Company;
SCA is a wholly-owned subsidiary of AcquisitionCo.
Pursuant to an Assignment and Assumption Agreement (the "Assignment") dated
as of August 24, 2000, the Company assigned to HoldCo, and HoldCo assumed,
substantially all of the assets and liabilities of the Company, including
HoldCo's assumption of the obligations as successor issuer pursuant to the
Indenture dated as of September 25, 1997, by and among the Company, the
guarantors named therein and The Bank of New York, as Trustee, as supplemented
through March 31, 1999 and as further supplemented by Supplemental Indenture No.
2, dated as of August 24, 2000, by and among the Company, HoldCo as successor
issuer, the guarantors named therein and The Bank of New York, as Trustee.
Pursuant to the Assignment, HoldCo also assumed all of the Company's rights and
obligations under the Company's existing revolving credit facility described in
Item 2, above, which was amended in connection with the consummation of the
asset acquisition.
As a result of the acquisition of the assets of the eight radio stations,
the FCC licenses of the radio stations were assigned to AcquisitionCo (KALC-FM,
Denver, Colorado) and subsidiaries of HoldCo as follows: New Inspiration
Broadcasting Company, Inc. (KXMX-FM and KEZY-AM, Anaheim, California), Caron
Broadcasting, Inc. (WKNR-AM and WRMR-AM,
<PAGE>
Cleveland, Ohio; WYGY-FM and WBOB-AM, Cincinnati, Ohio) and Inspiration Media of
Texas, Inc. (KDGE-FM, Dallas, Texas). An application for the assignment of the
FCC license of KALC-FM (Denver, Colorado) from AcquisitionCo to its wholly-owned
subsidiary, SCA, has been submitted to the FCC for approval.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Radio Stations KXMX(FM)/KEZY(AM)
Combined Financial Statements
Twelve Months Ended June 30, 2000
CONTENTS
Report of Independent Auditors ................................................1
Combined Financial Statements
Combined Balance Sheet ........................................................2
Combined Statement of Operations ..............................................3
Combined Statement of Cash Flows ..............................................4
Notes to Combined Financial Statements ........................................5
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Clear Channel Communications, Inc.
We have audited the accompanying combined balance sheet of Clear Channel
Communications, Inc.'s radio stations KXMX(FM) and KEZY(AM) as of June 30, 2000,
and the related combined statements of operations and cash flows for the twelve
months then ended. These financial statements are the responsibility of the
management of Clear Channel Communications, Inc. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Clear
Channel Communications, Inc.'s radio stations KXMX(FM) and KEZY(AM) at June 30,
2000, and the combined results of their operations and their cash flows for the
twelve months ended June 30, 2000, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
San Antonio, Texas
November 3, 2000
1
<PAGE>
<TABLE>
<CAPTION>
Radio Stations KXMX(FM)/KEZY(AM)
Combined Balance Sheet
June 30, 2000
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 500
Accounts receivable, net 693,495
-----------
Total current assets 693,995
Property, plant and equipment:
Land, building and improvements 623,330
Transmitter and studio equipment 1,803,389
Furniture and other equipment 139,737
-----------
2,566,456
Less accumulated depreciation 272,643
-----------
2,293,813
Intangible assets:
Licenses and goodwill 26,198,542
Less accumulated amortization 1,222,598
-----------
24,975,944
-----------
Total assets $27,963,752
===========
LIABILITIES AND PARENT COMPANY INVESTMENT ACCOUNT
Current liabilities:
Accounts payable $ 13,150
Accrued expenses 26,541
-----------
Total current liabilities 39,691
Parent company investment account 27,924,061
-----------
Total liabilities and parent company investment account $27,963,752
===========
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE>
<TABLE>
<CAPTION>
Radio Stations KXMX(FM)/KEZY(AM)
Combined Statement of Operations
Twelve Months Ended June 30, 2000
<S> <C>
Revenue:
Gross revenue $ 5,583,460
Less agency commissions 359,214
-----------
Net revenue 5,224,246
Expenses:
Operating expenses 3,974,576
Depreciation and amortization 1,283,902
Corporate general and administrative expenses 144,344
-----------
Total expenses 5,402,822
-----------
Operating loss (178,576)
Interest expense 1,445,763
-----------
Loss before income taxes (1,624,339)
Income tax benefit 663,542
-----------
Net loss $ (960,797)
===========
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
<TABLE>
<CAPTION>
Radio Stations KXMX(FM)/KEZY(AM)
Combined Statement of Cash Flows
Twelve Months Ended June 30, 2000
<S> <C>
OPERATING ACTIVITIES
Net loss $ (960,797)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 235,960
Amortization of intangibles 1,047,942
Changes in operating assets and liabilities:
Increase in accounts receivable (302,253)
Decrease in prepaid expenses 80,539
Increase in accounts payable and accrued expenses 10,699
-----------
Net cash provided by operating activities 112,090
INVESTING ACTIVITIES
Purchases of property, plant and equipment (26,397)
-----------
Net cash used in investing activities (26,397)
FINANCING ACTIVITIES
Net repayments to parent company (85,193)
-----------
Net cash used in financing activities (85,193)
-----------
Net increase in cash and cash equivalents 500
Cash and cash equivalents at beginning of period -
-----------
Cash and cash equivalents at end of period $ 500
===========
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Radio Stations KXMX(FM)/KEZY(AM)
Notes to Combined Financial Statements
June 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Clear Channel Communications, Inc. (Clear Channel) is a diversified media
company which was incorporated in Texas in 1974. Clear Channel owns, programs or
sells airtime for radio and television stations, and is one of the world's
largest outdoor advertising companies based on total advertising display
inventory in the United States and internationally.
Clear Channel owned and operated radio stations KXMX(FM) and KEZY(AM) (the
Stations) located in Anaheim, California, through one of its wholly owned
subsidiaries. The stations do not exist as a legal or taxed entity. These
combined financial statements have been prepared in connection with the sale of
the Stations to Salem Communications Corporation. These combined financial
statements present the operations of the Stations on a "carved-out" basis. The
combined financial statements have been prepared as if the Stations had operated
as a stand-alone entity for the period presented, and include only those assets,
liabilities, revenues and expenses directly attributable to the Stations'
operation. Corporate expenses, interest expense and income taxes have been
allocated to the Stations as indicated in Note 3. The financial information
included herein does not necessarily reflect the financial position and results
of operations of what the Stations would have been had they operated as a
stand-alone entity during the periods covered, and may not be indicative of
future operations or financial position.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
ACCOUNTS RECEIVABLE
Accounts receivable are stated net of agency commissions, as well as any
applicable allowance for uncollectible accounts. Allowances for uncollectible
accounts at June 30, 2000 were approximately $150,000. The provision for
uncollectible accounts was $127,760 and write-offs of uncollectible accounts
were $7,760 for the 12 months ended June 30, 2000.
5
<PAGE>
Radio Stations KXMX(FM)/KEZY(AM)
Notes to Combined Financial Statements (continued)
June 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
principally by the straight-line method at rates that, in the opinion of
management, are adequate to allocate the cost of such assets over their
estimated useful lives, which are as follows:
<TABLE>
<S> <C>
Buildings 10 to 30 years
Transmitter and studio equipment 7 to 15 years
Furniture and other equipment 2 to 10 years
Leasehold improvements generally life of lease
</TABLE>
Expenditures for maintenance and repairs are charged to operations as incurred,
whereas expenditures for renewal and betterments are capitalized.
INTANGIBLE ASSETS
Intangible assets are stated at cost and are being amortized using the
straight-line method. Excess cost over the fair value of net assets acquired
(goodwill) and FCC licenses are amortized over 25 years. The periods of
amortization are evaluated annually to determine whether circumstances warrant
revision.
The carrying value of intangible assets is reviewed on a regular basis for the
existence of facts or circumstances, both internally and externally, that may
suggest impairment. If such impairment is identified, the impairment loss will
be measured by comparing the estimated future undiscounted cash flows to the
asset's carrying value. To date, no such impairment has been indicated.
6
<PAGE>
Radio Stations KXMX(FM)/KEZY(AM)
Notes to Combined Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNFAVORABLE LEASE
For the facility lease assumed through Clear Channel's acquisition of the
Stations, the net excess of future minimum lease payments over the fair value of
these payments has been recorded as a liability of Clear Channel and is being
amortized over the remaining term of the lease. This liability is included in
the parent company investment account, and the amortization has been allocated
to the Stations monthly as the lease is paid. Total amortization allocated to
the Stations for the 12 months ended June 30, 2000 was approximately $86,000 and
the remaining liability included in the parent company investment account at
June 30, 2000 was approximately $456,000.
PARENT COMPANY INVESTMENT ACCOUNT
The Stations were acquired by Clear Channel through a stock acquisition of Jacor
Communications, Inc. on May 4, 1999. The Stations are not a legal entity and
have no separate capital accounts. The parent company investment account
contains Clear Channel's initial investment in the Stations and the accumulated
deficit from operations, offset by nonmaturing advances from and repayments to
Clear Channel.
INCOME TAXES
The Stations are included in the consolidated federal income tax return of Clear
Channel. For purposes of the accompanying financial statements, income tax
benefits have been calculated on a separate-company basis based on the federal
and state statutory rates. Deferred and current tax assets and liabilities are
included in the parent company investment account as they will be realized as
part of the Clear Channel consolidated tax return.
REVENUE RECOGNITION
Broadcasting revenue, which consists primarily of the sale of airtime to local,
regional and national customers, is recognized as advertisements or programs are
broadcast and is generally billed monthly.
7
<PAGE>
Radio Stations KXMX(FM)/KEZY(AM)
Notes to Combined Statement of Operations (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (CONTINUED)
Revenue from barter transactions is recognized when advertisements are
broadcast. Merchandise or services received are charged to expense when received
or used. For the twelve months ended June 30, 2000, the Stations recognized
barter revenue of approximately $810,000. Barter expense approximated barter
revenue in the same period.
ADVERTISING AND PROMOTION
Expenditures for advertising and promotion are charged to expense as incurred
and totaled approximately $688,000 for the twelve months ended June 30, 2000.
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 financial statements and accompanying notes.
Actual results could differ from those estimates.
