<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: October 23, 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 41011
(606) 655-2267
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
As previously reported, in October, 1997, Citicasters Co., an indirect
wholly-owned subsidiary of Jacor Communications, Inc. (the "Registrant"), signed
a letter of intent to acquire the assets of 17 radio stations (the "Stations")
from Nationwide Communications Inc. ("NCI") and its affiliated entities. These
stations are: KDMX-FM in Dallas, Texas; KEGL-FM in Ft. Worth, Texas; KHMX-FM in
Houston, Texas; KTBZ-FM in Lake Jackson, Texas; KMJZ-FM and KSGS-AM in St. Louis
Park, Minnesota; KMCG-FM in Carlsbad, California; KGLQ-FM in Phoenix, Arizona;
KZZP-FM in Mesa, Arizona; WPOC-FM in Baltimore, Maryland; WGAR-FM, WMJI-FM and
WMMS-FM in Cleveland, Ohio; WCOL-FM, WFII-AM and WNCI-FM in Columbus, Ohio; and
KXGL-FM in San Diego, California. Also, as previously reported, On December 19,
1997, Citicasters Co. and Jacor Communications Company, a wholly-owned
subsidiary of the Registrant ("JCC"), entered into a definitive Agreement of
Sale ("Sale Agreement") with NCI and its affiliated entities to acquire the
Stations for a purchase price of approximately $620 million in cash, of which
$30 million has been placed in escrow pending the closing of the Purchase.
For more information, see the initial Form 8-K previously
filed by the Registrant relating to this transaction. The historical
financial information and unaudited pro forma financial information relating
to this transaction is contained in Item 7 hereof.
Item 5. OTHER EVENTS
On November 26, 1997, the Securities and Exchange Commission declared
effective the omnibus shelf registration on Form S-3 (File No. 33-40127) filed
by the Registrant, JCC and the Subsidiary Guarantors to register for the offer
and sale of up to $500 million of certain types of equity or debt securities and
the guarantees of any such debt securities. The form of indenture for any debt
securities issued by JCC will require that all present and future subsidiaries
of the Registrant become guarantors of any such debt securities.
On January 21, 1998, the Registrant filed with the Securities and
Exchange Commission, pursuant to Rule 424(b), (i) the definitive prospectus
contained in the registration statement, (ii) a preliminary prospectus
supplement relating to the offer for sale of approximately 3,800,000 shares
of the Registrant's common stock, $.01 par value (including an underwriters'
overallotment option to purchase up to an additional 15% of the number of
shares offered), (iii) a preliminary prospectus supplement relating to the
offer for sale of $100 million in aggregate principal amount of Senior
Subordinated Notes due 2010 to be issued by JCC and guaranteed by the
Registrant and all of its subsidiaries, and (iv) a prospectus supplement
relating to the offer for sale of liquid yield option notes due 2018 with
expected gross proceeds of $150 million (together with an over-allotment
option to purchase up to an additional 10% of the liquid yield option notes
offered). In connection with such Rule 424(b) filing, the Registrant is
filing certain exhibits as part of this Form 8-K(A).
JCC has previously completed offerings of $100 million of its 10 1/8%
Senior Subordinated Notes due 2006, $170 million of its 9 3/4% Senior
Subordinated Notes due 2006 and $150 million of its 8 3/4% Series B Senior
Subordinated Notes due 2007 (collectively, the "Notes"). The Notes are jointly
and severally, fully and unconditionally guaranteed on a senior subordinated
basis by the Registrant and all subsidiaries of the Registrant (the "Subsidiary
Guarantors"). The Subsidiary Guarantors and JCC are wholly owned direct or
indirect subsidiaries of the Registrant. Additionally, there are no current
restrictions on the ability of the Subsidiary Guarantors to make distributions
to JCC, except to the extent provided by law generally. JCC's credit facility
and the terms of the indentures governing the Notes do restrict the ability of
JCC and of the Subsidiary Guarantors to make distributions to the Registrant.
Separate financial statements of JCC and each of the Subsidiary Guarantors
are not presented in the Registrant's periodic securities reports on Form 10-K
and Form 10-Q because the Registrant believes that such information would not
be material to investors. Provided below is unaudited
2
<PAGE>
summarized financial information with respect to the Registrant and the
Subsidiary Guarantors on a combined basis for each of the quarterly periods
ended March 31, June 30 and September 30, 1997 and 1996, respectively.
Summarized unaudited information for JCC is for all periods noted above
subsequent to June 6, 1996 (date of inception).
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30
----------------------------------------------------------------------------------------
Jacor | JCC | Combined subsidiary Guarantors
------------------------- | ------------------------- | ------------------------------
1997 1996 | 1997 1996 | 1997 1996
<S> <C> <C> | <C> <C> | <C> <C>
Net revenue - - | - - | $ 368,941 $ 127,520
Equity in earnings (loss) of subsidiaries $ (5,560) $ 6,958 | $ 1,251 $ 6,169 | - -
Operating income (loss) (15,601) 2,837 | 1,251 6,169 | 65,132 25,266
Income (loss) before extraordinary items (5,412) 4,737 | 1,896 9,924 | 1,251 6,169
Net income (loss) (5,412) 4,737 | (5,560) 6,958 | 1,251 6,169
| |
Current assets 1,142 756 | 24,529 44,475 | 144,025 91,269
Non-current assets 1,146,382 643,926 | 1,974,907 1,182,358 | 2,262,507 1,579,808
Current liabilities 6,662 4,281 | 23,061 16,481 | 56,781 31,136
Non current liabilities 228,429 158,290 | 1,304,473 1,029,858 | 1,437,318 1,157,830
Shareholders equity 912,433 482,111 | 671,902 180,494 | 912,433 482,111
| |
<CAPTION> | |
| (Unaudited) |
| Six Months Ended |
| June 30 |
---------------------------|----------------------------|---------------------------------
Jacor | JCC | Combined subsidiary Guarantors
-------------------------- | ------------------------- | -------------------------------
1997 1996 | 1997 1996 | 1997 1996
<S> <C> <C> | <C> <C> | <C> <C>
Net revenue - - | - - | $ 224,381 $ 73,194
Equity in earnings (loss) of subsidiaries $ (1,406) $ 6,105 | $ (1,527) $ 4,601 | - -
Operating income (loss) (7,795) 3,656 | (1,527) 4,601 | 35,660 14,365
Income (loss) before extraordinary items (3,995) 4,652 | 4,150 7,056 | (1,527) 4,601
Net income (loss) (3,995) 4,652 | (1,406) 6,105 | (1,527) 4,601
| |
Current assets 1,122 127 | 36,829 320,162 | 131,525 45,266
Non-current assets 1,120,858 581,514 | 1,869,975 356,217 | 2,158,229 663,013
Current liabilities 8,631 6,868 | 23,948 5,691 | 64,803 9,581
Non current liabilities 221,334 119,013 | 1,204,393 593,572 | 1,332,936 242,938
Shareholders equity 892,015 455,760 | 678,463 77,116 | 892,015 455,760
| |
<CAPTION> | |
| (Unaudited) |
| Three Months Ended |
| March 31 |
---------------------------|----------------------------|---------------------------------
Jacor | JCC | Combined subsidiary Guarantors
-------------------------- | ------------------------- | -------------------------------
1997 1996 | 1997 | 1997 1996
<S> <C> <C> | <C> | <C> <C>
Net revenue - - | - | $ 88,828 $ 30,074
Equity in earnings (loss) of subsidiaries $ (7,072) $ 867 | $ (3,516) | - -
Operating income (loss) (9,940) (272) | (3,516) | 8,260 3,585
Income (loss) before extraordinary items (8,140) 1,842 | (1,516) | (3,516) 867
Net income (loss) (8,140) 891 | (7,072) | (3,516) 867
| |
Current assets 300 4,967 | 14,438 | 101,087 34,683
Non-current assets 822,913 322,851 | 1,469,112 | 1,791,334 318,565
Current liabilities 4,622 387 | 24,915 | 44,459 14,214
Non current liabilities 222,768 187,056 | 1,076,364 | 1,252,139 268,023
Shareholders equity 595,823 140,375 | 382,271 | 595,823 71,011
</TABLE>
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Independent Auditors' Report
Financial Statements:
Combined Balance Sheets as of December 31, 1996 and September 30, 1997.
