<PAGE>
FORM 10-Q
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 March 31, 1998
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
50 East RiverCenter Blvd.
12th Floor
Covington, Kentucky 41011
Telephone (606) 655-2267
Indicate by check mark whether the Registrant (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
At May 1, 1998, 50,902,698 shares of common stock were outstanding.
<PAGE>
JACOR COMMUNICATIONS, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. - Financial Statements
Condensed Consolidated Balance Sheets
as of March 31, 1998 and December 31,
1997 3
Condensed Consolidated Statements of
Operations and Comprehensive Income
for the three months ended March 31, 1998
and 1997 4
Condensed Consolidated Statements of
Cash Flows for the three months ended
March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 12
PART II. Other Information
Item 6. - Exhibits and Reports on Form 8-K 18
Signatures 20
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 343,439 $ 28,724
Accounts receivable, less allowance for
doubtful accounts of $6,702 in 1998
and $6,195 in 1997 128,850 135,073
Prepaid expenses and other 39,340 33,790
Total current assets 511,629 197,587
Property and equipment, net 212,398 206,809
Intangible assets, net 2,157,393 2,128,718
Other assets 83,619 68,764
Total assets $ 2,965,039 $ 2,601,878
LIABILITIES
Current liabilities:
Accounts payable, accrued expenses
and other current liabilities $ 114,759 $ 118,249
Total current liabilities 114,759 118,249
Long-term debt 939,542 987,500
Liquid Yield Option Notes 294,920 125,300
Deferred tax liability 342,684 338,867
Other liabilities 116,880 115,611
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, authorized and unissued
4,000,000 shares - -
Common stock, no par value, $0.01 per share
stated value; authorized 100,000,000
shares, issued and outstanding shares:
50,898,868 in 1998 and 45,689,677 in 1997 509 457
Additional paid-in capital 1,109,835 863,086
Common stock warrants 31,500 31,500
Retained earnings 14,410 21,308
Total shareholders' equity 1,156,254 916,351
Total liabilities and
shareholders' equity $ 2,965,039 $ 2,601,878'
The accompanying notes are an integral
part of the condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
for the three months ended March 31, 1998 and 1997
(in thousands, except per share data)
(UNAUDITED)
<CAPTION>
1998 1997
<S> <C> <C>
Broadcast revenue $159,192 $100,153
Less agency commissions 17,164 11,325
Net revenue 142,028 88,828
Broadcast operating expenses 107,353 67,305
Depreciation and amortization 27,450 13,369
Corporate general and
administrative expenses 3,644 2,762
Operating income 3,581 5,392
Interest expense (23,958) (17,176)
Gain on sale of assets - 4,695
Other income, net 2,479 405
Loss before income taxes
and extraordinary loss (17,898) (6,684)
Income tax benefit 11,000 4,100
Loss before extraordinary loss (6,898) (2,584)
Extraordinary loss, net of income
tax benefit - (5,556)
Net loss (6,898) (8,140)
Other comprehensive income, net of tax:
Unrealized gains on securities - 6,149
Income tax expense related to items of
other comprehensive income - (2,460)
Other comprehensive income, net of tax - 3,689
Comprehensive loss $ (6,898) $ (4,451)
Basic and diluted net loss per common share:
Before extraordinary loss $ (0.14) $ (0.08)
Extraordinary loss - (0.17)
Net loss per common share $ (0.14) $ (0.25)
Number of common shares used in
basic and diluted calculation 48,419 32,588
The accompanying notes are an integral part
of the condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 1998 and 1997
(in thousands)
(UNAUDITED)
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities $19,391 $ 4,503
Cash flows from investing activities:
Capital expenditures (4,795) (4,860)
Cash paid for acquisitions (34,485) (133,215)
Deposits on broadcast stations (23,783) (2,975)
Proceeds from News Corp. Warrants sale - 44,495
Net cash used by investing activities (63,063) (96,555)
Cash flows from financing activities:
Issuance of long-term debt 149,539 77,000
Common stock proceeds, net of issuance costs 244,939 -
Issuance of Liquid Yield Option Notes 166,950 -
Repayment of long-term debt (197,500) (50,000)
Payment of finance costs (7,403) (667)
Other 1,862 -
Net cash provided by financing activities 358,387 26,333
Net increase (decrease) in cash and
cash equivalents 314,715 (65,719)
Cash and cash equivalents at
beginning of period 28,724 78,137
Cash and cash equivalents at end of period $ 343,439 $ 12,418
Supplemental schedule of non-cash investing
and financing activities:
Common shares issued in acquisitions - $105,900
Warrants issued in acquisitions - 5,000
Fair value of assets exchanged, net of cash $ 70,000 -
Liabilities assumed in acquisitions 2,687 5,616
The accompanying notes are an integral part
of the condensed consolidated financial statements.