2. COMMITMENTS
Clear Channel leases certain equipment and tower space under long-term operating
leases. At June 30, 2000, future minimum rental commitments of Clear Channel
which relate to the stations, under noncancelable lease agreements with terms in
excess of one year, consist of the following:
<TABLE>
<S> <C>
Through June 30, 2001 $ 186,000
2002 194,000
2003 200,000
2004 208,000
2005 104,000
-----------
$ 892,000
===========
</TABLE>
8
<PAGE>
Radio Stations KXMX(FM)/KEZY(AM)
Notes to Combined Statement of Operations (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2. COMMITMENTS (CONTINUED)
Rent expense charged to operations net of amortization of the unfavorable lease
liability for the twelve months ended June 30, 2000 was approximately $92,000.
3. CORPORATE ALLOCATIONS
As described in Note 1, the combined financial statements present the operations
of the Stations on a "carved-out" basis. Certain expenses, including corporate
general and administrative expenses, interest expense and income tax benefits,
have been allocated to the Stations.
Corporate general and administrative expenses have been allocated to the
Stations based on their proportionate share of broadcast net revenues. Interest
has been allocated to the Stations based upon management's estimate of the total
Clear Channel debt attributable to the acquisition and operation of the
Stations, using Clear Channel's weighted-average interest rate of approximately
5% for the twelve months ended June 30, 2000. Income tax benefits have been
allocated to the Stations based on the loss before income taxes at federal and
state statutory tax rates. Corporate allocations of general and administrative
expenses, interest expense and income tax benefits are included in the parent
company investment account.
4. SALE OF STATIONS (UNAUDITED)
On March 5, 2000, Salem Communications Corporation entered into an asset
purchase agreement with Clear Channel to purchase the FCC licenses and certain
operating assets of the Stations for approximately $35 million in cash. The
transaction was subject to FCC approvals, and was consummated August 24, 2000.
9
<PAGE>
RADIO STATION WBOB-AM
STATEMENT OF ASSETS ACQUIRED AS OF
AUGUST 24, 2000, AND STATEMENTS OF
REVENUES AND DIRECT OPERATING EXPENSES
FOR THE TWO YEARS ENDED DECEMBER 31, 1999
AND FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Salem Communications Corporation:
We have audited the accompanying statement of assets acquired as of August 24,
2000 and the statements of revenues and direct operating expenses of WBOB-AM
(the "Station") for each of the two years ended December 31, 1999. These
financial statements are the responsibility of the Station's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the statement of
assets acquired and the statements of revenues and direct operating expenses 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.
The accompanying financial statements reflect the assets acquired and the
revenues and direct operating expenses attributable to the Station as described
in Note 1 and are not intended to be a complete presentation of the assets or
revenues and expenses of the Station.
In our opinion, the statement of assets acquired and statements of revenues and
direct operating expenses present fairly, in all material respects, the assets
described in Note 1 as of August 24, 2000 and the revenues and direct operating
expenses as described in Note 1 for each of the two years ended December 31,
1999 of the Station, in conformity with accounting principles generally accepted
in the United States of America.
/s/ PricewaterhouseCoopers LLP
October 27, 2000
Dallas, Texas
<PAGE>
RADIO STATION WBOB-AM
STATEMENT OF ASSETS ACQUIRED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 24,
2000
---------------
<S> <C>
Property and equipment, net $ 509,539
Broadcast license, net 3,997,363
----------------
$ 4,506,902
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
RADIO STATION WBOB-AM
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
------------------------------------- -------------------------------------
1999 1998 2000 1999
----------------- ----------------- ----------------- ------------------
(unaudited)
<S> <C> <C> <C> <C>
Gross revenues $ 1,114,313 $ 1,046,470 $ 585,572 $ 491,595
Less agency commissions 75,090 64,593 36,134 32,084
----------------- ----------------- ----------------- ------------------
Net revenues 1,039,223 981,877 549,438 459,511
----------------- ----------------- ----------------- ------------------
Direct operating expenses:
Programming, technical and news 534,845 842,431 260,547 263,048
Sales and promotion 653,191 519,460 336,510 284,960
Station general and administrative 306,575 230,855 179,038 174,090
----------------- ----------------- ----------------- ------------------
Total direct operating expenses 1,494,611 1,592,746 776,095 722,098
----------------- ----------------- ----------------- ------------------
Excess of direct operating expenses
over net revenues $ (455,388) $ (610,869) $ (226,657) $ (262,587)
================= ================= ================= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
RADIO STATION WBOB-AM
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. THE STATION AND BASIS OF PRESENTATION
The accompanying financial statements are derived from the accounts of
WBOB-AM (the "Station"). The Station operates a commercial radio station
in Cincinnati, Ohio, and was wholly owned by AMFM Operating Inc.
("Operating") through August 24, 2000.
On August 24, 2000, Operating sold the assets of the Station to Salem
Communications Corporation ("Salem") under an asset purchase agreement.
No liabilities were assumed by Salem in the transaction. The accompanying
financial statements do not reflect any adjustments relating to this
transaction.
The accompanying statement of assets acquired and statements of revenues
and direct operating expenses have been prepared in accordance with
generally accepted accounting principles and were derived from the
historical accounting records of the Station.
The statement of assets acquired includes the assets of the Station
acquired by Salem on August 24, 2000. This statement does not include
cash, accounts receivable, prepaid or other assets, accounts payable,
accrued expenses or other borrowings.
The statements of revenues and direct operating expenses include the
revenues and direct expenses directly attributable to the Station. The
statements do not include corporate general and administrative costs,
interest expense or income taxes.
Complete financial statements, including historical balance sheets and
statements of cash flows, were not prepared as Operating had not
segregated indirect corporate operating cost information or related
assets and liabilities for the Station in its accounting records.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Property and equipment consists primarily of broadcasting equipment,
buildings, and other equipment. Property and equipment are stated at cost
less accumulated depreciation which approximates the appraised value of
the assets at the date of the sale. Operating continually evaluates the
propriety of the carrying amount of property and equipment to determine
whether current events or circumstances warrant adjustment to the
carrying value. Repairs and maintenance costs are charged to expense when
incurred.
BROADCAST LICENSES
Broadcast licenses are stated at cost less accumulated amortization.
Operating continually evaluates the propriety of the carrying amount of
broadcast licenses to determine whether current events or circumstances
warrant adjustment to the carrying value.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
4
<PAGE>
RADIO STATION WBOB-AM
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
The preparation of financial statements is conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the reported amounts of revenues and expenses. Actual results could
differ from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
In the opinion of management, the unaudited interim statements of
revenues and direct operating expenses for the six months ended June 30,
2000 and 1999, reflect all adjustments, consisting of only normal and
recurring items, which are necessary for a fair presentation of the
results for the interim period presented. The results for the interim
periods are not necessarily indicative of results to be expected for any
other interim periods or for the full year.
5
<PAGE>
RADIO STATION
WRMR-AM
FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR
ENDED JUNE 30, 2000
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Salem Communications Corporation:
In our opinion, the accompanying balance sheet and the related statements of
operations, station's equity and cash flows present fairly, in all material
respects, the financial position of WRMR-AM (the "Station") at June 30, 2000,
and the results of its operations and its cash flows for the year ended June 30,
2000, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Station's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
October 27, 2000
Dallas, Texas
<PAGE>
RADIO STATION WRMR-AM
BALANCE SHEET
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30,
2000
--------------
<S> <C>
ASSETS
Current assets:
Cash $ 351
Accounts receivable, less allowance for doubtful
accounts of $12,618 325,542
Barter receivables 27,391
-----------
Total current assets 353,284
Property and equipment, net 790,567
Broadcast license, net 14,735,106
-----------
Total assets $15,878,957
-----------
LIABILITIES AND STATION'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 122,648
Barter liabilities 72,458
-----------
Total current liabilities 195,106
Deferred lease credit 112,870
-----------
Total liabilities 307,976
Commitments and contingencies
Station's equity 15,570,981
-----------
Total station's equity 15,570,981
-----------
Total liabilities and station's equity $15,878,957
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
RADIO STATION WRMR-AM
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
2000
--------------
<S> <C>
Gross revenues $ 3,081,901
Less agency commissions 249,746
--------------
Net revenues 2,832,155
Operating expenses:
Programming, technical and news 726,566
Sales and promotion 968,918
General and administrative 819,540
Depreciation and amortization expense 1,125,896
--------------
Total operating expenses 3,640,920
--------------
Loss before income taxes (808,765)
Income tax benefit 69,892
--------------
Net loss $ (738,873)
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
RADIO STATION WRMR-AM
STATEMENT OF STATION'S EQUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Balance at June 30, 1999 $16,858,906
Net transfers to parent company (549,052)
Net loss (738,873)
-----------------
Balance at June 30, 2000 $15,570,981
-----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
RADIO STATION WRMR-AM
STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
2000
--------------
<S> <C>
Cash flows from operating activities:
Net loss $ (738,873)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense 41,604
Amortization expense 1,084,292
Non-cash rent expense 79,114
Barter revenues (180,041)
Barter expenses 225,108
Allocation of corporate expenses and income tax benefit 27,592
Changes in operating assets and liabilities:
Accounts receivable 69,382
Accounts payable and accrued expenses 1,111
--------------
Net cash provided by operating activities 609,289
--------------
Cash flows from investing activities:
Purchases of property and equipment (32,294)
--------------
Net cash used in investing activities (32,294)
--------------
Cash flows from financing activities:
Net transfers to parent company (576,644)
--------------
Net cash used in financing activities (576,644)
--------------
Net increase in cash 351
Cash at the beginning of the year -
--------------
Cash at the end of the year $ 351
--------------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
5
<PAGE>
RADIO STATION WRMR-AM
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying financial statements include the accounts of WRMR-AM (the
"Station"). The Station operates a commercial radio station in Cleveland,
Ohio, and is wholly-owned by AMFM Operating Inc. ("Operating"), an indirect
wholly-owned subsidiary of AMFM Inc. ("AMFM").
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
Operating allocates certain corporate expenses such as employee insurance
and benefits, legal fees, and other general and administrative costs to the
Station. These costs have been included as expenses in the accompanying
financial statements and amount to $54,178 for the year ended June 30,
2000. The Station shares facilities with another radio station owned by
Operating. A service charge of $43,306 for the year ended June 30, 2000
representing the Station's use of the shared facilities is included in the
accompanying financial statements. Management believes the allocation
methods employed to allocate corporate and shared facility expenses are
reasonable; however, the costs of these services and expenditures charged
to the Station may not necessarily reflect the results of operations,
financial position, and cash flows of the Station as if it had operated as
a stand-alone entity, and may not be indicative of future operations, cash
flows, or financial position. Furthermore, the costs allocated to the
Station may not be indicative of amounts which might be paid to unrelated
parties for similar services.
