FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-12404
JACOR COMMUNICATIONS, INC.
A Delaware Corporation Employer
Identification
No. 31-0978313
Commission File No. 1-8283
CITICASTERS INC.
(Successor by merger to JCAC, Inc.)
A Florida Corporation Employer
Identification
No. 59-2054850
1300 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
Telephone (513) 621-1300
Indicate by check mark whether the Registrant, Jacor
Communications, Inc.,
(1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding
twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
Yes X No
Indicate by check mark whether the Co-Registrant, Citicasters
Inc. (the successor by merger to JCAC, Inc.), (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
months (or for such shorter period that the Co-Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
Yes X No
Indicate by check mark whether the Co-Registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No
At November 1, 1996, 31,254,338 shares of the Registrant's common
stock were outstanding. At November 1, 1996, 100 shares of the
Co-Registrant's common stock were outstanding, all of which
shares are owned by the Registrant.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(the "Company")
INDEX
Page
Number
PART I. Financial Information
Item 1. - Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1996 and December 31,
1995 3
Condensed Consolidated Statements of
Operations for the three months and
nine months ended September 30, 1996
and 1995 4
Condensed Consolidated Statements of
Cash Flows for the nine months ended
September 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 14
PART II. Other Information
Item 5. - Other Information 21
Item 6. - Exhibits and Reports on Form 8-K 38
Signatures 40
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share data)
<CAPTION>
September 30, December 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 52,821 $ 7,437
Accounts receivable, less allowance for
doubtful accounts of $3,877 in 1996
and $1,606 in 1995 70,782 25,262
Other current assets 12,897 3,916
Total current assets 136,500 36,615
Property and equipment, net 141,259 30,801
Intangible assets, net 1,295,286 127,158
Other assets 98,032 14,265
Total assets $ 1,671,077 $ 208,839
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses
and other current liabilities $ 51,898 $ 12,180
Total current liabilities 51,898 12,180
Long-term debt 626,250 45,500
5.5% Liquid Yield Option Notes 117,090 -
Deferred taxes and other liabilities 393,728 12,086
Shareholders' equity:
Common stock, $.01 par value 312 182
Additional paid-in capital 430,307 118,248
Common stock warrants 26,500 388
Retained earnings 24,992 20,255
Total shareholders' equity 482,111 139,073
Total liabilities and
shareholders' equity $ 1,671,077 $ 208,839
The accompanying notes are an integral part
of the condensed consolidated financial statements.
</TABLE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and nine months ended September 30, 1996 and 1995
(In thousands, except per share amounts)
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Broadcast revenue $ 60,143 $ 36,116 $ 142,176 $ 97,648
Less agency commissions 5,817 3,822 14,656 10,472
Net revenue 54,326 32,294 127,520 87,176
Broadcast operating expenses 38,273 23,129 91,694 65,241
Depreciation and amortization 5,166 2,442 10,601 6,783
Corporate general and
administrative expenses 1,658 824 4,080 2,564
Operating income 9,229 5,899 21,145 12,588
Interest expense (6,844) (384) (13,397) (593)
Gain on sale of radio stations - - 2,539 -
Other income, net 3,160 348 4,701 1,052
Income before income taxes
and extraordinary loss 5,545 5,863 14,988 13,047
Income taxes 3,445 2,375 7,285 5,279
Income before
extraordinary loss 2,100 3,488 7,703 7,768
Extraordinary loss, net of
income tax credit (2,015) - (2,966) -
Net income $ 85 $ 3,488 $ 4,737 $ 7,768
NET INCOME PER COMMON SHARE:
Before extraordinary loss $ 0.06 $ 0.17 $ 0.31 $ 0.37
Extraordinary loss (0.06) - (0.12) -
Net income per common share $ 0.00 $ 0.17 $ 0.19 $ 0.37
Number of common shares used
in per share computations 33,303 21,009 24,880 21,136
The accompanying notes are an integral
part of the condensed consolidated financial statements.
</TABLE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1996 and 1995
(In thousands)
(UNAUDITED)
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,737 $ 7,768
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation 3,989 2,306
Amortization of intangibles 6,612 4,476
Extraordinary loss 2,966
Non-cash interest expense 2,525
Deferred income tax provision (benefit) 636 (352)
Gain on sale of radio stations (2,539)
Other (201) 197
Change in current assets and current
liabilities net of effects of
acquisitions and disposals:
Accounts receivable (7,769) (1,146)
Other current assets (2,556) (265)
Accounts payable, accrued expenses
and other current liabilities 9,256 3,976
Net cash provided by operating activities 17,656 16,960
Cash flows from investing activities:
Capital expenditures (7,506) (3,664)
Cash paid for acquisitions (827,941) (33,338)
Purchase of intangible assets - (15,183)
Proceeds from sale of radio stations 6,595 -
Loans originated and other (7,147) (4,397)
Net cash used by investing activities (835,999) (56,582)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 703,000 33,500
Proceeds from issuance of LYONs 115,172 -
Proceeds from issuance of common stock 317,109 254
Repayment of long-term debt (248,500)
Repurchase of common stock - (15,076)
Repurchase of warrants (1,379) -
Payment of finance costs (21,342) -
Other (333) (375)
Net cash provided by financing
activities 863,727 18,303
Net increase (decrease) in cash and
cash equivalents 45,384 (21,319)
Cash and cash equivalents at
beginning of period 7,437 26,975
Cash and cash equivalents at end of period $ 52,821 $ 5,656
The accompanying notes are an integral part
of the condensed consolidated financial statements.
</TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS
The December 31, 1995 consolidated balance sheet data was
derived from audited financial statements, but does not
include all disclosures required by generally accepted
accounting principles. The financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Although certain information and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted
pursuant to such rules and regulations, the Company believes
that the disclosures are adequate to make the information
presented not misleading and reflect all adjustments
(consisting only of normal recurring adjustments) which are
necessary for a fair presentation of results of operations
for such periods. Results for interim periods may not be
indicative of results for the full year. It is suggested
that these financial statements be read in conjunction with
the consolidated financial statements for the year ended
December 31, 1995 and the notes thereto.
2. ACQUISITIONS
Completed Acquisitions
In February 1996, the Company agreed to acquire Noble Br
oadcast Group, Inc. ("Noble"), for approximately $152
million in cash plus related costs and expenses. Noble
owned ten radio stations serving Denver (two AM and two FM),
St. Louis (one AM, two FM) and Toledo (one AM, two FM).
The Company entered into an agreement with the stockholders
of Noble to acquire all of the outstanding capital stock of
Noble for approximately $12.5 million. At the same time,
the Company also purchased a warrant for approximately $52.8
million entitling the Company to acquire a 79.1% equity
interest in Noble (the "Noble Warrant"). On July 15, 1996,
the Company consummated the purchase of the outstanding
Noble capital stock from the Noble stockholders and
exercised the Noble Warrant, resulting in the Company owning
100% of the equity interests in Noble.
Also, in February 1996, a wholly owned subsidiary of the
Company purchased for approximately $47 million certain
assets from Noble relating to Noble's San Diego operations.
As part of Noble's San Diego operations, Noble provided
programming to and sold the air time for two radio stations
serving San Diego (one AM, one FM), which programming and
air time is now provided and sold by the Company. In
addition, another wholly owned subsidiary of the Company
provided a credit facility to Noble in the amount of $41
million of which $40 million was drawn down. Such amount
became part of the purchase consideration upon consummation
of the transaction on July 15, 1996.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. Completed Acquisitions, Continued
In February 1996, the Company entered into an agreement to
acquire Citicasters Inc. ("Citicasters") through a merger of
Citicasters with and into a wholly owned Jacor subsidiary
(the "Citicasters Merger"). Citicasters owned and/or
operated 19 radio stations, located in Atlanta, Phoenix,
Tampa, Portland, Kansas City, Cincinnati, Sacramento,
Columbus and two television stations, one located in Tampa
and one in Cincinnati. The Company consummated the
Citicasters Merger in September 1996 for an approximate
aggregate value of $801.2 million, which included the
purchase of all outstanding shares of Citicasters common
stock, the assumption of Citicasters outstanding
indebtedness and the issuance of warrants to purchase an
aggregate of 4,400,000 shares of Common Stock. Each
Citicasters Warrant is exercisable for .2035247 of a share
of the Company's common stock at an exercise price of $28.00
per full share.
In March 1996, the Company entered into an agreement to
acquire the FCC licenses of WCTQ-FM and WAMR-AM in Venice,
Florida and to purchase certain real estate and transmission
facilities necessary to operate the stations. In June 1996,
the Company consummated this acquisition for a purchase
price of approximately $4.4 million.
In June 1996, the Company entered into an agreement to
acquire the FCC licenses of WLAP-AM, WMXL-FM and WWYC-FM in
Lexington, Kentucky and to purchase real estate and
transmission facilities necessary to operate the stations.
In August 1996, the Company consummated this acquisition for
a purchase price of approximately $14.0 million.
In June 1996, the Company financed the purchase by Critical
Mass Media, Inc. ("CMM") of a 40% interest in a newly formed
limited liability company which purchased for $540,000 the
assets of Duncan American Radio, Inc. CMM is a marketing
research and radio consulting business which is owned by a
limited partnership of which the Company is the 5% general
partner and a corporation wholly owned by Randy Michaels,
the Chief Executive Officer of the Company, is the 95%
limited partner.
The completed acquisitions are accounted for as purchases.
The excess cost over the fair value of identifiable net
assets acquired will be amortized over 40 years. Assuming
each of these acquisitions had taken place at the
beginning of 1996 and 1995, respectively, unaudited pro
forma consolidated results of operations would have been
as follows (in thousands except per share amounts):
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. Completed Acquisitions, Continued
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Net revenue $ 85,887 $ 79,171 $242,548 $225,259
Loss before
extraordinary items (1,817) (846) (4,487) (7,234)
Net loss per share $ (0.06) $ (0.03) $ (0.14) $ (0.23)
Pending Acquisitions
In May 1996, the Company entered into an agreement to
acquire the FCC licenses and certain operating assets of
WIOT-FM and WCWA-AM in Toledo, Ohio for $13 million in cash,
which funds have been placed in escrow pending the closing
of the transaction. Subject to certain conditions, pending
the closing of this transaction, the Company has entered
into a time brokerage agreement with respect to these
stations.