Combined Statements of Earnings for the years ended December 31, 1995 and
1996 and for the nine month period ended September 30, 1997.
Combined Statements of Shareholder's Equity for the years ended December
31, 1995 and 1996 and for the nine month period ended September 30,
1997.
Combined Statements of Cash Flows for the years ended December 31, 1995 and
1996 and the nine month period ended September 30, 1997.
Notes to Combined Financial Statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Mutual Insurance Company:
We have audited the accompanying combined balance sheets of Nationwide
Communications as of September 30, 1997 and December 31, 1996, and the related
combined statements of earnings, shareholder's equity, and cash flows for the
nine months ended September 30, 1997 and each of the years in the two year
period ended December 31, 1996. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these combined 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 combined financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide
Communications as of September 30, 1997 and December 31, 1996, and the results
of their operations and their cash flows for the nine months ended September 30,
1997 and each of the years in the two year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 4, 1998
<PAGE>
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Combined Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1997 1996
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,044,306 $ 47,223,751
Short-term investments, at amortized cost - 74,990,903
Accounts receivable, net of allowance
for doubtful accounts of $869,468 at
September 30, 1997 and $716,940 at December 31, 1996 21,303,195 17,573,992
Notes receivable, current portion 982,820 931,278
Deferred income taxes 897,000 1,179,967
Assets held for sale 44,667,939 8,868,376
Prepaid expenses 2,057,180 1,471,765
-------------- --------------
Total current assets 76,952,440 152,240,032
Property and equipment, net 17,517,067 8,254,028
Broadcast licenses and other intangibles, net 253,496,524 90,107,979
Notes receivable, excluding current portion 6,119,960 5,765,856
Other assets 2,674,472 3,025,813
-------------- --------------
Total assets $ 356,760,463 $ 259,393,708
-------------- --------------
-------------- --------------
Liabilities and Shareholder's Equity
------------------------------------
Current liabilities:
Accounts payable $ 2,256,583 $ 1,166,614
Accrued compensation and benefits 2,190,967 2,506,395
Accrued expenses and other current liabilities 1,389,985 1,403,751
Accrued interest 1,179,516 200,278
Accrued professional fees 932,083 641,882
Accrued property and sales tax 214,776 359,005
Income taxes payable 2,721,629 1,968,891
-------------- --------------
Total current liabilities 10,885,539 8,246,816
-------------- --------------
Long-term debt 92,500,000 40,500,000
Deferred compensation 2,513,139 2,098,705
Accrued retirement benefits 2,909,169 2,892,414
Deferred income taxes 16,283,000 1,172,512
-------------- --------------
Total liabilities 125,090,847 54,910,447
-------------- --------------
Shareholder's equity:
4% noncumulative preferred stock of $50
par value per share; redeemable at par. Authorized,
issued, and outstanding 20,000 shares 1,000,000 1,000,000
Common stock, without par value. Authorized
15,000 shares; issued and outstanding
14,750 shares at stated value 14,750 14,750
Additional paid-in capital 11,495,250 11,495,250
Contributed capital for combined radio station 22,500,000 22,500,000
Retained earnings 196,659,616 169,473,261
-------------- --------------
Total shareholder's equity 231,669,616 204,483,261
-------------- --------------
Total liabilities and shareholder's equity $ 356,760,463 $ 259,393,708
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Combined Statements of Earnings
<TABLE>
<CAPTION>
Years ended
Nine months ended December 31,
September 30, ------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Broadcast revenues $ 82,015,129 $ 85,276,016 $ 73,217,793
Less agency commissions 10,865,664 11,516,477 10,181,081
--------------- ------------ ------------
Net revenues 71,149,465 73,759,539 63,036,712
Broadcast operating expenses 61,716,538 58,596,364 45,469,057
Depreciation and amortization 6,948,264 7,356,348 5,603,704
Corporate general and administrative expenses 2,657,117 3,282,159 3,461,354
--------------- ------------ ------------
Operating (loss) income (172,454) 4,524,668 8,502,597
--------------- ------------ ------------
Interest income 1,488,447 7,256,973 9,562,334
Interest expense (4,540,479) (2,883,337) (3,134,887)
Gain on sale of radio stations and other properties 44,131,624 5,947,951 5,126,403
Other expense, net (55,892) (484,901) (128,874)
--------------- ------------ ------------
Nonoperating income, net 41,023,700 9,836,686 11,424,976
--------------- ------------ ------------
Income before taxes 40,851,246 14,361,354 19,927,573
Income tax expense 13,664,891 5,309,885 7,072,231
--------------- ------------ ------------
Net income $ 27,186,355 $ 9,051,469 $ 12,855,342
--------------- ------------ ------------
--------------- ------------ ------------
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Combined Statements of Shareholder's Equity
<TABLE>
<CAPTION>
4% noncumulative Contributed
preferred stock Common stock Additional capital for Total
------------------- ----------------- paid in combined Retained shareholder's
Shares Amount Shares Amount capital radio station earnings equity
------ ------ ------ ------- ------- ------------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1994 20,000 $ 1,000,000 14,750 $ 14,750 $ 11,495,250 $ - $ 147,646,450 $ 160,156,450
Dividends paid--
preferred stock - - - - - - (40,000) (40,000)
Net income - - - - - - 12,855,342 12,855,342
------ ----------- ------ -------- ------------ ------------- ------------- -------------
Balances at December
31, 1995 20,000 1,000,000 14,750 14,750 11,495,250 - 160,461,792 172,971,792
Dividends paid--
preferred stock - - - - - - (40,000) (40,000)
Contributed capital
for combined radio
station - - - - - 22,500,000 - 22,500,000
Net income - - - - - - 9,051,469 9,051,469
------ ----------- ------ -------- ------------ ------------- ------------- -------------
Balances at December
31, 1996 20,000 1,000,000 14,750 14,750 11,495,250 22,500,000 169,473,261 204,483,261
Net income - - - - - - 27,186,355 27,186,355
------ ----------- ------ -------- ------------ ------------- ------------- -------------
Balances at September
30, 1997 20,000 $ 1,000,000 14,750 $ 14,750 $ 11,495,250 $ 22,500,000 $ 196,659,616 $ 231,669,616
------ ----------- ------ -------- ------------ ------------- ------------- -------------
------ ----------- ------ -------- ------------ ------------- ------------- -------------
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended
Nine months ended December 31,
September 30, --------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 27,186,355 $ 9,051,469 $ 12,855,342
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 6,948,264 7,356,348 5,603,704
Loss on sale of property and equipment 18,724 100,995 28,310
Net gain on sale of radio stations and cable system (44,131,624) (5,947,951) (5,126,403)
Provision for doubtful accounts receivable 152,528 273,526 106,579
Deferred income taxes 15,393,455 (1,936,915) (403,088)
Changes in assets and liabilities, net of effects
of acquisitions and disposals:
Accounts receivable (3,881,731) (2,181,725) (2,345,109)
Prepaid expenses and other assets (1,232,034) (2,524,774) (1,403,917)
Accounts payable (250,031) 383,037 (660,744)
Accrued expenses and other liabilities 1,032,472 1,536,048 (316,643)
Income taxes payable 752,738 912,525 (44,877,594)
------------- ------------ ------------
Net cash provided (used) by operating activities 1,989,116 7,022,583 (36,539,563)
------------- ------------ ------------
Cash flows from investing activities:
