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 September 30, 1999
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 wholly owned subsidiary of Clear Channel Communications, Inc.)
A Delaware Corporation Employer Identification
No. 74-2916308
50 East RiverCenter Blvd.
12TH Floor
Covington, KY 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 November 1, 1999, 1 share of common stock was outstanding.
<PAGE>
JACOR COMMUNICATIONS, INC.
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
INDEX
Page
Number
PART I. Financial Information
Item 1. - Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1999 and
December 31, 1998 3
Condensed Consolidated Statements of
Operations and Comprehensive Income
for the three months ended September 30,
1999 and 1998 4
Condensed Consolidated Statements of
Operations and Comprehensive Income
for the period from May 5, 1999 through
September 30, 1999, the period from
January 1, 1999 through May 4, 1999 and
the nine months ended September 30, 1998 5
Condensed Consolidated Statements of
Cash Flows for the period from May 5, 1999
through September 30, 1999, the period from
January 1, 1999 through May 4, 1999,
and the nine months ended September 30, 1998 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 18
PART II. Other Information
Item 6. - Exhibits and Reports on Form 8-K 28
Signatures 29
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
<CAPTION>
Predecessor
September 30, December 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 31,545 $ 20,051
Accounts receivable, less allowance
for doubtful accounts of $10,285
at September 30, 1999 and $8,303 at
December 31, 1998 231,527 201,466
Prepaid expenses and other 35,071 32,796
Total current assets 298,143 254,313
Property and equipment, net 312,538 281,049
Intangible assets, net 6,812,282 2,749,348
Other assets 106,784 135,998
Total assets $ 7,529,747 $ 3,420,708
LIABILITIES
Current liabilities:
Current portion long-term debt - $ 35,000
Accounts payable, accrued expenses
and other current liabilities $ 254,479 128,400
Total current liabilities 254,479 163,400
Due to Clear Channel 707,992 -
Long-term debt 539,257 1,289,574
Liquid Yield Option Notes 493,314 306,202
Deferred tax liability 813,526 345,478
Other liabilities 112,189 112,988
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:
1 in 1999 and 51,184,217 in 1998 - 512
Additional paid-in capital 4,382,377 1,124,057
Common stock warrants 253,428 30,819
Accumulated other comprehensive income - 25,428
Retained earnings (26,815) 22,250
Total shareholders' equity 4,608,990 1,203,066
Total liabilities and
shareholders' equity $ 7,529,747 $3,420,708
The accompanying notes are an integral
part of the condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
for the three months ended September 30, 1999 and 1998
(in thousands, except per share amounts)
(UNAUDITED)
<CAPTION>
Predecessor
Three Months Three Months
ended ended
Sept. 30, 1999 Sept. 30, 1998
<S> <C> <C>
Broadcast revenue $ 303,118 $ 230,951
Less agency commissions 34,473 26,443
Net revenue 268,645 204,508
Broadcast operating expenses 162,464 128,777
Depreciation and amortization 90,188 31,161
Corporate general and
administrative expenses 4,045 4,878
Operating income 11,948 39,692
Interest expense (22,521) (27,526)
Gain on sale of assets - 10,896
Other (expense) income, net (1,103) 1,677
(Loss) income before income
taxes (11,676) 24,739
Income tax expense (8,900) (24,300)
Net (loss) income (20,576) 439
Other comprehensive income,
net of tax:
Unrealized gains on securities - 21,052
Income tax expense related to
items of other comprehensive
income - (8,421)
Other comprehensive income,
net of tax - 12,631
Comprehensive (loss) income $ (20,576) $ 13,070
Basic net income per
common share $ 0.01
Diluted net income per
common share $ 0.01
Number of common shares used
in Basic calculation 50,999
Number of common shares used
in Diluted calculation 55,287
The accompanying notes are an integral
part of the condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
for the period from May 5, 1999 through September 30, 1999, the period from
January 1, 1999 through May 4, 1999, and the nine months ended
September 30, 1998
(in thousands, except per share amounts)
(UNAUDITED)
<CAPTION>
Predecessor
May 5, 1999 January 1, 1999 Nine Months
through through ended
Sept. 30, 1999 May 4, 1999 Sept. 30, 1998
<S> <C> <C> <C>
Broadcast revenue $ 495,906 $ 306,824 $ 597,244
Less agency commissions 57,182 35,177 66,872
Net revenue 438,724 271,647 530,372
Broadcast operating expenses 262,442 192,077 356,877
Depreciation and amortization 141,650 46,951 87,444
Corporate general and
administrative expenses 6,811 7,373 13,052
Operating income 27,821 25,246 72,999
Interest expense (42,046) (39,731) (76,563)
Gain on sale of assets - 130,385 10,896
Other (expense) income, net (2,490) (163) 10,431
(Loss) income before income
taxes (16,715) 115,737 17,763
Income tax expense (10,100) (52,300) (19,200)
Net (loss) income (26,815) 63,437 (1,437)
Other comprehensive income,
net of tax:
Unrealized gains on securities - - 21,052
Income tax expense related to
items of other comprehensive
income - - (8,421)
Reclassification adjustment
for gains included in net
income, net of taxes - (25,428) -
Other comprehensive income,
net of tax - (25,428) 12,631
Comprehensive (loss) income $ (26,815) $ 38,009 $ 11,194
Basic net income (loss)
per common share $ 1.24 $(0.03)
Diluted net income (loss)
per common share $ 1.07 $(0.03)
Number of common shares used
in Basic calculation 51,299 50,133
Number of common shares used
in Diluted calculation 61,916 50,133
The accompanying notes are an integral
part of the condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the period from May 5, 1999 through September 30, 1999, the period from
January 1, 1999 through May 4, 1999, and the nine months ended September
30, 1998
(in thousands)
(UNAUDITED)
<CAPTION>
Predecessor
May 5,1999 January 1, 1999 Nine Months
through through Ended
Sept. 30, 1999 May 4, 1999 Sept. 30, 1998
<S> <C> <C> <C>
Cash flows from operating activities:
Net cash provided by operating
activities $ 73,227 $ 46,698 $ 64,601
Cash flows from investing activities:
Deposits on broadcast properties and other (68,393) (7,656) (11,209)
Capital expenditures (8,046) (12,540) (23,354)