In July 1996, the Company entered into an agreement with New
Wave Communications, L.P. and New Wave Broadcasting, Inc. to
acquire the FCC licenses of WSPB-AM, WSRZ-FM and WYNF-FM in
Sarasota, Florida and to purchase certain real estate and
transmission facilities necessary to operate the stations.
The purchase price for the assets is $12.5 million, of which
$3 million has been placed in escrow, subject to a maximum
purchase price of $15.0 million based on the timing of the
closing.
In September 1996, the Company entered into a binding
agreement with a subsidiary of Gannett Co., Inc. ("Gannett")
to effect an exchange of the Company's Tampa television
station, WTSP-TV, acquired by the Company in the Citicasters
Merger, for six of Gannett's radio stations (the "Gannett
Exchange"). The stations to be acquired by the Company are
KIIS-FM and KIIS-AM in Los Angeles, KSDO-AM and KKBH-FM in
San Diego and WDAE-AM in Tampa-St. Petersburg. The Company
will also acquire the licenses and operating assets of WUSA-
FM in Tampa-St. Petersburg while Gannett will retain the
call letters. The assets to be exchanged are valued by the
Company and Gannett at approximately $190.0 million. The
Company anticipates that this transaction will constitute a
tax-free like-kind exchange.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Pending Acquisitions, Continued
In October 1996, the Company entered into a definitive
merger agreement with Regent Communications, Inc. ("Regent")
whereby Regent will merge with and into the Company (the
"Regent Merger"). Regent owns, operates or represents 20
radio stations located in Kansas City, Salt Lake City, Las
Vegas, Louisville and Charleston, S.C. The merger
consideration to be paid by the Company to the Regent
stockholders consists of 3.55 million shares of Common
Stock, subject to adjustment pursuant to the terms of the
merger agreement, up to $64.0 million in cash to be used to
repay outstanding Regent indebtedness, and warrants to
acquire an aggregate of 500,000 shares of Common Stock at an
exercise price of $40 per full share. In the event that the
value of the Common Stock to be received by the Regent
stockholders is less than $116.0 million, at the Company's
option: (a) Jacor may make up the difference by the delivery
of additional shares of Common Stock; (b) pay the difference
in cash; or (c) pay all of the merger consideration in cash.
In October 1996, the Company also entered into binding
agreements with Par Broadcasting Company ("Par") to purchase
four radio stations in San Diego, KOGO-AM, KCBQ-AM, KIOZ-FM
and KKLQ-FM, for $72.0 million in cash and with
Entertainment Communications, Inc. ("Entercom") to sell the
Company's two radio stations in Sacramento, KSEG-FM and KRXQ-
FM, for $45.0 million in cash. Approximately $3.7 million
of the purchase price has been placed in escrow. Although
these transactions are not directly contingent upon each
other, the Company anticipates that these transactions will
occur in a manner that permits the transactions to be
treated as a tax-free like-kind exchange. Par has entered
into a Local Marketing Agreement ("LMA") with the Company
such that the Company will commence operating the San Diego
stations upon the expiration or termination of the
applicable waiting periods under the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended ("HSR Act").
The Company has entered into an LMA with Entercom such that
Entercom will commence operating the Sacramento stations
upon the expiration or termination of the applicable waiting
periods under the HSR Act.
In October 1996, the Company entered into a binding exchange
agreement with Nationwide Communications, Inc.
("Nationwide") whereby the Company will exchange the assets
of its two radio stations in Phoenix, KSLX-AM and KSLX-FM,
for the assets of Nationwide's two radio stations in San
Diego, KGB-FM and KPOP-AM. The assets to be exchanged are
valued by the Company and Nationwide at approximately $45.0
million. The Company anticipates that this transaction will
constitute a tax-free like-kind exchange. This transaction
is contingent upon the successful closing of Nationwide's
agreement to purchase KGB-FM and KPOP-AM from KGB, Inc.
Nationwide has assigned to the Company its rights under an
LMA with KGB, Inc. such that the Company will commence
operating the San Diego stations upon the expiration or
termination of the applicable waiting periods under the HSR
Act. The Company has entered into an LMA with Nationwide
such that Nationwide will commence operating the Phoenix
stations upon the expiration or termination of the
applicable waiting periods under the HSR Act. In connection
with entering into the exchange agreement with Nationwide,
the Company also announced that it intends to sell KCBQ-AM
in San Diego, upon its acquisition from Par, to EXCL
Communications, Inc. ("EXCL") for $6.0 million in cash. No
binding agreement has yet been entered into with EXCL.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Pending Acquisitions, Continued
In addition, in October 1996, Jacor entered into three
separate binding agreements with three unaffiliated radio
broadcast companies whereby the Company will acquire the FCC
licenses and assets of a total of nine radio stations.