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The December 31, 1997 condensed 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, 1997 and the notes thereto.
2. ACQUISITIONS AND DISPOSITIONS
Completed Radio Station Acquisitions and Dispositions
January Transactions
The Company acquired WKNR-AM in Cleveland, Ohio from CV
Radio Associates, L.P. for $8.4 million in cash, all of
which was placed in escrow in 1997.
The Company acquired KFXD-AM in Nampa, Idaho from Doubledee
Broadcasting Group for $1.8 million in cash, of which $0.1
million was placed in escrow in 1997.
The Company acquired KLDZ-AM (formerly KIST-AM) in Santa Barbara,
California from Engles Enterprises, Inc. for $0.9 million in cash,
of which $0.1 million was placed in escrow in 1997.
The Company completed a like-kind exchange, whereby the assets of
WDAF-AM, KYYS-FM, KUDL-FM, and KMXV-FM in Kansas City, Missouri
were exchanged for the assets of WMMX-FM, WTUE-FM, WLQT-FM,
WXEG-FM, WBTT-FM, and WONE-AM in Dayton, Ohio.
February Transactions
The Company acquired WMRN-AM, WMRN-FM and WDIF-FM of Marion,
Ohio, WQTL-FM of Ottawa, Ohio and WHMQ-FM of North Baltimore,
Ohio from Marion Broadcasting Company for $14.5 million in cash,
of which $0.8 million was placed in escrow in 1997.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS AND DISPOSITIONS, Continued
March Transactions
The Company acquired KCIX-FM of Garden City, Idaho and KXLT-FM
of Eagle, Idaho from LMS of Boise, Inc. and LMS Licenses,Inc.
for $8.0 million in cash, all of which was placed in escrow in 1997.
The Company sold WLOH-AM in Columbus, Ohio for $0.1 million in cash.
Completed Broadcasting Services Acquisitions
February Transactions
The Company acquired Hot Mix Radio Network, Inc., producer of
seven nationally syndicated "dance mix" radio programs in four
major radio formats, for $2.3 million in cash, plus additional
contingent consideration of up to $1.6 million payable over
three years.
The Company acquired the "Invasion" production music library
from Brandon D'Amore Productions for $0.8 million in cash.
March Transactions
The Company acquired Chancellor Broadcasting Co., Inc. and
Talk Radio Network, Inc., syndicator of two Art Bell network
radio programs, as well as 17 other talk radio programs, for
$8.5 million in cash.
