JACOR COMMUNICATIONS INC, 8-K/A, 1997-05-05

JACOR COMMUNICATIONS INC
8-K/A, 1997-05-05
RADIO BROADCASTING STATIONS

Previous: CENTENNIAL BANCORP, 10-Q, 1997-05-05

Next: JACOR COMMUNICATIONS INC, 424B3, 1997-05-05

<PAGE>
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K(A)

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934

Date of Report: April 7, 1997

JACOR COMMUNICATIONS, INC.

DELAWARE
(State or Other Jurisdiction of Incorporation)

0-12404 31-0978313
(Commission File No.) (IRS Employer Identification No.)

50 East RiverCenter Boulevard
12th Floor
Covington, KY 41017

(606) 655-2267
<PAGE>

Item 2. Acquisition or Disposition of Assets

As previously reported, on April 7, 1997, Jacor Communications, Inc. (the
"Company"), Jacor Communications Company ("JCC"), a wholly-owned subsidiary of
the Company, and PRN Holding Acquisition Corp. ("Buyer"), a wholly-owned
subsidiary of JCC, entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Premiere Radio Networks, Inc. ( "Premiere"). Pursuant to the
terms of the Merger Agreement, Buyer will merge with and into Premiere (the
"Merger") such that each outstanding share of Premiere capital stock (other than
Premiere shares held by the Company, treasury shares and dissenting shares, if
any) will be converted into the right to acquire $13.50 in cash and .1525424
shares (the "Exchange Ratio") of Jacor common stock. Premiere will be the
surviving company in the merger and will be a subsidiary of the Company.

The details of the Merger are set forth in more detail in the Company's
initial Form 8-K filed with the Securities and Exchange Commission on April 8,
1997.

Item 7. Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired. Page

Report of Independent Auditors
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1996
Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended December 31, 1996
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1996
Notes to Consolidated Financial Statements

(b) Pro Forma Financial Information.

Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1996
Unaudited Pro Forma Condensed Consolidated Balance Sheet at
December 31, 1996
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

2.1 Agreement and Plan of Merger dated as of April 7, 1997 among Jacor
Communications, Inc. (the "Company"), Jacor Communications Company ("JCC"),
PRN Holding Acquisition Corp. ("Buyer"), and Premiere Radio Networks, Inc.
(omitting schedules and exhibits not deemed material). *

<PAGE>

2.2 Shareholders' Agreement dated as of April 7, 1997 by and among the Company,
JCC, Archon Communications, Inc. ("Archon"), the stockholders of Archon and
certain shareholders of Premiere (omitting schedules and exhibits not
deemed material). *

2.3 Stock Purchase Agreement dated as of April 7, 1997 among the Company, JCC,
Archon Communications Partners LLC and News America Holdings Incorporated
(omitting schedules and exhibits not deemed material). *

23.1 Consent of Ernst & Young LLP

99.1 Press Release dated April 7, 1997 (relating to Premiere). *

99.2 Press Release dated April 7, 1997 (relating to NSN Network Services). *

* Previously filed.

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 hereunto duly authorized.

JACOR COMMUNICATIONS, INC.

May 2, 1997 By: /s/ Jon M. Berry
----------------------------------
Jon M. Berry, Senior Vice President
and Treasurer

<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information is based on the
historical financial statements of the Company and Premiere and has been
prepared to illustrate the effects of the acquisitions described below and
the related financing transactions.

The unaudited pro forma condensed consolidated statements of operations
for the year ended December 31, 1996, the latest twelve months ended March
31, 1997 and the three months ended March 31, 1996 give effect to each of the
following transactions as if such transactions had been completed January 1,
1996: (i) the Merger, (ii) the Company's acquisition of the assets of EFM
Media Management, Inc., EFM Publishing, Inc. and PAM Media, Inc. (the "EFM
Acquisition") and (iii) the Company's 1996 acquisitions of Citicasters, Inc.
("Citicasters"), Noble Broadcast Group, Inc. ("Noble") and the Selected
Gannett Radio Stations, the Company's immaterial acquisitions completed in
1996, the Company's divestiture of its Tampa television station, the
Company's 1997 acquisition of Regent Communications, Inc. ("Regent") and the
Company's immaterial transactions completed in 1997 (collectively, the "Other
Acquisitions"). The unaudited pro forma condensed consolidated statement of
operations for the three months ended March 31, 1997 gives effect to the
following transactions as if such transactions had been completed January 1,
1997: (i) the Merger, (ii) the EFM Acquisition, and (iii) Jacor's 1997
acquisition of Regent and other 1997 immaterial acquisitions both completed
and pending as of April 30, 1997. The pro forma condensed consolidated
balance sheet as of March 31, 1997 has been prepared as if the Merger and the
Company's other pending acquisitions of radio stations as of April 30, 1997
(the "Pending Transactions") had occurred on March 31, 1997.

The Pending Transactions will be accounted for using the purchase method of
accounting. The total purchase costs of the Pending Transactions will be
allocated to the tangible and intangible assets and liabilities acquired based
upon their respective fair values. The allocation of the aggregate purchase
price reflected in the Unaudited Pro Forma Financial Information is preliminary.
The final allocation of the purchase price will be contingent upon the receipt
of final appraisals of the acquired assets and notes thereto. The Unaudited Pro
Forma Financial Information is not necessarily indicative of either future
results of operations or the results that might have occurred if the foregoing
transactions had been consummated on the indicated dates.

The Unaudited Pro Forma Financial Information should be read in
conjunction with Jacor's Consolidated Financial Statements and notes thereto
and Premiere's Consolidated Financial Statements and notes thereto filed
herewith.

<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------
OTHER JACOR
ACQUISITIONS OTHER
HISTORICAL PRO FORMA ACQUISITIONS HISTORICAL HISTORICAL
JACOR ADJUSTMENTS PRO FORMA EFM PREMIERE
----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue..................................................... $ 223,761 $ 220,373(a) $ 444,134 $ 47,357 $ 23,826
Broadcast operating expenses.................................... 151,065 154,119(a) 305,184 29,538 16,533
Depreciation and amortization................................... 23,404 40,993(a) 64,397 84 1,908
Corporate general and administrative expenses................... 7,629 1,479(a) 9,108 13,645
Unusual charges................................................. 417
Special bonuses................................................. 2,303 2,303
----------- ------------ ------------ ----------- -----------
Operating income (loss)..................................... 39,360 23,782 63,142 4,090 4,968
Interest expense................................................ (32,244) (46,232)(b) (78,476) (102)
Gain on sale of radio stations and other assets................. 2,539 2,539
Write-off of debt issuance costs................................ (1,949)
Other income (expense), net..................................... 5,716 5,716 488 1,217
----------- ------------ ------------ ----------- -----------
Income (loss) before income taxes and extraordinary items... 15,371 (22,450) (7,079) 4,578 4,134
----------- ------------ ------------ ----------- -----------
Income tax (expense) benefit.................................... (7,300) 6,629(h) (671) (1,698)
----------- ------------ ------------ ----------- -----------
Income (loss) before extraordinary items.................... $ 8,071 $ (15,821) $ (7,750) $ 4,578 $ 2,436
----------- ------------ ------------ ----------- -----------
----------- ------------ ------------ ----------- -----------
Income (loss) per common share.............................. $ 0.30
-----------
-----------
Number of common shares used in per share computations.......... 26,830
-----------
-----------

<CAPTION>
LTM ENDED
MARCH 31,
1997
-----------
PREMIERE ACQUISITION TOTAL TOTAL
PRO FORMA PRO FORMA COMBINED COMBINED
ADJUSTMENTS ADJUSTMENTS PRO FORMA PRO FORMA
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net revenue..................................................... $ 7,852(c) $ 523,169 $ 533,627
Broadcast operating expenses.................................... 5,932(c) $ 2,606(d) 359,793 368,124
Depreciation and amortization................................... 2,400(c) 18,426(e) 87,215 88,020
Corporate general and administrative expenses................... (13,645)(d) 9,108 10,190
Unusual charges................................................. (417)(f)
Special bonuses................................................. 2,303 2,303
------------- ------------ ----------- -----------
Operating income (loss)..................................... (480) (6,970) 64,750 64,990
Interest expense................................................ (1,617)(b) (80,195) (78,712)
Gain on sale of radio stations and other assets................. 2,539 4,695
Write-off of debt issuance costs................................ 1,949(g)
Other income (expense), net..................................... (632)(c) 6,789 6,855
------------- ------------ ----------- -----------
Income (loss) before income taxes and extraordinary items... (1,112) (6,638) (6,117) (2,172)
------------- ------------ ----------- -----------
Income tax (expense) benefit.................................... 354(c) 1,128(h) (887) (454)
------------- ------------ ----------- -----------
Income (loss) before extraordinary items.................... $ (758) $ (5,510) $ (7,004) $ (2,626)
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
Income (loss) per common share.............................. $ (0.16) $ (0.06)
----------- -----------
----------- -----------
Number of common shares used in per share computations.......... 42,985(n) 42,985
----------- -----------
----------- -----------
</TABLE>

See accompanying notes to unaudited pro forma condensed consolidated financial
statements.