These agreements are with Palmer Broadcasting Limited
Partnership ("Palmer") to acquire WHO-AM and KLYF-FM in Des
Moines and WMT-AM and WMT-FM in Cedar Rapids for a purchase
price of $52.5 million, providing the Company with a leading
position with four powerful broadcast signals; with Clear
Channel Radio, Inc. to purchase KTWO-AM, KMGW-FM and the
Wyoming Radio Network, in Casper, Wyoming for a purchase
price of $1.9 million; and with Colfax Communications to
acquire KIDO-AM and KLTB-FM in Boise, Idaho and KARO-FM in
Caldwell, Idaho for a purchase price of $11.0 million in
cash. An aggregate of $5.9 million has been placed in
escrow in connection with these acquisitions.
3. OTHER ASSETS
The Company's other assets at September 30, 1996 and
December 31, 1995
consist of the following (in thousands):
September 30, December 31,
1996 1995
New World Warrants $ 39,800 $ -
Hanna Barbera Escrow 13,700 -
Acquisition escrows 16,000 -
Other 28,532 14,265
$ 98,032 $ 14,265
The New World Warrants and Hanna Barbera Escrow were
included in the Citicasters acquisition. The Hanna Barbera Escrow is
expected to be received in December 1996. Terms of the New World
Warrants allow the Company to purchase 5 million shares of New World
Common Stock at $16.00 per share until September 1999.
4. LONG-TERM DEBT
The Company's debt obligations at September 30, 1996 and
December 31, 1995 consist of the following (in thousands):
September 30, December 31,
1996 1995
Credit facility borrowings $ 400,000 $ 45,000
9 3/4% Senior Subordinated Notes 126,250
10 1/8% Senior Subordinated
Notes, due 2006 $ 100,000 -
$ 626,250 $ 45,000
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. LONG-TERM DEBT, Continued
Former Credit Facility
On February 20, 1996 the Company entered into a credit
facility (the "Former Credit Facility") with a group of
banks. The Company borrowed approximately $200 million
under the facility in conjunction with the Noble and other
acquisitions. In June 1996, outstanding borrowings were
repaid from a portion of the proceeds from public debt and
common stock offerings (see notes 4, 5 and 6).
New Credit Facility
In June 1996, the Company entered into a new credit facility
(the "New Credit Facility"). The New Credit Facility is
with a syndicate of banks and other financial institutions.
The New Credit Facility provides availability of up to $600
million of loans in three components: (i) a revolving credit
facility of up to $200 million with mandatory semi-annual
commitment reductions beginning in December 1998 and a final
maturity date of October 21, 2003; (ii) a term loan of up to
$300 million with scheduled semi-annual reductions beginning
December 1997 and a final maturity date of September 18,
2003; and (iii) a term loan of up to $100 million with
scheduled semi-annual reductions beginning December 1998 and
a final maturity date of September 18, 2004.
Borrowings under the New Credit Facility bear interest at
rates that fluctuate with a bank base rate and/or the
Eurodollar rate. The weighted average interest rate at
September 30, 1996 was 7.73%.
Loans under the New Credit Facility are guaranteed by the
Company and each of the Company's direct and indirect
subsidiaries other than certain immaterial subsidiaries.
The Company's obligations with respect to the New Credit
Facility and each guarantor's obligations with respect to
the related guaranty is collateralized by substantially all
of their respective assets, and, in the case of the
Company's subsidiaries, capital stock.
The New Credit Facility contains covenants and provisions
that restrict, among other things, the Company's ability to:
(i) incur additional indebtedness; (ii) incur liens on its
property; (iii) make investments and advances; (iv) enter
into guarantees and other contingent obligations; (v) merge
or consolidate with or acquire an other person or engage in
other fundamental changes; (vi) engage in certain sales of
assets; (vii) make capital expenditures; (viii) enter into
leases; (ix) engage in certain transactions with affiliates;
and (x) make restricted junior payments. The New Credit
Facility also requires satisfaction of certain financial
performance criteria (including a consolidated interest
coverage ratio, a leverage-to-operating cash flow ratio and
a consolidated operating cash flow available for fixed
charges ratio) and the repayment of loans under the New
Credit Facility with proceeds of certain sales of assets and
debt issuances, and with 50% of the Company's Consolidated
Excess Cash Flow (as defined in the New Credit Facility).
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. LONG-TERM DEBT, Continued
10 1/8% Senior Subordinated Notes Due 2006
In June 1996, the Company completed an offering of $100
million of its 10 1/8% Senior Subordinated Notes (the
"Notes"). The Notes will mature on June 15, 2006. Interest
on the Notes is payable semi-annually on June 15 and
December 15 of each year, commencing December 15, 1996. The
Company will not be required to make any mandatory
redemption or sinking fund payment with respect to the Notes
prior to maturity. The Notes will be redeemable at the
option of the Company, in whole or in part, at any time on
or after June 15, 2001. The redemption prices commence at
105.063% and are reduced by 1.688% annually until June 15,
2004 when the redemption price is 100%.