The above acquisitions and all 1997 acquisitions have been
accounted for as purchases. The excess cost over the fair
value of net assets acquired is being amortized over 40
years. The results of operations of the acquired businesses
are included in the Company's financial statements since the
respective dates of acquisition. Assuming the above
acquisitions had taken place at the beginning of 1997 and
that the 1997 acquisitions, which were completed at various
dates in 1997, had taken place at the beginning of 1997,
unaudited pro forma consolidated results of operations would
have been as follows (in thousands except per share amounts):
<TABLE>
Pro forma (Unaudited)
Three Months Ended
March 31,
<CAPTION>
1998 1997
<S> <C> <C>
Net revenue $143,739 $128,539
Net loss before
extraordinary items $ (6,666) $ (5,262)
Diluted net loss per
common share before
extraordinary items $ (0.13) $ (0.10)
</TABLE>
These unaudited pro forma amounts do not purport to be
indicative of the results that might have occurred if the
foregoing transactions had been consummated on the indicated dates.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS AND DISPOSITIONS, Continued
Radio Station Acquisitions and Dispositions Completed
Subsequent to March 31, 1998
The Company completed the acquisitions of two radio stations
in two broadcast areas for $3.5 million in cash. The Company
also completed the sale of the FCC licenses and substantially
all of the broadcast assets of two radio stations in one
broadcast area for approximately $0.2 million in cash.
Pending Radio Station Acquisitions and Dispositions
In December 1997, the Company entered into a binding
agreement to purchase the assets of Nationwide
Communications, Inc.'s 17 radio stations (the "Nationwide
Transaction") for $620.0 million, of which $30.0 million was
placed in escrow in 1997. The stations are located in
Dallas, Houston, Minneapolis, Phoenix, Baltimore, San Diego,
Cleveland, and Columbus. The Company anticipates this
transaction will close in the third quarter of 1998. The
Company has signed a letter of intent to sell two radio
stations in the San Diego broadcast area for $65.2 million
upon the consummation of the Nationwide Transaction.
In February 1998, the Company entered into a binding
agreement with Smith Broadcasting, Inc. to purchase a
construction permit for a new FM radio station in Vancouver,
Washington for approximately $20.8 million in cash, all of
which was paid in escrow in 1998.
The Company has entered into agreements to purchase FCC
licenses and substantially all of the broadcast assets of 17
stations in seven of the Company's existing broadcast areas
and in seven new broadcast areas for a total purchase price
of approximately $75.3 million, of which $5.6 million has
already been paid in escrow through March 31, 1998, and to
exchange the assets of one station for another station in
one broadcast area
3. ISSUANCE OF COMMON STOCK
In February 1998, the Company completed an offering of
4,560,000 shares of common stock at $50.50 per share net of
underwriting discounts of $2.02 per share (the "Offering").
The over-allotment option was also exercised by the
underwriters resulting in the issuance of an additional
513,000 shares. Net proceeds to the Company from the
Offering were approximately $244.9 million.
4. ISSUANCE OF SUBORDINATED NOTES
In February 1998, the Company issued $120.0 million of 8%
Senior Subordinated Notes (the "8% Notes"). Net proceeds to
the Company were $117.1 million. The 8% Notes will mature
on February 15, 2010. Interest on the 8% Notes is payable
semi-annually. The 8% Notes will be redeemable at the option
of the Company, in whole or in part, at any time on or after
February 15, 2003. The redemption prices commence at 104.00%
and are reduced by .80% annually until February 15, 2008
when the redemption price is 100%.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. ISSUANCE OF SUBORDINATED NOTES, Continued
The 8% Notes are obligations of Jacor Communications Company ("JCC"),
and are jointly and severally, fully and unconditionally guaranteed
on a senior subordinated basis by Jacor and by all of the Company's
subsidiaries (the "Subsidiary Guarantors"). JCC and each of the
Subsidiary Guarantors are wholly owned direct or indirect subsidiaries
of Jacor. Separate financial statements of JCC and each of the
Subsidiary Guarantors are not presented because Jacor believes that
such information would not be material to investors. The direct and
indirect non-guarantor subsidiaries of Jacor are inconsequential, both
individually and in the aggregate. 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
8% Notes do restrict the ability of JCC and of the Subsidiary
Guarantors to make distributions to the Registrant.
The 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.