<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
----------------------------------------------------
OTHER JACOR
ACQUISITIONS OTHER
HISTORICAL PRO FORMA ACQUISITIONS HISTORICAL
JACOR ADJUSTMENTS PRO FORMA EFM
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net revenue.................................................................. $ 88,828 $ 11,151(a) $ 99,979 $ 11,191
Broadcast operating expenses................................................. 67,305 9,956(a) 77,261 6,833
Depreciation and amortization................................................ 13,369 3,411(a) 16,780 16
Corporate general and administrative expenses................................ 2,762 2,762 1,146
----------- ------------ ------------ -----------
Operating income (loss).................................................. 5,392 (2,216) 3,176 3,196
Interest expense............................................................. (17,176) (2,353)(b) (19,529)
Gain on sale of radio stations and other assets.............................. 4,695 4,695
Other income (expense), net.................................................. 405 405 6
----------- ------------ ------------ -----------
Income (loss) before income taxes and extraordinary items................ (6,684) (4,569) (11,253) 3,202
----------- ------------ ------------ -----------
Income tax (expense) benefit................................................. 4,100 1,781(h) 5,881
----------- ------------ ------------ -----------
Income (loss) before extraordinary items................................. $ (2,584) $ (2,788) $ (5,372) $ 3,202
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Loss per common share.................................................... $ (0.08)
-----------
-----------
Number of common shares used in per share computations....................... 34,085

<CAPTION>
THREE

MONTHS

ENDED MARCH

31, 1996

-----------

ACQUISITION TOTAL TOTAL

HISTORICAL PRO FORMA COMBINED COMBINED

PREMIERE ADJUSTMENTS PRO FORMA PRO FORMA

----------- ------------ ----------- -----------

<S> <C> <C> <C> <C>
Net revenue.................................................................. $ 7,190 $ 118,360 $ 107,902

Broadcast operating expenses................................................. 5,163 $ 650(d) 89,907 81,576

Depreciation and amortization................................................ 1,073 4,632(e) 22,501 21,696

Corporate general and administrative expenses................................ (1,146)(d) 2,762 1,680

----------- ------------ ----------- -----------

Operating income (loss).................................................. 954 (4,136) 3,190 2,950

Interest expense............................................................. (494)(b) (20,023) (21,506)

Gain on sale of radio stations and other assets.............................. 4,695 2,539

Other income (expense), net.................................................. 170 581 515

----------- ------------ ----------- -----------

Income (loss) before income taxes and extraordinary items................ 1,124 (4,630) (11,557) (15,502)

----------- ------------ ----------- -----------

Income tax (expense) benefit................................................. (461) 1,472(h) 6,892 6,459

----------- ------------ ----------- -----------

Income (loss) before extraordinary items................................. $ 663 $ (3,158) $ (4,665) $ (9,043)

----------- ------------ ----------- -----------

Loss per common share.................................................... $ (0.11) $ (0.21)

----------- -----------

Number of common shares used in per share computations....................... 42,985(n) 42,985

</TABLE>

See accompanying notes to unaudited pro forma condensed consolidated financial
statements.

<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------------------------------------------------
OTHER JACOR
ACQUISITION OTHER
HISTORICAL PRO FORMA ACQUISITIONS HISTORICAL HISTORICAL
JACOR ADJUSTMENTS PRO FORMA EFM(O) PREMIERE
---------- ----------- ------------ ---------- ----------

<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 12,418 $ (6,831)(j) $ 5,587 $ 4,868 $11,584
Accounts receivable............................. 86,326 156(i) 86,482 2,220 6,973
Prepaid expenses and other current assets....... 17,081 754(i) 17,835 7,283 2,049
---------- ----------- ------------ ---------- ----------
Total current assets........................ 115,825 (5,921) 109,904 14,371 20,606
Property and equipment............................ 157,631 27,418(i) 185,049 153 2,375
Intangible assets................................. 1,531,138 209,732(i) 1,740,870 29,405
Other assets...................................... 87,827 (24,174)(i) 54,653 33 5,632
(9,000)(j)
---------- ----------- ------------ ---------- ----------
Total assets................................ $1,892,421 $198,055 $2,090,476 $ 14,557 $58,018
---------- ----------- ------------ ---------- ----------
---------- ----------- ------------ ---------- ----------
Current liabilities:
Accounts payable, accrued expenses and other
current liabilities........................... $ 65,496 $ 1,199(i) $ 66,695 $ 11,155 $ 3,354
Long-term debt, current portion................. 8,500 8,500
---------- ----------- ------------ ---------- ----------
Total current liabilities................... 73,996 1,199 75,195 11,155 3,354
Long-term debt.................................... 688,500 173,000(j) 861,500
5 1/2% Liquid Yield Option Notes.................. 120,183 120,183
Other liabilities................................. 111,035 1,206(i) 112,241 3,322 1,825
Deferred tax liability............................ 302,884 302,884 3,726
Shareholders' equity:
Common stock ................................... 348 9(j) 357 2 79
Additional paid-in capital...................... 538,564 22,641(j) 561,205 40,997
Common stock warrants........................... 31,500 31,500
Unrealized gain on investments.................. 8,191 8,191
Retained earnings............................... 17,220 17,220 78 8,037
---------- ----------- ------------ ---------- ----------
Total shareholders' equity.................. 595,823 22,650 618,473 80 49,113
---------- ----------- ------------ ---------- ----------
Total liabilities and shareholders'
equity..................................... $1,892,421 $198,055 $2,090,476 $ 14,557 $58,018
---------- ----------- ------------ ---------- ----------
---------- ----------- ------------ ---------- ----------

ACQUISITION TOTAL
PRO FORMA COMBINED
ADJUSTMENTS PRO FORMA
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents....................... $(16,300)(l) $ 5,739
Accounts receivable............................. 95,675
Prepaid expenses and other current assets....... 27,167
----------- ----------
Total current assets........................ (16,300) 128,581
Property and equipment............................ 528(k) 188,105
Intangible assets................................. 200,079(k) 1,970,354
Other assets...................................... 60,318

----------- ----------
Total assets................................ $184,307 $2,347,358
----------- ----------
----------- ----------
Current liabilities:
Accounts payable, accrued expenses and other
current liabilities........................... $ 81,204
Long-term debt, current portion................. 8,500
----------
Total current liabilities................... 89,704
Long-term debt.................................... $ 23,500(l) 885,000
5 1/2% Liquid Yield Option Notes.................. 120,183
Other liabilities................................. 117,388
Deferred tax liability............................ 12,000(k) 318,610
Shareholders' equity:
(81)(m)
Common stock ................................... 71(l) 428
Additional paid-in capital...................... (40,997)(m) 759,134
197,929(l)
Common stock warrants........................... 31,500
Unrealized gain on investments.................. 8,191
Retained earnings............................... (8,115)(m) 17,220
----------- ----------
Total shareholders' equity.................. 143,107 816,473
----------- ----------
Total liabilities and shareholders'
equity..................................... $184,307 $2,347,358
----------- ----------
----------- ----------
</TABLE>

See accompanying notes to unaudited pro forma condensed consolidated financial
statements.

<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1997
(IN THOUSANDS)

(a) These adjustments reflect additional revenues and expenses related to the
Other Acquisitions.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------
BROADCAST DEPRECIATION
NET OPERATING AND CORPORATE G
REVENUE EXPENSES AMORTIZATION & A
--------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Noble............................................. $ 10,715 $ 9,062 $ 2,365 --
Citicasters....................................... 101,806 58,543 21,913 $ 1,479
Gannett........................................... 2,202 6,727 -- --
Regent............................................ 33,797 26,447 6,897 --
Other............................................. 71,853 53,340 9,818 --
--------- ----------- ------------- -----------
Total......................................... $ 220,373 $ 154,119 $ 40,993 $ 1,479
--------- ----------- ------------- -----------
--------- ----------- ------------- -----------
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------
BROADCAST DEPRECIATION
NET OPERATING AND
REVENUE EXPENSES AMORTIZATION
--------- ----------- -------------
<S> <C> <C> <C> <C>
Regent............................................ -- $ 233 $ 1,145
Other............................................. $ 11,151 9,723 2,266
--------- ----------- -------------
11,151 9,956 3,411
--------- ----------- -------------
--------- ----------- -------------
</TABLE>

(b) These adjustments represent additional interest expense associated with
the Company's borrowings under its Credit Facility, the issuance of its
1996 10 1/8% Notes, 1996 9 3/4% Notes and 5 1/2% Liquid Yield Option
Notes, which proceeds were used to finance acquisitions. The assumed
interest rate under the Credit Facility was 7 1/8%, which represents
the rate as of April 1997.

(c) These adjustments represent additional revenues and expenses related to
Premiere's acquisitions of After MidNite Entertainment, completed January
1997, and Cutler Productions, SJM Productions and Philadelphia Music Works,
which were completed at various dates during the second half of 1996.

(d) These adjustments represent the elimination of $11,039 and $1,146 of
corporate expenses related to the EFM Acquisition and the reclassification
of $2,606 and $650 in operating expenses for the year ended December 31,
1996 and the three months ended March 31, 1997, respectively, to conform
with the Company's reporting practices. The elimination of expenses is due
primarily to salaries of the selling shareholder whose employment was not
continued.

(e) These adjustments reflect the additional depreciation and amortization
expense resulting from the allocation of the Company's purchase price to
the assets acquired in the Merger and the EFM Acquisition including, an
increase in property and equipment and identifiable intangible assets, to
their estimated fair market values and the goodwill associated with the
acquisition of Premiere. Goodwill is amortized over 40 years.

