<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 12, 1999
(December 10, 1998)
Clear Channel Communications, Inc.
(Exact name of registrant as specified in its charter)
Texas
(State of Incorporation)
1-9645 74-1787536
(Commission File Number) (I.R.S. Employer Identification No.)
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
(210) 822-2828
(Address and telephone number of principal executive offices)
<PAGE> 2
Clear Channel Communications, Inc.
Form 8-K/A
Item 5 OTHER EVENTS.
On December 10, 1998, Clear Channel Communications, Inc., a Texas corporation
(the "Company"), filed a Current Report on Form 8-K. On February 23, 1999 the
Company filed a Current Report on Form 8-K/A to amend the December 10, 1998
filing to adjust the pro forma information under item 7 (b). The Company is
filing this amendment to include financial statements under item 7 (a) and the
associated pro forma information under item 7 (b) as of and for the year ended
December 31, 1998.
Item 7 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jacor Communications, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, shareholders'
equity and cash flows present fairly, in all material respects, the financial
position of Jacor Communications, Inc. and its subsidiaries at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Cincinnati, Ohio
February 12, 1999
<PAGE> 4
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(In thousands, except share amounts)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 20,051 $ 28,724
Accounts receivable, less allowance for
doubtful accounts of $8,303 in 1998
and $6,195 in 1997 201,466 135,073
Prepaid expenses and other 32,796 33,790
---------- ----------
Total current assets 254,313 197,587
Property and equipment, net 281,049 206,809
Intangible assets, net 2,749,348 2,104,221
Other assets 135,998 93,261
---------- ----------
Total assets $3,420,708 $2,601,878
========== ==========
LIABILITIES
Current liabilities:
Current portion long-term debt $ 35,000 $ --
Accounts payable 20,015 17,294
Accrued expenses and other 86,184 68,971
Accrued payroll 16,238 15,246
Accrued income taxes 5,963 16,738
---------- ----------
Total current liabilities 163,400 118,249
Long-term debt 1,289,574 987,500
Liquid Yield Option Notes 306,202 125,300
Deferred tax liability 345,478 338,867
Other liabilities 112,988 115,611
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:
51,184,217 in 1998 and 45,689,677 in 1997 512 457
Additional paid-in capital 1,124,057 863,086
Common stock warrants 30,819 31,500
Accumulated other comprehensive income 25,428 --
Retained earnings 22,250 21,308
---------- ----------
Total shareholders' equity 1,203,066 916,351
---------- ----------
Total liabilities and
shareholders' equity $3,420,708 $2,601,878
========== ==========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 5
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
for the years ended December 31, 1998, 1997 and 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Broadcast revenue $ 850,720 $ 595,229 $ 250,461
Less agency commissions 96,252 64,655 26,700
--------- --------- ---------
Net revenue 754,468 530,574 223,761
Broadcast operating expenses 497,861 356,783 151,065
Depreciation and amortization 120,392 78,485 23,404
Corporate general and
administrative expenses 19,684 14,093 9,932
--------- --------- ---------
Operating income 116,531 81,213 39,360
Interest expense (107,295) (82,315) (32,244)
Gain on sale of assets 10,896 11,135 2,539
Other income 12,248 3,452 6,342
Other expense (3,338) (481) (626)
--------- --------- ---------
Income before
income taxes and
extraordinary loss 29,042 13,004 15,371
Income tax expense (28,100) (9,600) (7,300)
--------- --------- ---------
Income before
extraordinary loss 942 3,404 8,071
Extraordinary loss, net
of income tax benefit -- (7,456) (2,966)
--------- --------- ---------
Net income (loss) 942 (4,052) 5,105
--------- --------- ---------
Other comprehensive income
(loss) before tax:
Unrealized gains on securities 42,380 2,697 3,403
Less: reclassification adjustment
for gains included in net
income -- (6,100) --
--------- --------- ---------