Cash paid for acquisitions - (127,311) (671,442)
Proceeds from sale of investments - 87,605 -
Proceeds from sale of broadcast properties - 5,017 10,400
Advances and other - - (4,500)
Net cash used by investing activities (76,439) (54,885) (700,105)
Cash flows from financing activities:
Issuance of long-term debt - 180,000 439,539
Issuance of LYONs - - 166,950
Common stock proceeds, net of issuance costs - 19,232 248,371
Repayment of long-term debt (872,136) (115,000) (197,500)
Payment of finance costs - - (8,496)
Advances to Clear Channel (92,500) - -
Advances from Clear Channel 903,297 - -
Net cash (used) provided by financing
activities (61,339) 84,232 648,864
Net (decrease) increase in cash and
cash equivalents (64,551) 76,045 13,360
Cash and cash equivalents at
beginning of period 96,096 20,051 28,724
Cash and cash equivalents at end of period $ 31,545 $ 96,096 $ 42,084
Supplemental schedule of non-cash investing
and financing activities:
Liabilities assumed in acquisitions $ - $ - $ 2,687
Fair value of assets exchanged,
net of cash 38,500 20,000 265,150
The accompanying notes are an integral part
of the condensed consolidated financial statements.
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The December 31, 1998 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 condensed consolidated financial
statements be read in conjunction with the consolidated
financial statements for the year ended December 31, 1998 and
the notes thereto.
2. CLEAR CHANNEL MERGER
On October 8, 1998 the Company entered into a definitive merger
agreement with Clear Channel Communications, Inc. ("Clear
Channel") for a tax-free, stock for stock transaction (the
"Merger" or the "Clear Channel Merger"). The Company and Clear
Channel consummated the Merger at the close of business May 4,
1999. Pursuant to terms of the agreement, each share of Jacor
common stock was exchanged for 1.1573151 shares of Clear Channel
common stock. Upon conclusion of the Merger, Clear Channel
became the sole shareholder of the Company, owning one
outstanding share of Jacor common stock.
Clear Channel accounted for its acquisition of the Company as a
purchase and purchase accounting adjustments, including
goodwill, have been pushed down and reflected in the
consolidated financial statements of the Company subsequent to
May 4, 1999. The consolidated financial statements of the
Company for the periods ended before May 5, 1999, were prepared
using the Company's historical basis of accounting and are
designated as "Predecessor." The comparability of operating
results for the Predecessor and the periods encompassing push
down accounting are affected by the purchase accounting
adjustments including the amortization of goodwill over a period
of 25 years.
The process of determining the fair value of assets and
liabilities at the Merger date is continuing, and the final
result awaits resolution of income tax and other contingencies
and finalization of certain preliminary estimates. The
following table summarizes the preliminary changes made to the
accounts of the Company as a result of applying push down
accounting:
Adjustments
(in thousands)
Current assets $ (50,000)
Goodwill and other intangible assets 4,143,173
Total assets $4,093,173
Current liabilities $ 35,000
Long-term debt (603,837)
Other liabilities 1,290,812
Shareholders' equity 3,371,198
Total liabilities and equity $4,093,173
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. CLEAR CHANNEL MERGER, Continued
Upon consummation of the Merger, a change in control event
occurred with respect to covenants in the Company's credit
facility, liquid yield option notes and each outstanding issue
of the senior subordinated notes. Such change in control gave
the credit facility lenders the right to require repayment of
amounts borrowed under the facility, and required the Company to
offer repayment of the senior subordinated notes at 101% of the
principal amount and the liquid yield option notes at their
issue price plus accrued original issue discount at such date.
Approximately $22.1 million of senior subordinated notes were
tendered in connection with the repayment offer.
As a result of the Merger, all options and stock appreciation
rights for Jacor common stock not vested at the effective time
of the Merger became fully vested and exercisable one day before
the effective time of the Merger. Clear Channel assumed all of
these options and stock appreciation rights on the same terms
and conditions as were applicable prior to the effective time of
the Merger. The holders may exercise such options and stock
appreciation rights for or with respect to shares of Clear
Channel common stock at an exercise price adjusted to reflect
the exchange ratio of the Merger.
In August 1998, the Company entered into an advisory agreement
with Equity Group Investments, Inc. ("EGI"), an affiliate of the
Company's largest shareholder, the Zell/Chilmark Fund L.P.,
whereby the Company agreed to pay EGI a fee equal to .75% of the
equity value of the Company, as defined in the advisory
agreement, on any change in control event. As a result of the
Merger, EGI received a fee of approximately $38.2 million.
3. ACQUISITIONS AND DISPOSITIONS
Completed Radio Station Acquisitions and Dispositions
First Six Months Transactions
In the first six months of 1999, the Company acquired the stock
of one and the assets of 31 radio stations and one low-powered
television station in four of the Company's existing broadcast
areas and 15 new broadcast areas for a purchase price of
approximately $116.3 million in cash, of which approximately
$10.4 million was placed in escrow in 1998 and 1997. The
Company sold the assets of one radio station for $5.0 million in
cash. The Company also exchanged the assets of one radio
station, valued at $20.0 million, for a radio station in a
different broadcast area, and exchanged five radio stations in
two broadcast areas for an aggregate purchase price of $83.0
million, all of which was placed in escrow with a qualified
intermediary in anticipation of subsequent radio station
acquisitions which would result in the exchanges being treated
as tax deferred like-kind exchanges.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS AND DISPOSITIONS, Continued
July Transactions
The Company acquired the broadcast assets of WEBZ-FM in Port St.