Summarized financial information with respect to Jacor, JCC and with
respect to the Subsidiary Guarantors on a combined basis as of
March 31, 1998 and for each of the periods ended March 31, 1998
and 1997 is as follows:
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. ISSUANCE OF SUBORDINATED NOTES, Continued
<CAPTION>
Jacor _________JCC__________
March 31, March 31, March 31, March 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating Statement
Data (in thousands):
Net revenue - - - -
Equity in earnings
of subsidiaries $ (5,484) $ (7,072) $ (6,463) $ (3,516)
Operating loss (9,398) (9,940) (6,463) (3,516)
Loss before
extraordinary items (6,898) (8,140) (5,484) (1,516)
Net loss (6,898) (8,140) (5,484) (7,072)
Balance Sheet Data
(in thousands):
Current assets $ 164,197 $ 186,589
Non-current assets 1,411,924 2,178,339
Current liabilities 28,208 22,498
Non-current
liabilities 391,659 1,670,528
Shareholders' equity 1,156,254 671,902
Combined
Subsidiary Guarantors
March 31, March 31,
1998 1997
Operating Statement
Data (in thousands):
Net revenue $ 142,664 $ 88,828
Equity in earnings
of subsidiaries - -
Operating income 7,495 8,260
Loss before
extraordinary items (6,463) (3,516)
Net loss (6,463) (3,516)
Balance Sheet Data
(in thousands):
Current assets $ 160,843
Non-current assets 2,426,078
Current liabilities 64,053
Non-current
liabilities 1,366,614
Shareholders' equity 1,156,254
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. LIQUID YIELD OPTION NOTES
In February 1998, the Company issued 4 3/4% Liquid Yield Option
Notes due 2018 (the "1998 LYONs") in the aggregate principal
amount at maturity of $426.9 million. Each 1998 LYON had an
issue price of $391.06 and a principal amount at maturity of
$1,000.00. The 1998 LYONs are convertible, at the option of
the holder, at any time on or prior to maturity, into common
stock at a conversion rate of 6.245 shares per each 1998 LYON,
for an aggregate of approximately 2.7 million shares of common
stock. Net proceeds from the issuance of the 1998 LYONs were
$161.9 million.
6. EARNINGS PER SHARE
Basic earnings per share ("EPS") for the first quarter of
1998 and 1997 are computed by dividing net loss by the
weighted average number of common shares outstanding for
each period. The Company's 1996 Liquid Yield Option Notes
and 1998 LYONs (collectively, the "LYONs") can be converted
into approximately 6.2 million shares of common stock at the
option of the holder. The effect of the Company's LYONs,
warrants, stock options and other dilutive securities have
not been included in the calculation of diluted EPS because
they are antidilutive due to net losses for the quarters
ended March 31, 1998 and 1997.
7. RECENT PRONOUNCEMENTS
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income." SFAS 130 requires the reporting of
comprehensive income in financial statements by all entities that
provide a full set of financial statements. The term "comprehensive
income" describes the total of all components of comprehensive
income including net income. The statement only deals with reporting
and display issues. It does not consider recognition or measurement
issues.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 provides accounting guidance for reporting
information about operating segments in annual financial statements
and requires such enterprises to report selected information about
operating segments in interim financial reports. The statement uses
a "management approach" to identify operating segments and provides
specific criteria for operating segments. SFAS 131 is effective for
the year ended December 31, 1998 and will be required for interim
periods in 1999. The Company is currently evaluating the impact
SFAS 131 will have on its financial statements, if any.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
GENERAL
The following discussion should be read in conjunction with the
financial statements beginning on page 3.
This report includes certain forward-looking statements within
the meaning of Section 27A of the Securities Act. When used in
this report, the words "believes," "anticipates," "expects" and
similar expressions are intended to identify forward-looking
statements. 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
as a result of the matters discussed in this report generally.
The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that
may be made to reflect any future events or circumstances.
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 the
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.