Acquisition of radio stations (166,294,524) (23,349,989) -
Proceeds from sale of radio stations and cable system 2,600,000 10,558,450 15,500,000
Proceeds from collection of notes receivable - 4,000,000 4,012,942
Additions to property and equipment (5,048,866) (2,965,878) (2,977,258)
Proceeds from sale of property and equipment 49,829 177,717 15,363
Proceeds from maturity of investments 75,000,000 5,085,480 19,917,096
------------- ------------ ------------
Net cash (used) provided by investing activities (93,693,561) (6,494,220) 36,468,143
------------- ------------ ------------
Cash flows from financing activities:
Debt issuance costs paid (475,000) - (281,877)
Borrowings under long-term debt 98,000,000 - 1,702,940
Repayments of long-term debt (46,000,000) - -
Dividends paid - (40,000) (40,000)
------------- ------------ ------------
Net cash provided (used) by financing activities 51,525,000 (40,000) 1,381,063
------------- ------------ ------------
Net (decrease) increase in cash and cash
equivalents (40,179,445) 488,363 1,309,643
Cash and cash equivalents at beginning of period 47,223,751 46,735,388 45,425,745
------------- ------------ ------------
Cash and cash equivalents at end of period $ 7,044,306 $ 47,223,751 $ 46,735,388
------------- ------------ ------------
------------- ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Net cash paid (refunds received) for income taxes $ (2,481,301) $ 6,334,674 $ 52,352,913
------------- ------------ ------------
------------- ------------ ------------
Cash paid for interest $ 3,309,071 $ 2,831,913 $ 2,727,060
------------- ------------ ------------
------------- ------------ ------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets exchanged $ 53,000,000 - -
------------- ------------ ------------
------------- ------------ ------------
Assets acquired from capital contribution from affiliated company - $ 22,500,000 -
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements
September 30, 1997 and December 31, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
Nationwide Communications (the Company) reflects the broadcast
operations of Nationwide Mutual Insurance Company (the Parent).
These operations include commercial radio stations in various
geographic regions across the United States, primarily in the top
twenty-five radio revenue markets.
(b) BASIS OF PRESENTATION
The combined financial statements include the accounts related to the
operation of the Parent's commercial radio stations. The
majority of these operations are in Nationwide Communications,
Inc. (NCI), a wholly owned subsidiary of the Parent. The
Company's financial statements also include the results of
operations of KXGL-FM, a station owned by an affiliated company
(San Diego Lotus Corporation) controlled by the Parent, as the
station is operated and controlled by the Company under a time
brokerage agreement. Due to related ownership and control of the
station, all significant accounts related to the station have
been combined with NCI's financial statements for financial
reporting purposes.
(c) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be
cash equivalents. Cash and cash equivalents consist of cash with
the Parent, money market funds and cash in banks. Cash with the
Parent is invested in various financial instruments and is
available upon demand to the Company.
(d) REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial
announcements to local and national advertisers. Revenue is
recognized when the commercial announcements are broadcast.
Fees received or paid pursuant to various time brokerage
agreements are recognized as revenue or expense, respectively, in
accordance with the terms of the agreements.
(e) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of
equipment is computed using an accelerated method. The Company
uses the straight-line method for all buildings and leasehold
improvements. The useful lives of property and equipment are as
follows:
Building and improvements 31.5 years
Leasehold improvements 31.5 years
Equipment 3 to 20 years
(Continued)
<PAGE>
2
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
(f) INTANGIBLE ASSETS
Intangible assets consist primarily of broadcast licenses. The
Company amortizes intangible assets using the straight-line
method over the estimated useful lives ranging from 5 to 40
years. The carrying value of intangible assets is reviewed by
the Company when events or circumstances suggest that the
recoverability of an asset may be impaired. If this review
indicates that goodwill and licenses will not be recoverable, as
determined based on the undiscounted cash flows of the station
over the remaining amortization period, the carrying value of the
intangible assets will be reduced accordingly.
(g) MARKETABLE SECURITIES
All marketable debt securities are classified as held to maturity
as the Company has the ability and it is management's intent to
hold them until maturity. In accordance with SFAS No. 115,
marketable securities held to maturity are stated at amortized
cost. All marketable securities matured during 1997.
(h) INCOME TAXES
The Company files a consolidated federal income tax return with
the Parent. The Company calculates income taxes on a separate
company basis in accordance with a tax sharing agreement with the
Parent.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period the change occurred.
(i) PENSION AND OTHER POSTRETIREMENT PLANS
The Company participates in a multiemployer defined benefit
pension plan and a multiemployer life and health care plan
covering substantially all employees achieving certain levels of
service. The cost of these programs is being funded currently.
The Company also participates in two multiemployer supplemental
nonqualified defined benefit plans. The net periodic costs are
recognized as employees render the services necessary to earn the
retirement benefits.
(j) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reporting of revenues
and expenses during the reporting period to prepare these
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
(Continued)
<PAGE>
3
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
(2) ACQUISITIONS AND DISPOSITIONS
(a) COMPLETED TRANSACTIONS
In January 1995, the Company sold the assets of its cable system in
Houston for cash of $15 million and an unsecured note for $6
million due January 2001. This note was discounted to $3,474,341
using an effective interest rate of 8.5%. A pretax gain of $4.9
million was recorded on this sale.
In April 1996, the Company entered into an agreement to exchange the
assets of WOMX-FM in Orlando and $43.5 million for the assets of
WMJI-FM and WMMS-FM in Cleveland. Pending the completion of the
exchange, the Company entered into a time brokerage agreement
which allowed the Company to operate WMJI-FM and WMMS-FM (and
relinquish day to day operations of WOMX-FM) from July 1996 to
the February 1997 closing. The assets of WOMX-FM totaling
$2,742,696 are classified as "Assets held for sale" on the
December 31, 1996 balance sheet. The transaction was completed
in February 1997. The Company recorded a pre-tax gain on the
exchange of approximately $23 million.
In May 1996, the Company acquired the common stock of San Diego Lotus
Corporation for $23 million with the purpose of simultaneously
transferring the stock to an affiliated company for $23 million.
Governmental restrictions delayed the actual transfer of the
stock to the affiliated company until September 1996.
Simultaneously with the transfer, the Company entered into a time
brokerage agreement for $1.125 million per year which allows the
Company to operate KFSD-FM. KFSD-FM call letters were changed to
KXGL-FM in 1997. All significant accounts related to KXGL-FM
have been combined in the accompanying financial statements.
In June 1996, the Company purchased the assets of KMJZ-FM and KSGS-AM
in Minneapolis for $22 million.