Joe, Florida from DP Media, Inc. for $0.8 million in cash, all
of which was paid from escrows held by a qualified intermediary.
This transaction was treated as a tax-deferred like-kind
exchange.
September Transactions
The Company acquired KMUS-FM in Cheyenne, Wyoming from KMUS,
Inc. for $1.2 million in cash, of which approximately $0.1
million was placed in escrow in 1998.
The Company acquired KFLY-FM and KEJO-AM in Corvallis, Oregon
from Madgekal Broadcasting for approximately $2.3 million in
cash, all of which was paid from escrows held by a qualified
intermediary. This transaction was treated as a tax-deferred
like-kind exchange.
The Company acquired KASI-AM and KCCQ-FM in Ames, Iowa from Ames
Broadcasting Company and Betty Baudler for $4.0 million in cash,
a portion of which was paid from escrows held by a qualified
intermediary and treated as a tax-deferred like-kind exchange.
The Company acquired WYJS-FM in Jackson, Mississippi for
approximately $3.4 million in cash, a portion of which was paid
from escrows held by a qualified intermediary and treated as a
tax-deferred like-kind exchange.
The Company acquired KPEK-FM and KTEG-FM in Albuquerque, New
Mexico from Trumper Communications for $28.0 million in cash, a
portion of which was paid from escrows held by a qualified
intermediary and treated as a tax-deferred like-kind exchange.
Pro Forma Results of Operations
The Company's 1999 completed acquisitions both individually and
in the aggregate are immaterial to the Company's results of
operations. Assuming the Company's significant acquisitions in
1998 were completed as of January 1, 1998, unaudited pro forma
consolidated results of operations would have been as follows
(in thousands except per share amounts):
Pro forma (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1998
Net revenue $ 236,462 $ 658,285
Income (loss) before
extraordinary items $ 675 $ (4,166)
Diluted income (loss) per common
share before extraordinary items $ 0.01 $ (0.08)
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
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS AND DISPOSITIONS, Continued
Radio Station Acquisitions Completed Subsequent to September 30,
1999
The Company completed the acquisitions of six radio stations in
three new broadcast areas and one existing broadcast area for
approximately $27.3 million in cash, a portion of which was paid
from escrows held by a qualified intermediary and treated as tax-
deferred like-kind exchanges.
Pending Radio Station Acquisitions and Dispositions
The Company has entered into agreements to purchase the stock of
one and the FCC licenses and substantially all of the broadcast
assets of 18 radio stations in four of the Company's existing
broadcast areas and four new broadcast areas for approximately
$32.6 million in cash, of which approximately $2.1 million has
been placed in escrow.
The Company has entered into an agreement to sell the
intellectual property of one station and the FCC license and
broadcast assets of another station in one broadcast area for
approximately $0.1 million in cash and the assumption of certain
liabilities.
4. SUBSIDIARY GUARANTORS
The Company's 10 1/8% senior subordinated notes, 9 3/4% senior
subordinated notes, 8 3/4% senior subordinated notes, and 8%
senior subordinated notes (the "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 is a wholly-owned subsidiary of
Jacor and the Subsidiary Guarantors are wholly-owned
subsidiaries of JCC. 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. 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.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. SUBSIDIARY GUARANTORS, Continued
Summarized financial information with respect to Jacor, JCC and
with respect to the Subsidiary Guarantors on a combined basis as
of September 30, 1999 and for the period from May 5, 1999
through September 30, 1999, the period from January 1, 1999
through May 4, 1999, and the nine months ended September 30,
1998 is as follows:
<TABLE>
<CAPTION>
JACOR
Predecessor
May 5, 1999 January 1, 1999 Nine Months
through through Ended
Sept. 30, 1999 May 4, 1999 Sept. 30, 1998
<S> <C> <C> <C>
Operating Statement
Data (in thousands):
Net revenue - - -
Equity in earnings
of subsidiaries $ (16,956) $ (955) $ 5,498
Operating loss (24,530) (10,928) (8,101)
(Loss) income before
extraordinary items (26,815) 63,437 (1,437)
Net (loss) income (26,815) 63,437 (1,437)
Balance Sheet Data
(in thousands):
Current assets $ 2,628
Non-current assets 5,907,510
Current liabilities 711,097
Non-current
liabilities 590,051
Shareholders' equity 4,608,990
Statement of Cash
Flow Data (in thousands):
Operating activities $ (23,761) $ (7,711) $ (14,829)
Investing activities (56,519) 92,222 (6,392)
Financing activities 80,280 (84,511) 21,834
Net change in cash and
cash equivalents - - 613
Cash and cash equivalents
at beginning of period - - (613)
Cash and cash equivalents
at end of period - - -
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. SUBSIDIARY GUARANTORS, Continued
<TABLE>
<CAPTION>
JCC
Predecessor
May 5, 1999 January 1, 1999 Nine Months