Other comprehensive income,
before tax 42,380 (3,403) 3,403
Income tax (expense) benefit
related to items of other
comprehensive income (16,952) 1,361 (1,361)
--------- --------- ---------
Other comprehensive income
(loss), net of tax 25,428 (2,042) 2,042
--------- --------- ---------
Comprehensive income (loss) $ 26,370 $ (6,094) $ 7,147
========= ========= =========
</TABLE>
(Continued)
<PAGE> 6
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
for the years ended December 31, 1998, 1997 and 1996
(In thousands, except per share amounts)
(Continued)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Basic net income (loss)
per common share:
Before extraordinary loss $ .02 $ .08 $ .32
Extraordinary loss -- (.18) (.12)
-------- -------- --------
Net income (loss)
per common share $ .02 $ (.10) $ .20
======== ======== ========
Diluted net income (loss)
per common share:
Before extraordinary loss $ .02 $ .08 $ .30
Extraordinary loss -- (.18) (.11)
-------- -------- --------
Net income (loss)
per common share $ .02 $ (.10) $ .19
======== ======== ========
Number of common shares used
in Basic calculation 50,389 40,460 25,433
======== ======== ========
Number of common shares used
in Diluted calculation 54,565 42,163 26,442
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 7
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
----------------- Additional Common Other
Shares Stated Paid-In Stock Comprehensive Retained
Value Capital Warrants Income Earnings Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31,
1995 18,157 $ 182 $ 118,248 $ 388 -- $ 20,255 $ 139,073
Common stock
offering 11,250 113 301,636 -- -- -- 301,749
Employee stock
purchases 48 -- 672 -- -- -- 672
Exercise of
stock options 106 1 650 -- -- -- 651
Conversion of
warrants 1,726 17 14,704 (374) -- -- 14,347
Purchase of
warrants -- -- (5,080) (14) -- -- (5,094)
Issuance of
warrants -- -- -- 26,500 -- -- 26,500
Other
comprehensive
income -- -- -- -- $ 2,042 -- 2,042
Stock related
compensation -- -- 1,891 -- -- -- 1,891
Net income -- -- -- -- -- 5,105 5,105
- --------------------------------------------------------------------------------------------------------
Balances,
December 31,
1996 31,287 313 432,721 26,500 2,042 25,360 486,936
Common stock
offering 8,321 83 246,079 -- -- -- 246,162
Stock issued for
acquisitions 5,774 58 179,370 -- -- -- 179,428
Employee stock
purchases 87 1 2,137 -- -- -- 2,138
Exercise of
stock options 220 2 3,030 -- -- -- 3,032
Issuance of
warrants -- -- -- 5,000 -- -- 5,000
Other
comprehensive
income -- -- -- -- (2,042) -- (2,042)
Other -- -- (251) -- -- -- (251)
Net loss -- -- -- -- -- (4,052) (4,052)
- --------------------------------------------------------------------------------------------------------
Balances,
December 31,
1997 45,689 $ 457 $ 863,086 $ 31,500 -- $ 21,308 $ 916,351
- --------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
<PAGE> 8
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1998, 1997 and 1996
(In thousands)
(Continued)
<TABLE>
<CAPTION>
Common Shares Accumulated
---------------- Additional Common Other
Shares Stated Paid-In Stock Comprehensive Retained
Value Capital Warrants Income Earnings Total
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31,
1997 45,689 $457 $863,086 $31,500 -- $21,308 $916,351
Common stock
offering 5,073 51 244,888 -- -- -- 244,939
Employee stock
purchases 70 -- 3,080 -- -- -- 3,080
Exercise of
stock options 277 3 4,707 -- -- -- 4,710
Conversion of
warrants 70 1 3,504 (681) -- -- 2,824
Other
comprehensive
income -- -- -- -- $25,428 -- 25,428
LYONs conversions 5 -- 194 -- -- -- 194
Other -- -- 4,598 -- -- -- 4,598
Net income -- -- -- -- -- 942 942
- -------------------------------------------------------------------------------------------
Balances,
December 31,
1998 51,184 $512 $1,124,057 $30,819 $25,428 $22,250 $1,203,066
===========================================================================================
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE> 9
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 942 $ (4,052) $ 5,105
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 26,457 17,836 7,661