The Station does not maintain a significant cash balance and is funded as
needed by Operating. The average station equity balance for the period was
$16,214,944.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LONG-LIVED ASSETS
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that extend the economic lives
of the assets, are capitalized at cost and depreciated on a straight-line
basis over their estimated useful lives ranging from seven to ten years for
broadcasting facilities and seven to twenty years for transmitter towers
and equipment.
The Station's broadcast license is stated at cost and is amortized over 15
years using the straight-line method.
Operating continually evaluates the propriety of the carrying amount of the
Station's long-lived assets and related useful lives to determine whether
current events or circumstances warrant adjustments to the carrying value
and/or revised estimates of useful lives. To the extent this review
indicates that undiscounted cash flows are not expected to be adequate to
recover the carrying amounts of the related long-lived assets, such
carrying amounts are written down by charges to expense.
REVENUE RECOGNITION
The Station's revenue is derived primarily from the sale of commercial
airtime to local and national advertisers in the Cleveland, Ohio market
area. Revenue is recognized as commercials are broadcast.
6
<PAGE>
RADIO STATION WRMR-AM
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
BARTER AGREEMENTS
The Station enters into trade agreements which give rise to sales of
advertising airtime in exchange for products and services. Revenues from
trade agreements are recognized at the fair market value of products or
services received as advertising airtime is broadcast. Products and
services received are expensed when used in the Station's broadcast
operations.
INCOME TAXES
The Station is a member of a group that files a consolidated income tax
return. For purposes of separate financial statement presentation, the
Station's current and deferred income taxes have been determined by
allocating Operating's tax expense/benefit based on the tax attributes of
the Station's assets and liabilities. Deferred tax assets and liabilities
have not been allocated to the Station. The Station recognizes tax benefits
from operating losses as those benefits are realized by Operating.
SIGNIFICANT RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Financial instruments which potentially subject the Station to
concentrations of credit risk consist principally of accounts receivable.
The credit risk is limited due to the large number of customers comprising
the Station's customer base.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of certain of the Station's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable
and accrued expenses approximate fair value due to their short maturities.
3. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2000 consisted of broadcasting
facilities and equipment recorded at $41,371 less accumulated depreciation
of $1,616, and transmitter towers and equipment recorded at $808,047 less
accumulated depreciation of $57,235.
4. BROADCAST LICENSE
At June 30, 2000 the Station's broadcast license is recorded at $16,264,385
less accumulated amortization of $1,529,279.
7
<PAGE>
RADIO STATION WRMR-AM
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
5. INCOME TAXES
Income tax benefit for the year ended June 30, 2000 consists of the
following:
<TABLE>
<CAPTION>
<S> <C>
Current state and city tax expense $ 64,464
Deferred federal tax benefit (134,356)
-----------------
Income tax benefit $ (69,892)
-----------------
</TABLE>
The Station's effective tax rate differed from the U.S. federal statutory
income tax rate of 35% for the year ended June 30, 2000 as a result of the
following:
<TABLE>
<CAPTION>
<S> <C>
Federal statutory rate 35.00 %
Nondeductible meals and entertainment (1.73 %)
Current state and city taxes, net of federal benefit (5.18 %)
Deferred state and city taxes 7.03 %
Federal, city and state benefit not deemed realizable by Parent (26.48 %)
---------
Effective tax rate 8.64 %
----------
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Station leases office equipment, studio facilities, and tower space
under certain noncancelable operating leases. Rent expense for the year
ended June 30, 2000 was $332,026. Future minimum lease payments under
noncancelable operating leases, with initial or remaining terms in excess
of one year as of June 30, 2000, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ended June 30:
2001 $ 257,530
2002 262,286
2003 267,184
2004 278,005
2005 287,327
Thereafter 5,937,661
------------------
$ 7,289,993
------------------
</TABLE>
7. BENEFIT PLAN
AMFM offers substantially all of its employees, including employees of the
Station, voluntary participation in a 401(k) plan. AMFM may make
discretionary contributions to the plans; however, no such contributions
were made by AMFM during the year ended June 30, 2000.
8. SUBSEQUENT EVENT
On August 24, 2000, AMFM entered into an asset purchase agreement to sell
substantially all of the assets used in connection with the operation of
the Station to Salem Communications Corporation ("Salem"). The acquisition
of the Station's assets was part of a transaction between Salem and
affiliates of AMFM and Clear Channel Communications, Inc. ("Clear
Channel"), in which Salem acquired certain of the assets and assumed
certain of the liabilities of eight AMFM and Clear Channel stations for an
aggregate purchase price of $185.6 million. No adjustments have been made
to the Station's financial statements as a result of this transaction.
8
<PAGE>
RADIO STATION
WKNR-AM
FINANCIAL STATEMENTS
AS OF JUNE 30, 2000 AND FOR THE
PERIOD FROM JULY 13, 1999 TO
JUNE 30, 2000
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Salem Communications Corporation:
In our opinion, the accompanying balance sheet and the related statements of
operations, station's equity and cash flows present fairly, in all material
respects, the financial position of WKNR-AM (the "Station") at June 30, 2000,
and the results of its operations and its cash flows for the period from July
13, 1999 to June 30, 2000, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Station's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
October 27, 2000
Dallas, Texas
<PAGE>
RADIO STATION WKNR-AM
BALANCE SHEET
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30,
2000
-----------------
<S> <C>
ASSETS
Current assets:
Cash $ 15,750
Accounts receivable, less allowance for doubtful
accounts of $98,416 407,583
Barter receivables 89,273
Prepaid expenses and other current assets 118,333
-----------------
Total current assets 630,939
Property and equipment, net 2,320,507
Intangible assets, net 5,620,802
-----------------
Total assets $ 8,572,248
-----------------
LIABILITIES AND STATION'S EQUITY
Current liabilities:
Accounts payable $ 26,148
Accrued expenses and other current liabilities 15,682
-----------------
Total liabilities 41,830
Commitments and contingencies
Station's equity 8,530,418
-----------------
Total station's equity 8,530,418
-----------------
Total liabilities and station's equity $ 8,572,248
-----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
RADIO STATION WKNR-AM
STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JULY 13,
1999 TO
JUNE 30, 2000
------------------
<S> <C>
Gross revenues $ 2,220,551
Less agency commissions 247,762
------------------
Net revenues 1,972,789
Operating expenses:
Programming, technical and news 829,303
Sales and promotion 876,911
General and administrative 686,548
Depreciation and amortization 564,225
------------------
Total operating expenses 2,956,987
------------------
Loss before income taxes (984,198)
Income tax benefit 348,262
------------------
Net loss $ (635,936)
------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
RADIO STATION WKNR-AM
STATEMENT OF STATION'S EQUITY
-------------------------------------------------------------------------------
Balance at July 13, 1999 $ 8,826,234
Net transfers from parent company 340,120
Net loss (635,936)
-----------------
Balance at June 30, 2000 $ 8,530,418
-----------------
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
RADIO STATION WKNR-AM
STATEMENT OF CASH FLOWS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
JULY 13,
1999 TO
JUNE 30, 2000
-------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (635,936)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense 162,740
Amortization expense 401,485
Barter revenues (132,115)
Barter expenses 140,952
Allocation of corporate expenses and income tax benefit (309,226)
Changes in operating assets and liabilities:
Accounts receivable (64,118)
Prepaid expenses and other current assets (29,533)
Accounts payable (151,975)
Accrued expenses and other current liabilities 3,782
-------------------
Net cash used in operating activities (613,944)
-------------------
Cash flows from investing activities:
Purchases of property and equipment (38,552)
-------------------
Net cash used in investing activities (38,552)
-------------------
Cash flows from financing activities:
Net transfers from parent company 649,346
-------------------
Net cash provided by financing activities 649,346
-------------------
Net decrease in cash (3,150)
Cash at the beginning of the period 18,900
-------------------
Cash at the end of the period $ 15,750
-------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
RADIO STATION WKNR-AM
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying financial statements include the accounts of WKNR-AM (the
"Station"). The Station operates a commercial radio station in Cleveland,
Ohio, and is wholly-owned by AMFM Operating Inc. ("Operating"), an indirect
wholly-owned subsidiary of AMFM Inc. ("AMFM").
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
Operating allocates certain corporate expenses such as interest, employee
insurance and benefits, legal fees, and other general and administrative
costs to the Station. These costs have been included as expenses in the
accompanying financial statements and amount to $39,036 for the period from
July 13, 1999 to June 30, 2000. Management believes the allocation methods
employed to allocate corporate expenses are reasonable; however, the costs
of these services charged to the Station may not necessarily reflect the
results of operations, financial position, and cash flows of the Station as
if it had operated as a stand-alone entity, and may not be indicative of
future operations, cash flows, or financial position. Furthermore, the
costs allocated to the Station may not be indicative of amounts which might
be paid to unrelated parties for similar services.
The Station does not maintain a significant cash balance and is funded as
needed by Operating. The average station equity balance for the period was
$8,678,326.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LONG-LIVED ASSETS
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that extend the economic lives
of the assets, are capitalized at cost and depreciated on a straight-line
basis over their estimated useful lives, as follows:
<TABLE>
<S> <C>
Vehicles 5- 7 years
Furniture and fixtures 7-10 years
Building and improvements 20-30 years
Broadcasting towers and equipment 7-10 years
Other equipment 3-10 years
</TABLE>
The Station's intangible assets consist of goodwill and broadcast licenses.
Intangible assets are stated at cost and amortized over 15 years using the
straight-line method.
Operating continually evaluates the propriety of the carrying amount of the
Station's long-lived assets and related useful lives to determine whether
current events or circumstances warrant adjustments to the carrying value
and/or revised estimates of useful lives. To the extent this review
indicates that undiscounted cash flows are not expected to be adequate to
recover the carrying amounts of the related long-lived assets, such
carrying amounts are written down by charges to expense.
REVENUE RECOGNITION
The Station's revenue is derived primarily from the sale of commercial
airtime to local and national advertisers in the Cleveland, Ohio market
area. Revenue is recognized as commercials are broadcast.
BARTER AGREEMENTS
The Station enters into trade agreements which give rise to sales of
advertising airtime in exchange for products and services. Revenues from
trade agreements are recognized at the fair market value of
6
<PAGE>
RADIO STATION WKNR-AM
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
products or services received as advertising airtime is broadcast. Products
and services received are expensed when used in the Station's broadcast
operations.