through through Ended
Sept. 30, 1999 May 4, 1999 Sept. 30, 1998
<S> <C> <C> <C>
Operating Statement
Data (in thousands):
Net revenue - - -
Equity in earnings
of subsidiaries $ (10,651) $ (2,031) $ 2,692
Operating (loss) income (10,651) (2,031) 2,692
(Loss) income before
extraordinary items (16,956) (955) 5,498
Net (loss) income (16,956) (955) 5,498
Balance Sheet Data
(in thousands):
Current assets $ 35,934
Non-current assets 6,421,737
Current liabilities 24,440
Non-current
liabilities 1,814,382
Shareholders' equity 4,618,849
Statement of Cash
Flow Data (in thousands):
Operating activities $ (250) $ 821 $ 8,106
Investing activities (12,074) (134,967) (672,251)
Financing activities (52,227) 210,190 676,892
Net change in cash and
cash equivalents (64,551) 76,045 12,747
Cash and cash equivalents
at beginning of period 96,096 20,051 29,337
Cash and cash equivalents
at end of period 31,545 96,096 42,084
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. SUBSIDIARY GUARANTORS, Continued
<TABLE>
<CAPTION>
COMBINED SUBSIDIARY GUARANTORS
Predecessor
May 5, 1999 January 1, 1999 Nine Months
through through Ended
Sept. 30, 1999 May 4, 1999 Sept. 30, 1998
<S> <C> <C> <C>
Operating Statement
Data (in thousands):
Net revenue $ 438,724 $ 271,647 $ 530,372
Equity in earnings
of subsidiaries - - -
Operating income 35,395 35,220 86,598
(Loss) income before
extraordinary items (10,651) (2,031) 2,692
Net (loss) income (10,651) (2,031) 2,692
Balance Sheet Data
(in thousands):
Current assets $ 259,581
Non-current assets 7,270,166
Current liabilities 226,934
Non-current
liabilities 2,693,823
Shareholders' equity 4,608,990
Statement of Cash
Flow Data (in thousands):
Operating activities $ 97,238 $ 53,588 $ 71,324
Investing activities (7,846) (12,140) (21,462)
Financing activities (89,392) (41,448) (49,862)
Net change in cash and
cash equivalents - - -
Cash and cash equivalents
at beginning of period - - -
Cash and cash equivalents
at end of period - - -
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share ("EPS") computations
for the period from January 1, 1999 through May 4, 1999, and the
three months and nine months ended September 30, 1998 (in
thousands except per share amounts):
<TABLE>
<CAPTION>
Three January 1, Nine
Months 1999 Months
Ended through Ended
1998 May 4, 1999 1998
<S> <C> <C> <C>
Net income (loss) for basic EPS $ 439 $63,437 $(1,437)
LYONs interest expense, net of tax - 2,686 -
Net income (loss) for diluted EPS $ 439 $66,123 $(1,437)
Weighted average
shares - basic 50,999 51,299 50,133
Effect of dilutive securities:
Stock options 1,505 1,661 -
Warrants 2,398 2,817 -
LYONs - 6,097 -
Other 385 42 -
Weighted average
shares - diluted 55,287 61,916 50,133
Net income (loss) per common share:
Basic $ 0.01 $ 1.24 $ (0.03)
Diluted $ 0.01 $ 1.07 $ (0.03)
</TABLE>
Earnings per share is not presented subsequent to May 4, 1999.
At the date of the Merger all of the outstanding stock of the
Company was converted into Clear Channel common stock rendering
the calculation not meaningful.
Prior to the Merger, the Company's 1996 Liquid Yield Option
Notes and 1998 Liquid Yield Option Notes (collectively, the
"LYONs") could be converted into approximately 6.1 million
shares of common stock at the option of the holder. Assuming
conversion of the LYONs for the three and nine months ended
September 30, 1998 would result in an increase in per share
amounts, therefore the LYONs are not included in the computation
of diluted EPS. Due to the Merger, the LYONs are now
convertible into shares of Clear Channel common stock at the
Merger conversion ratio.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. SEGMENT INFORMATION
The Company operates in a single reportable segment, radio,
which derives its revenue from the sale of commercial broadcast
inventory. The radio segment includes all of the Company's
radio stations owned or operated and Premiere, a radio
syndication business. The Company also aggregates into the
category "other", one television station and several broadcast
related businesses that provide market research, traffic
reporting and satellite connectivity. Intersegment sales
consist primarily of license fees for syndicated programming and
broadcast services provided to the Company's radio stations.
Intersegment revenues are recorded at market value.
No single customer provides more than 10% of the Company's
revenues, and the Company derives less than 10% of its revenues
from markets outside of the U.S.
"Broadcast cash flow" means operating income before depreciation
and amortization and corporate general and administrative
expenses. The Company's management believes that broadcast cash
flow is helpful in understanding cash flow generated from its
broadcasting in comparing operating performance of the Company's
broadcast entities to other broadcast companies. Broadcast cash
flow is also a key factor in the Company's assessment of
performance. Broadcast cash flow should not be considered an
alternative to net income or operating income as an indicator of
the Company's overall performance.