(f) These adjustments represent costs recorded by Premiere related to certain
attempted business acquisitions and the assimilation of completed business
acquisitions, including miscellaneous severance, professional fees and
transition costs.

(g) These adjustments represent the elimination of debt issuance costs written
off by Premiere in 1996.

(h) To provide for the tax effect of pro forma adjustments using an estimated
statutory tax rate of 40%. The acquisition adjustments described in Note (a)
include non-deductible goodwill amortization estimated to be approximately
$5,000 for the year ended December 31, 1996 and $1,250 for the three months
ended March 31, 1997. The acquisition adjustments for the Premiere Merger
include non-deductible goodwill amortization estimated to be approximately
$3,800 for the year ended December 31, 1996 and $950 for the three months
ended March 31, 1997.

(i) These adjustments represent the allocation of the purchase price of the
Other Acquisitions to the estimated fair value of the assets acquired and
liabilities assumed, and the recording of goodwill associated with the
acquisitions. Previously funded escrow deposits of $24,174 were allocated as
part of the purchase price.

<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1997
(IN THOUSANDS)

(j) The adjustment represents the issuance of stock, and Credit Facility
borrowings to finance the Other Acquisitions.

<TABLE>
<CAPTION>
OTHER
ACQUISITIONS

<S> <C>
Common Stock Issued.................................................................. $ 22,650
Credit Facility Borrowings........................................................... 173,000
-----------
Total............................................................................ $ 195,650
-----------
-----------
</TABLE>

The Company utilized $6,831 in excess cash and $9,000 of proceeds from the
sale of an investment to finance, in part, the Other Acquisitions.

(k) The adjustments represent the allocation of the purchase price of the EFM
Acquisition and the Premiere Merger to the estimated fair value of the
assets acquired and liabilities assumed, and the recording of goodwill
associated with these acquisitions.

(l) The adjustment represents the assumed net proceeds from proposed
offerings of Common Stock by the Company pursuant to its omnibus shelf
registration statement (Form S-3 No. 333-19291) declared effective by the
Commission in April 1997 and as described in the Company's Preliminary
Prospectus Supplement thereto dated May 2, 1997, to be utilized in part
to finance a portion of the Premiere merger consideration, and the issuance
of stock to the Premiere stockholders, borrowings under the Credit Facility
to finance the EFM Acquisition and excess cash utilized to pay down Credit
Facility borrowings.

<TABLE>
<CAPTION>
EFM PREMIERE TOTAL

<S> <C> <C> <C>
Common Stock Offering Net Proceeds.................................. -- $ 129,200 $ 129,200
Zell Offering Proceeds.............................................. -- 20,000 20,000
Common Stock Issued to Premiere Stockholders........................ -- 48,800 48,800
Credit Facility Borrowings (repayments)............................. $ 50,000 (26,500) 23,500
Excess Cash Utilized................................................ -- 16,300 16,300
--------- ----------- ---------
$ 50,000 $ 187,800 $ 237,800
--------- ----------- ---------
--------- ----------- ---------
</TABLE>

Common Stock issued to Premiere stockholders includes Jacor stock options
which will be issued to certain Premiere option holders valued at $5,700.

(m) The adjustments represent the elimination of historical stockholders' equity
of the EFM Companies and Premiere as these acquisitions will be accounted
for as purchases.

(n) The pro forma weighted average shares outstanding includes all shares of
Common Stock outstanding at December 31, 1996 and March 31, 1997 and the
shares to be issued in the Company's proposed offerings of Common Stock,
the shares issued in conjunction with the acquisition of Regent and the
shares to be issued to the Premiere stockholders. The pro forma weighted
average shares of Jacor do not reflect any outstanding options and warrants
as they are antidilutive.

(o) The historical balance sheet for the EFM Companies has been prepared as of
December 31, 1996, the latest date for which a historical balance sheet was
available. The historical balance sheet of the EFM Companies is not material
to the Unaudited Pro Forma Condensed Consolidated Balance Sheet.

<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
REFERENCE
-------------
<S> <C>
Report of Independent Auditors......................................................................... F-2

Consolidated Balance Sheets at December 31, 1996 and 1995.............................................. F-3

Consolidated Statements of Income for each of the three years in the period ended December 31, 1996.... F-5

Consolidated Statements of Stockholders' Equity for each of the three years in the period ended
December 31, 1996..................................................................................... F-6

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31,
1996.................................................................................................. F-7

Notes to Consolidated Financial Statements............................................................. F-8
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
Premiere Radio Networks, Inc.

We have audited the accompanying consolidated balance sheets of Premiere
Radio Networks, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Premiere Radio
Networks, Inc. at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Los Angeles, California
February 21, 1997

F-2
<PAGE>
PREMIERE RADIO NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 14,776,436 $ 5,432,088
Accounts receivable, less allowance for doubtful accounts of $144,000 (1996) and
$214,000 (1995)................................................................ 7,165,928 4,086,623
Notes receivable from officer/employees.......................................... 98,172 282,279
Recoverable income taxes (Note 7)................................................ 213,828 250,952
Deferred income taxes (Note 7)................................................... 1,000,993 549,000
Prepaid expenses and other assets................................................ 739,208 1,375,805
------------- -------------
Total current assets........................................................... 23,994,565 11,976,747
Notes receivable from officer/employees (Note 9)................................... 668,356 845,000
Investments (Note 15).............................................................. 4,215,268 --
Deferred income taxes.............................................................. 99,000 --
Property and equipment, at cost, less accumulated depreciation and amortization
(Note 4).......................................................................... 2,318,939 1,797,337
Acquired program library and program networks, net of accumulated amortization of
$699,217 (1996) and $367,469 (1995) (Note 2)...................................... 1,368,223 1,699,971
Intellectual property, net of accumulated amortization of $1,376,893 (1996) and
$550,200 (1995) (Note 2).......................................................... 14,002,048 4,858,749
Debt issuance costs, net of accumulated amortization of $27,300 (1995) (Notes 10
and 11)........................................................................... -- 2,143,729
Other assets (Note 9).............................................................. 899,558 711,968
------------- -------------
Total assets................................................................... $ 47,565,957 $ 24,033,501
------------- -------------
------------- -------------
</TABLE>

See Accompanying Notes.

F-3
<PAGE>
PREMIERE RADIO NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other liabilities
(Notes 8 and 10)............................................................... $ 1,535,429 $ 1,722,205
Accrued payroll, bonuses, deferred compensation and profit sharing contribution
(Note 9)....................................................................... 830,788 905,468
Income taxes payable (Note 7).................................................... 15,920 25,022
Deferred revenue (Notes 2 and 15)................................................ 250,000 83,326
Current portion of notes payable, net of discount of $6,568 (1996)
(Note 5)....................................................................... 505,932 400,000
------------- -------------
Total current liabilities...................................................... 3,138,069 3,136,021
Notes payable, net of discount of $45,045 (1995), less current portion (Notes 2 and
5)................................................................................ 75,125 1,467,455
Deferred revenue................................................................... 1,516,800 --
Due to related party (Note 10)..................................................... -- 120,000
Other liabilities (Note 9)......................................................... 258,482 7,714
Commitments and contingencies (Note 6).............................................
Stockholders' equity (Notes 10 and 12):
Preferred stock, par value $.01 per share, 5,000,000 shares authorized........... -- --
Common stock, par value $.01 per share, 14,000,000 shares authorized, 3,592,675
and 3,641,650 shares issued at December 31, 1996 and 1995, respectively........ 35,927 36,417
Class A common stock, par value $.01 per share, 20,000,000 shares authorized,
4,041,420 shares issued at December 31, 1996................................... 40,414 --
Additional paid-in capital....................................................... 34,617,213 11,752,595
Retained earnings................................................................ 9,834,325 7,513,299
Less cost of common stock held in treasury, 1,000 shares of common stock and
186,600 shares of Class A common stock at December 31, 1996.................... (1,950,398) --
------------- -------------
Total stockholders' equity..................................................... 42,577,481 19,302,311
------------- -------------
Total liabilities and stockholders' equity..................................... $ 47,565,957 $ 24,033,501
------------- -------------
------------- -------------
</TABLE>

See Accompanying Notes.