The Notes are general, unsecured obligations of the Company
subordinated in right of payment to all senior debt of the
Company including the New Credit Facility.
The Note Indenture contains certain covenants which impose
certain limitations and restrictions on the ability of the
Company to incur additional indebtedness, pay dividends or
make other distributions, make certain loans and
investments, apply the proceeds of asset sales (and use the
proceeds thereof), create liens, enter into certain
transactions with affiliates, merge, consolidate or transfer
substantially all its assets and make investments in
unrestricted subsidiaries.
9 3/4% Senior Subordinated Notes
In September 1996, as a result of the merger with
Citicasters, the Company assumed obligations of Citicasters'
outstanding 9 3/4% Senior Subordinated notes due 2004 (the
"9 3/4% Notes"). As a result of a change of control
covenant in the 9 3/4% Notes, the holders had the option to
cause the Company to purchase the 9 3/4% Notes at 101%, and
in October 1996, approximately $107 million par value of the
9 3/4% Notes were put to the Company pursuant to this
covenant.
5. LIQUID YIELD OPTION NOTES
In June 1996, the Company issued 5.5% Liquid Yield Option
Notes ("LYONs") due 2011 in the aggregate principal amount
at maturity of $259,900,000. Each LYON had an issue price
of $443.14 and a principal amount at maturity of $1,000. At
September 30, 1996 the accreted value of the LYONs was
$117.1 million which included $1.6 million of accretion
during the third quarter.
Each LYON is convertible, at the option of the Holder, at
any time on or prior to maturity, unless previously redeemed
or otherwise purchased, into Common Stock at a conversion
rate of 13.412 shares per LYON.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. LIQUID YIELD OPTION NOTES, Continued
The LYONs are not redeemable by the Company prior to June
12, 2001. Thereafter, the LYONs are redeemable for cash at
any time at the option of the Company, in whole or in part,
at redemption prices equal to the issue price plus accrued
original issue discount to the date of redemption.
The LYONs will be purchased by the Company, at the option of
the Holder, on June 12, 2001 and June 12, 2006, for a
Purchase Price of $581.25 and $762.39 (representing issue
price plus accrued original issue discount to each date),
respectively, representing a 5.50% yield per annum to the
Holder on such date, computed on a semiannual bond
equivalent basis. The Company, at its option, may elect to
pay the purchase price on any such purchase date in cash or
Common Stock, or any combination thereof.
6. CAPITAL STOCK
Issuance of Additional Common Stock
In June 1996, the Company issued pursuant to a public
offering (the "1996 Stock Offering"), 11,250,000 shares of
its Common Stock at a price of $28.00 per share. Net
proceeds to the Company from this 1996 Offering were
approximately $303.6 million. The Company used a portion of
the net proceeds to repay all of its indebtedness under the
Former Credit Facility (approximately $196.5 million).
1993 Warrants
In connection with the 1996 Stock Offering, the Company
determined that it would convert the 1,983,605 outstanding
1993 Warrants into the right to receive the Fair Market
Value (as defined in the 1993 Warrant) calculated to be
$19.70 per Warrant. This resulted in the issuance by the
Company of an additional 1,726,004 shares of Common Stock
with proceeds aggregating approximately $14.3 million. The
Company used approximately $5.1 million of these proceeds to
fund the conversion of the remaining 1993 Warrants presented
for redemption.
Citicasters Warrants
The Company issued the Citicasters Warrants pursuant to the
terms of the Citicasters Merger Agreement. If all of the
Citicasters Warrants are exercised, 4,400,000 shares of
Common Stock would be issued. Each Citicasters Warrant
initially entitles the holder thereof to purchase .2035247
of a share of Common Stock at a price of $28.00 per full
share through September 18, 2001.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Completed Acquisitions
In March 1996, the Company entered into an agreement to acquire
the FCC licenses of WCTQ-FM and WAMR-AM in Venice, Florida and to
purchase certain real estate and transmission facilities
necessary to operate the stations. In June 1996, the Company
consummated this acquisition for a purchase price of
approximately $4.4 million.
In June 1996, the Company entered into an agreement to acquire
the FCC licenses of WLAP-AM, WMXL-FM and WWYC-FM in Lexington,
Kentucky and to purchase real estate and transmission facilities
necessary to operate the stations. In August 1996, the Company
consummated this acquisition for a purchase price of
approximately $14.0 million.
In July 1996, the Company completed the acquisition of Noble,
which owned ten radio stations serving Denver, St. Louis and
Toledo. Previously, the Company purchased Noble's operating
assets in San Diego which included an exclusive sales agency
agreement under which Noble, and now the Company, provides
programming to and sells air time for two radio stations serving
San Diego (XTRA-AM and XTRA-FM). The aggregate value of the
completed Noble acquisition is approximately $160.0 million,
including related fees and expenses.