Financial information for the Company's business segment is as
follows (in thousands):
<TABLE>
<CAPTION>
Radio Other Corporate Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Quarter ended September 30, 1999
Net broadcast revenue $ 254,211 $ 17,589 - $ (3,155) $ 268,645
Broadcast operating expenses 151,389 14,190 - (3,115) 162,464
Broadcast cash flow 102,822 3,399 - (40) 106,181
Corporate expenses - - $ 4,045 - 4,045
Depreciation 7,897 911 270 - 9,078
Amortization 80,020 1,092 - (2) 81,110
Operating income (loss) 14,905 1,396 (4,315) (38) 11,948
Capital expenditures 5,981 440 73 - 6,494
Radio station and other
acquisitions - - - - -
Total assets 7,197,437 208,746 148,321 (24,757) 7,529,747
Quarter ended September 30, 1998
(Predecessor)
Net broadcast revenue $ 190,555 $ 15,006 - $ (1,053) $ 204,508
Broadcast operating expenses 117,114 12,716 - (1,053) 128,777
Broadcast cash flow 73,441 2,290 - - 75,731
Corporate expenses - - $ 4,878 - 4,878
Depreciation 6,880 (344) 280 - 6,816
Amortization 24,145 (500) 700 - 24,345
Operating income (loss) 42,416 3,134 (5,858) - 39,692
Capital expenditures 9,318 332 544 - 10,194
Radio station and other
acquisitions 609,343 - - - 609,343
Total assets 2,929,160 237,790 159,023 1,695 3,327,668
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. SEGMENT INFORMATION, Continued
<TABLE>
<CAPTION>
Radio Other Corporate Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Period from January 1, 1999 through
May 4, 1999 (Predecessor)
Net broadcast revenue $ 265,773 $ 17,450 $ (8,414) $ (3,162) $ 271,647
Broadcast operating expenses 184,809 15,600 (5,062) (3,270) 192,077
Broadcast cash flow 80,964 1,850 (3,352) 108 79,570
Corporate expenses - - 7,373 - 7,373
Depreciation 9,104 990 100 - 10,194
Amortization 35,489 1,255 17 (4) 36,757
Operating income (loss) 36,371 (395) (10,842) 112 25,246
Capital expenditures 10,698 965 877 - 12,540
Radio station and other
acquisitions 134,967 - - - 134,967
Total assets 3,015,497 257,738 352,676 (24,627) 3,601,284
Period from May 5, 1999
through September 30, 1999
Net broadcast revenue $ 395,222 $ 48,125 - $ (4,623) $ 438,724
Broadcast operating expenses 227,525 39,491 - (4,574) 262,442
Broadcast cash flow 167,697 8,634 - (49) 176,282
Corporate expenses - - $ 6,811 - 6,811
Depreciation 11,445 1,517 456 - 13,418
Amortization 125,872 1,836 532 (8) 128,232
Operating income (loss) 30,380 5,281 (7,799) (41) 27,821
Capital expenditures 6,664 1,284 98 - 8,046
Radio station and other
acquisitions 13,361 - - - 13,361
Total assets 7,197,437 208,746 148,321 (24,757) 7,529,747
Nine Months ended
September 30, 1998 (Predecessor)
Net broadcast revenue $ 486,718 $ 46,813 - $ (3,159) $ 530,372
Broadcast operating expenses 322,354 37,682 - (3,159) 356,877
Broadcast cash flow 164,364 9,131 - - 173,495
Corporate expenses - - $ 13,052 - 13,052
Depreciation 16,628 1,341 844 - 18,813
Amortization 65,050 1,483 2,098 - 68,631
Operating income (loss) 82,686 6,307 (15,994) - 72,999
Capital expenditures 19,548 1,267 2,539 - 23,354
Radio station and other
acquisitions 682,651 - - - 682,651
Total assets 2,929,160 237,790 159,023 1,695 3,327,668
</TABLE>
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT
Credit Facility
At the date of the Merger, the Company's credit facility, consisting
of $450.0 million of outstanding debt under a revolving credit
facility and $400.0 million of outstanding debt under a term loan,
along with accrued interest, was paid in full by Clear Channel.
Senior Subordinated Notes
Due to the change in control, provisions in the Company's 10 1/8%
senior subordinated notes, 9 3/4% senior subordinated notes, 8 3/4% senior
subordinated notes and 8% senior subordinated notes (the "Notes")
required the Company to offer repayment of the Notes at 101% of the
principal amount. Approximately $22.1 million in Notes were tendered
for repayment and were paid by Clear Channel.
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 Accounting for
Derivative Instruments and Hedging Activities. Statement 133
establishes new rules for the recognition and measurement of
derivatives and hedging activities. Statement 133 is amended by
Statement 137 Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133,
and is effective for years beginning after June 15, 2000. The Company
plans to adopt this statement in fiscal year 2001. Management does
not believe adoption of this statement will materially impact the
Company's financial position or results of operations.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
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.
LIQUIDITY AND CAPITAL RESOURCES
CLEAR CHANNEL MERGER
On October 8, 1998 the Company entered into a definitive merger agreement
with Clear Channel Communications, Inc. ("Clear Channel") for a tax-free,
stock for stock transaction (the "Merger" or the "Clear Channel Merger").
The Company and Clear Channel consummated the Merger at the close of
business May 4, 1999. Pursuant to terms of the agreement, each share of
Jacor common stock was exchanged for 1.1573151 shares of Clear Channel
common stock. Upon conclusion of the Merger, Clear Channel became the sole
shareholder of the Company, owning one outstanding share of Jacor common
stock.
Upon consummation of the Merger, a change in control event occurred with
respect to the Company's credit facility, liquid yield option notes and the
senior subordinated notes. Such change in control gave the credit facility
lenders the right to require repayment of amounts borrowed under the
facility, and required the Company to offer repayment of the senior
subordinated notes at 101% of the principal amount and the liquid yield
option notes at their issue price plus accrued original issue discount at
such date.
As a result of the Merger, all options and stock appreciation rights for
Jacor common stock not vested at the effective time of the Merger became
fully vested and exercisable one day before the effective time of the
Merger. Clear Channel assumed all of these options and stock appreciation
rights on the same terms and conditions as were applicable prior to the
effective time of the Merger. The holders may exercise such options and
stock appreciation rights for or with respect to shares of Clear Channel
common stock at an exercise price adjusted to reflect the exchange ratio of
the Merger.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
LIQUIDITY AND CAPITAL RESOURCES, Continued
Additionally, the Merger resulted in each holder of the Company's common
stock warrants becoming entitled to exercise such warrants for shares of
Clear Channel common stock instead of Jacor common stock. Upon the
exercise of such warrants after the Merger, the holders of such warrants
will receive that number of shares of Clear Channel common stock that the
holder would have received if he or she had exercised such warrants for
shares of Jacor common stock immediately prior to the effective time of the
Merger, as adjusted to reflect the exchange ratio of the Merger.