INCOME TAXES
The Station is a member of a group that files a consolidated income tax
return. For purposes of separate financial statement presentation, the
Station's current and deferred income taxes have been determined by
allocating Operating's tax expense/benefit based on the tax attributes
of the Station's assets and liabilities. Deferred tax assets and
liabilities have not been allocated to the Station. The Station
recognizes tax benefits from operating losses as those benefits are
realized by Operating.
SIGNIFICANT RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Financial instruments which potentially subject the Station to
concentrations of credit risk consist principally of accounts receivable.
The credit risk is limited due to the large number of customers comprising
the Station's customer base.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of certain of the Station's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable,
and accrued liabilities approximate fair value due to their short
maturities.
3. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2000 consisted of the following:
<TABLE>
<S> <C>
Vehicles $ 9,546
Furniture and fixtures 50,371
Land 631,650
Buildings and improvements 660,991
Broadcasting towers and studio equipment 996,733
Other equipment 133,956
-----------------
Total property and equipment 2,483,247
Less: accumulated depreciation (162,740)
-----------------
Property and equipment, net $ 2,320,507
-----------------
</TABLE>
7
<PAGE>
RADIO STATION WKNR-AM
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
4. BROADCAST LICENSE
At June 30, 2000 the Station's goodwill was recorded at $1,022,287 less
accumulated amortization of $68,152 and its broadcast license was recorded
at $5,000,000 less accumulated amortization of $333,333.
5. INCOME TAXES
Income tax benefit for the year ended June 30, 2000 consists of the
following:
<TABLE>
<S> <C>
Current state and city tax expense $ 34,784
Deferred federal tax benefit (383,046)
-----------------
Income tax benefit $ (348,262)
-----------------
</TABLE>
The Station's effective tax rate differed from the U.S. federal statutory
income tax rate of 35% for the year ended June 30, 2000 as a result of the
following:
<TABLE>
<S> <C>
Federal statutory rate 35.00 %
Amortization of goodwill (2.42 %)
Nondeductible meals and entertainment (1.24 %)
Current state and city taxes, net of federal benefit (2.30 %)
Deferred state and city taxes 6.35 %
-----------------
Effective tax rate 35.39 %
-----------------
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Station leases office equipment, studio facilities, and tower space
under certain noncancelable operating leases. Rent expense for the year
ended June 30, 2000 was $88,800. Future minimum lease payments under
noncancelable operating leases, with initial or remaining terms in excess
of one year as of June 30, 2000, are as follows:
<TABLE>
<S> <C>
Year ended June 30:
2001 $ 88,800
2002 88,800
2003 88,800
2004 88,800
2005 88,800
Thereafter 288,397
------------------
$ 732,397
------------------
</TABLE>
8
<PAGE>
RADIO STATION WKNR-AM
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
7. BENEFIT PLAN
AMFM offers substantially all of its employees, including employees of the
Station, voluntary participation in a 401(k) plan. AMFM may make
discretionary contributions to the plans; however, no such contributions
were made by AMFM during the year ended June 30, 2000.
8. SUBSEQUENT EVENT
On August 24, 2000, AMFM entered into an asset purchase agreement to sell
substantially all of the assets used in connection with the operation of
the Station to Salem Communications Corporation ("Salem"). The acquisition
of the Station's assets was part of a transaction between Salem and
affiliates of AMFM and Clear Channel Communications, Inc. ("Clear
Channel"), in which Salem acquired certain of the assets and assumed
certain of the liabilities of eight AMFM and Clear Channel stations for an
aggregate purchase price of $185.6 million. No adjustments have been made
to the Station's financial statements as a result of this transaction.
9
<PAGE>
SUNBURST DALLAS, LP
FINANCIAL STATEMENTS FOR THE YEAR
ENDED JUNE 30, 2000 AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Sunburst Dallas, LP:
We have audited the accompanying consolidated balance sheet of Sunburst Dallas,
LP, a Delaware limited partnership (the "Partnership"), as of June 30, 2000, and
the related consolidated statements of operations, partners' capital, and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of June 30, 2000, and the
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
October 31, 2000
Dallas, Texas
-1-
<PAGE>
<TABLE>
<CAPTION>
SUNBURST DALLAS, LP
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
---------------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,096,337
Accounts receivable, net of allowance for doubtful accounts of $117,813 2,408,872
Advance to related party 200,000
Prepaids and other 64,095
------------
Total current assets 3,769,304
PROPERTY AND EQUIPMENT, NET 3,074,894
INTANGIBLE ASSETS, NET 21,639,295
OTHER ASSETS 12,839
------------
TOTAL ASSETS $ 28,496,332
============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 509,364
Accrued liabilities 788,004
Current portion of long-term debt 423,883
------------
Total current liabilities 1,721,251
LONG-TERM DEBT, excluding current portion 24,150,733
PUT WARRANT OBLIGATION 625,000
------------
Total liabilities 26,496,984
============
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' CAPITAL:
Deficit in general partner's capital (773,724)
Limited partners' capital 2,773,072
------------
Total partners' capital 1,999,348
------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 28,496,332
============
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
SUNBURST DALLAS, LP
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2000
------------------------------------------------------------------------------------
<S> <C>
BROADCASTING REVENUE $ 12,660,372
AGENCY COMMISSIONS 2,487,043
------------
Net broadcasting revenue 10,173,329
------------
OPERATING EXPENSES:
Programming, technical and news 1,578,776
Sales, advertising and promotion 1,938,018
General and administrative 1,555,179
Time brokerage agreement fees 1,943,515
Depreciation and amortization 1,953,398
------------
Total operating expenses 8,968,886
------------
INCOME FROM OPERATIONS 1,204,443
OTHER INCOME (EXPENSE):
Interest expense (4,055,759)
Interest income 96,164
Non-operating expense (589,269)
------------
Total other expense (4,548,864)
------------
NET LOSS $ (3,344,421)
============
</TABLE>
See notes to financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
SUNBURST DALLAS, LP
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DEFICIT IN
GENERAL LIMITED
PARTNER'S PARTNERS'
CAPITAL CAPITAL TOTAL
BALANCE, JULY 1, 1999 $ (235,612) $ 3,605,313 $ 3,369,701
Capital contributions 1,974,068 1,974,068
Net loss (33,444) (3,310,977) (3,344,421)
Limited partner priority return (504,668) 504,668
------------ ----------- ------------
BALANCE, JUNE 30, 2000 $ (773,724) $ 2,773,072 $ 1,999,348
============ =========== ============
</TABLE>
See notes to financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
SUNBURST DALLAS, LP
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2000
---------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,344,421)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 1,953,398
Interest expense related to put warrant 251,000
Provision for doubtful accounts receivable 120,180
Payment in kind interest 120,685
Changes in operating assets and liabilities:
Accounts receivable (2,524,052)
Advance to related party (200,000)
Prepaids and other (62,157)
Accounts payable 504,264
Accrued liabilities 223,552
-----------
Net cash used in operating activities (2,957,551)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,203,828)
Cash paid for acquisition of identifiable intangible assets (5,541,269)
-----------
Net cash used in investing activities (7,745,097)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 8,000,000
Repayments of notes payable (172,069)
Deferred financing costs (15,000)
Proceeds from additional partner contributions 1,974,068
-----------
Net cash provided by financing activities 9,786,999
-----------
NET DECREASE IN CASH (915,649)
CASH:
Beginning of year 2,011,986
-----------
End of year $ 1,096,337
===========
SUPPLEMENTARY CASH FLOW INFORMATION -
Cash paid for interest $ 3,496,718
===========
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES - See Notes 1 and 10.
-5-
<PAGE>
SUNBURST DALLAS, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
Sunburst Dallas, LP (the "Partnership"), a Delaware limited partnership,
was formed on June 26, 1997 by Sunburst Dallas, Inc., a Delaware
corporation, as general partner, and Media/Communications Partners III
Limited Partnership, Media/Communications Investors, LLC (together, "M/C
Partners"), Borders Partners, Ltd., and one other individual as limited
partners. The term of the Partnership shall continue in full force and
effect until terminated pursuant to the provisions of Article 7 of the
Agreement of Limited Partnership. The Partnership owns radio stations
KRJT-FM in Highland Village, Texas and KPXI-FM in Overton, Texas. KRJT-FM
began operations on February 1, 2000 and KPXI-FM has had no operations.
During the period July 1, 1999 to January 31, 2000, the Partnership
operated radio station KLTY-FM in Dallas, Texas pursuant to a time
brokerage agreement ("TBA"). On February 1, 2000, programming under the
TBA was terminated and the KLTY call letters were moved to KRJT-FM.
The financial statements of the Partnership represent the operations of
the radio broadcast stations owned or operated by the Partnership and its
wholly owned subsidiary, Bowie-Nocona Broadcasting Company, Inc.
("Bowie-Nocona"). All significant intercompany accounts have been
eliminated in the financial statements of the Partnership.
ALLOCATION OF PROFITS AND LOSSES - The allocation of profits and losses,
with respect to any partner, is intended to comply with the provisions of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
LIMITED PARTNER PRIORITY RETURN - The Limited Partner Priority Return, as
defined in the Agreement of Limited Partnership, is equal to 11% per annum
of each limited partner's limited partner adjusted capital contribution
and is compounded annually with respect to each capital contribution of
each limited partner on the anniversary of the date each such capital
contribution is made. The limited partner priority return is intended to
be a preferential return of capital to the limited partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents. The carrying value of these investments approximates
fair value.
REVENUE RECOGNITION - Broadcasting revenue is derived primarily from the
sale of program time and commercial announcements to local, regional and
national advertisers. Revenue is recognized when the programs and
commercial announcements are broadcast.
TBA FEES - TBA fees consist of fees paid by the Partnership under an
agreement which permits an acquirer to program and market stations prior
to acquisition. The Partnership entered into such an agreement prior to
the consummation of the station acquisition. The total expense from TBA
fees was $1,943,515 for the year ended June 30, 2000.
-6-
<PAGE>
BARTER TRANSACTIONS - Barter transactions represent advertising time
exchanged primarily for promotional items, advertising, supplies,
equipment and services. Barter revenue is recorded at the fair market
value of the goods or services received and is recognized when the
advertisements are broadcast. Goods or services are charged to expense
when received or used. Advertising time owed and goods or services due the
Partnership are included in accounts payable and accounts receivable,
respectively. For the year ended June 30, 2000, barter revenues and
expenses amounted to $271,647 and $187,742, respectively. Accounts payable
and accounts receivable resulting from barter transactions amounted to
$37,886 and $131,292 at June 30, 2000.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is provided on the
straight-line method based on the following estimated useful lives:
Classification Years
Buildings and towers 15 - 30
Broadcasting equipment 5 - 7
Autos 5
Furniture, fixtures and office equipment 5 - 7
Leasehold improvements are amortized using the straight-line method over
the shorter of their useful lives or the terms of the related leases.