In September 1996, the Company completed the acquisition of
Citicasters through a merger of Citicasters with and into a
wholly owned Jacor subsidiary. Citicasters owned and/or operated
19 radio stations, located in the United States in Atlanta,
Phoenix, Tampa, Portland, Kansas City, Cincinnati, Sacramento,
Columbus and two television stations, one located in Tampa and
one in Cincinnati. The Company consummated the Citicasters
merger for an approximate aggregate value of $802.1 million,
which included (i) the purchase of all outstanding shares of
Citicasters common stock at $29.50 per share for approximately
$624.5 million in cash, (ii) the assumption of Citicasters
9 3/4% notes ($125 million), (iii) the payoff of Citicasters
outstanding bank loan ($20 million), and (iv) the issuance of
warrants to purchase an aggregate of 4.4 million shares of common
stock (valued at $26.5 million).
Citicasters' outstanding 9 3/4% Notes became obligations of the
surviving corporation in the merger. As a result of a change in
control covenant in the indenture pursuant to which such Notes
were issued, the holders of the 9 3/4% Notes were permitted to
cause the Company to purchase the Notes at 101% of the principal
amount thereof. In October 1996, approximately $107 million of
the 9 3/4% notes were put to the Company pursuant to the change
in control covenant. The put was funded from borrowings under
the New Credit Facility.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Completed Acquisitions, Continued
The completed acquisitions were funded as follows: (i) $303.6
million proceeds from the public offering of 11.25 million shares
of Common Stock, (ii) $115.2 million in proceeds from the Liquid
Yield Option Notes public offering, (iii) $100.0 million from the
10 1/8% Senior Subordinated Notes public offering, and (iv) $400
million in borrowings under the New Credit Facility.
Pending Acquisitions
In September 1996, the Company entered into a binding agreement
with a subsidiary of Gannett to effect an exchange of the
Company's Tampa television station. WTSP-TV was acquired by the
Company in the Citicasters Merger, for six of Gannett's radio
stations. The stations to be acquired by the Company are KIIS-FM
and KIIS-AM in Los Angeles, KSDO-AM and KKBH-FM in San Diego and
WDAE-AM in Tampa-St. Petersburg. The Company will also acquire
the licenses and operating assets of WUSA-FM in Tampa-St.
Petersburg while Gannett will retain the call letters. The
exchange will enhance the Company's existing station portfolios
in San Diego and Tampa and will create a new multiple radio
station platform in the Los Angeles broadcast area. The assets
to be exchanged are valued by the Company and Gannett at
approximately $190.0 million. The Company anticipates that this
transaction will constitute a tax-free like-kind exchange.
In October 1996, the Company entered into a definitive merger
agreement with Regent whereby Regent will merge with and into the
Company. Regent owns, operates or represents 20 radio stations
located in Kansas City, Salt Lake City, Las Vegas, Louisville and
Charleston. The merger consideration to be paid by the Company
to the Regent stockholders consists of 3.55 million shares of
Common Stock and up to $64.0 million in cash to be used to repay
outstanding Regent indebtedness, and warrants to acquire an
aggregate of 500,000 shares of Common Stock at an exercise price
of $40 per full share, subject to adjustment pursuant to the
terms of the merger agreement. In the event that the value of
the Common Stock to be received by the Regent stockholders is
less than $116.0 million, at the Company's option: (a) the
Company may make up the difference by the delivery of additional
shares of Common Stock; (b) pay the difference in cash; or (c)
pay all of the merger consideration in cash.
The Company also has acquisitions pending in the following
markets: (i) in Sarasota, Florida, (ii) Toledo, Ohio, (iii) San
Diego, California, (iv) Des Moines and Cedar Rapids, Iowa, (v)
Casper, Wyoming, (vi) and Boise, Idaho. The net cash to be paid
for these acquisitions after giving effect to escrow deposits of
$25.6 million, totals approximately $150 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Credit Facilities and Other
In June 1996, the Company entered into the New Credit Facility
which provides for availability of $600.0 million pursuant to a
$200.0 million reducing revolving facility under which the
aggregate commitments would reduce on a semi-annual basis
commencing in December 1998; a $300.0 million amortizing term
loan that would reduce on a semi-annual basis commencing in
December 1997; and a $100.0 million amortizing term loan that
would reduce on a semi-annual basis commencing in December 1998.
The New Credit Facility bears interest at floating rates based on
a Eurodollar rate or a bank base rate. The New Credit Facility
also provides the Company with additional credit for future
acquisitions as well as working capital and other general
corporate purposes. As of November 1, 1996 the Company had
incurred $500.0 million of outstanding indebtedness under the New
Credit Facility.
The pending acquisitions will be primarily funded by the
remaining $100 million available under the New Credit Facility
and excess cash on hand, which will include the Hanna Barbera
Escrow proceeds of $13.7 million which will be received during
the fourth quarter. The Company believes that various sources
are available for the additional funds required to complete the
acquisitions and is currently exploring those alternatives. Such
alternatives include increased availability under the Company's
credit facilities as well as the possible issuance of additional
equity and/or debt securities of the Company.