F-4
<PAGE>
PREMIERE RADIO NETWORKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Revenue:
Gross revenue..................................................... $ 27,147,199 $ 20,756,932 $ 18,015,998
Less agency commissions........................................... (3,321,637) (2,437,973) (2,036,600)
------------- ------------- -------------
Net operating revenue............................................... 23,825,562 18,318,959 15,979,398
Operating expenses:
Production, programming and promotions............................ 7,495,131 5,472,346 5,284,036
Selling, general and administrative............................... 9,038,141 7,827,153 7,664,557
Depreciation and amortization..................................... 1,908,035 1,265,358 937,649
Other charges (Note 11)........................................... 417,045 -- --
------------- ------------- -------------
Total operating expenses........................................ 18,858,352 14,564,857 13,886,242
------------- ------------- -------------
Operating income.................................................... 4,967,210 3,754,102 2,093,156
Other income and expenses:
Interest income................................................... 1,217,885 262,046 88,989
Interest expense.................................................. (101,807) (244,503) (266,289)
Gain on sale of networks.......................................... -- -- 1,659,642
Gain on sale of radio station assets.............................. -- 452,919 --
Gain (loss) on sale of marketable securities and other............ -- 18,445 (221,112)
Write-off of debt issuance costs (Note 11)........................ (1,949,120) -- --
------------- ------------- -------------
(833,042) 488,907 1,261,230
------------- ------------- -------------
Income before minority interest and income taxes.................... 4,134,168 4,243,009 3,354,386
Minority interest in loss of joint venture.......................... -- 34,121 --
------------- ------------- -------------
Income before income taxes.......................................... 4,134,168 4,277,130 3,354,386
Provision for income taxes (Note 7)................................. 1,698,000 1,721,000 1,369,000
------------- ------------- -------------
Net income.......................................................... $ 2,436,168 $ 2,556,130 $ 1,985,386
------------- ------------- -------------
------------- ------------- -------------
Earnings per share.................................................. $ 0.28 $ 0.46 $ 0.43
------------- ------------- -------------
------------- ------------- -------------
Weighted average common and common equivalent shares outstanding.... 8,929,954 6,105,494 4,664,921
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

See Accompanying Notes.

F-5
<PAGE>
PREMIERE RADIO NETWORKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK TREASURY STOCK ADDITIONAL
---------------------- ---------------------- --------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993......................... 3,000,000 $ 30,000 -- $ -- -- $ -- $5,057,234 $2,971,783
Net income for 1994......... -- -- -- -- -- -- -- 1,985,386
Exercise of options......... 10,832 108 -- -- -- -- 77,176 --
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
Balance at December 31,
1994......................... 3,010,832 30,108 -- -- -- -- 5,134,410 4,957,169
Net income.................. -- -- -- -- -- -- -- 2,556,130
Sale of common stock and
Class B warrants.......... 500,000 5,000 -- -- -- -- 3,855,877 --
Issuance of Class A
warrants.................. -- -- -- -- -- -- 1,378,650 --
Income tax benefit from
stock options exercised... -- -- -- -- -- -- 400,000 --
Exercise of options and
warrants.................. 130,818 1,309 -- -- -- -- 983,658 --
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
Balance at December 31,
1995......................... 3,641,650 36,417 -- -- -- -- 11,752,595 7,513,299
Net income.................. -- -- -- -- -- -- -- 2,436,168
Exchange of common stock for
Class A common stock...... (140,000) (1,400) 140,000 1,400 -- -- -- --
Issuance of Class A common
stock..................... -- -- 1,360,000 13,600 -- -- 22,035,167 --
Income tax benefit from
stock options exercised... -- -- -- -- -- -- 262,000 --
Stock dividend.............. -- -- 2,502,988 25,030 -- -- -- (25,030)
Exercise of options and
warrants.................. 91,025 910 38,432 384 -- -- 567,451 --
Unrealized loss on
securities available for
sale...................... -- -- -- -- -- -- -- (90,112)
Purchase of treasury
stock..................... -- -- -- -- 187,600 (1,950,398) -- --
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
Balance at December 31,
1996......................... 3,592,675 $ 35,927 4,041,420 $ 40,414 187,600 $(1,950,398) $34,617,213 $9,834,325
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
--------- ----------- --------- ----------- --------- ---------- ---------- ---------

TOTAL
----------
<S> <C>
Balance at December 31,
1993......................... $8,059,017
Net income for 1994......... 1,985,386
Exercise of options......... 77,284
----------
Balance at December 31,
1994......................... 10,121,687
Net income.................. 2,556,130
Sale of common stock and
Class B warrants.......... 3,860,877
Issuance of Class A
warrants.................. 1,378,650
Income tax benefit from
stock options exercised... 400,000
Exercise of options and
warrants.................. 984,967
----------
Balance at December 31,
1995......................... 19,302,311
Net income.................. 2,436,168
Exchange of common stock for
Class A common stock...... --
Issuance of Class A common
stock..................... 22,048,767
Income tax benefit from
stock options exercised... 262,000
Stock dividend.............. --
Exercise of options and
warrants.................. 568,745
Unrealized loss on
securities available for
sale...................... (90,112)
Purchase of treasury
stock..................... (1,950,398)
----------
Balance at December 31,
1996......................... $42,577,481
----------
----------
</TABLE>

See Accompanying Notes.

F-6
<PAGE>
PREMIERE RADIO NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................................... $ 2,436,168 $2,556,130 $1,985,386
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization.............................................. 1,908,035 1,265,358 937,649
Loss on sale of marketable securities...................................... -- -- 221,114
Write-off of debt issuance costs........................................... 1,949,120 -- --
Gain on sale of networks................................................... -- -- (1,659,642)
Gain on sale of radio station assets....................................... -- (452,919) --
Gain on sale of fixed assets............................................... (1,216) (12,636) --
Deferred compensation...................................................... -- -- 106,939
Deferred operating costs of radio station.................................. -- (260,071) (431,667)
(Decrease) increase in allowance for doubtful accounts..................... (70,000) 8,000 53,000
Changes in deferred income taxes........................................... (551,000) (290,000) (353,000)
Changes in operating assets and liabilities:
Accounts receivable...................................................... (3,009,305) (948,679) (602,494)
Income taxes............................................................. 28,029 (404,249) 447,319
Prepaid expenses and other current assets................................ 566,432 (1,060,751) (308,795)
Notes receivable from officer/employees.................................. 110,751 (797,612) (339,767)
Investments.............................................................. (6,825) -- --
Other assets............................................................. (187,590) 25,082 (327,818)
Accounts payable and accrued liabilities................................. (227,326) 232,344 342,631
Deferred income.......................................................... 1,683,474 (521,129) 549,840
Other liabilities........................................................ 242,979 (99,225) --
----------- --------- ---------
Net cash provided by (used in) operating activities.......................... 4,871,726 (760,357) 620,695
----------- --------- ---------
INVESTING ACTIVITIES
Acquisition of property and equipment........................................ (1,250,046) (631,084) (469,579)
Acquisition of intangible assets............................................. (9,713,176) (2,320,935) (3,986,199)
Purchase of common stock of Audio Net........................................ (4,000,028) -- --
Net proceeds from sale of radio station assets............................... -- 5,565,496 --
Net proceeds from sale of equipment.......................................... 35,000 80,000 --
Sale of program networks..................................................... -- -- 2,136,339
Sale of marketable securities, net........................................... -- -- 1,095,896
----------- --------- ---------
Net cash (used in) provided by investing activities.......................... (14,928,250) 2,693,477 (1,223,543)
FINANCING ACTIVITIES
Proceeds from borrowings..................................................... -- -- 2,500,000
Repayment of note payable to officer......................................... -- (750,000) --
Repayment of borrowings...................................................... (1,528,242) (2,962,500) (237,500)
Proceeds from issuance of common stock and Class B warrants.................. -- 3,860,877 --
Proceeds from issuance of Class A common stock............................... 22,048,767 -- --
Exercise of stock options and warrants, including related tax benefit........ 830,745 1,384,967 77,284
Increase in debt issuance costs.............................................. -- (405,690) --
Purchase of treasury stock................................................... (1,950,398) -- --
----------- --------- ---------
Net cash provided by financing activities.................................... 19,400,872 1,127,654 2,339,784
----------- --------- ---------
Increase in cash and cash equivalents........................................ 9,344,348 3,060,774 1,736,936
Cash and cash equivalents at beginning of year............................... 5,432,088 2,371,314 634,378
----------- --------- ---------
Cash and cash equivalents at end of year..................................... $14,776,436 $5,432,088 $2,371,314
----------- --------- ---------
----------- --------- ---------
Cash paid for:
Interest................................................................... $ 11,034 $ 198,058 $ 250,135
----------- --------- ---------
----------- --------- ---------
Income taxes............................................................... $ 1,929,612 $1,998,871 $1,271,700
----------- --------- ---------
----------- --------- ---------
</TABLE>

See Accompanying Notes.

F-7
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

Premiere Radio Networks, Inc. (the Company) is an independent creator,
producer and distributor of comedy, entertainment and music-related network
radio programming, and research and other services. The Company derives a
substantial portion of its revenues from the sale of commercial radio broadcast
time to advertisers. The Company obtains commercial radio broadcast time from
third party radio station affiliates in exchange for its network radio programs
and services. The Company also derives a portion of its revenues from
commissions on sales of commercial broadcast time which it sells on behalf of
third party network radio programmers pursuant to exclusive sales representation
agreements. Substantially all of the Company's accounts receivable are from
advertising agencies that purchase commercial broadcast time from the Company on
behalf of national advertisers. The Company generally does not require
collateral from its customers.

The Company also owned a radio station in Denver, Colorado (see Note 2).
Radio station revenues were generally derived from the sale of commercial
broadcast time to advertisers and from the leasing of the radio station to a
buyer (from October 1, 1994 through February 28, 1995).

PRINCIPLES OF CONSOLIDATION

The consolidated 1995 financial statements include the accounts of the
Company's 75% owned joint venture (see Note 3). All material intercompany
transactions and accounts have been eliminated. Effective on September 3, 1996,
the Company acquired the other partner's interest in the joint venture and
merged the joint venture entity into the Company as part of one of its
divisions.