Financing Activities
Cash provided by financing activities for the first nine months of 1999 was
$22.9 million compared to $648.9 million provided by financing activities
for the first nine months of 1998. The decrease is due to the issuance of
the 8% Senior Subordinated Notes and 1998 LYONs and the equity offering
that occurred during the first nine months in 1998. Additionally, during
the first nine months of 1999 the outstanding debt under the Company's
credit facility and $22.1 million of the Company's senior subordinated
notes were paid by Clear Channel and replaced with an intercompany payable.
Investing Activities
Cash flows used for investing activities were $131.3 million for the first
nine months of 1999 as compared to $700.1 million for the first nine months
of 1998. The variations from year to year are primarily related to station
acquisition and disposition activity, as described below.
Completed Acquisitions and Dispositions
During the first nine months of 1999,the Company acquired the stock of one
and the broadcast assets and FCC licenses of 32 radio stations and one low-
powered television station in four of the Company's existing broadcast
areas and 15 new broadcast areas for cash consideration of approximately
$117.4 million, of which approximately $10.5 million was placed in escrow
in 1997 and 1998. These acquisitions were funded primarily through
borrowings under the Company's credit facility, which was paid in full by
Clear Channel at the date of the Merger. The broadcast assets and FCC
licenses of seven radio stations, and the broadcast assets of one
additional radio station, valued in total at approximately $38.5 million,
in one of the Company's existing broadcast area and four new broadcast
areas were purchased in part with proceeds held by a qualified intermediary
from the exchange of five stations in two broadcast areas, valued at $83.0
million. The remaining cash held by the qualified intermediary was used to
consummate exchanges subsequent to September 30, 1999 or was returned to
the Company. The Company also sold the broadcast assets and FCC license of
one radio station for $5.0 million in cash.
Recently Completed Radio Station Acquisitions
The Company completed the acquisitions of six radio stations in three new
broadcast areas and one existing broadcast area for approximately $27.3
million in cash, a portion of which was paid from escrows held by a
qualified intermediary and treated as tax-deferred like-kind exchanges.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
LIQUIDITY AND CAPITAL RESOURCES, Continued
Pending Radio Station Acquisitions and Dispositions
The Company has entered into agreements to purchase the stock of one and
the FCC licenses and substantially all of the broadcast assets of 18 radio
stations in four of the Company's existing broadcast areas and four new
broadcast areas for approximately $32.6 million in cash, of which
approximately $2.1 million has been placed in escrow. The Company expects
all financing of its pending acquisitions will be provided by cash flows
from operating activities.
The Company has entered into an agreement to sell the intellectual property
of one station and the FCC license and broadcast assets of another station
in one broadcast area for approximately $0.1 million in cash and the
assumption of certain liabilities.
Capital Expenditures
The Company had capital expenditures of $20.6 million and $23.4 million for
the nine months ended September 30, 1999 and 1998, respectively. The
Company's capital expenditures consist primarily of broadcasting equipment,
tower upgrades, and purchases related to the Company's plan to replace and
upgrade business, programming, and connectivity technology.
Operating Activities
For the nine months ended September 30, 1999, cash flow provided by
operating activities was $120.0 million, as compared to $64.6 million for
the nine months ended September 30, 1998. The change is primarily due to
an increase in operating income related to acquisitions.
RESULTS OF OPERATIONS
The Company operates in one reportable segment - Radio. At September 30,
1999, the radio segment included 250 radio stations in 75 broadcast areas
and Premiere Radio Networks, Inc. ("Premiere"), a radio syndication
business. Substantially all revenues of each broadcast area and Premiere
is generated from the sale of commercial broadcast inventory. Aggregated
segments included in the caption "other" includes one television station
and various broadcast related businesses that provide services such as
market research, satellite connectivity and traffic reporting.
The Company's management evaluates each broadcast area's performance based
on operating income before corporate expenses, interest expense, income
taxes, gains or losses and miscellaneous expenses. Specific industry
related performance measures also reviewed by management include "Broadcast
Cash Flow", which excludes depreciation and amortization from the operating
income measurement defined above. Intersegment sales consist primarily of
license fees for syndicated programming and other broadcast services
provided to the Company's radio stations. Intersegment revenues are
recorded at market rates.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
RESULTS OF OPERATIONS, Continued
Financial information for the Company's segments is as follows (in
thousands):
Favorable
(Unfavorable)
For the quarter ended September 30, 1999 Change 1998
Net revenues:
Radio $ 254,211 33.4% $ 190,555
Other 14,434 3.4% 13,953
Total net revenues $ 268,645 31.4% $ 204,508
Broadcast operating expenses:
Radio $ 151,389 (29.3%) $ 117,114
Other 11,075 5.0% 11,663
Total broadcast operating expenses $ 162,464 (26.2%) $ 128,777
Broadcast cash flow:
Radio $ 102,822 40.0% $ 73,441
Other 3,359 46.7% 2,290
Total broadcast cash flow $ 106,181 40.2% $ 75,731
Depreciation & amortization:
Radio $ 87,917 (183.4%) $ 31,025
Other 2,001 (337.1%) (844)
Corporate 270 72.4% 980
Total depreciation & amortization $ 90,188 (189.4%) $ 31,161
Operating income before
Corporate general and
administrative expense:
Radio $ 14,905 (64.9%) $ 42,416
Other 1,358 (56.7%) 3,134
Corporate (270) 72.4% (980)