In June 1996, the Company entered into an agreement to exchange the
assets of KISW-FM in Seattle and $12.5 million for the assets of
KTBZ-FM in Houston. Pending the completion of the exchange, the
Company entered into a time brokerage agreement which allowed the
Company to operate KTBZ-FM (and relinquish day to day operations
of KISW-FM) from June 1996 to the May 1997 closing. The assets
of KISW-FM totaling $6,125,680 are classified as "Assets held for
sale" on the December 31, 1996 balance sheet. The transaction was
completed in May 1997. The Company recorded a pre-tax gain on
the exchange of approximately $21 million.
In July 1996, the Company sold the assets of KLUC-FM and KXNO-AM in
Las Vegas for $10.6 million. A pretax gain of approximately $5.9
million was recorded on the sale.
(Continued)
<PAGE>
4
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
In September 1996, the Company entered into an agreement to purchase
the assets of KUPR-FM and KCEO-AM San Diego for $32 million. The
transaction was completed in April 1997. Pending the completion
of this acquisition, the Company entered into a time brokerage
agreement which allowed the Company to operate KUPR-FM and
KCEO-AM. The Company sold KCEO-AM in June 1997 for $2.6 million.
No gain or loss was realized on the sale. KUPR-FM's call letters
were changed to KMCG-FM in 1997.
In February 1997, the Company entered into an agreement to purchase
the assets of KHTC-FM in Phoenix for $34 million. The
transaction was completed in June 1997. Pending the completion
of this acquisition, the Company entered into a time brokerage
agreement which allowed the Company to operate KHTC-FM from
March 1, 1997 through the completion of the transaction. KHTC-
FM's call letters were changed in 1997 to KGLQ-FM.
The acquisitions completed in 1997 and 1996 have been accounted for by
the purchase method of accounting. The purchase price has been
allocated to the assets acquired based on their fair values at
the date of acquisition. The excess of the purchase price over
the estimated fair values of the net tangible assets acquired has
been recorded as broadcast licenses. The results of operations
of the acquired businesses are included in the Company's
financial statements since the respective dates of acquisitions.
Assuming each of the above acquisitions and dispositions had taken
place at the beginning of 1996 and removing the effects of all
gains and losses from these transactions, unaudited pro forma
combined results of operations would have been as follows:
Pro forma (unaudited)
----------------------------------
Nine months ended Year ended
September 30, December 31,
1997 1996
---- ----
Net revenue $ 71,712,497 86,818,631
Net income (loss) (3,976,192) (2,981,098)
(Continued)
<PAGE>
5
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
(b) PENDING AS OF SEPTEMBER 30, 1997
In August 1996, the Company entered into an agreement to purchase the
assets of KGB-FM and KPOP-AM in San Diego for $44.2 million. The
Company then signed agreements to exchange KGB-FM and KPOP-AM in
San Diego for KSLX-FM and KSLX-AM in Phoenix and, following that
closing, exchange the Phoenix stations for KEGL-FM in Dallas.
The acquisition of the San Diego stations was completed in
January 1997. The Company operated KGB-FM and KPOP-AM under a
time brokerage agreement from August 1996 to the January 1997
closing. In April 1997, the exchange of the San Diego and
Phoenix stations was completed. The Phoenix-Dallas exchange is
pending FCC approval of the renewal of the KEGL-FM license. In
the meantime, the Company has entered into a time brokerage
agreement which allows the Company to operate KEGL-FM (and
relinquish day to day operations of the Phoenix stations). The
assets of the Phoenix stations totaling $44,667,939 are
classified as "Assets held for Sale" on the September 30, 1997
balance sheet. The Company does not anticipate recognizing a
gain on this transaction.
After the completion of these transactions, the Company will own
and/or operate the following stations:
Station Location
------- --------
KDMX-FM Dallas, Texas
KEGL-FM
KHMX-FM Houston, Texas
KTBZ-FM
KMJZ-FM Minneapolis, Minnesota
KSGS-AM
KXGL-FM San Diego, California
KMCG-FM
KZZP-FM Phoenix, Arizona
KGLQ-FM
WPOC-FM Baltimore, Maryland
WMJI-FM Cleveland, Ohio
WMMS-FM
WGAR-FM
WNCI-FM Columbus, Ohio
WCOL-FM
WFII-AM
(Continued)
<PAGE>
6
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
(c) TIME BROKERAGE AGREEMENT FEES
The Company has included $1,731,000 and $634,000 of time
brokerage agreement revenue in gross broadcast revenues for the
periods ended September 30, 1997 and December 31, 1996,
respectively. Broadcast operating expenses include $4,218,000
and $4,942,000 of time brokerage agreement expense for the
periods ended September 30, 1997 and December 31, 1996,
respectively. There were no time brokerage agreements in 1995.
(3) NOTES RECEIVABLE
A summary of notes receivable follows:
September 30, December 31,
1997 1996
---- ----
$6 million note receivable net
of discounts of $1,679,897 and
$1,936,407 at September 30, 1997
and December 31, 1996, respectively;
due January 2001 discounted at 8.5% $ 4,320,103 4,063,593
$5 million note receivable net of
discounts of $217,323 and $366,459
at September 30, 1997 and December
31, 1996, respectively; $1 million
installments due November 1995 to
1999; discounted at 8% 2,782,677 2,633,541
--------- ---------
7,102,780 6,697,134
Less current portion (982,820) (931,278)
--------- ---------
$ 6,119,960 5,765,856
--------- ---------
--------- ---------
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment follows:
September 30, December 31,
1997 1996
---- ----
Land $ 597,111 471,462
Building and improvements 1,029,072 806,475
Leasehold improvements 1,965,855 1,264,883
Equipment 20,956,133 13,728,965
Construction in process 2,974,208 669,684
---------- ----------
27,522,379 16,941,469
Accumulated depreciation (10,005,312) (8,687,441)
---------- ----------
Net property and equipment $ 17,517,067 8,254,028
---------- ----------
---------- ----------
Depreciation expense was $1,966,702, $2,184,554, and $1,673,843 for the
nine month period ended September 30, 1997 and for the years ended
December 31, 1996 and 1995, respectively.
(Continued)
<PAGE>
7
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
(5) BROADCAST LICENSES AND OTHER INTANGIBLES
Intangible assets consist of the following:
September 30, December 31,
Useful life 1997 1996
----------- ---- ----
Broadcast licenses 40 Years $ 217,348,705 48,978,599
Broadcast licenses 15-25 Years 56,035,276 56,035,276
Other intangibles 5-20 Years 5,993,898 5,993,898
-------------- -----------
279,377,879 111,007,773
Accumulated amortization (25,881,355) (20,899,794)
-------------- -----------
Net intangible assets $ 253,496,524 90,107,979
-------------- -----------
-------------- -----------
Amortization expense was $4,981,562, $5,171,794, and $3,929,861 for the
nine month period ended September 30, 1997 and for the years ended
December 31, 1996 and 1995, respectively.
(6) LONG-TERM DEBT
A summary of long-term debt follows:
September 30, December 31,
1997 1996
---- ----
Notes payable to banks under Credit
Agreement (7.813% to 8.125% at
September 30, 1997 and 6.625% at December
31, 1996); notes mature March 31, 2004 $92,000,000 40,000,000
Note payable to bank, variable interest
rate based on prime (8.5% at September 30,
1997 and December 31, 1996); principal due
December 31, 2001 500,000 500,000
----------- ----------
Total debt $92,500,000 40,500,000
----------- ----------
----------- ----------
In April 1997, the Company entered into a new facility (Credit Agreement).