Expenditures for repair and maintenance are expensed when incurred.
Betterments are capitalized. When property or equipment is disposed or
retired, the related cost and accumulated depreciation are removed from
the accounts, and the resulting gain or loss is reflected in the statement
of operations.
INTANGIBLE ASSETS - Intangible assets are carried at historical cost, less
accumulated amortization. Amortization is determined using the
straight-line method based upon the estimated useful lives of the assets
as follows:
<TABLE>
<CAPTION>
CLASSIFICATION YEARS
<S> <C>
FCC licenses and permits 15
Intellectual property 15
Deferred financing costs Life of loan
Covenants not to compete and consulting agreements Life of contract
Goodwill 15
</TABLE>
The Partnership continually evaluates intangible assets for impairment
based on anticipated undiscounted cash flows as well as by analyzing the
operating results and trends and prospects of the business. The
Partnership also takes into consideration recent acquisition patterns
within the broadcast industry, the impact of recently enacted or potential
Federal Communications Commission (the "FCC") rules and regulations and
any other events or circumstances which might indicate potential
impairment. At this time, the Partnership believes that no significant
impairment of its intangible assets has occurred.
LONG-LIVED ASSETS - The Partnership periodically reviews long-lived assets
to assess recoverability, based on estimated future results of operations
and undiscounted cash flows.
DEBT DISCOUNT - Debt discount related to the issuance of debt is reported
in the balance sheet as a direct deduction from the face amount of the
note. Amortization of the discount is determined using the effective
interest method and is reported as interest expense in the statement of
operations.
-7-
<PAGE>
CONCENTRATION OF CREDIT RISK - The Partnership's revenues and accounts
receivable primarily relate to advertising of products and services within
the radio stations' broadcast areas, currently, Dallas, Texas. The
Partnership's management performs ongoing credit evaluations of customers'
financial condition and, generally, requires no collateral from its
customers. Credit losses have been within management's expectations, and
allowances for any anticipated uncollectible receivables are maintained.
INCOME TAXES - The Partnership does not pay federal or state income taxes
on its taxable income. Instead, individual partners are liable for income
taxes on their respective share of the Partnership's taxable income.
ADVERTISING AND PROMOTION - All costs associated with advertising and
promotion are expensed in the year incurred.
RECENTLY ISSUED ACCOUNTING STANDARDS - In June 1998, Statement of
Financial Accounting Standards No. 133 ("FAS 133"), Accounting for
Derivative Instruments and Hedging Activities, was issued. This statement
establishes standards for valuing and reporting at fair value all
derivative instruments as either assets or liabilities. FAS 133, as
amended by FAS 137, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Management of the Partnership does
not expect adoption of this Standard to have a material impact on its
financial statements.
On December 3, 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION IN
FINANCIAL STATEMENTS. SAB No. 101 provides guidance on the recognition,
presentation and disclosures of revenue in financial statements filed
with the Commission and is required to be implemented no later than the
fourth quarter of fiscal 2000. Management of the Partnership believes
the adoption of SAB No. 101 will not have a material effect on its
financial statements.
MANAGEMENT'S ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NON-OPERATING EXPENSE - Non-operating expense represents costs of the
proposed roll-up of the Partnership and an affiliate with two other
broadcasting companies, and subsequent initial public offering. The
proposed roll-up and initial public offering were aborted in 2000.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment at June 30, 2000 consisted of the following:
<S> <C>
Buildings $ 54,448
Broadcasting equipment 2,063,061
Autos 33,322
Furniture, fixtures and office equipment 233,977
Leasehold improvements 1,011,403
-----------
3,396,211
Less accumulated depreciation and amortization (321,317)
-----------
$ 3,074,894
===========
</TABLE>
Depreciation expense for the year ended June 30, 2000 was $321,317.
-8-
<PAGE>
4. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
Intangible assets at June 30, 2000 consist of the following:
<S> <C>
FCC licenses and permits $ 18,705,207
Intellectual property 4,110,000
Deferred financing costs 246,169
Covenants not to compete and consulting agreements 200,000
Goodwill 10,000
------------
23,271,376
Less accumulated amortization (1,632,081)
------------
$ 21,639,295
============
</TABLE>
Amortization expense for the year ended June 30, 2000 was $1,632,081.
5. COMMON CONTROL TRANSFER
Through a series of transactions by the Partnership with affiliated
entities under common control, the Partnership acquired the business
operations and licensed the intellectual property of 94.1 FM KLTY. These
transactions are further described as follows.
KLTY-FM - On July 1, 1999, an affiliate of the Partnership, Sunburst
Texas, LP ("Sunburst Texas"), a Delaware limited partnership formed on
February 26, 1999, purchased 100% of the stock of Delaware Radio, Inc.
("Delaware Radio") from Marcos Rodriguez et. al. for approximately $63.3
million. In accordance with the stock purchase agreement, Sunburst Texas
also purchased the stock of an affiliated entity for $110,000 and entered
into a noncompete and consulting agreement with Marcos Rodriguez and a
related entity for $100,000. Delaware Radio was the owner of the license,
business and intellectual property of radio station 94.1 FM KLTY, Dallas
Texas. Concurrent with the acquisition, the Partnership and Sunburst Texas
entered into a verbal agreement whereby the Partnership commenced
operation of KLTY-FM.
The consideration paid by Sunburst Texas was funded by a $57.0 million
bridge loan from HBC Broadcasting Texas, LP ("HBC") (formerly Heftel
Broadcasting Texas, LP) and cash.
On September 22, 1999, the following events occurred:
o Sunburst Texas sold 100% of the outstanding common stock of Delaware
Radio to SBT Communications Statutory Trust ("SBT") for $63.3
million. The bridge loan from HBC was repaid in full at closing.
o Pursuant to a license agreement, the Partnership licensed certain
intellectual property (e.g., adult-contemporary Christian music
programming, trademarks, copyrights, employees, advertising
relationships, etc.) from SBT for $4.0 million. The license
agreement provided for $2.5 million to be paid on the date of the
agreement. The remaining balance of $1.5 million is being paid over
a five-year term. At the end of the lease term, the Partnership has
the option to purchase the licensed property for the total cash
consideration of $100. In order to fund the initial $2.5 million
under the license agreement, the Partnership borrowed $5 million
from HBC. See Note 6.
o Sunburst Texas assigned to the Partnership (via a written
assignment), and the Partnership received, all of the rights arising
under a noncompete and consulting agreement with Marcos Rodriguez
and a related entity.
-9-
<PAGE>
o The Partnership and SBT entered into a TBA that granted the
Partnership the rights to present programming on KLTY-FM through
January 31, 2000 for the purpose of broadcasting the acquired
intellectual property. Sunburst Texas was subsequently liquidated.
On September 23, 1999, SBT sold the license of KLTY-FM to HBC License
Corporation and HBC (collectively, the "HBC Entities"). In connection with
the sale, the TBA was assigned to the HBC Entities.
Once KRJT-FM commenced operations, programming under the TBA was
terminated and the KLTY call letters were moved to KRJT-FM.
6. LONG-TERM DEBT AND PUT WARRANT OBLIGATION
<TABLE>
<CAPTION>
Long-term debt at June 30, 2000 consists of the following:
<S> <C>
Bank note to Finova, interest at prime plus 1.50% (11% at
June 30,2000), quarterly principal installments ranging
from $169,125 to $676,500, beginning April 1, 2001 through
January 1, 2004, with the remaining principal due on March 2, 2004 $ 13,250,000
Bank note to Finova, interest at 12.00% per annum, quarterly
principal installments ranging from $150,000 to $600,000,
beginning April 1, 2001 through January 1, 2004, with the
remaining principal due on March 2, 2004 5,250,000
Note to HBC, variable interest (10% at June 30, 2000),
with payment due September 24, 2004 5,000,000
PIK notes to HBC issued in lieu of interest payments, variable interest
(10% at June 30, 2000), with final payment due September 24, 2004 120,685
License fee to SBT, interest at 12.00% per annum, monthly principal
and interest payments of $33,367 through October 31, 2004 (see Note 5) 1,327,931
------------
24,948,616
Less unamortized discount on Finova notes (374,000)
------------
24,574,616
Less current portion (423,883)
------------
Long-term debt $ 24,150,733
============
</TABLE>
In March 1999, the Partnership entered into a loan agreement with Finova,
the proceeds of which were used to finance acquisitions and provide cash
for working capital needs. The loan agreement, as amended, provides for
loans up to $18,500,000. The effective rate of the $13.3 million bank note
approximates 12%.
The bank note to Finova is collateralized by a first lien on the assets of
the Partnership. The note to Finova is senior to all other long-term debt.
The loan agreement provides for penalties of up to 2% on early prepayment.
In connection with the loan agreement with Finova, the Partnership issued
a warrant to Finova entitling Finova to purchase a limited partnership
interest in the Partnership with a sharing ratio of 2.50% for an exercise
price of $100.00. The warrant may be exercised at any time prior to March
2, 2009. Finova may also elect at any time during the put period, as
defined by the agreement, to require the Partnership to repurchase the
warrant at an amount equal to the fair value of the Partnership multiplied
by the sharing ratio. In addition, the Partnership may elect at any time
during a call period, as defined by the agreement, to repurchase the
warrant from Finova at an amount equal to the fair value of the
Partnership multiplied by the sharing ratio. The fair value on the date of
issuance approximated $425,000. The fair value at June 30, 2000 was
$625,000 and the increase in fair value during the first half of 2000 has
been recorded in the statement of operations as interest expense.
-10-
<PAGE>
The Finova debt agreement contains various affirmative and negative
covenants. Under the most restrictive covenants, the Partnership:
o May not declare or pay distributions (except tax distributions, as
defined),
o May not make capital expenditures, as defined, in excess of $50,000
in 2000 and 2001, and $100,000 thereafter,
o Must maintain a minimum ratio of operating cash flow to debt
service, as defined, and
o May not exceed a maximum ratio of principal balance to broadcast
cash flow as defined.
The covenants related to the ratios commenced on March 31, 2000.
Pursuant to a license agreement, the Partnership licensed certain
intellectual property from SBT for approximately $4.0 million. To fund a
portion of the license, the Partnership borrowed $5.0 million from HBC.