Subtotal 15,993 (64.1%) 44,570
Corporate general and administrative
expense: (4,045) 17.1% (4,878)
Net operating income $ 11,948 (69.9%) $ 39,692
Other Consolidated Statements of
Operations Data:
Interest expense $ (22,521) 18.2% $ (27,526)
Gain on sale of assets $ - (100.0%) 10,896
Income tax expense $ (8,900) 63.4% $ (24,300)
Net (loss) income $ (20,576) (4787.0%) $ 439
Other Consolidated Financial
Statement Data:
Capital expenditures $ 6,494 (36.3%) $ 10,194
Radio station and other
acquisitions $ - (100.0%) $ 609,343
Total assets $7,529,747 126.3% $3,327,668
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
RESULTS OF OPERATIONS, Continued
Favorable
(Unfavorable)
For the nine months ended September 30, 1999 Change 1998
Net revenues:
Radio $ 660,995 35.8% $ 486,718
Other 49,376 13.1% 43,654
Total net revenues $ 710,371 33.9% $ 530,372
Broadcast operating expenses:
Radio $ 412,334 (27.9%) $ 322,354
Other 42,185 (22.2%) 34,523
Total broadcast operating expenses $ 454,519 (27.4%) $ 356,877
Broadcast cash flow:
Radio $ 248,661 51.3% $ 164,364
Other 7,191 (21.2%) 9,131
Total broadcast cash flow $ 255,852 47.5% $ 173,495
Depreciation & amortization:
Radio $ 181,910 (122.7%) $ 81,678
Other 5,586 (97.8%) 2,824
Corporate 1,105 62.4% 2,942
Total depreciation & amortization $ 188,601 (115.7%) $ 87,444
Operating income before
Corporate general and
administrative expense:
Radio $ 66,751 (19.3%) $ 82,686
Other 1,605 (74.6%) 6,307
Corporate (1,105) 62.4% (2,942)
Subtotal 67,251 (21.8%) 86,051
Corporate general and administrative
expense: (14,184) (8.7%) (13,052)
Net operating income $ 53,067 (27.3%) $ 72,999
Other Consolidated Statements of
Operations Data:
Interest expense $ (81,777) (6.8%) $ (76,563)
Gain on sale of assets $ 130,385 1096.6% 10,896
Income tax expense $ (62,400) (225.0%) $ (19,200)
Net income (loss) $ 36,622 2648.5% $ (1,437)
Other Consolidated Financial
Statement Data:
Capital expenditures $ 20,586 (11.9%) $ 23,354
Radio station and other
acquisitions $ 148,328 (78.3%) $ 682,651
Total assets $7,529,747 126.3% $3,327,668
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
RESULTS OF OPERATIONS, Continued
Discussion of Radio Segment Financial Statement Changes for the Quarters
ended September 30, 1999 and 1998
The increase in net revenue from 1998 to 1999 is due primarily to revenue
generated at those properties owned or operated during 1999, but not during
the comparable 1998 period. On a "same station" basis - reflecting results
from stations operated since January 1, 1998 - broadcast revenue increased
$25.5 million or 14.6%, from $174.6 million in 1998 to $200.1 million in
1999. The increase is due in part to favorable ratings and a strong
advertising environment.
The increase in radio broadcast operating expenses from 1998 to 1999 is due
primarily to expenses incurred at those properties owned or operated during
1999 but not during the comparable 1998 period. "Same station" broadcast
expenses increased by $11.2 million or 10.0% from $112.0 million in 1998 to
$123.2 million in 1999. The increases between years was the result of
increased payroll, programming and selling costs.
Depreciation and amortization expense increased from 1998 to 1999 primarily
due to the increase in intangible assets associated with the Clear Channel
Merger, and also due to acquisitions made during 1998 and the first nine
months of 1999.
Operating income decreased from 1998 to 1999 as a result of the increase in
amortization expense associated with the Clear Channel Merger.
Discussion of Other Statement of Operations Data
Interest expense decreased from 1998 to 1999 due to a decrease in the
effective yield resulting from the purchase price adjustment.
The gain on sale of assets in 1998 resulted primarily from the exchange of
two radio stations in San Diego, California and three radio stations in
Columbus, Ohio.
Income tax expense for the third quarter of 1998 included approximately
$14.8 million in deferred tax expense related to gains recorded on the
exchange of certain radio stations. The increase in the effective tax rate
from 1998 to 1999 is due primarily to the increase in non-deductible
goodwill amortization expense associated with the Clear Channel Merger.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
RESULTS OF OPERATIONS, Continued
Discussion of Radio Segment Financial Statement Changes for the Nine Months
ended September 30, 1999 and 1998
The increase in net revenue from 1998 to 1999 is due primarily to revenue
generated at those properties owned or operated during 1999, but not during
the comparable 1998 period. On a "same station" basis - reflecting results
from stations operated since January 1, 1998 - broadcast revenue increased
$61.0 million or 12.7%, from $481.1 million in 1998 to $542.1 million in
1999. The increase is due in part to favorable ratings and a strong
advertising environment.
The increase in radio broadcast operating expenses from 1998 to 1999 is due
primarily to expenses incurred at those properties owned or operated during
1999 but not during the comparable 1998 period. "Same station" broadcast
expenses increased by $22.1 million or 6.7% from $327.6 million in 1998 to
$349.7 million in 1999. The increases between years was the result of
increased payroll, programming and selling costs.
Depreciation and amortization expense increased from 1998 to 1999 primarily
due to the increase in intangible assets associated with the Clear Channel
Merger, and also due to acquisitions made during 1998 and the first nine
months of 1999.
Operating income decreased from 1998 to 1999 primarily due to an increase
in depreciation and amortization expense associated with the Clear Channel
Merger.
Discussion of Other Statement of Operations Data
Interest expense increased from 1998 to 1999 due to increases in
outstanding debt incurred in connection with the Company's acquisitions,
partially offset by the decline in the effective yield relating to the
purchase price adjustment.
The gain on sale of assets in 1999 resulted from the sale of an investment
in a marketable equity security and the recognition of gains on the
disposal of radio stations in Tampa, Florida and Louisville, Kentucky.