The Credit Agreement is with a syndicate of banks and has a capacity
of $105 million. Borrowings under the Credit Agreement bear interest
at rates that fluctuate with a bank base rate and/or the Eurodollar.
The unused portion of the Credit Agreement carries a commitment fee of
0.5%.
The Credit Agreement contains various covenants including restrictions
on additional indebtedness, liens on property, investments, dividends
and mergers or acquisitions. The Credit Agreement also requires that
the Company meet certain financial ratios including a leverage ratio,
an interest coverage ratio and a free cash flow ratio. The Company
was in compliance with all restrictive covenants as of September 30,
1997.
The weighted average interest rate of borrowings outstanding at September
30, 1997 is 7.98%.
(Continued)
<PAGE>
8
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
Aggregate maturities of long-term debt for the next five years and
thereafter are as follows:
1998 and 1999 $ -
2000 2,000,000
2001 10,500,000
2002 20,000,000
2003 and thereafter 60,000,000
----------
$ 92,500,000
----------
----------
NCI is required under terms of its Credit Agreement to obtain interest
rate protection of 50% of the commitment amount ($52.5 million).
During 1997, the Company entered into five-year interest rate swap
agreements in order to obtain the required protection. Under the swap
agreements, the Company receives a floating rate based on LIBOR, as
determined at three month intervals, on a total notional amount of
$55,000,000 and pays fixed rates ranging from 5.90% to 5.99%. The
swaps effectively change a portion of the Company's interest rate
exposure from a variable rate to a fixed rate. Net, off balance-
sheet, fair value of the swaps at September 30, 1997 was approximately
$271,000 based on the quoted market prices as provided by the
financial institutions which are the counterparties to the swap.
(7) INCOME TAXES
A summary of income tax expense follows:
Federal State Total
------- ----- -----
September 30, 1997:
Current $ (1,675,000) (53,564) (1,728,564)
Deferred 15,544,327 (150,872) 15,393,455
------------- --------- ----------
$ 13,869,327 (204,436) 13,664,891
------------- --------- ----------
------------- --------- ----------
December 31, 1996:
Current $ 6,191,800 1,055,000 7,246,800
Deferred (1,623,915) (313,000) (1,936,915)
------------- --------- ----------
$ 4,567,885 742,000 5,309,885
------------- --------- ----------
------------- --------- ----------
December 31, 1995:
Current 6,900,000 575,319 7,475,319
Deferred (216,788) (186,300) (403,088)
------------- --------- ----------
$ 6,683,212 389,019 7,072,231
------------- --------- ----------
------------- --------- ----------
(Continued)
<PAGE>
9
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
The actual expense differs from the expected expense as follows:
<TABLE>
<CAPTION>
Years ended
Nine months ended December 31,
September 30, -------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Expected tax expense computed at 35% $ 14,297,936 5,026,474 6,974,651
State income tax expense (benefit),
net of federal tax benefit (185,689) 482,300 252,863
Amortization of intangibles 48,236 70,741 106,329
Gain on sale of nonamortizable intangibles (901,627) (411,584) (172,581)
Other, net 406,035 141,954 (89,031)
------------- --------- ---------
$ 13,664,891 5,309,885 7,072,231
------------- --------- ---------
------------- --------- ---------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
as follows:
September 30, December 31,
1997 1996
---- ----
Deferred tax assets:
Accounts receivable $ 304,314 301,115
Accrued expenses 7,000 145,846
Accrued income taxes 698,814 790,117
Deferred compensation 879,599 881,456
Accrued retirement benefits 1,018,209 1,214,814
--------- ---------
Total gross deferred tax asset 2,907,936 3,332,688
--------- ---------
Deferred tax liabilities:
Investments and other assets (181,746) (168,216)
Property and equipment (137,447) (382,383)
Intangibles (17,861,614) (2,718,183)
Prepaid expenses and other assets (113,129) (56,451)
----------- ----------
Total gross deferred tax
liabilities (18,293,936) (3,325,233)
----------- ----------
Net deferred tax assets
(liabilities) $ (15,386,000) 7,455
----------- ----------
----------- ----------
The Company believes the existing deductible temporary differences will
reverse during periods in which the Company generates net taxable
earnings. The Company has considered the above factors in concluding
that it is more likely than not that the Company will realize the
benefits of existing deferred tax assets.
The IRS has begun an examination of the Parent's consolidated 1993, 1994
and 1995 federal income tax returns. The outcome of this examination
is not presently determinable; however, in the opinion of management,
the effects, if any, of this examination are not expected to be
material to the Company's combined financial statements.
(Continued)
<PAGE>
10
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value for cash, short-term investments, accounts receivable,
the current portion of notes receivable and current liabilities
approximates their respective fair values because of the short
maturity of these instruments. The fair value of notes receivable
($6,119,960 at September 30, 1997 excluding the current portion) is
calculated by discounting scheduled cash flows through maturity using
the current rates. The carrying value for these notes at
September 30, 1997 and December 31, 1996 approximated fair value at
that date. The carrying value of long-term debt approximates fair
value since the interest rate varies periodically with market interest
rates. Net, off balance-sheet, fair value of the interest rate swaps
at September 30, 1997 was approximately $271,000 based on the quoted
market prices as provided by the financial institutions which are the
counterparties to the swap.
(9) PENSION PLANS
The Company is a participant, together with other affiliated companies, in
a pension plan covering all employees who have completed at least
1,000 hours of service within a twelve month period and who have met
certain age requirements. Benefits are based upon the highest average
annual salary of a specified number of consecutive years of the last
ten years of service. The Company funds pension costs accrued for all
employees as directed by the Parent.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire
cost of the enhanced benefit was borne by the Parent and certain of
its property and casualty insurance company affiliates.
Pension cost (benefits) charged to operations by the Company during the
nine months ended September 30, 1997 and during the years ended
December 31, 1996 and 1995 were ($359,000), ($519,000), and $151,000,
respectively.
The Company's net prepaid (accrued) pension expense as of September 30,
1997 and December 31, 1996 was $134,000 and $(213,000), respectively.
Accrued pension expense at December 31, 1996 is included in accrued
expenses and other current liabilities.
The Company also participates, together with certain affiliated companies,
in two nonqualified unfunded defined-benefit pension plans covering
directors and certain key executives. The Company's pension expense
for these plans was $347,000, $413,000 and $542,000 for the nine
months ended September 30, 1997 and for the years ended December 31,
1996 and 1995, respectively. Accrued post retirement expense for
these plans is $2,909,169 and $2,892,414 at September 30, 1997 and
December 31, 1996, respectively.
(Continued)
<PAGE>
11
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
(10) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the defined benefit pension plan, the Company, together with
other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life
and health care benefits generally available to full time employees
who have attained age 55 and have accumulated 15 years of service with
the Company after reaching age 40. Postretirement health care benefit
contributions are adjusted annually and contain cost-sharing features
such as deductibles and coinsurance. In addition, there are caps on
the Company's portion of the per-participant cost of the
postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of Nationwide Life Insurance Company.
The Company had prepaid accrued postretirement benefits as of September 30,
1997 and December 31, 1996 of $189,000 and $134,000, respectively.
The net periodic postretirement cost (benefit) for the nine months
ended September 30, 1997 and for the years ended December 31, 1996 and
1995 was ($55,000), $13,000 and ($128,000), respectively.