The Partnership has the right to repay without penalty all or any portion
of the principal amount of the notes at any time prior to the maturity
date (five years after the effective date, or September 24, 2004). Each
year after the year in which the senior debt payment date has occurred
(senior date payment date is the date on which all obligations of the
Partnership and Bowie-Nocona have been repaid on the senior credit
agreement, which is the loan agreement dated March 2, 1999 between the
Partnership and Finova), the Partnership shall pay to HBC an amount equal
to the lesser of (i) 50% of the excess cash flow for that year, as
defined, and (ii) the amount by which cash equivalents as of December 31
of that year exceeds $1.0 million. The payment is payable no later that
the earlier of (i) 30 days after HBC receives the Partnership's financial
statements or (ii) 120 days after year end. All partial prepayments are
first credited to accrued and unpaid interest on the notes and second to
the principal of the notes. Interest rates are as follows: 10% from
effective date of note to the first anniversary; 11% during the second
year; 12% during the third year; and 13% during the fourth year until the
maturity date. Accrued interest is payable on the first business day of
each calendar quarter beginning October 1, 1999. The Partnership must at
least pay interest at the rate of 7% per annum and can pay the remaining
interest by issuing payment-in-kind ("PIK") notes (notes issued in lieu of
interest payments). The Partnership must pay interest at the same rate of
the initial note on the unpaid principal amount of each PIK note until the
principal amount is paid in full.
The HBC loan agreement contains financial covenants and restrictions on
capital distributions, additional loans, advances or investments, and
partnership interests. Additionally, the agreement requires the
Partnership to maintain certain financial covenants related to debt
service commencing June 30, 2000.
-11-
<PAGE>
Accrued interest on the long-term debt amounted to $562,782 at June 30,
2000. This amount is included in accrued liabilities in the accompanying
balance sheet.
At June 30, 2000, the future maturities of long-term debt are as follows:
<TABLE>
JUNE 30
-----------
<S> <C>
2001 $ 423,883
2002 1,245,392
2003 2,352,825
2004 15,707,700
2005 5,218,816
-----------
$24,948,616
===========
</TABLE>
7. RELATED PARTY TRANSACTIONS
The Partnership incurred management fees of approximately $121,000 from
Sunburst Media Management, Inc., an entity controlled by one of the
limited partners of the Partnership, during the year ended June 30, 2000.
As of June 30, 2000, $25,000 of the management fees were prepaid and
included in prepaid and other assets in the accompanying balance sheet.
The Partnership had a non-interest bearing advance in the amount of
$200,000 due from Sunburst Media, LP, an affiliated entity, at June 30,
2000. The amount was collected in August 2000.
8. COMMITMENTS AND CONTINGENCIES
The principal types of property leased by the Partnership are office
space, towers, real estate related to tower sites and transmitting
equipment.
The minimum rental commitments of the Partnership, under all noncancelable
operating leases, are set forth below:
<TABLE>
JUNE 30
----------
<S> <C>
2001 $ 275,855
2002 284,492
2003 285,153
2004 252,737
2005 150,000
Thereafter 400,000
----------
$1,648,237
==========
</TABLE>
Operating lease expense for the year ended June 30, 2000 was approximately
$269,171.
The Partnership is involved in various claims and lawsuits that are
generally incidental to its business. The Partnership believes that their
ultimate resolution will not have a material adverse effect on its
financial position, result of operations, or cash flows.
-12-
<PAGE>
9. DEFINED CONTRIBUTION PLAN
Employees of the Partnership may participate in the Sunburst Media
Retirement Savings Plan (the "Plan") if they meet certain eligibility
requirements. The Plan is for the benefit of all eligible full-time
employees with at least 90 days of service who have attained the age of
21. All eligible participants may elect to contribute a portion of their
compensation to the Plan subject to Internal Revenue Service limitations.
The Partnership makes a matching contribution equal to 50% of the
employee's contribution, up to a maximum of 3% of the employee's annual
salary. The Partnership's matching contribution for 2000 was approximately
$49,200.
10. SUBSEQUENT EVENT
In September 2000, the Partnership entered into an Asset Exchange
Agreement with Inspiration Media of Texas, Inc. (Inspiration) whereby the
Partnership will exchange, subject to FCC approval, the license,
intellectual property, and primary transmission equipment of KLTY and KPXI
for the same assets of 94.5 FM KDGE of Gainsville, Texas. Further, the
Partnership and Inspiration entered into reciprocal time brokerage
agreements, effective October 1, 2000, to allow the Partnership and
Inspiration to program and market KDGE and KLTY, respectively, until the
asset exchange is approved by the FCC.
**********
- 14 -
<PAGE>
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed consolidated financial
statements give effect to the Transaction, as defined and described as follows:
On August 24, 2000, the Company completed its acquisition of certain assets
of eight radio stations from affiliates of Clear Channel and AMFM, pursuant to
the terms of an Asset Purchase Agreement dated March 5, 2000, by and among the
Company and affiliates of Clear Channel and AMFM. The Company completed the
acquisition by acquiring certain assets of the radio stations KALC-FM (Denver,
Colorado), KXMX-FM and KEZY-AM (Anaheim, California); WKNR-AM and WRMR-AM
(Cleveland, Ohio); WYGY-FM and WBOB-AM (Cincinnati, Ohio); and KDGE-FM (Dallas,
Texas) through four subsidiaries wholly-owned, directly or indirectly, by the
Company. The acquired assets consist principally of property, plant and
equipment, FCC licenses and other intangible assets used in the radio
broadcasting business and will continue to be utilized by the Company's
subsidiaries for such purposes.
The acquired assets were purchased for $185.6 million in cash, which
purchase price was determined through arms-length negotiation. The acquisition
was financed through cash on hand, borrowings and the sale of certain assets,
including the FCC license, of radio station KLTX-AM, Los Angeles, California.
Such borrowings included a $58 million borrowing under a short-term credit
facility provided by ING (U.S.) Capital, LLC as Agent, and an additional $110.8
million borrowing under the Company's existing credit facility provided by The
Bank of New York as Administrative Agent, which existing credit facility was
amended to (i) permit up to $225 million in borrowing, (ii) replace the Company
with its wholly-owned subsidiary Salem Communications Holding Corporation as
borrower, and (iii) amend or waive certain provisions of the existing credit
facility.
On August 22, 2000, the Company sold radio station KLTX-AM, Los
Angeles, California for $29.5 million. The Company was able to treat this sale
as a Section 1031 like-kind exchange for tax purposes. The station was
exchanged, through a fiscal intermediary, for WYGY-FM, one of the Clear
Channel/AMFM stations. Audited financial statements and pro forma amounts for
WYGY-FM have not been included in this report as that station had not operated
on a stand-alone basis prior to being material or acquired by the Company.
Accordingly, historical amounts would not be material or meaningful to the
readers of this financial information. The accompanying unaudited pro forma
combined condensed consolidated financial statements reflect the
sale of KLTX-AM for $29.5 million.
Subsequent to the initial transaction, the Company announced two related
transactions.
On August 29, 2000, the Company announced that it entered into an asset
exchange agreement with Sunburst Dallas, LP ("Sunburst"). The Company will
exchange KDGE-FM, Dallas, Texas for KLTY-FM, Dallas, Texas. The two companies
signed a local marketing agreement ("LMA") to begin operating the stations on
October 1, 2000. The LMA allows Salem to operate KLTY-FM, and Sunburst to
operate KDGE-FM, before the transaction has closed. Accordingly, the
accompanying unaudited pro forma combined condensed consolidated financial
statements exclude the pro forma affect of KDGE-FM and include the pro forma
effect of KLTY-FM.
On September 18, 2000, the Company announced a definitive agreement with
Emmis Communications ("Emmis") to sell KALC-FM, Denver, Colorado for
approximately $100 million in cash. Emmis began operating the station under an
LMA on October 15, 2000. Accordingly, the accompanying unaudited pro forma
combined condensed consolidated financial statements exclude the historical
balance sheet and statement of operations of KALC-FM and reflect the receipt of
$100 million in cash to be received upon the closing of the sale expected in
January 2001.
The sale of KALC-FM is contingent upon obtaining regulatory approval, which
the Company believes is probable. However, if such approval is not obtained and
the sale not completed, the Company will reflect additional intangible assets,
borrowing and amortization and interest expense in its consolidated financial
statements.
For accounting purposes, the Company will account for the Transaction as a
purchase of assets; accordingly, the net assets of the acquired radio stations
have been adjusted to their estimated fair values based upon a preliminary
purchase price allocation.
The unaudited pro forma combined condensed consolidated balance sheet at
June 30, 2000 gives effect to the Transaction as if it occurred on June 30,
2000. The unaudited pro forma combined condensed
<PAGE>
consolidated statements of operations for the year ended December 31, 1999 and
for the six months ended June 30, 2000 give effect to the Transaction as if it
had occurred on January 1, 1999.
The unaudited pro forma combined condensed consolidated balance sheet was
prepared based upon the historical balance sheets of the Company and the
acquired radio stations. For radio station WBOB-FM, the historical numbers
included in the pro forma combined condensed consolidated balance sheet is based
upon the statement of assets acquired as of August 24, 2000.
The unaudited pro forma combined condensed consolidated statements of
operations for the year ended December 31, 1999 and for the six months ended
June 30, 2000 was prepared based upon the historical statement of operations of
the Company, and the historical statements of operations of the acquired radio
stations. For radio stations WRMR-AM, WKNR-AM and KLTY-FM, the amounts included
in the pro forma combined condensed consolidated statements of operations for
the year ended December 31, 1999 represent the results of operations for the
twelve months ended June 30, 2000, which the Company believes, as a result of
numerous ownership changes during the twelve months ended December 31, 1999,
provides a more meaningful presentation for the purposes of the pro forma
combined condensed consolidated statement of operations for the year ended
December 31, 1999. For the six months ended June 30, 2000, the pro forma
combined condensed consolidated statements of operations for WRMR-AM and WKNR-AM
are the twelve months amounts divided by two, which the Company believes
approximates the historical activity of these stations during the six months
ended June 30, 2000.
Certain amounts in the historical financial statements of the acquired
radio stations have been reclassified to conform to the Company's presentation.
The unaudited pro forma combined condensed consolidated financial
statements should be read in conjunction with the historical financial
statements of the Company and the acquired radio stations.
The unaudited pro forma combined condensed consolidated financial
statements are not necessarily indicative of the actual results of operations or
financial position that would have occurred had the Transaction occurred on the
dates indicated nor are they necessarily indicative of future operating results
or financial position.