REVENUE RECOGNITION

Revenue from the sale to advertisers of commercial broadcast time obtained
in exchange for produced radio programs or research and other services is
recognized when the commercials are broadcast. Sales representation commission
revenue is recognized when the commercials are broadcast. Promotional fees are
recognized as services are rendered. Amounts received prior to the rendering of
promotional related services are recorded as deferred revenue.

Radio station revenue was recognized in the period in which commercials were
broadcast or in the case of the Local Programming and Marketing Agreement (LMA)
(see Note 2) in the period during which the LMA pertains.

Barter revenues, representing commercial broadcast time exchanged for
products or services, are recognized when the commercials are broadcast and are
recorded at the lesser of the estimated fair value of the commercial broadcast
time or the estimated fair value of products or services received, whichever is
more readily determinable.

PRODUCTION AND PROGRAMMING COSTS

Production and programming costs are expensed in the period in which they
occur. Costs related to programs not broadcast as of the balance sheet date are
insignificant. The Company does not capitalize costs associated with production
and distribution of internally developed programming, as the estimated future
revenues from this programming is considered immaterial.

F-8
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS

Advertising costs are expensed in the period in which they occur. The
accompanying statements of income include advertising costs of $105,000 in 1996,
$160,000 in 1995 and $153,000 in 1994.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less, when purchased, to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization is
computed by the straight-line method over the estimated useful lives of the
related assets as follows:

Office furniture and equipment 5 years
Production and programming equipment 5 - 7 years
Leasehold improvements Remaining life of lease

MARKETABLE SECURITIES

The Company determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates their classification at each
balance sheet date. Securities are classified as held-to-maturity when the
Company has the intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at cost and investment income is included
in earnings. The Company classifies certain highly liquid securities as trading
securities. Trading securities are stated at fair value and unrealized holding
gains and losses are included in income. Securities that are not classified as
held-to-maturity or trading are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
holding gains and losses, net of tax, reported in stockholders' equity.

FINANCIAL INSTRUMENTS

The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. Unless
otherwise described, the fair values of financial instruments approximate their
recorded values.

DEBT ISSUANCE COSTS

Debt issuance costs include the value of certain of the Class A warrants and
commitment fees, legal and other professional costs directly related to the
subordinated debentures. Debt issuance costs related to commitment fees incurred
in connection with the subordinated debentures were being amortized over a
seven-year period using the straight-line method. During the fourth quarter of
1996, the Company wrote-off the then remaining unamortized balance of debt
issuance costs (Notes 10 and 11).

INTANGIBLE ASSETS

Intangible assets are stated at cost and consist of program networks, an
acquired program library, production music libraries and other intellectual
properties. The carrying value of intangible assets are

F-9
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reviewed if the facts and circumstances suggest they may be impaired. If this
review indicates that the intangible assets will not be recoverable based on the
undiscounted cash flows over the remaining amortization period, the Company's
carrying value of the intangible assets will be reduced by the estimated short
fall of the discounted cash flows.

PROGRAM NETWORKS: Program networks represent the value of contracts with
various radio stations to broadcast certain Company-produced programming and the
tradenames and contracts with talent, used in the production of programming. The
program networks are being amortized over a seven-year or ten-year period using
the straight-line method.

ACQUIRED PROGRAM LIBRARY: The acquired program library represents the value
of a compilation of sports radio broadcasts purchased by the Company to produce
sports-oriented programming. The library is being amortized over a seven-year
period using the straight-line method.

INTELLECTUAL PROPERTY: Intellectual property consists of acquired software
used in radio broadcast research and the tradenames Mediabase and Newstrack, and
contracts with various third party radio station affiliates which subscribe to
the Mediabase and/or Newstrack research services. In addition, intellectual
property includes production music libraries consisting of copyrights or
exclusive licenses to production music and jingles libraries, including
short-form background music utilized in the production of radio programs,
commercials and jingles. Intellectual property is being amortized over a
seven-year or ten-year period using the straight-line method.

INCOME TAXES

The Company utilizes the liability method of accounting for income taxes, in
accordance with Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes."

EARNINGS PER SHARE

The computation of earnings per common and common equivalent shares is based
upon the weighted average number of common shares outstanding during the period
plus (in periods in which they have a dilutive effect) the effect of common
shares contingently issuable, primarily from the assumed exercise of stock
options and warrants to purchase common stock.

During 1996 and 1995, primary earnings per share and fully diluted earnings
per share were the same. During 1994, stock options and warrants to purchase
common stock were antidilutive for purposes of calculating fully diluted
earnings per share.

Earnings per share for the years ended December 31, 1996 and 1995, is
computed under the modified treasury stock method which assumes the exercise of
all outstanding stock options and warrants to purchase common stock, and the use
of the assumed proceeds thereof to purchase up to a maximum of 20% of the then
outstanding common stock of the Company. Excess proceeds derived from the
assumed purchase of such shares are assumed to be utilized to first reduce the
outstanding balances of notes payable and second for investment in short-term,
cash equivalent marketable securities. As a result, for purposes of determining
earnings per share, net income is adjusted for the hypothetical reduction in
interest expense ($16,000 and $108,000 for 1996 and 1995, respectively) and for
hypothetical interest

F-10
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income related to the assumed investment in marketable securities ($48,000 and
$140,000 for 1996 and 1995, respectively), such adjustments being made net of
income taxes.

Earnings per share for the year ended December 31, 1994 was computed under
the treasury stock method. Under the treasury stock method, the Company reduces
the assumed number of common shares issued from the exercise of stock options
and warrants to purchase common stock by the number of treasury shares assumed
to be purchased from the proceeds of such dilutive securities by utilizing the
average market price of the Company's common stock.

During March 1996 the Company's Board of Directors declared a 1-for-2 stock
dividend effected in the form of a 3-for-2 stock split. The stock dividend was
payable in shares of Class A common stock to holders of record of the Company's
common stock and Class A common stock (Stock Dividend). All references in the
financial statements to the number of shares and per share amounts prior to
March 1996, have been retroactively adjusted for the stock dividend.

STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 established a fair value-based method of
accounting for compensation cost related to stock options and other forms of
stock-based compensation plans. However, SFAS 123 allows an entity to continue
to measure compensation costs using the principles of APB 25 if certain pro
forma disclosures are made. The Company has elected to account for its stock
compensation arrangements under the provisions of APB 25, "Accounting for Stock
Issued to Employees." The Company adopted the provisions for pro forma
disclosure requirements of SFAS 123 in fiscal 1996.

CHANGE IN BASIS OF PRESENTATION

Certain reclassifications have been made to the 1995 and 1994 financial
statements in order to conform to the 1996 presentation.

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.

F-11
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITIONS AND DISPOSITIONS

RADIO STATION

On March 12, 1993, the Company completed an acquisition of certain assets of
radio station KZDG-FM in Denver, Colorado (KZDG-FM), for $3,605,395, including
acquisition costs. On September 30, 1994, the Company entered into an agreement
with Shamrock Broadcasting Inc. (Shamrock), a Delaware corporation, pursuant to
which the Company sold the radio station and broadcast license. The sale was
completed on February 28, 1995. Under the terms of the agreement, Shamrock
acquired the assets of the radio station, exclusive of cash, accounts receivable
and certain identified assets for $5,500,000. In connection with the sale, the
Company deferred operating losses and disposition costs of $432,000 for the
period October 1, 1994 to December 31, 1994. For the year ended December 31,
1994 the radio station had revenues of $1,209,000 and losses from operations
before income taxes of $729,000.

The Company also entered into a LMA with Shamrock pursuant to which the
Company licensed its broadcast time to Shamrock, including advertising time, for
$22,500 per month commencing October 1, 1994. The LMA terminated upon the
consummation of the sale of the radio station to Shamrock.

OLYMPIA PROGRAM NETWORKS

On November 29, 1993, the Company acquired nine radio program networks from
Olympia Networks of Missouri, Inc., including three comedy, one country music
and five sports program networks for $1,000,000.

On March 1, 1994, the Company completed the sale of the five sports program
networks for $2,700,000. In connection with the sale, the Company issued
warrants to purchase 15,000 shares of the Company's common stock exercisable at
$8 per share through February 28, 1998.

In addition, the Company signed an agreement to provide certain future sales
representation services on an exclusive basis to the buyer of the networks for a
period of three years. In connection with the sales representation agreement,
the Company received a nonrefundable $1,000,000 advance which was recognized as
income in accordance with the terms of the agreement.

ACQUIRED SPORTS RADIO PROGRAM LIBRARY

On December 14, 1994, the Company acquired a collection of sports radio
broadcasts (the Library) from a corporation controlled by an officer of the
Company. The Library was acquired for $1,500,000 (exclusive of acquisition costs
of $19,286) payable, $750,000 at closing and $750,000 on April 1, 1995.

BROADCAST RESULTS GROUP (BRG)

On August 29, 1995, the Company acquired substantially all of the assets of
BRG for $2,337,500 cash and a noninterest bearing, 18-month note payable with a
face amount of $412,500. The assets of BRG acquired by the Company consist
principally of intellectual properties and other intangibles, including
production music libraries, third-party radio station affiliate broadcast
contracts, and copyrights. The Company did not assume any preacquisition
accounts payable or other obligations of BRG, except for certain commitments
under real property and equipment leases. The acquisition of BRG has been
accounted for using the purchase method of accounting. The former chief
executive officer and 39% stockholder of BRG has been employed by the Company
pursuant to a four-year employment agreement.