The issuance of additional debt will negatively impact the
Company's debt-to-equity ratio and its results of operations and
cash flows due to higher amounts of interest expense, although
the issuance of additional equity will soften this impact to some
extent.
RESULTS OF OPERATIONS
In the following analysis, management discusses station operating
income excluding depreciation and amortization. Station
operating income excluding depreciation and amortization should
not be considered in isolation from, or as a substitute for,
operating income, net income or cash flow and other consolidated
income or cash flow statement data computed in accordance with
generally accepted accounting principles or as a measure of a
company's profitability or liquidity. Although this measure of
performance is not calculated in accordance with generally
accepted accounting principles, it is widely used in the
broadcasting industry as a measure of a company's operating
performance because it assists in comparing station performance
on a consistent basis across companies without regard to
depreciation and amortization, which can vary significantly
depending on accounting methods (particularly where acquisitions
are involved) or non-operating factors such as historical cost
bases. Station operating income excluding depreciation and
amortization also excludes the effect of corporate general and
administrative expenses, which generally do not relate directly
to station performance.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE
MONTHS ENDED
SEPTEMBER 30, 1995
Broadcast revenue for the first nine months of 1996 was $142.2
million, an increase of $44.5 million or 45.6% from $97.6 million
during the first nine months of 1995. This increase resulted
primarily from the revenue generated at those properties owned or
operated during the 1996 first nine-months but not during the
comparable 1995 period, and to a lesser extent, from an increase
in advertising rates in both local and national advertising. On
a "same station" basis - reflecting results from stations
operated in the first nine months of both 1996 and 1995 -
broadcast revenue for the 1996 period was $104.9 million, an
increase of $10.7 million or 11.3% from $94.2 million for the
1995 period.
Agency commissions for the first nine months of 1996 were $14.7
million, an increase of $4.2 million or 40.0% from $10.5 million
during the first nine months of 1995 due to the increase in
broadcast revenue.
Broadcast operating expenses for the first nine months of 1996
were $91.7 million, an increase of $26.5 million or 40.5% from
$65.2 million during the first nine months of 1996. These
expenses increased as a result of expenses incurred at those
properties owned or operated during the first nine months of 1996
but not during the comparable 1995 period and, to a lesser
extent, increased selling and other payroll costs and programming
costs. On a "same station" basis, broadcast operating expenses
for the 1996 period were $66.3 million, an increase of $4.1
million or 6.6% from $62.2 million for the 1995 period.
Station operating income excluding depreciation and amortization
for the nine months ended September 30, 1996 was $35.8 million,
an increase of $13.9 million or 63.3% from the $21.9 million for
the nine months ended September 30, 1995. On a "same station"
basis, station operating income excluding depreciation and
amortization for the 1996 period was $27.4 million, an increase
of $5.6 million or 25.6% from $21.8 million for the 1995 period.
Depreciation and amortization for the first nine months of 1996
and 1995 was $10.6 million and $6.8 million, respectively. The
increase from period-to-period resulted primarily from the
acquisitions made by the Company during the last quarter of 1995
and the first nine months of 1996.
Operating income for the first nine months of 1996 was $21.1
million, an increase of $8.5 million or 68.0% from an operating
income of $12.6 million during the first nine months of 1995.
Interest expense for the first nine months of 1996 and 1995 was
$13.4 million and $0.6 million, respectively. The increase in
interest expense resulted principally from the increase in the
Company's outstanding Credit Facility borrowings and the issuance
of the 10 1/8% Senior Subordinated Notes and Liquid Yield Option
Notes which are primarily related to the Company's acquisition
strategy.
The gain on sale of radio stations in the first nine months of
1996 resulted from the Company's February sale of two FM radio
stations in Knoxville.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1995, Continued
The extraordinary item in the first nine months of 1996
represents the write-off of unamortized costs associated with the
Company's 1993 Credit Agreement which was replaced in February
1996 by the Company's Former Credit Facility and the write-off of
unamortized costs associated with the Company's Former Credit
Facility which was replaced by the Company's New Credit Facility
in June 1996.
Net income for the first nine months of 1996 and 1995 was $4.7
and $7.8 million, respectively.
THE THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1995
Broadcast revenue for the third quarter of 1996 was $60.1
million, an increase of $24.0 million or 66.5% from $36.1 million
during the third quarter of 1995. This increase resulted
primarily from the revenue generated at those properties owned or
operated during the 1996 third quarter but not during the
comparable 1995 period, and to a lesser extent, from an increase
in advertising rates in both local and national advertising. On
a "same station" basis - reflecting results from stations
operated in the third quarter of both 1996 and 1995 - broadcast
revenue for the 1996 period was $38.6 million, an increase of
$4.2 million or 12.4% from $34.4 million for the 1995 period.
Agency commissions for the third quarter of 1996 were $5.8
million, an increase of $2.0 million or 52.2% from $3.8 million
during the third quarter of 1995 due to the increase in broadcast
revenue.