LIQUIDITY AND CAPITAL RESOURCES
Recent liquidity needs have been driven by the Company's
acquisition strategy. The Company's acquisitions since 1996 have
been financed with funds raised through a combination of debt and
equity instruments. An important factor in management's
financing decisions includes maintenance of leverage ratios
consistent with their long-term growth strategy. The Company
currently has cash on hand and additional borrowing capacity to
finance the Company's pending acquisitions, with financing
available to pursue other acquisitions.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES, Continued
Based upon current levels of the Company's operations and anticipated
growth, it is expected that operating cash flow will be sufficient to
meet expenditures for operations, administrative expenses and debt service.
Financing Activities
Cash provided by financing activities for the first quarter of 1998 was
$358.4 million compared to $26.3 million for the first quarter of 1997.
The change between years is due primarily to funds raised in the first
quarter of 1998 for the acquisition of radio stations and broadcasting
related service companies.
Credit Facilities
The Company has a $1.15 billion credit facility (the "Credit Facility")
with a syndicate of banks and other financial institutions. The Credit
Facility provides loans to the Company in two components: (i) a reducing
revolving credit facility (the "Revolving Credit Facility") of up to
$750 million under which the aggregate commitments will reduce on a
semi-annual basis commencing in June 2000; and (ii) a $400 million
amortizing term loan (the "Term Loan")that would reduce on a semi-annual
basis commencing in December 1999. The Term Loan and the Revolving
Credit Facility expire on December 31, 2004. Amounts repaid or prepaid
under the Term Loan may not be reborrowed. The Credit Facility bears
interest at a rate that fluctuates, with an applicable margin ranging
from 0.00% to a maximum of 1.75%, based on the Company's ratio of total
debt to earnings before interest, taxes, depreciation and amortization
for the four consecutive fiscal quarters then most recently ended
(the "Leverage Ratio"), plus a bank base rate or a Eurodollar base rate,
as applicable. At May 1, 1998, the average interest rate on Credit Facility
borrowings was 6.57%. The Company pays interest on the unused portion of
the Revolving Credit Facility at a rate ranging from 0.250% to 0.375% per
annum, based on the Company's Leverage Ratio.
As of May 1, 1998, the Company had $400.0 million of outstanding indebtedness
under the Term Loan and available borrowings of $750.0 million.
Debt and Equity Offerings
In February 1998, the Company completed offerings of 5.1 million shares of
common stock, 8% Senior Subordinated Notes due 2010, and 4 3/4% Liquid
Yield Option Notes (collectively the "February 1998 Offerings"). Net
proceeds from the February 1998 Offerings were $525.0 million, of which
$197.5 million was used to pay off the then outstanding balance of the
Revolving Credit Facility. The remaining proceeds are currently held in
short-term highly liquid securities.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES, Continued
Investing Activities
Cash flows used for investing activities were $63.1 million for the
first quarter of 1998 as compared to $96.6 million for the first quarter
of 1997. The variations from year to year are related to station
acquisition activity, as described below, as well as the sale of the
Company's investment in the News Corp. Warrants.
Completed Acquisitions and Dispositions
During the first quarter of 1998, the Company completed the following:
acquisitions of ten radio stations in six broadcast areas; one like-kind
exchange, whereby the Company exchanged four stations in one broadcast
area for six stations in another broadcast area; the disposition of one
station, and; acquisitions of four broadcasting related businesses. The
Company paid cash consideration for the above transactions of approximately
$27.9 million in the first quarter of 1998, in addition to approximately
$17.3 million placed in escrow in 1997, and received cash consideration of
approximately $0.1 million for the sale of one station. The acquisitions
were funded through borrowings under the Credit Facility.
Acquisitions and Dispositions Completed Subsequent to March 31, 1998
Through May 1, 1998, the Company completed acquisitions of two radio
stations in two broadcast areas for $3.5 million in cash. The Company
also completed the sale of the FCC licenses and substantially all of
the broadcast assets of two radio stations in one broadcast area for
approximately $0.2 million in cash.