(11) SAVINGS PLAN
The Company is a participant in the Nationwide Insurance Enterprise 401(k)
savings plan which covers substantially all employees. Employee
contributions to the plan are matched by the Company at the rate of
70% of the first 2% of pay and 40% of the next 4% of pay contributed
to the plan. The Company's contribution expense for the plan for the
nine months ended September 30, 1997 and for the years ended
December 31, 1996 and 1995 were approximately $263,000, $284,000 and
$328,000, respectively.
(12) COMMITMENTS AND CONTINGENCIES
(a) LEASES
The Company has operating leases for certain land and facilities used
in their operations with initial or remaining lease terms in
excess of one year. Future minimum lease payments under these
leases as of September 30, 1997 are:
Three months ending December 31, 1997 $ 1,027,657
Years ended:
1998 3,367,298
1999 3,207,915
2000 3,139,186
2001 2,739,192
2002 and years ended thereafter 8,614,179
---------
Total minimum lease payments $ 22,095,427
----------
----------
(Continued)
<PAGE>
12
NATIONWIDE COMMUNICATIONS
(Broadcast Operations of Nationwide Mutual Insurance Company)
Notes to Combined Financial Statements, Continued
September 30, 1997 and December 31, 1996 and 1995
Total rent expense was $2,530,206, $1,769,657 and $1,629,567 for the
period ended September 30, 1997 and the years ended December 31,
1996 and 1995, respectively.
(b) LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management,
the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position,
results of operations or liquidity.
(13) SUBSEQUENT EVENTS
On December 19, 1997, the Company signed an agreement with Citicasters Co.,
a wholly owned subsidiary of Jacor Communications, Inc., to sell
substantially all of the radio station assets (exclusive of cash, cash
equivalents, accounts receivable and notes receivable) for $591
million. In the same agreement, Jacor also agreed to purchase the
radio station assets of San Diego Lotus Corporation, an affiliate of
the Company, for $29 million. These transactions are expected to be
finalized in the second quarter of 1998.
In December 1997, all employees, assets and liabilities of NCI were
transferred to the Parent.
As part of the liquidation, the Company paid off its existing long-term
debt and canceled its related swap agreements with the proceeds from
borrowings from the Parent in December 1997. In connection with the
extinguishment, the Company anticipates recognizing an extraordinary
loss of approximately $800,000 which includes loss on the
extinguishment of debt and early termination fees related to the
interest rate swaps.
(b) Unaudited Pro Forma Financial Information
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
year ended December 31, 1996 and the nine month period ended September
30, 1997.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September
30, 1997.
Notes to Unaudited Pro Forma Financial Information.
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information is based on the
historical financial statements of Jacor and Nationwide 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 nine months ended September 30,1997 and the year ended December 31,
1996 give effect to each of the following transactions as if such
transactions had been completed January 1, 1996: (i) the Nationwide
Acquisition, and (ii) other 1996 and 1997 Jacor acquisitions previously
described in the Company's quarterly reports on Form 10-Q and current reports
on Form 8-K. The pro forma condensed consolidated balance sheet as of
September 30, 1997 has been prepared as if the Nationwide Acquisition and the
other acquisitions pending as of September 30, 1997 and any other transaction
consummated after September 30, 1997, had occurred on September 30, 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
contained in Jacor's Form 10-K for the year ended December 31, 1996 and
Nationwide's Combined Financial Statements and notes thereto included in this
Form 8-K(A).
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
LMA Date Year Ended December 31, 1996
Closing Date -------------------------------------------------------------
Other Jacor
Acquisition Other
Historical Pro Forma Acquisitions Historical
Jacor Adjustments Pro Forma Nationwide
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net revenue $223,761 $335,209 (a) $558,970 $73,760
Broadcast operating expenses 151,065 235,630 (a) 386,695 58,596
Depreciation and amortization 23,404 79,870 (a) 103,274 7,356
Corporate general and
administrative expenses 7,629 1,479 (a) 9,108 3,282
Special bonuses 2,303 - 2,303
----------- ------------ ----------- -----------
Operating income 39,360 18,230 57,590 4,526
Interest expense, net (32,244) (51,467)(b) (83,711) 4,373
Gain on sale of radio stations 2,539 - 2,539 5,948
Other income (expense), net 5,716 1,073 (c) 6,769 (485)
----------- ------------ ----------- -----------
Income (loss) before
income taxes and
extraordinary items 15,371 (32,164) (16,793) 14,362
----------- ------------ ----------- -----------
Income tax (expense) benefit (7,300) 11,528 (d) 4,228 (5,310)
----------- ------------ ----------- -----------
Income (loss) before
extraordinary items $8,071 ($20,636) ($12,565) $9,052
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Income (loss) per common share $0.30
Number of common shares
used in per share
computations 26,830
<CAPTION>
Nationwide Acquisition Total
Pro Forma Pro Forma Combined
Adjustments Adjustments Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Net revenue $13,059 (e) (4,014)(h) $641,775
Broadcast operating expenses 8,739 (e) (14,630)(h) 439,400
Depreciation and amortization 4,306 (e) 4,559 (i) 119,495
Corporate general and
administrative expenses (3,282)(h) 9,108
Special bonuses 2,303
----------- ------------ -----------
Operating income 14 9,339 71,469
Interest expense, net (13,401)(e) (15,371)(j) (108,110)
Gain on sale of radio stations (6,203)(f) 2,284
Other income (expense), net 6,304
----------- ------------ -----------
Income (loss) before
income taxes and
extraordinary items (19,590) (6,032) (28,053)
----------- ------------ -----------
Income tax (expense) benefit 7,559 (g) 2,413 (k) 8,890
----------- ------------ -----------
Income (loss) before
extraordinary items ($12,031) ($3,619) ($19,163)
----------- ------------ -----------
----------- ------------ -----------
Income (loss) per common share
before extraordinary items ($0.39)
Number of common shares
used in per share
computations 49,564(r)
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------------
OTHER JACOR
ACQUISITIONS OTHER NATIONWIDE
HISTORICAL PRO FORMA ACQUISITIONS HISTORICAL PRO FORMA
JACOR ADJUSTMENTS PRO FORMA NATIONWIDE ADJUSTMENTS
----------- -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenue............................................. $ 368,941 $ 70,972 (a) $ 439,913 $ 71,149 $ 565 (e)
Broadcast operating expenses............................ 251,513 47,524 (a) 299,037 61,717 (1,699)(e)
Depreciation and amortization........................... 53,097 23,363 (a) 76,460 6,948 1,812 (e)
Corporate general and administrative expenses........... 9,240 9,240 2,657
----------- ------- ------------ ----------- ----------
Operating income (loss)............................. 55,091 85 55,176 (173) 452
Interest expense........................................ (57,348) (7,677)(b) (65,025) (3,052) (3,197)(e)
Gain on sale of radio stations and other assets......... 10,801 10,801 44,132 (44,132)(f)
Other income (expense), net............................. 298 (c) 298 (56)
----------- ------- ------------ ----------- ----------
Income (loss) before income taxes and extraordinary
items............................................. 8,544 (7,294) 1,250 40,851 (46,877)
----------- ------- ------------ ----------- ----------
Income tax (expense) benefit............................ (6,500) 3,825 (d) (2,675) (13,665) 15,714 (g)
----------- ------- ------------ ----------- ----------
Income (loss) before extraordinary items............ $ 2,044 $ (3,469) $ (1,425) $ 27,186 $ (31,163)