<PAGE>
Salem Communications Corporation
Pro Forma Financial Statements
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Acquisition
Adjustment For of
The Disposition KXMX-FM
Salem of KLTX-AM (A) Subtotal KEZY-AM
------------ ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
AS OF JUNE 30, 2000
ASSETS
Current assets:
Cash and cash equivalents $ 4,432 $ 29,500 (1) $ 33,932 $ 1
Accounts receivable, net 17,529 - 17,529 693
Other current assets 5,467 - 5,467 -
------------ ------------------- ------------------- --------------
Total current assets 27,428 29,500 56,928 694
Property, plant, equipment and software, net 55,695 (324)(2) 55,371 2,294
Intangible assets, net 187,342 (25)(3) 187,317 27,964
Other assets 6,148 - 6,148 -
------------ ------------------- ------------------- --------------
Total assets $276,613 $ 29,151 $305,764 $ 27,964
============ =================== =================== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 10,667 $ - $ 10,667 $ 40
Current portion of long-term debt 301 - 301 -
Short-term financing - - - -
------------ ------------------- ------------------- --------------
Total current liabilities 10,968 - 10,968 40
Long-term debt, less current portion 113,092 - 113,092 -
Other long-term liabilities 9,770 10,434 (4) 20,204 -
Stockholders' equity 142,783 18,717 (5) 161,500 27,924
------------ ------------------- ------------------- --------------
Total liabilities and stockholders' equity $276,613 $ 29,151 $305,764 $ 27,964
============ =================== =================== ==============
<CAPTION>
Acquisition of Acquisition of Acquisition of Acquisition of
WBOB-AM WRMR-AM WKNR-AM KLTY-FM
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
AS OF JUNE 30, 2000
ASSETS
Current assets:
Cash and cash equivalents $ - $ - $ 16 $ 1,096
Accounts receivable, net - 353 497 2,409
Other current assets - - 118 264
--------------- --------------- --------------- --------------
Total current assets - 353 631 3,769
Property, plant, equipment and software, net 510 791 2,320 3,075
Intangible assets, net 3,997 14,735 5,621 21,639
Other assets - - - 13
--------------- --------------- --------------- --------------
Total assets $ 4,507 $15,879 $ 8,572 $28,496
=============== =============== =============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ - $ 195 $ 42 $ 1,297
Current portion of long-term debt - - - 424
--------------- --------------- --------------- --------------
Total current liabilities - 195 42 1,721
Long-term debt, less current portion - - - 24,151
Other long-term liabilities - 113 - 625
Stockholders' equity 4,507 15,571 8,530 1,999
--------------- --------------- --------------- --------------
Total liabilities and stockholders' equity $ 4,507 $15,879 $ 8,572 $28,496
=============== =============== =============== ==============
<CAPTION>
Pro Forma
Combined
Before Pro Forma
Pro Forma Acquisition Pro Forma
Adjustments Adjustments(C) Salem
----------------- --------------- --------------
<S> <C> <C> <C>
AS OF JUNE 30, 2000
ASSETS
Current assets:
Cash and cash equivalents $ 35,045 $(29,811)(10) $ 5,234
Accounts receivable, net 21,481 (3,952)(11) 17,529
Other current assets 5,849 (382)(12) 5,467
----------------- ---------------- --------------
Total current assets 62,375 (34,145) 28,230
Property, plant, equipment and software, net 64,361 -- 64,361
Intangible assets, net 258,285 6,392 (13) 264,677
Other assets 6,161 1,637 (14) 7,798
----------------- ---------------- --------------
Total assets $391,182 $(26,116) $365,066
================= ================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 12,241 $ 13,677 (15) $ 25,918
Current portion of long-term debt 725 (424)(16) 301
----------------- ---------------- --------------
Total current liabilities 12,966 13,253 26,219
Long-term debt, less current portion 137,243 37,487 (17) 174,730
Other long-term liabilities 20,942 (16,829)(18) 4,113
Stockholders' equity 220,031 (60,027)(19) 160,004
----------------- ---------------- --------------
Total liabilities and stockholders' equity $391,182 $(26,116) $365,066
================= ================ ==============
</TABLE>
<PAGE>
Salem Communications Corporation
Pro Forma Financial Statements
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Acquisition
Adjustment For of
The Disposition KXMX-FM
Salem of KLTX-AM (B) Subtotal KEZY-AM
------------ --------------- --------------- --------------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 2000
Net revenues $ 51,224 $ (1,176)(6) $ 50,048 $ 2,865
Operating expenses 34,326 (405)(7) 33,921 2,139
Depreciation and amortization expense 10,338 (26)(8) 10,312 642
Corporate expenses 5,272 - 5,272 86
---------- ----------- ------------ -------
Operating income 1,288 (745) 543 (2)
Other income (expense)
Interest income (expense), net (4,868) - (4,868) (649)
Gain (loss) on disposal of assets 4,408 - 4,408 -
Other expense, net (420) - (420) -
---------- ----------- ------------ -------
Income (loss) before income taxes 408 (745) (337) (651)
Provision (benefit) for income taxes 464 (268)(9) 196 (266)
---------- ----------- ------------ -------
Net income (loss) $ (56) $ (477) $ (533) $ (385)
========== =========== ============ =======
Basic and diluted income (loss) per share $ (0.00)
==========
Basic and diluted average shares outstanding 23,456,088
==========
<CAPTION>
Acquisition of Acquisition of Acquisition of Acquisition of
WBOB-AM WRMR-AM WKNR-AM KLTY-FM
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 2000
Net revenues $ 549 $ 1,416 $ 987 $ 5,174
Operating expenses 776 1,258 1,197 3,103
Depreciation and amortization expense - 563 282 1,042
Corporate expenses - - - -
--------------- --------------- --------------- --------------
Operating income (227) (405) (492) 1,029
Other income (expense)
Interest income (expense), net - - - (1,550)
Gain (loss) on disposal of assets - - - -
Other expense, net - - - (589)
--------------- --------------- --------------- --------------
Income (loss) before income taxes (227) (405) (492) (1,110)
Provision (benefit) for income taxes - (35) (174) -
--------------- --------------- --------------- --------------
Net income (loss) $ (227) $ (370) $ (318) $ (1,110)
=============== =============== =============== ==============
Basic and diluted income (loss) per share
Basic and diluted average shares outstanding
<CAPTION>
Pro Forma
Combined
Before Pro Forma
Pro Forma Acquisition Pro Forma
Adjustments Adjustments (D) Salem
----------------- ---------------- --------------
<S> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 2000
Net revenues $ 61,039 $ - $ 61,039
Operating expenses 42,394 - 42,394
Depreciation and amortization expense 12,841 764(20) 13,605
Corporate expenses 5,358 - 5,358
----------------- ---------------- --------------
Operating income 446 (764) (318)
Other income (expense) -
Interest income (expense), net (7,067) (731)(21) (7,798)
Gain (loss) on disposal of assets 4,408 - 4,408
Other expense, net (1,009) - (1,009)
----------------- ---------------- --------------
Income (loss) before income taxes (3,222) (1,495) (4,717)
Provision (benefit) for income taxes (279) (739)(22) (1,018)
----------------- ---------------- --------------
Net income (loss) $ (2,943) $ (756) $ (3,699)
================= ================ ==============
Basic and diluted loss per share $ (0.16)
==============
Basic and diluted average shares outstanding 23,456,088
==============
</TABLE>
<PAGE>
Salem Communications Corporation
Pro Forma Financial Statements
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Adjustment For Acquisition of
The Disposition KXMX-FM
Salem of KLTX-AM(B) Subtotal KEZY-AM
------------ --------------- ---------- --------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Net revenues $ 93,546 $ (2,076)(6) $ 91,470 $ 4,285
Operating expenses 56,276 (831)(7) 55,445 3,324
Depreciation and amortization expense 18,233 (53)(8) 18,180 1,295
Corporate expenses 8,507 -- 8,507 114
Stock and related cash grant 2,550 -- 2,550 --
----------- --------- --------- ---------
Operating income 7,980 (1,192) 6,788 (448)
Other income (expense)
Interest income (expense), net (13,214) -- (13,214) (1,789)
Gain (loss) on disposal of assets (219) -- (219) --
Other expense, net (633) -- (633) --
----------- --------- --------- ---------
Income (loss) before income taxes (6,086) (1,192) (7,278) (2,237)
Provision (benefit) for income taxes (1,611) (428)(9) (2,039) (914)
----------- --------- --------- ---------
Income (loss) from continuing operations $ (4,475) $ (764) $ (5,239) $ (1,323)
=========== ========= ========= =========
Basic and diluted income (loss) per share $ (0.22)
===========
Basic and diluted average shares outstanding 20,066,006
===========
<CAPTION>
Acquisition of Acquisition of Acquisition of Acquisition of
WBOB-AM WRMR-AM WKNR-AM KLTY-FM
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Net revenues $ 1,039 $ 2,832 $ 1,973 $ 10,173
Operating expenses 1,495 2,515 2,393 7,016
Depreciation and amortization expense 1,126 564 1,953
Corporate expenses -- -- -- --
Stock and related cash grant -- -- -- --
--------- --------- --------- ---------
Operating income (456) (809) (984) 1,204
Other income (expense)
Interest income (expense), net -- -- -- (3,959)
Gain (loss) on disposal of assets -- -- -- --
Other expense, net -- -- -- (589)
--------- --------- --------- ---------
Income (loss) before income taxes (456) (809) (984) (3,344)
Provision (benefit) for income taxes -- (70) (348) --
--------- --------- --------- ---------
Income (loss) from continuing operations $ (456) $ (739) $ (636) $ (3,344)
========= ========= ========= =========
Basic and diluted income (loss) per share
Basic and diluted average shares outstanding
<CAPTION>
Pro Forma
Combined Before Pro Forma
Pro Forma Acquisition Pro Forma
Adjustments Adjustments Salem
--------------- ----------- ------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Net revenues $ 111,772 $ -- $ 111,772
Operating expenses 72,188 -- 72,188
Depreciation and amortization expense 23,118 1,389 (20) 24,507
Corporate expenses 8,621 -- 8,621
Stock and related cash grant 2,550 2,550
--------- --------- -----------
Operating income 5,295 (1,389) 3,906
Other income (expense) --
Interest income (expense), net (18,962) (112)(21) (19,074)
Gain (loss) on disposal of assets (219) -- (219)
Other expense, net (1,222) -- (1,222)
--------- --------- -----------
Income (loss) before income taxes (15,108) (1,501) (16,609)
Provision (benefit) for income taxes (3,371) (1,265)(22) (4,636)
--------- --------- -----------
Income (loss) from continuing operations $ (11,737) $ (236) $ (11,973)
========= ========= ===========
Basic and diluted loss per share $ (0.60)
===========
Basic and diluted average shares outstanding 20,066,006
===========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
This gain is excluded from the pro forma combined condensed financial
statements because it is a non-recurring item, however, such gain will be
recorded in the third quarter of 2000.