Pending Acquisitions and Dispositions
In December 1997, the Company entered into a binding agreement to
purchase the assets of Nationwide Communications, Inc.'s 17 radio
stations (the "Nationwide Transaction") for $620.0 million, of
which $30.0 million was placed in escrow in 1997. The stations
are located in Dallas, Houston, Minneapolis, Phoenix, Baltimore,
San Diego, Cleveland, and Columbus. The Company anticipates this
transaction will close in the third quarter of 1998.
In February 1998, the Company entered into a binding agreement with
Smith Broadcasting, Inc. to purchase a construction permit for a new
FM radio station in Vancouver, Washington for approximately $20.8 million
in cash, all of which was paid in escrow in 1998.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES, Continued
The Company has also entered into agreements to purchase FCC
licenses and substantially all of the broadcast assets of 17 stations
in seven of the Company's existing broadcast areas and in seven new
broadcast areas for a total purchase price of approximately $75.3 million,
of which $5.6 million has already been paid in escrow through May 1, 1998,
and to exchange the assets of one station for another station in one
broadcast area.
The Company will finance its pending acquisitions from a combination of
the net proceeds from the February 1998 Offerings and borrowings under
the Revolving Credit Facility. The Company anticipates after financing
all pending acquisitions, available borrowings under the Revolving Credit
Facility will be approximately $480.0 million. Additionally, the Company
has signed a letter of intent to sell two radio stations in the San Diego
broadcast area for $65.2 million upon the consummation of the Nationwide
Transaction.
In May 1998, the Company filed an omnibus shelf registration statement with
the Securities and Exchange Commission to register the possible future
issuance of up to $500 million of additional equity and/or debt securities.
The issuance of additional debt would negatively impact the Company's
debt-to-equity ratio and its results of operations and cash flows due to
higher amounts of interest expense. Any issuance of additional equity
would soften this impact to some extent.
Capital Expenditures
The Company had capital expenditures of $4.8 million and $4.9 million for
the quarters ended March 31, 1998 and 1997, respectively. The Company's
capital expenditures consist primarily of purchases related to the
Company's ongoing strategic technology plan, broadcasting equipment
and tower upgrades.
Operating Activities
For the quarter ended March 31, 1998, cash flow provided by operating
activities was $19.4 million, as compared to $4.5 million for the quarter
ended March 31, 1997. The change is primarily due to an increase in
operating income related to acquisitions.
RESULTS OF OPERATIONS
The Quarter Ended March 31, 1998 Compared to The Quarter Ended
March 31, 1997
Broadcast revenue for the first quarter of 1998 was $159.2 million,
an increase of $59.0 million or 58.9% from $100.2 million during the
same quarter of 1997. This increase resulted primarily from the revenue
generated at those properties owned or operated during the first quarter
of 1998 but not during the comparable 1997 period, including revenues
generated from commercial broadcast time received and rights fees from
syndicated programming. On a "same station" basis - reflecting results
from stations operated in the first quarter of both 1998 and
1997 - broadcast revenue for 1998 was $100.4 million, an increase of
$10.3 million or 11.4% from $90.1 million for 1997.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS, Continued
Agency commissions for the first quarter of 1998 were $17.2 million,
an increase of $5.9 million or 52.2% from $11.3 million during the
first quarter of 1997 due to the increase in broadcast revenue. On
a "same station" basis, agency commissions for the first quarter of
1998 were $11.3 million, an increase of $1.1 million or 10.8% from
$10.2 million for the first quarter of 1997.
Broadcast operating expenses for the first quarter of 1998 were
$107.4 million, an increase of $40.1 million or 59.6% from $67.3
million during the comparable period of 1997. These expenses
increased primarily as a result of expenses incurred at those
properties, including broadcast related service businesses, owned
or operated during the first quarter of 1998 but not during the
comparable period of 1997. On a "same station" basis, broadcast
operating expenses for the first quarter of 1998 were $66.2 million,
an increase of $5.4 million or 8.9% from $60.8 million for the
comparable period of 1997.