F-12
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
The results of operations of BRG have been included in the consolidated
statement of income from the date of acquisition.

The net purchase price was allocated as follows:

<TABLE>
<S> <C>
Property, plant and equipment........................... $ 25,000
Intellectual property................................... 2,543,000
Other assets............................................ 25,000
---------
$2,593,000
---------
---------
</TABLE>

PHILADELPHIA MUSIC WORKS (PMW)

On September 27, 1996 the Company acquired substantially all of the assets
of Philadelphia Music Works, Inc. (PMW) from an employee (the former chief
executive officer of BRG) of the Company, for total consideration of $635,000,
consisting of $435,000 in cash and $200,000 in a 6.5% interest, two-year
promissory note payable. Further, additional consideration of up to $700,000 may
be payable depending upon the audience levels delivered by PMW in the future.

The assets of PMW acquired by the Company consist principally of
intellectual properties and other intangible assets, including a library of over
6,000 jingles, third-party radio station affiliate broadcast contracts, and
copyrights. The Company did not assume any pre-acquisition accounts payable or
other obligations of PMW, except for certain commitments under real property and
equipment leases. The acquisition of PMW has been accounted for using the
purchase method of accounting.

On September 27, 1996 the Company amended and restated an August 29, 1995
agreement pursuant to which it had entered into future commitments to acquire
licenses to three (3) production music libraries from Canary Productions, Inc.
(Canary), which is wholly-owned by an employee of the Company. Under the amended
and restated agreement, the Company has entered into future commitments to
acquire a license to one (1) additional production music library, or four (4)
production music libraries in total, from Canary. The licenses to the production
music libraries will be acquired by the Company, one each year during the next
four years, for a purchase price that will be based upon a formula of a multiple
of earnings of each such library, payable in cash or shares of the Company's
Class A common stock. Subsequent to December 31, 1996, the Company acquired the
license to the first such library for a nominal amount.

The net purchase price of PMW was allocated as follows:

<TABLE>
<S> <C>
Property, plant and equipment............................. $ 10,000
Intellectual property..................................... 676,000
Other assets.............................................. 25,000
---------
$ 711,000
---------
---------
</TABLE>

The results of operations of PMW have been included in the consolidated
statement of income from the date of acquisition.

F-13
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
CUTLER PRODUCTIONS, INC. AND SJM PRODUCTIONS, INC. (CUTLER)

On October 1, 1996, the Company consummated an agreement pursuant to which
it acquired substantially all of the assets of Cutler Productions, Inc. and SJM
Productions, Inc. (collectively, Cutler) for consideration consisting of
$8,500,000 in cash.

The assets of Cutler acquired by the Company consist principally of
intellectual properties and other intangibles, including third-party radio
station affiliate broadcast contracts, a library of programs and program rights,
and copyrights. The Company did not assume any pre-acquisition accounts payable
or other obligations of Cutler, except for certain commitments under real
property and equipment leases. The acquisitions of Cutler has been accounted for
using the purchase method of accounting. Cutler's sole shareholder and Chief
Executive officer has been employed by the Company pursuant to a three year
employment agreement.

The net purchase price of Cutler was allocated as follows:

<TABLE>
<S> <C>
Property, plant and equipment........................... $ 75,000
Intellectual property................................... 8,736,000
Covenant not to compete................................. 100,000
Other assets............................................ 180,000
---------
$9,091,000
---------
---------
</TABLE>

The results of operations of Cutler have been included in the consolidated
statement of income from the date of acquisition.

In connection with the acquisition of Cutler, the Company paid Archon
Communications Inc. (Archon) a fee of $100,000.

The following summarized, unaudited pro forma statements of operations give
effect to the acquisition of PMW and Cutler as if the acquisitions had occurred
at the beginning of each period presented and after giving effect to certain
adjustments, including the inclusion of PMW's and Cutler's operations during the
years ended December 31, 1996 and 1995. The summarized, unaudited pro forma
statements of income do not purport to be indicative of the results of
operations that actually would have resulted had the sale occurred on the date
indicated, and is not intended to be indicative of future results.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1996 1995
------------- -------------
(UNAUDITED)
<S> <C> <C>
Net operating revenue.......................................... $ 28,654,000 $ 22,689,000
Operating income............................................... 5,547,000 3,681,000
Net income..................................................... 2,774,000 2,516,000
Primary earnings per share..................................... $ 0.32 $ 0.45
Weighted average common and common equivalent shares
outstanding................................................... 8,929,954 6,105,494
</TABLE>

3. JOINT VENTURES

On May 28, 1993, the Company entered into an agreement with Mediabase, a
Michigan corporation, pursuant to which the Company and Mediabase formed a joint
venture to nationally syndicate the Monday

F-14
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. JOINT VENTURES (CONTINUED)
Morning Replay research service to radio stations principally throughout the
United States and Canada. The joint venture had commenced operations as
Mediabase Premiere Radio Networks (MPRN) and was 50% owned by each party, with
profits and losses shared equally. During the period May 28, 1993 through April
27, 1994, the Company accounted for this joint venture using the consolidation
method of accounting as it held a majority of the seats on the Executive
Committee and had management control of the joint venture.

Effective April 27, 1994, the Company acquired the remaining 50% share of
MPRN for $3,216,915, including transaction costs. The purchase price was
allocated to tangible equipment of $230,000 and $2,720,559 to intellectual
property (net of the carrying value of the minority interest of $266,356).

On March 20, 1995, the Company entered into a joint venture agreement with
Marketing/Research Partners, Inc. (MRPI) to nationally syndicate Newstrack
(Newstrack Joint Venture), a research service jointly developed by the Company
and MRPI. The Newstrack Joint Venture commenced operations on or about September
1, 1995.

In exchange for a 75% interest in the Newstrack Joint Venture, the Company
agreed to contribute $265,000 payable in four quarterly payments of $66,250
commencing on August 15, 1995, and advance certain commencement costs related to
the Newstrack Joint Venture. MRPI received a 25% interest in the Newstrack Joint
Venture for contributing computer systems and providing certain research
services for a one-year period.

The Company had the option to acquire MRPI's interest in the Newstrack Joint
Venture anytime after May 1, 1997 based upon a multiple of Newstrack's pre-tax
earnings, or at an earlier date based upon defined conditions. Effective
September 3, 1996, the Company acquired the remaining 25% minority interest from
MRPI for $303,188.

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Office furniture and equipment.................................... $ 2,101,584 $ 1,758,283
Production and programming equipment.............................. 1,220,861 973,372
Leasehold improvements............................................ 799,449 445,417
------------ ------------
4,121,894 3,177,072
Less accumulated depreciation and amortization.................... 1,802,955 1,379,735
------------ ------------
$ 2,318,939 $ 1,797,337
------------ ------------
------------ ------------
</TABLE>

5. NOTES PAYABLE

On March 19, 1993, the Company entered into an agreement (as subsequently
amended) with Bank of America NT&SA (the Bank) whereby the Company obtained a
$2,200,000 term loan which was subsequently amended to $4,200,000 on July 15,
1994 and a $2,000,000 working capital line of credit which expired on May 15,
1996. Both loans were secured by substantially all the assets of the Company.
Outstanding borrowings were repaid in full in January 1996.

F-15
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. NOTES PAYABLE (CONTINUED)
In connection with the acquisition of BRG, the Company issued a $412,500
non-interest bearing note payable, due in January 1997. In connection with the
acquisition of PMW the Company issued a $200,000, 6 1/2% interest note payable
due in equal quarterly installments of principal and accrued interest over two
years (see Note 2).

6. COMMITMENTS AND CONTINGENCIES

The Company leases space for its office and production facilities under
operating leases expiring at various dates through 2000. Renewal options are
available on certain of these leases. Future minimum lease payments under
noncancelable operating leases, including amounts payable under barter
arrangements, at December 31, 1996, are as follows:

Rental expense under operating leases was $671,585 in 1996, $453,248 in 1995
and $312,508 in 1994.

The Company is, from time to time, a party to various legal actions and
complaints arising in the ordinary course of business. In the opinion of the
Company's management, all such matters are without merit or involve amounts
which, in the event of unfavorable disposition, will not have a material impact
on the Company's financial position or results of operations.