(A) The pro forma adjustments for the disposition of KLTX-AM at June 30, 2000
are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
-----------------
<S> <C>
(1) Increase in cash resulting from the sale of KLTX-AM............................... $ 29,500
(2) Net decrease in property, plant, equipment and software resulting from the sale
of KLTX-AM fixed assets........................................................... (324)
(3) Net decrease in intangible assets resulting from the sale of KLTX-AM intangible
assets (principally the FCC license).............................................. (25)
(4) Increase in other long-term liabilities resulting from the deferred tax
liability on the gain recognized on the sale of KLTX-AM........................... 10,434
(5) Increase, net of deferred tax effect of $10,434, in stockholders' equity
resulting from the gain recognized on the asset sale of KLTX-AM (treated as a
Section 1031 exchange for tax purposes and accordingly has no immediate cash tax
effect). This gain is excluded from the pro forma combined condensed statement
of operations because it is a non-recurring item, however, such gain will be
recorded in the third quarter of 2000............................................. 18,717
</TABLE>
(B) The pro forma adjustments for the disposition of KLTX-AM for the year
ended December 31, 1999 and for the six months ended June 30, 2000 are as
follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
TO INCOME
12/31/99 6/30/00
------------- -------------
<S> <C> <C>
(6) Decrease in net revenues resulting from the sale of KLTX-AM................... $ 2,076 $ 1,176
(7) Decrease in operating expenses resulting from the sale of KLTX-AM............. (831) (405)
(8) Decrease in depreciation and amortization expense resulting from
the sale of KLTX-AM........................................................... (53) (26)
(9) Increase in benefit for income taxes resulting from the sale of KLTX-AM...... (428) (268)
</TABLE>
(C) The pro forma acquisition adjustments at June 30, 2000 are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
-----------------
<S> <C>
(10) Decrease in cash resulting as follows:
Borrowing under short-term credit facility........................................ $ 58,000
Borrowing under amended credit facility........................................... 110,750
Payment to Clear Channel and AMFM in connection with the Asset Purchase Agreement. (185,600)
Elimination of cash not acquired in the Transaction .............................. (1,113)
Payment of financing fees......................................................... (3,986)
Prepayment of interest related to the short-term credit facility.................. (7,112)
Payment of transaction-related costs.............................................. (750)
-----------------
Total decrease in cash............................................................ $ (29,811)
=================
(11) Decrease in accounts receivable resulting from the elimination of accounts
receivable not acquired in the Transaction ....................................... (3,952)
(12) Decrease in other current assets resulting from the elimination of other current
assets not acquired in the Transaction ........................................... (382)
(13) Increase in intangible assets resulting as follows:
Purchase price of radio stations acquired in connection with the Asset Purchase
Agreement......................................................................... $ 185,600
Sale of KALC-FM................................................................... (100,000)
Payment of transaction-related costs.............................................. 750
-----------------
Purchase price to be allocated to net assets acquired........................... 86,350
Less net tangible assets (liabilities) not being acquired as follows:
Cash.......................................................................... 1,113
Accounts receivable, net...................................................... 3,952
Other current assets.......................................................... 382
Other assets.................................................................. 13
Accounts payable and other current assets..................................... (1,574)
Current portion of long-term debt............................................. (424)
Long-term debt................................................................ (24,151)
Other long-term liabilities................................................... (738)
-----------------
Net liabilities not assumed................................................. (21,427)
-----------------
Total intangible assets to be allocated......................................... 64,923
Less equity of radio stations acquired............................................ (58,531)
-----------------
Total increase in intangible assets, net.......................................... $ 6,392
=================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
-----------------
<S> <C>
(14) Increase in other assets resulting as follows:
Payment of financing fees in connection with the short-term credit facility and the
additional borrowing and amendment of the Company's existing credit facility...... $ 3,986
Elimination of other assets not acquired in the Transaction ...................... (13)
Write-off of financing fees associated with the short-term financing paid off
earlier than anticipated as a result of the sale of KALC-FM....................... (2,336)
-----------------
Total increase in other assets.................................................... $ 1,637
=================
(15) Decrease in accounts payable and other current liabilities resulting as follows:
Elimination of liabilities not assumed in the Transaction ........................ $ (1,574)
Tax liability resulting from the sale of KALC-FM. The Company is in the process
of evaluating alternatives to reduce this tax liability, including a Section 1031
exchange.......................................................................... 15,251
-----------------
$ 13,677
=================
(16) Decrease in current portion of long-term debt resulting from the elimination of
debt not assumed in the Transaction .............................................. (424)
(17) Increase in long-term debt resulting as follows:
Elimination of KLTY-FM long-term debt not acquired................................ $ (24,151)
Borrowing under amended credit facility........................................... 110,750
Paydown of debt from excess cash received from the sale of KALC-FM ($100,000) after
payoff of short-term credit facility ($58,000) ................................... (42,000)
Paydown of debt from prepaid interest refunded in connection with the payoff of the
short-term credit facility........................................................ (7,112)
-----------------
Total increase in long-term debt.................................................. $ 37,487
=================
(18) Decrease in other long-term liabilities resulting as follows:
Elimination of long-term liabilities not assumed in the Transaction............... $ (738)
Reduction of deferred tax liability resulting from the extraordinary loss on
early extinguishment of short-term financing...................................... (840)
Deferred tax effect from the sale of KALC-FM...................................... (15,251)
-----------------
Total decrease in long-term liabilities $ (16,829)
=================
(19) Decrease in stockholders' equity resulting as follows:
Elimination of equity of radio stations acquired in connection with the Asset
Purchase Agreement................................................................ $ (58,531)
Extraordinary loss on early extinguishment of debt (short-term credit facility)... (1,496)
-----------------
Total decrease in stockholders' equity............................................ $ (60,027)
=================
</TABLE>
(D) The pro forma acquisition adjustments for the year ended December 31, 1999
and for the six months ended June 30, 2000 are as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
TO INCOME
12/31/99 6/30/00
------------- --------------
<S> <C> <C> <C>
(20) Increase in amortization expense resulting as follows:
Amortization of the total intangible assets to be allocated created as a
result of the Transaction (primarily FCC licenses to be amortized on a
straight-line basis of 15 years).................................................. $ (5,156) $ (2,578)
Elimination of the amortization expense of the radio stations acquired............ 3,767 1,814
------------- --------------
Total increase in amortization expense............................................ $ (1,389) $ (764)
============= ==============
(21) Increase in interest expense as follows:
Elimination of interest expense (debt not assumed)................................ $ 5,748 $ 2,199
Interest expense related to the increase in long-term debt at 9.125%.............. (5,624) (2,812)
Amortization of loan fees over a seven-year period................................ (236) (118)
------------- --------------
Total decrease in interest expense................................................ $ (112) $ (731)
============= ==============
(22) Increase in benefit for income taxes resulting from the historical losses and
the increase in interest expense and amortization expense previously discussed.... $ 1,265 $ 739
</TABLE>
<PAGE>
(c) Exhibits.
EXHIBITS
2.01+ Certificate of Incorporation of Salem Communications Holding
Corporation.
2.02+ Bylaws of Salem Communications Holding Corporation.
2.03+ Certificate of Incorporation of Salem Communications Acquisition
Corporation.
2.04+ Bylaws of Salem Communications Acquisition Corporation.
2.05+ Certificate of Incorporation of SCA License Corporation.
2.06+ Bylaws of SCA License Corporation.
4.01* Indenture, dated as of September 25, 1997, by and among Salem
Communications Corporation, a California corporation and
predecessor to the Company ("Salem-California"), the guarantors
named therein and The Bank of New York, as Trustee.
4.10** Supplemental Indenture No. 1, dated as of March 31, 1999, by and
among Salem-California, the Company, the guarantors named therein
and The Bank of New York, as Trustee.
4.11+ Supplemental Indenture No. 2 dated as of August 24, 2000, by and
among the Company, HoldCo, the guarantors named therein and The
Bank of New York, as Trustee.
4.18+ Amendment No. 3 to First Amended and Restated Credit Agreement,
dated as of August 17, 2000, by and among the Company, The Bank
of New York, as Administrative Agent for the Lender, Bank of
America, N.A., as Documentation Agent and the Lenders party
thereto.
4.19+ Second Amended and Restated Credit Agreement, dated as of August
24, 2000, by and among Salem Communications Holding Corporation,
The Bank of New York as Administrative Agent, Bank of America,
N.A. as Syndication Agent, Fleet National Bank as Documentation
Agent, Union Bank of California, N.A. and The Bank of Nova Scotia
as Co-Agents and the Lenders party thereto.
4.20+ Credit Agreement, dated as of August 24, 2000, by and among the
Company, ING (U.S.) Capital LLC as Administrative Agent, The Bank
of New York as Syndication Agent, Fleet National Bank as
Documentation Agent, and the Lenders party thereto.
10.08.05*** Asset Purchase Agreement, dated as of March 6, 2000, by and among
the Company, Citicasters Co., AMFM Texas Broadcasting, LP; AMFM
Texas Licenses LP; AMFM Ohio, Inc.; AMFM Radio Licenses LLC;
Capstar Radio Operating Company and Capstar TX Limited
Partnership.
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
23.3 Consent of Independent Auditors
* Incorporated by reference to the exhibit of the same number of
Salem-California's Registration Statement on Form S-4 (No. 333-41733), as
amended, as declared effective by the Securities and Exchange Commission on
February 8, 1998.
** Incorporated by reference to the exhibit of the same number of the
Company's Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on March 31, 1999.
*** Incorporated by reference to the exhibit of the same number of the
Company's Quarterly Report on Form 10-Q, filed with the Securities and Exchange
Commission on May 15, 2000.
+ Incorporated by reference to the exhibit of the same number of the
Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 8, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
SALEM COMMUNICATIONS CORPORATION
Date: November 7, 2000
By: /s/ EDWARD G. ATSINGER III
--------------------------------------
Edward G. Atsinger III
President and Chief Executive Officer
Date: November 7, 2000
By: /s/ DAVID A. R. EVANS
--------------------------------------
David A. R. Evans
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