Depreciation and amortization for the first quarter of 1998 and 1997
was $27.5 million and $13.4 million, respectively. The increase was
due to acquisitions during 1997 and the first quarter of 1998.
Operating income for the first quarter of 1998 was $3.6 million,
a decrease of $1.8 million or 33.3% from an operating income of
$5.4 million for the same period of 1997. The decrease in operating
income is primarily the result of increased amortization and
depreciation expense due to acquisitions made at various dates
in 1997 and 1998.
Interest expense for the first quarter of 1998 was $24.0 million, an
increase of $6.8 million or 39.5% from $17.2 million for the comparable
period in 1997. Interest expense increased due to an increase in
outstanding debt that was incurred in connection with acquisitions.
The gain on the sale of assets in the first quarter of 1997 resulted
from the sale of the Company's investment in News Corp. Warrants
in February 1997.
Income tax benefit was $11.0 million for the first quarter of
1998 and $4.1 million for the first quarter of 1997.
The Company recognized an extraordinary loss of $5.6 million, net of
income tax credit, in 1997 related to the write off of debt financing
costs due to significant amendments to the Company's Credit Facility.
Net loss for the first quarter of 1998 was $6.9 million, compared to net
loss of $8.1 million reported by the Company for the comparable period
in 1997.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS, Continued
Year 2000 Computer System Compliance
The Year 2000 issue ("Y2K") is the result of computer programs written
with date sensitive codes that contain two digits (rather than four)
to define the year. As the year 2000 approaches, certain computer
systems may be unable to accurately process certain date-based
information as the program may interpret the year 2000 as 1900.
The Company has substantially completed a Y2K assessment inventory of
its computer, broadcast and environmental systems. Additionally, the
Company purchased an enterprise license for Y2K compliance testing
and repair software. The software has been distributed throughout
the Company's locations, where it will be used to assess and repair
PC based hardware for Y2K compliance. The Company has also begun a
process of requesting Y2K compliance certificates from the appropriate
vendors and is instituting policies to ascertain that all future
purchases of equipment are Y2K compliant.
The Company believes that its Y2K compliance issues will be resolved
on a timely basis and that any related costs will not have a material
impact on the Company's operations, cash flows or financial condition
of future periods.
Recent Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures
about Segments of an Enterprise and Related Information". SFAS 131
provides accounting guidance for reporting information about operating
segments in annual financial statements and requires such enterprises
to report selected information about operating segments in interim
financial reports. The statement uses a "management approach" to identify
operating segments and provides specific criteria for operating segments.
SFAS 131 is effective for the year ended December 31, 1998 and will be
required for interim periods in 1999. The Company is currently evaluating
the impact SFAS 131 will have on its financial statements, if any.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Number Description Page
4.1 Indenture dated as of February 9, 1998 among Jacor
Communications, Inc. ("Jacor"), Jacor Communications
Company ("JCC"), the Subsidiary Guarantors named
therein and the Bank of New York for JCC's 8% Senior
Subordinated Notes due 2010 and Jacor's and the
Subsidiary Guarantors Guaranty thereof. Incorporated
by reference to Exhibit 4.20 of the Company's Form
S-3 Registration Statement, File No. 333-51489. *
4.2 Indenture dated as of February 9, 1998 between Jacor
and the Bank of New York for Jacor's Liquid Yield
Option Notes due 2018. Incorporated by reference to
Exhibit 4.21 of the Company's Form S-3 Registration
Statement, File No. 333-51489. *
27 Financial Data Schedule 21
___________
* Incorporated by reference.