7. INCOME TAXES

The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal........................................... $ 1,766,000 $ 1,577,000 $ 1,423,000
State............................................. 423,000 434,000 299,000
------------ ------------ ------------
2,189,000 2,011,000 1,722,000
Deferred:
Federal........................................... (384,000) (226,000) (287,000)
State............................................. (107,000) (64,000) (66,000)
------------ ------------ ------------
(491,000) (290,000) (353,000)
------------ ------------ ------------
$ 1,698,000 $ 1,721,000 $ 1,369,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax

F-16
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. INCOME TAXES (CONTINUED)
purposes. Significant components of the Company's current deferred tax assets as
of December 31 are as follows:

<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Accounts receivable allowance....................................... $ 121,000 $ 169,000
Deferred compensation............................................... 143,000 196,000
State income taxes.................................................. 65,000 50,000
Unrealized losses on securities..................................... 78,000 18,000
Deferred revenue.................................................... 706,000 33,000
Accrued expenses.................................................... 17,000 110,000
Other............................................................... 29,000 33,000
------------ ----------
Total............................................................... 1,159,000 609,000
Valuation allowance................................................. (60,000) (60,000)
------------ ----------
Net deferred tax assets............................................. $ 1,099,000 $ 549,000
------------ ----------
------------ ----------
</TABLE>

The effective tax rate varied from the statutory federal income tax rate as
follows:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal rate........................................... 34.0% 34.0% 34.0%
State and local taxes, net of federal tax benefit................ 5.1 5.2 4.6
Other items...................................................... 1.9 1.0 2.2
--------- --------- ---------
Effective income tax rate........................................ 41.0% 40.2% 40.8%
--------- --------- ---------
--------- --------- ---------
</TABLE>

8. BARTER ARRANGEMENTS

The Company exchanges otherwise perishable, unsold commercial broadcast time
for products and services. Net operating revenue includes $1,517,210 in 1996,
$1,337,809 in 1995 and $1,194,427 in 1994, representing the fair value of
products or services exchanged for broadcast time. Selling and general and
administrative expenses include the fair value of products and services utilized
of $1,010,906 in 1996, $956,661 in 1995 and $1,003,222 in 1994. Additions to
property and equipment through such transactions were $70,350 in 1996, $425,936
in 1995 and $187,342 in 1994.

Included in accounts payable, accrued expenses and other liabilities at
December 31, 1996 and 1995, is $159,686 and $193,729, respectively, representing
the fair value of goods and services owed by the Company to third parties under
noncancelable agreements for commercial time broadcast prior to December 31 of
the respective years.

9. RETIREMENT PLANS, EXECUTIVE BONUS POOL, EXECUTIVE LIFE INSURANCE AND
EXECUTIVE LOAN

The Company provides for retirement through a profit-sharing plan, as
subsequently amended into a qualified 401(k) savings retirement plan, and
through a non-qualified Supplemental Executive Retirement Plan (SERP).

The Company's 401(k) savings retirement plan covers all eligible employees.
Contributions were determined by the Board of Directors subject to maximum
limitations as provided in the Internal Revenue

F-17
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. RETIREMENT PLANS, EXECUTIVE BONUS POOL, EXECUTIVE LIFE INSURANCE AND
EXECUTIVE LOAN (CONTINUED)
Code. Contributions by the Company made under the plan and included in the
accompanying statements of income were $58,800 in 1996, $69,000 in 1995 and
$80,000 in 1994.

Under the 401(k) savings retirement plan (401(k) Plan), all employees who
have completed one year of service or 1,000 hours of service in that year with
the Company are eligible to join the 401(k) Plan on January 1 or July 1 of any
given year. All eligible employees may contribute from 1% to 15% of their annual
compensation on a pre-tax basis subject to annual IRS limitations. The Company
makes matching contributions in an amount equal to 20% of the employee's
contributions up to 10% of their annual compensation. Matching contributions
made by the Company vest 20% per year beginning with the employee's first date
of eligibility and participation in the 401(k) Plan.

The Company has an Executive Bonus Pool under which bonuses are paid to
executives at the discretion of the Compensation Committee. Amounts recorded as
expense under the plan were $285,000 in 1996, $240,000 in 1995 and $170,000 in
1994.

Effective December 31, 1995, the Company adopted a SERP for 5% or more
stockholder/employees and certain designated executive officers of the Company.
Under the SERP, all eligible employees may defer up to 100% of their annual
compensation up to a maximum of $100,000 per year and earn interest on their
deferred amounts. The total participant deferrals, were $120,000 and $230,000
during the years ended December 31, 1996 and 1995, respectively.

During 1996, the Company entered into split-dollar life insurance agreements
with certain executives of the Company. Under the terms of the agreements, the
Company purchases life insurance policies on behalf of the executives that build
cash surrender value while also providing life insurance benefits for the
executives. The Company is entitled to a refund of all previously paid premiums
or the cash surrender value, whichever is lower. In the event of the death of
the executive, the Company will immediately be entitled to a refund of
previously paid premiums. The Company may terminate the agreements at any time
by giving written notice to the executive. At December 31, 1996, none of the
executive insurance policies had any cash surrender value in excess of
previously paid premiums.

As contemplated pursuant to the terms of an employment agreement, on
November 10, 1995, the Company loaned its Chief Executive Officer (the
Executive) $800,000, which is secured by 170,000 and 85,000 shares of the
Company's common stock and Class A common stock, respectively, owned by the
Executive. The loan is non-recourse and bears interest, payable quarterly, at
the Bank's Reference Rate, as announced on the first day of each quarter. The
loan is payable on the earlier of July 28, 1999, or such date as the Executive
ceases full-time employment with the Company (or, if the Company terminates such
employment without cause, one year thereafter). Not less than 70% of the net
proceeds of the sale by the Executive of any pledged shares and 25% of the net
proceeds of sale of any other Company shares owned by the Executive shall be
applied to repayment of the loan. The number of pledged shares will be reduced
proportionately in the event of partial principal payments on the loan, provided
that no collateral would be released to the extent the fair market value or the
collateral remaining as security is less than 200% of the outstanding principal
amount. During 1996, the executive repaid $197,664 in principal.

F-18
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. DEBT AND EQUITY PLACEMENT

On July 26, 1995, the Company's stockholders approved, and on July 28, 1995
(Closing Date), the Company consummated, various agreements including the
Securities Purchase Agreement with Archon pursuant to which Archon provided to
the Company standby commitments (Commitment Agreements) to purchase up to
$10,800,000 of subordinated debentures (Debentures) and purchased from the
Company 750,000 shares of common stock and 1,221,750 Class B warrants (659,250
warrants were placed in escrow to be released to Archon pro rata if Debentures
were issued by the Company or upon termination of the commitments, whichever
came first) for aggregate cash consideration of $4,025,000. The Debentures were
issuable in units consisting of $1,000 principal amount of Debentures and 150
detachable Class A warrants exercisable at $7.00 per share (an aggregate or up
to 1,620,000 detachable Class A warrants were issuable). The Debentures were
issuable at the Company's call through October 28, 1996. In the event the
Company did not exercise its call rights with respect to the Debentures, Archon
was still entitled to receive 1,060,500 of the Class A warrants.

On the Closing Date, the Company paid Archon a commitment fee of $108,000
for executing the Commitment Agreements and $40,000 representing the first of
five annual installments for providing standby commitments to purchase the
Debentures. The Company was also obligated to pay Archon a facility fee equal to
0.30% per quarter of the average principal amount of the unused subordinated
debentures which facility fee was waived by Archon effective January 1, 1996. In
addition, the Company paid $204,000 directly to or on behalf of Archon for legal
and professional fees and expenses incurred by Archon in connection with these
transactions.

All of the securities, including the Debentures, common stock and warrants,
have certain registration and piggyback rights.

Under the Securities Purchase Agreement, Archon and the Company's principal
stockholders and executive officers (the Insiders) have entered into a
Stockholders' Agreement. Under the Stockholders' Agreement, the Insiders and
Archon have entered into a Voting Trust Agreement pursuant to which Archon has
contributed 500,000 shares of common stock and 250,000 shares of Class A common
stock and the Insiders have contributed 1,288,624 shares of common stock, and
644,312 shares of Class A common stock. Through the Voting Trust Agreement,
Archon has received proxies which will enable it to effectuate 50% control of
the voting trust shares and 50% of the shares of Insiders not in the voting
trust. In addition, Archon received three seats on the eight-member board of
directors and the right to designate two outside directors.

During January 1996, the Company completed the sale of 1,500,000 shares of
Class A common stock at $18.25 per share (after giving effect to the Stock
Dividend, holders received 2,250,000 shares of Class A common stock from this
sale) pursuant to a follow-on public offering and received net proceeds of
$22,049,000 (net of underwriting discounts, commissions and expenses). Included
in prepaid expenses and other assets at December 31, 1995, is approximately
$511,000 representing expenses incurred in connection with the public offering.

In connection with this offering, the Company paid Archon a fee of $200,000.

11. WRITE-OFF OF DEBT ISSUANCE COSTS AND OTHER CHARGES

The Company recorded, as debt issuance costs, the value of the 1,060,500
Class A warrants which were issuable to Archon whether or not the Company
exercised its call rights with respect to the Debentures, commitment fees,
legal, professional and other costs directly related to the Debentures (Note

F-19
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. WRITE-OFF OF DEBT ISSUANCE COSTS AND OTHER CHARGES (CONTINUED)
10). Because the Company did not call on Archon to purchase the Debentures by
October 28, 1996, the Company wrote off the then remaining unamortized debt
issuance costs which resulted in a one-time earnings charge during the fourth
quarter of 1996 of $1,949,120.

In connection with attempted business acquisitions and the assimilation of
completed business acquisitions (Note 2) during the year ended December 31,
1996, the Company incurred professional fees, severance, transition and other
costs. The costs which aggregated $417,045 were charged to expense in the 1996
statement of income.

12. STOCKHOLDERS' EQUITY

In connection with the Company's initial public offering on May 5, 1992, the
Company issued warrants for 100,000 shares of common stock (and up to 50,000
shares of Class A common stock after giving effect to the Stock Dividend) (such
number of warrants are subject to adjustment under certain conditions) to the
underwriter that are exercisable through April 28, 1997. At December 31, 1996,
warrants for 52,667 and 27,334 shares of common stock and Class A common stock,
respectively, at an exercise price of $4.31 per share were outstanding.