----------- ------- ------------ ----------- ----------
----------- ------- ------------ ----------- ----------
Income (loss) per common share before
extraordinary items .............................. $ 0.05
-----------
-----------
Number of common shares used in per share computations.. 41,647
-----------
-----------
<CAPTION>
ACQUISITION TOTAL
PRO FORMA COMBINED
ADJUSTMENTS PRO FORMA
------------- -------------
<S> <C> <C>
Net revenue............................................. $ (2,176)(h) $ 509,451
Broadcast operating expenses............................ (15,946)(h) 343,109
Depreciation and amortization........................... 3,406 (i) 88,625
Corporate general and administrative expenses........... (2,657)(h) 9,240
------------ ------------
Operating income (loss)............................. 13,021 68,476
Interest expense........................................ (12,051)(j) (83,325)
Gain on sale of radio stations and other assets......... 10,801
Other income (expense), net............................. 242
------------ ------------
Income (loss) before income taxes and extraordinary
items............................................. 970 (3,806)
------------ ------------
Income tax (expense) benefit............................ (388)(k) (1,014)
------------ ------------
Income (loss) before extraordinary items............ $ 582 $ (4,820)
------------ ------------
------------ ------------
Income (loss) per common share...................... $ (0.10)
------------
------------
Number of common shares used in per share computations.. 49,564 (r)
------------
------------
</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 SEPTEMBER 30, 1997
---------------------------------------------------------------------------------
OTHER JACOR NATIONWIDE
ACQUISITION OTHER ACQUISITION TOTAL
HISTORICAL PRO FORMA ACQUISITIONS AND RELATED SAN DIEGO COMBINED
JACOR ADJUSTMENTS PRO FORMA FINANCING DISPOSITION PRO FORMA
---------- ------------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents.................... $ 18,779 $ 18,779 $ 18,779
Accounts receivable.......................... 118,500 118,500 118,500
Prepaid expenses and other current assets.... 32,417 32,417 32,417
---------- ------------- ------------ ------------ ------------- -----------
Total current assets..................... 169,696 169,696
Property and equipment......................... 175,567 $ 20,050 (l) 195,617 $ 28,000(o)$ (2,000)(q) 221,617
Intangible assets.............................. 2,003,526 183,925 (l) 2,185,551 604,000(o) (63,000)(q) 2,728,451
Other assets................................... 57,743 (26,225)(m) 31,518 31,518
---------- ------------- ------------ ------------ ------------- -----------
Total assets............................. $2,406,532 $ 177,750 $ 2,584,282 $ 632,000 $ (65,000) $3,151,282
---------- ------------- ------------ ------------ ------------- -----------
---------- ------------- ------------ ------------ ------------- -----------
Current liabilities:
Accounts payable, accrued expenses and other
current liabilities........................ $ 86,504 $ 86,504 $ 86,504
Long-term debt, current portion.............. --
---------- ------------- ------------ ------------ ------------- -----------
Total current liabilities................ 86,504 86,504 86,504
Long-term debt................................. 834,500 $ 174,000(n) 1,008,500 $ 290,000(p) $ (65,000)(p) 1,233,500
Liquid Yield Option Notes...................... 123,619 123,619 150,000(p) 273,619
Other liabilities.............................. 114,927 3,750(l) 118,677 118,677
Deferred tax liability......................... 334,549 334,549 334,549
Shareholders' equity:
Common stock................................. 455 455 40(p) 495
Additional paid-in capital................... 860,530 860,530 191,960(p) 1,052,490
Common stock warrants........................ 31,500 31,500 31,500
Retained earnings............................ 19,948 19,948 19,948
---------- ------------- ------------ ------------ ------------- -----------
Total shareholders' equity............... 912,433 912,433 192,000 1,104,433
---------- ------------- ------------ ------------ ------------- -----------
Total liabilities and shareholders'
equity.................................. $2,406,532 $ 177,750 $ 2,584,282 $ 632,000 $ (65,000) $3,151,282
---------- ------------- ------------ ------------ ------------- -----------
---------- ------------- ------------ ------------ ------------- -----------
</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
(in thousands)
(a) These adjustments reflect additional revenues and expenses related to the
following acquisitions for periods prior to the dates of acquisition, and
other individually immaterial acquisitions completed during 1996 and 1997 and
pending as of September 30, 1997:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
------------------------------------
Broadcast
Net Operating Depreciation and
Revenue Expenses Amortization
------- -------- ------------
<S> <C> <C> <C>
Regent (February 1997) $ 233 $ 1,061
Premiere (June 1997) $14,130 9,276 4,347
Radio Active Media (April 1997) 11,191 7,484 3,834
Multiverse (October 1997) 11,445 4,179 6,589
Other (various) 34,206 26,352 7,532
------- ------- -------
Total $70,972 $47,524 $23,363
------- ------- -------
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1996
----------------------------
Broadcast General
Net Operating Depreciation and and
Revenue Expenses Amortization Administrative
------- -------- ------------ --------------
<S> <C> <C> <C> <C>
Noble (February and July 1996) $ 10,721 $ 8,872 $ 2,665
Citicasters (September 1996) 101,806 58,543 21,913 $ 1,479
Gannett (December 1996) 2,503 6,828 --
Regent (February 1997) 33,797 26,447 6,369
Premiere (June 1997) 31,678 22,465 9,486
Radio Active Media (April 1997) 47,357 32,144 15,336
Multiverse (October 1997) 7,444 2,832 8,786
Other (various) 99,903 77,499 15,315
-------- -------- ------- ------
Total $335,209 $235,630 $79,870 $1,479
-------- -------- ------- ------
-------- -------- ------- ------
</TABLE>
(b) The adjustment represents additional interest expense associated with
Jacor's borrowings under the Credit Facility and the issuance of various debt
securities in 1996 and 1997 to finance in part the acquisitions. The weighted
average interest rate of 7.3% is based on the proforma capitalization of
Jacor as of September 30, 1997, prior to the acquisition of Nationwide and
the related financings. The assumed interest rate on the Credit Facility
borrowings is 6.5%
(c) Adjustments represent miscellaneous income generated primarily by
Premiere for periods prior to acquisition.
<PAGE>
(d) To provide for the tax effect of pro forma adjustments. The acquisition
adjustments described in Note (a) include non-deductible goodwill
amortization estimated to be approximately $1,350 for the nine months ended
September 30, 1997 and $7,600 for the year ended December 31, 1996.
(e) The adjustments for the year ended December 31, 1996 represent additional
revenues and expenses related to Nationwide's acquisitions of radio stations
in the Dallas, Houston, Phoenix, San Diego, Minneapolis and Cleveland
markets. These adjustment amounts are net of stations divested in the
Las Vegas, Orlando and Seattle markets.
The adjustments for the nine months ended September 30, 1997 represent
additional revenues and expenses related primarily to Nationwide's
acquisitions of radio stations in the Dallas, Phoenix and San Diego markets.
Nationwide has operated a majority of the stations acquired in 1997 under
local marketing agreements since January 1, therefore a significant amount of
the revenues and operating expenses related to these stations are included in
Nationwide's historical financial statements for the nine months ended
September 30, 1997.
(f) The adjustments represent elimination of Nationwide's gain on the sale
and exchange of certain radio stations in 1996 and 1997.
(g) To provide for the tax effect of Nationwide's pro forma adjustments
relating to their acquisitions and divestitures at statutory rates.