Broadcast operating expenses for the third quarter of 1996 were
$38.3 million, an increase of $15.2 million or 65.5% from $23.1
million during the third quarter of 1995. These expenses
increased as a result of expenses incurred at those properties
owned or operated during the 1996 second quarter but not during
the comparable 1995 period and, to a lesser extent, increased
selling and other payroll costs and programming costs. On a
"same station" basis, broadcast operating expense for the 1996
period were $24.0 million, an increase of $2.3 million or 10.6%
from $21.7 million for the 1995 period.
Station operating income excluding depreciation and amortization
for the three months ended September 30, 1996 was $16.1 million,
an increase of $6.9 million or 75.2% from the $9.2 million for
the three months ended September 30, 1995. On a "same station"
basis, station operating income excluding depreciation and
amortization for the 1996 period was $10.6 million, an increase
of $1.6 million or 17.4% from $9.0 million for the 1995 period.
Depreciation and amortization for the third quarter of 1996 and
1995 was $5.2 million and $2.4 million, respectively. The
increase from quarter-to-quarter resulted primarily from the
acquisitions made by the Company during the fourth quarter of
1995 and the first nine months of 1996.
Operating income for the third quarter of 1996 was $9.2 million,
an increase of $3.3 million or 56.5% from $5.9 million during the
third quarter of 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1995, Continued
Interest expense for the third quarter of 1996 and 1995 was $6.8
million and $0.4 million, respectively. The increase in interest
expense resulted principally from the increase in the Company's
outstanding Credit Facility borrowings which are primarily
related to the Company's acquisition strategy and the issuance of
the 10 1/8% Senior Subordinated Notes and Liquid Yield Option
Notes.
The extraordinary item in the third quarter represents the write-
off of unamortized costs associated with the Company's Former
Credit Facility which was replaced by the Company's New Credit
Facility in June 1996.
Net income for the third quarter of 1996 was $0.1 million,
compared to net income of $3.5 million reported by the Company
for the third quarter of 1995. The 1996 period includes $2.1
million of income tax expense while the 1995 period includes $2.4
million of income tax expense.
CASH FLOWS
Cash flows provided by operating activities, inclusive of working
capital, were $17.7 million and $17.0 million for the nine months
ended September 30, 1996 and 1995, respectively. Cash flows
provided by operating activities for the first nine months of
1996 resulted primarily from the add-back of $10.6 million of
depreciation and amortization together with the add-back of $3.0
million for the extraordinary loss net of ($2.5) million from the
gain on sale of radio stations together with the ($1.3) million
net change in working capital to net income of $4.7 million for
the period. The additional $3.1 million resulted principally
from the add back of $.6 million net change in deferred taxes and
$2.5 million of non-cash interest. Cash flows provided by
operating activities for the comparable 1995 period resulted
primarily from the add-back of $6.8 million of depreciation and
amortization together with the net change in working capital of
$2.8 million to net income of $7.8 million for the period. The
additional ($.4) million resulted from the deferred income tax
benefit.
Cash flows used by investing activities were ($836.0) million and
($56.6) million for the nine months ended September 30, 1996 and
1995, respectively. Investing activities include capital
expenditures of $7.5 million and $3.7 million for the first nine
months of 1996 and 1995, respectively. Investing activities
during the first nine months of 1996 include expenditures of
$827.9 million and $7.1 million, respectively, for acquisitions,
loans made in connection with the Company's joint sales
agreements and other. Additionally, investing activities for the
1996 period includes $6.6 million of proceeds from the sale of
radio stations WMYU-FM and WWST-FM in Knoxville. Investing
activities during the first nine months of 1995 include
expenditures of $48.5 million and $4.4 million, respectively for
acquisitions and loans made in connection with the Company's
joint sales agreements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CASH FLOWS, Continued
Cash flows from financing activities were $863.7 million and
$18.3 million for the nine months ended September 30, 1996 and
1995, respectively. Cash flows provided by financing activities
during the first nine months of 1996 resulted primarily from the
$818.2 million of proceeds from the issuance of public debt,
Liquid Yield Option Notes and borrowings under the Existing
Credit Facility, together with $317.1 million in proceeds
received from the issuance of common stock net of the $248.5
million repayment of long-term debt and $21.3 million of paid
debt related finance costs. Cash flows used from financing
activities during the comparable 1995 nine-month period resulted
primarily from the $15.1 million repurchase of the Company's
common stock net of the $33.5 million in borrowings under the
Company's Former Credit Agreement.
The foregoing discussion sets forth forward looking statements
within the meaning of Section 27A of the Securities Act of 1933.
Such statements are subject to a number of risks and
uncertainties. Actual results in the future could differ
materially from those described in the forward looking
statements. Factors that could cause actual results to differ
materially include, but are not limited to, the ability to
consummate the pending acquisitions, interest rates, competition
and the economy and industry conditions in general.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant and Co-Registrant has each duly caused this
Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
JACOR COMMUNICATIONS, INC.
(Registrant)
and
CITICASTERS INC.
(Co-Registrant)
DATED: February 3, 1997 BY /s/ R. Christopher Weber
R. Christopher Weber,
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and
Accounting Officer of Registrant
and Co-Registrant)