The Company purchased 1,000 shares of common stock and 186,600 shares of
Class A common stock in 1996 at an aggregate cost of $1,950,398. At December 31,
1996 the Company had remaining authorization under its stock repurchase program
to acquire up to an aggregate value of $1,049,602 of either class of its common
stock.

As a condition, among others, to the consummation of the Securities Purchase
Agreement (Note 10), the Company reincorporated from the State of California to
the State of Delaware. Upon completion of the reincorporation, each outstanding
share of the Company's common stock, no par value, was converted into one share
of common stock, $.01 par value of the Delaware corporation. In addition, the
authorized capital stock of the Delaware corporation was expanded to include
14,000,000 shares of Class A common stock, $.01 par value, and 5,000,000 shares
of "blank check" preferred stock, $.01 par value. The common stock and Class A
common stock are identical in all respects except that each share of common
stock will be entitled to one vote and Class A common stock will be entitled to
one-tenth vote on all matters submitted to stockholders.

In August 1996, the Company's stockholders approved an amendment to the
Certificate of Incorporation of the Company which provided that (a) each share
of common stock is entitled to ten votes per share and each share of Class A
common stock is entitled to one vote per share, (b) each share of common stock
is convertible into one share of Class A common stock at the option of the
holder thereof, (c) that the Company may not treat the common stock and Class A
common stock differently (except for voting rights) in any merger,
reorganization, recapitalization or similar transaction or support a tender
offer which attempts to do so, and (d) the authorized number of shares of common
stock and Class A common stock be increased to 14,000,000 and 20,000,000 shares,
respectively.

13. STOCK OPTION PLANS

On May 5, 1992, the Company established the 1992 Stock Option Plan (1992
Plan) pursuant to which 547,207 and 221,029 shares of common stock and Class A
common stock, respectively, have been reserved for issuance under the 1992 Plan.
All options were granted at no less than the fair market value of the shares on
the date of grant (or 110% of fair market value, in the case of persons owning
10% or more of

F-20
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. STOCK OPTION PLANS (CONTINUED)
the Company's stock on the date of grant). On July 26, 1995, the Company's
stockholders approved the Company's 1995 Stock Option Plan (1995 Plan) pursuant
to which additional options for 1,113,887 Class A common stock have been
reserved for future issuance.

The Company's 1992 Plan and 1995 Plan have certain anti-dilution provisions.
As a result of the Stock Dividend, options authorized, granted and outstanding
on the record date of the Stock Dividend were adjusted accordingly. At December
31, 1996, an aggregate of 1,722,438 options have been granted under the
Company's stock option plans and 898,115 options were vested and exercisable.

The Company has elected to follow APB 25 (Note 1) in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under SFAS 123, requires use of option valuation models
that were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for each of
the years ended December 31, 1996 and 1995: risk-free interest rates ranging
from 5.5% to 6.5%; volatility factors of the expected market price of the
Company's common stock of 0.551; and a weighted-average expected life of the
options ranging from 1 to 5 years.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Given this
method of amortization, the initial impact of applying SFAS 123 on pro forma net
income and pro forma earnings per share is not representative of the potential
impact on pro forma amounts in future years, when the effect of amortization
from multiple awards would be reflected. The Company's pro forma information
follows:

<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Pro forma net income.............................................. $ 1,221,832 $ 2,691,289
Pro forma earnings per share...................................... $ 0.13 $ 0.37
</TABLE>

F-21
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. STOCK OPTION PLANS (CONTINUED)
The following is a summary of stock options granted, exercised and
terminated through December 31:

<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............ 910,873 $ 6.18 755,323 $ 4.64 727,601 $ 4.63
Granted..................................... 643,500 $ 10.50 264,375 $ 9.90 63,750 $ 4.73
Exercised................................... (95,230) $ 4.32 (108,825) $ 4.52 (16,250) $ 4.76
Forfeited................................... (39,653) $ 6.78 -- -- (19,778) $ 4.63
---------- ----------- ---------- ----- ---------- -----
Outstanding at end of year.................. 1,419,490 $ 8.24 910,873 $ 6.18 755,323 $ 4.64
---------- ----------- ---------- ----- ---------- -----
---------- ----------- ---------- ----- ---------- -----
Exercisable at end of year.................. 898,115 $ 6.83 806,370 $ 5.10 701,063 $ 4.72
---------- ----------- ---------- ----- ---------- -----
---------- ----------- ---------- ----- ---------- -----
Weighted average fair value of options
granted during year........................ $ 5.11 $ 3.76
</TABLE>

Exercise prices for options outstanding as of December 31, 1996 ranged from
$3.83 to $20.00. The weighted average remaining contractual life of those
options is 3.6 years. Options vest over a period of two or five years from
respective grant dates.

At December 31, 1996, the Company had outstanding, other than the Class A
warrants and Class B warrants (Note 10), and the warrants issued to an
underwriter in connection with its initial public offering (Note 12), 52,500 and
26,250 warrants to purchase common stock and Class A common stock issued to a
company controlled by a director of the Company, respectively, at an exercise
price of $5.17 per share, and 135,000 warrants to purchase Class A common stock
at $8.67 per share issued to certain current and former directors of the
Company.

During October 1996 the Company granted 60,000 options to an affiliate of
Archon at an exercise price of $11.00 per share.

14. NOTE RECEIVABLE

On November 15, 1995, the Company loaned $500,000 to Major Networks, Inc.
(Major) secured by certain of Major's accounts receivable and five sports
programs. The loan does was noninterest bearing and was payable from proceeds of
accounts receivable collected by the Company under the terms of a sales
representation agreement. During 1996, the loan was repaid.

15. INVESTMENTS

During November 1996 the Company acquired 5% of the outstanding common
shares of Audionet, Inc. (Audionet) for $4,000,028 in cash. The investment which
is available for sale is being carried at fair value (approximates cost at
December 31, 1996). Under separate agreements, Audionet has retained the Company
as Audionet's exclusive network radio sales representative, and has paid to the
Company an advance of $2,000,000 towards Audionet's commitment to purchase
network radio advertising from the Company over a two-year period. At December
31, 1996 the Company has recorded $1,766,800 of deferred revenue representing
the unrecognized amount of the advance paid by Audionet.

F-22
<PAGE>
PREMIERE RADIO NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. INVESTMENTS (CONTINUED)
Also, included in investments at December 31, 1996 is $215,240 representing
the estimated fair value of third-party common stock acquired in exchange for
commercial time broadcast prior to December 31, 1996. At December 31, 1996, an
unrealized loss of $150,112, which was offset by deferred income taxes of
$60,000, was charged to stockholders' equity.

16. SUBSEQUENT EVENT--ACQUISITION OF AFTER MIDNITE ENTERTAINMENT, INC.

Effective on January 7, 1997, pursuant to an Agreement and Plan of Merger By
and Among the Company, After MidNite Entertainment, Inc. (AME) and the
Shareholders of AME dated as of January 1, 1997 (Merger Agreement), a
wholly-owned merger subsidiary of the Company acquired 100% of the outstanding
shares of AME for consideration consisting of $3,900,000 cash and 400,000 shares
of the Company's Class A common stock. Under the terms of the Merger Agreement,
the Company has agreed to pay additional consideration either in cash or
additional shares of Class A common stock, at its option, if the market value of
the Class A common stock is less than $16.00 per share one year from the closing
date of the transaction.

Pursuant to the terms of the Merger Agreement, the sellers assumed
responsibility for all pre-acquisition accounts payable or other obligations of
AME, except for certain commitments under real property and equipment leases. In
addition, the sellers retained AME's pre-Closing accounts receivable and cash
balances as of the closing date of the transaction. The acquisition of AME will
be accounted for by the Company as a purchase.

In connection with the AME acquisition, the Company entered into various
agreements with a former shareholder of AME, whereby, among other things, the
Company paid the shareholder a transaction fee in the amount of $500,000. In
addition, the Company has agreed to retain the shareholder under a two-year
consulting agreement and the shareholder was nominated to the Company's Board of
Directors in January 1997.

17. SUBSEQUENT EVENT (UNAUDITED)--SALE OF 100% OF THE COMPANY'S COMMON STOCK TO
JACOR COMMUNICATIONS, INC.

On April 7, 1997, the Company announced that it had signed a definitive
merger agreement with Jacor Communications, Inc. (Jacor) pursuant to which Jacor
will acquire 100% of the outstanding common stock, Class A common stock and
common stock equivalents of the Company for cash and stock valued at
approximately $185 million or approximately $18 per share, consisting of $13.50
in cash with the balance in Jacor common stock. The acquisition price is subject
to adjustment in certain circumstances. Actual closing of the merger transaction
is subject to regulatory review, including the expiration of the applicable
Hart-Scott-Rodino waiting period, and other customary closing considerations.

F-23

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Amendment No. 1 to the
Registration Statement (Form S-3 No. 333-19291) and related Prospectus of
Jacor Communications, Inc. of our report dated February 21, 1997, with
respect to the consolidated financial statements of Premiere Radio Networks,
Inc. included in this Current Report on Form 8-K(A) dated April 7, 1997.

Ernst & Young LLP

Los Angeles, California
May 2, 1997