(h) The adjustments represent revenue and expense elimination from the
planned divestitures of Nationwide's San Diego stations and projected expense
savings of $13,707 and $10,476 for the year ended December 31, 1996 and the
nine months ended September 30, 1997, respectively. Expense savings will
result from the elimination of redundant broadcast operating expenses arising
from the operation of multiple stations in certain markets, changes in
compensation and benefit plan structures to conform with Jacor's and the
elimination of Nationwide's corporate office function. Estimated savings are
as follows:
1996 1997
---- ----
Corporate general and administrative $ 3,282 $ 2,657
Benefit plan expenses 2,850 2,138
Commissions 675 506
Promotion and programming 2,500 1,875
Personnel reductions 3,200 2,400
Other 1,200 900
------- -------
Total $13,707 $10,476
------- -------
------- -------
(i) The adjustment reflects the additional depreciation and amortization
expense resulting from the allocation of Jacor's purchase price to the assets
acquired including an increase in property and equipment and identifiable
intangible assets to their estimated fair market values.
<PAGE>
(j) The adjustment reflects additional interest expense related to additional
borrowings under the credit facility and the 1998 debt offerings to finance,
in part, the Acquisition of Nationwide's radio stations. See Note (p) for
description of related financings.
(k) To provide for the tax effect of pro forma adjustments.
(l) The adjustment represents the allocation of Jacor's purchase price, for
other individually immaterial acquisitions pending as of September 30, 1997,
to the estimated fair value of the assets acquired and certain liabilities
assumed.
(m) The adjustment represents the application of previously funded escrow
deposits to the purchase price of the other acquisitions described in note l.
(n) The adjustment represents incremental credit facility borrowings required
to finance Jacor's other acquisitions.
(o) The adjustment represents the allocation of Jacor's purchase price of
Nationwide to the estimated fair value of the assets acquired and the recording
of goodwill associated with the acquisition.
(p) The adjustment represents the assumed net proceeds from the common stock
offering, the liquid yield option notes (LYON's) offering, the subordinated
notes offering and incremental credit facility borrowings to finance the
acquisition of Nationwide's radio stations.
Common stock proceeds $192,000
Notes offering 100,000
LYONs 150,000
Net credit facility borrowings 125,000
--------
Total $567,000
--------
--------
The net credit facility borrowings assumes Jacor divests the San Diego
stations for cash proceeds of $65 million.
(q) Upon completion of the Nationwide acquisition, Jacor's radio station
ownership in the San Diego market would exceed the Federal Communications
Commission ownership limitation in that market. Jacor plans to divest the
Nationwide radio stations currently operating in the market. The sale price
is management's estimate based on current available information.
(r) The pro forma weighted average shares outstanding includes all shares
outstanding as of September 30, 1997 and the shares to be issued in the 1998
common stock offering. The pro forma weighted average shares of Jacor do not
reflect any outstanding options and warrants as they are antidilutive. The
LYON's are not common stock equivalents and are therefore, excluded from the
computations.
<PAGE>
(c) Exhibits
2.1 Agreement of Sale dated December 19, 1997 by and between
Nationwide Mutual Insurance Company, Employers Insurance of
Wausau, Nationwide Communications Inc., San Diego Lotus Corp.,
The Beak and Wire Corporation, Citicasters Co. and Jacor
Communications Company (omitting schedules and exhibits not
deemed material).*
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP
23.3 Consent of William T. Ogden, Inc.
23.4 Consent of KPMG Peat Marwick LLP
3
<PAGE>
99.1 Press Release dated October 13, 1997 *
99.2 Press Release dated October 23, 1997*
99.3 Press Release dated October 27, 1997*
* 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.
January 20, 1998 By: /s/ Jon M. Berry
---------------------------------------------
Jon M. Berry, Senior Vice President and
Treasurer
4
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplements
to the Registration Statement of Jacor Communications, Inc., Jacor
Communications Company and Subsidiary Guarantors on Form S-3 (File No.
333-40127) of our report dated February 27, 1997 on our audits of the
consolidated financial statements of Jacor Communications, Inc. as of December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996, which report is included in Jacor Communications, Inc.'s Annual Report
on Form 10-K; of our report dated February 28, 1997, on our audits of the
combined financial statements of EFM Media Management, Inc., EFM Publishing,
Inc., and PAM Media, Inc. as of December 31, 1995 and 1996 and for each of the
three years in the period ended December 31, 1996, which report is included in
Jacor Communications, Inc.'s Current Report on Form 8-K dated March 21, 1997, as
amended on March 26, 1997; of our report dated November 7, 1997 on our audits of
the financial statements of Archon Communications, Inc. as of December 31, 1996
and March 31, 1997 and for the period July 6, 1995 (Date of Inception) to
December 31, 1995, the year ended December 31, 1996 and the three months ended
March 31, 1997, which report is included in Jacor Communications, Inc.'s Current
Report on form 8-K dated November 21, 1997; and of our report dated November 14,
1997 on our audits of the combined balance sheet of Synergy Broadcast Investment
Enterprises, L.L.C., Worldstar, Inc. and MultiVerse Networks, L.L.C. as of
September 28, 1997 and the combined balance sheets of Shanahan Broadcasting,
Inc., Worldstar, Inc. and MultiVerse Networks, L.L.C. as of December 29, 1996
and December 31, 1995, and the related combined statements of income,
shareholders' equity and cash flows for the nine month period ended September
28, 1997, the year ended December 29, 1996 and the ten months ended December 31,
1995, which report is included in Jacor Communications, Inc.'s Current Report on
Form 8-K dated November 21, 1997. We also consent to the reference to our firm
under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
January 20, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Preliminary Prospectus Supplements dated January 21, 1998 to the Prospectus
contained in the Registration Statement (Form S-3 No. 333-40127) of Jacor
Communications, Inc., Jacor Communications Company and the Subsidiary Guarantors
and to the incorporation by reference therein of our report dated February 21,
1997, with respect to the consolidated financial statements of Premiere Radio
Networks, Inc. included in Jacor Communications, Inc.'s Current Report on Form
8-K(A) dated April 7, 1997.
ERNST & YOUNG LLP
Los Angeles, California
January 19, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated September 18, 1997, with respect to the financial
statements of Jacor Broadcasting of Youngstown, Inc. (formerly WN Broadcasting
Corp.) incorporated by reference in the Preliminary Prospectus Supplements to
the Registration Statement on Form S-3 (File No. 333-40127) and related
Prospectus of Jacor Communications Company, Jacor Communications, Inc. and
Subsidiary Guarantors.
WILLIAM T. OGDEN, INC.
Youngstown, Ohio
January 19, 1998
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Preliminary
Prospectus Supplements to the Prospectus contained in the registration
statement (No. 333-40127) on Form S-3 of Jacor Communications, Inc., Jacor
Communications Company and the Subsidiary Guarantors of our report dated
January 4, 1998, with respect to the combined balance sheets of Nationwide
Communications as of September 30, 1997 and December 31, 1996, and the
related combined statements of earnings, shareholder's equity, and cash flows
for the nine month period ended September 30, 1997 and each of the years in the
two year period ended December 31, 1996, which report appears in the Form 8-K
of Jacor Communications, Inc. dated January 5, 1998, as amended.
In addition, we consent to the reference to our firm under the heading
"Experts" in the Preliminary Prospectus Supplements to the Prospectus
contained in the registration statement (No. 333-40127) on Form S-3 of Jacor
Communications, Inc., Jacor Communications Company and the Subsidiary
Guarantors.
KPMG Peat Marwick LLP
Columbus, Ohio
January 20, 1998