(b) Reports on Form 8-K
1. Form 8-K dated January 5, 1998. This Form 8-K
described the Company's entering into of a definitive
agreement to purchase the assets of 17 radio stations
from Nationwide Communications, Inc. and its affiliated
entities for a purchase price of $620.0 million. This
Form 8-K was subsequently amended in a January 21, 1998
filing with the Commission to include the historical
audited financial statements of Nationwide
Communications for the nine months ended September 30,
1997 and the unaudited pro forma financial statements
reflecting the financial statement effect of such
acquisition on the Company. The January 21, 1998
amendment also disclosed the Company's filing of its
preliminary prospectus supplements relating to its
proposed public offerings of common stock, liquid yield
option notes and senior subordinated notes. This Form
8-K was again amended on April 30, 1998 to include the
historical audited financial statements of Nationwide
Communications for the year ended December 31, 1997 and
the unaudited pro forma financial statements reflecting
the financial statement effect of such acquisition on
the Company.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
(b) Reports on Form 8-K
2. Form 8-K dated February 4, 1998. This Form 8-K described
the Company's filing of its definitive prospectus supplements
relating to the offer for sale of 5,073,000 shares of common
stock in an underwritten public offering, of $426,917,000
aggregate principal amount at maturity of liquid yield option
notes due 2018 and of $120.0 million in aggregate principal
amount at maturity of 8% Senior Subordinated Notes due 2011.
This Form 8-K was subsequently amended in a February 20, 1998
filing with the Commission to revise certain exhibits to the
initial filing reflecting the total amount of each security
sold in the three public offerings.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
JACOR COMMUNICATIONS, INC.
(Registrant)
DATED: May 14, 1998 BY /s/ R. Christopher Weber
R. Christopher Weber,
Senior Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT 27
Financial Data Schedule
for the three months ended March 31, 1998
<CAPTION>
Fiscal-Year-End December 31, 1998
Period-End March 31, 1998
<S> <C>
Item Description Amount
(1)
Cash and cash items 343,439
Marketable securities -
Notes and accounts receivable-trade 135,552
Allowances for doubtful accounts 6,702
Inventory -
Total current assets 511,629
Property, plant and equipment 249,371
Accumulated depreciation 36,973
Total assets 2,965,039
Total current liabilities 114,759
Bonds, mortgages and similar debt 1,234,462
Preferred stock-mandatory redemption -
Preferred stock-no mandatory redemption -
Common stock 509
Other stockholders' equity 1,155,745
Total liabilities and stockholders' equity 2,965,039
Net sales of tangible products -
Total revenues 159,192
Cost of tangible goods sold -
Total costs and expenses applicable to
sale and revenues 124,517
Other costs and expenses 31,094
Provision for doubtful accounts and notes 507
Interest and amortization of debt discount 23,958
Income before taxes and other items (17,898)
Income tax expense (11,000)
Income/loss continuing operations (6,898)
Discontinued operations -
Extraordinary items -
Cumulative effect - changes in accounting
principles -
Net income (6,898)
Earnings per share - primary (.14)
Earnings per share - fully diluted (.14)
(1) Dollars in thousands except per share amounts.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 343439
<SECURITIES> 0
<RECEIVABLES> 135552
<ALLOWANCES> 6702
<INVENTORY> 0
<CURRENT-ASSETS> 511629
<PP&E> 249371
<DEPRECIATION> 36973
<TOTAL-ASSETS> 2965039
<CURRENT-LIABILITIES> 114759
<BONDS> 1234462
0
0
<COMMON> 509
<OTHER-SE> 1155745
<TOTAL-LIABILITY-AND-EQUITY> 2965039
<SALES> 0
<TOTAL-REVENUES> 159192
<CGS> 0
<TOTAL-COSTS> 124517
<OTHER-EXPENSES> 31094
<LOSS-PROVISION> 507
<INTEREST-EXPENSE> 23958
<INCOME-PRETAX> (17898)
<INCOME-TAX> (11000)
<INCOME-CONTINUING> (6898)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6898)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