Income tax expense for the first nine months of 1999 increased compared to
the first nine months of 1998. The effective tax rate increased from 1998
to 1999 due primarily to the increase in non-deductible goodwill
amortization expense associated with the Clear Channel Merger.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
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. In connection with this date change,
the Company's management has developed a formal, enterprise-wide strategic
plan to ensure that computer systems are Y2K compliant.
The Y2K issue involves the identification and assessment of the existing
problem, plan of remediation, as well as a testing and implementation plan.
To date, the Company has substantially completed the identification and
assessment process, with the following significant financial and
operational components identified as being affected by the Y2K issue:
Computer hardware running critical financial accounting and
information system software that is not capable of recognizing a four-digit
code for the applicable year.
Advertising inventory management software responsible for managing,
scheduling and billing customer's broadcasting and outdoor advertising
purchases.
Broadcasting studio equipment and software necessary to deliver radio
and television programming.
Significant non-technical systems and equipment that may contain
microcontrollers which are not Y2K compliant.
The Company has instituted the following remediation plan to address the
Y2K issues:
A computer hardware replacement plan for computers running essential
broadcast, operational and financial software applications with Y2K
compatible computers has been instituted. As of September 30, 1999
approximately 90% of all essential computers related to broadcast or studio
equipment are Y2K compatible. Substantially all of the essential financial
based computers are Y2K compliant. The Company anticipates this
replacement plan to be substantially completed during the fourth quarter of
1999.
Software upgrades or replacement with advertising inventory management
software which is Y2K compliant have been substantially completed as of
September 30, 1999. The Company has received assurances from its software
vendors, with a few minor exceptions, that supply its advertising inventory
management software that their software is Y2K compliant. For these non-
compliant vendors, the Company will install inventory management software
from a compliant vendor in the beginning of the fourth quarter of 1999.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
RESULTS OF OPERATIONS, Continued
The Company has received assurances from its software vendors that supply
broadcasting digital automation systems that the software used by the
Company is currently compliant or has upgrades currently available that are
compliant. Broadcast software and studio equipment is considered to be
more than 90% compliant as of September 30, 1999 and is anticipated to
approach 100% compliance during the fourth quarter of 1999. Additionally,
financial accounting software has been replaced and is Y2K compliant.
The Company believes its remediation plan will provide reasonable assurance
that material disruptions will not occur due to internal failure, however
the possibility of some interruption still exists.
The final phase of the strategic plan, the testing phase, includes the
actual testing of the enhanced and upgraded systems and has been
substantially completed at September 30, 1999. This process included
internal and external user review and confirmation, as well as unit testing
and integration testing with other systems interfaces.
The Company is currently querying other significant vendors that do not
share information systems with it (external agents). To date, the Company
is not aware of any external agent with a Y2K issue that would materially
impact its results of operations, liquidity, or capital resources.
However, the Company has no means of ensuring that external agents will be
Y2K ready. The inability of external agents to complete their Y2K
resolution process in a timely fashion could materially impact the Company.
The effect of non-compliance by external agents is not determinable. In
addition, disruptions in the economy generally resulting from the Y2K
issues could also materially adversely affect the Company. The Company
could be subject to litigation for computer systems failures, equipment
shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated.
The Company has contingency plans for certain critical applications in
sites deemed significant to operations. These contingency plans involve,
among other actions, manual work around for on-air and financial systems, a
store of Y2K compliant computers available for rapid deployment, backup
generators at key broadcast and transmitter sites and staffing strategies
to affect such contingency plans.
The Company believes that any remaining 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. The costs incurred in the assessment phase
are primarily internal costs, which have been expensed as incurred and are
immaterial. Costs in the remediation phase include replacement of certain
computer hardware and software, have not been material and are included in
the capital expenditures of the Company.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
RESULTS OF OPERATIONS, Continued
Recent Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 Accounting for Derivative
Instruments and Hedging Activities. Statement 133 establishes new rules for
the recognition and measurement of derivatives and hedging activities.
Statement 133 is amended by Statement 137 Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133, and is effective for years beginning after June 15,
2000. The Company plans to adopt this statement in fiscal year 2001.
Management does not believe adoption of this statement will materially
impact the Company's financial position or results of operations.
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
(A wholly owned subsidiary of Clear Channel Communications, Inc.)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description Page
27 Financial Data Schedule 30
__ _________
(b) Reports on Form 8-K
The following Form 8-K was filed during the fourth quarter of 1999:
Form 8-K dated November 3, 1999. This Form 8-K was filed to report a
change in the Registrant's Certifying Accountant.
<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.
(A wholly owned subsidiary of
Clear Channel Communications, Inc.)
(Registrant)
DATED: November 12, 1999 BY /s/ Randall T. Mays
Randall T. Mays,
Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 31,545
<SECURITIES> 0
<RECEIVABLES> 241,812
<ALLOWANCES> 10,285
<INVENTORY> 0
<CURRENT-ASSETS> 298,143
<PP&E> 328,476
<DEPRECIATION> 15,938
<TOTAL-ASSETS> 7,529,747
<CURRENT-LIABILITIES> 254,479
<BONDS> 1,032,571
0
0
<COMMON> 0
<OTHER-SE> 4,608,990
<TOTAL-LIABILITY-AND-EQUITY> 7,529,747
<SALES> 0
<TOTAL-REVENUES> 802,730
<CGS> 0
<TOTAL-COSTS> 546,878
<OTHER-EXPENSES> 202,785
<LOSS-PROVISION> 1,982
<INTEREST-EXPENSE> 81,777
<INCOME-PRETAX> 99,022
<INCOME-TAX> 62,400
<INCOME-CONTINUING> 36,622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,622
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