Amortization of intangible assets 93,935 60,649 15,743
Extraordinary loss -- 7,456 2,966
Non-cash interest expense 17,227 6,618 4,327
Provision for bad debts
and other 2,108 1,155 1,870
Deferred income taxes 14,956 (6,648) (233)
Gain on sale of assets (10,896) (11,135) (2,539)
Changes in operating assets and
liabilities, net of effects
of acquisitions and disposals:
Accounts receivable (68,319) (37,495) (18,626)
Prepaid expenses and
other assets (1,451) (9,637) (4,076)
Accounts payable 2,720 4,694 10,054
Accrued expenses and other
liabilities 4,920 26,599 2,655
-------- -------- --------
Net cash provided by
operating activities 82,599 56,040 24,907
-------- -------- --------
</TABLE>
(Continued)
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 10
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1998, 1997 and 1996
(In thousands)
(Continued)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from investing activities:
Capital expenditures $ (36,232) $ (19,980) $ (11,852)
Cash paid for acquisitions (786,992) (680,206) (826,302)
Deposits on broadcast stations (13,219) (51,410) (23,608)
Proceeds from sale of assets 10,400 93,263 6,595
Loans originated and other (10,000) -- (4,097)
--------- --------- ---------
Net cash used by investing
activities (836,043) (658,333) (859,264)
--------- --------- ---------
Cash flows from financing activities:
Issuance of long-term debt 534,539 627,700 973,000
Issuance of common stock 249,243 248,433 431,898
Repayment of long-term debt (197,500) (310,200) (471,600)
Payment of financing costs (8,461) (13,659) (27,435)
Issuance of LYONs 166,950 -- --
Other -- 606 (806)
--------- --------- ---------
Net cash provided by
financing activities 744,771 552,880 905,057
--------- --------- ---------
Net (decrease) increase in cash
and cash equivalents (8,673) (49,413) 70,700
Cash and cash equivalents at
beginning of year 28,724 78,137 7,437
--------- --------- ---------
Cash and cash equivalents at
end of year $ 20,051 $ 28,724 $ 78,137
========= ========= =========
Supplemental disclosures of cash
flow information:
Cash paid for:
Interest $ 87,253 $ 72,191 $ 5,300
Income taxes $ 8,588 $ 5,383 $ 4,992
Supplemental schedule of non-cash
investing and financing activities:
Fair value of assets exchanged $ 258,566 $ 120,000 $ 170,000
Liabilities assumed in acquisitions $ 19,263 $ 120,325 $ 296,187
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 11
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
Description of Business
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.
As of December 31, 1998 the Company owned and/or operated 214 radio
stations and one television station in 57 broadcast areas throughout
the United States.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Jacor Communications, Inc. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Revenues
Revenues for commercial broadcasting advertisements are recognized when
the commercial is broadcast. Revenues from syndicated program fees are
recognized over the term of the contracts.
Barter Transactions
Barter transactions are reported at the estimated fair value of the
product or service received. Revenue from barter transactions
(advertising provided in exchange for goods and services) is recognized
as income when advertisements are broadcast, and merchandise or
services received are charged to expense when received or used. If
merchandise or services are received prior to the broadcast of the
advertising, a liability (deferred barter revenue) is recorded. If the
advertising is broadcast before the receipt of the goods or services, a
receivable is recorded.
Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with an original maturity of
three months or less, when purchased, to be cash equivalents. The
effect of barter transactions has been eliminated.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and accounts receivable. Concentrations of credit risk with
respect to accounts receivable are limited due to the large number of
customers comprising the Company's customer base and their dispersion
across many different geographic areas of the country.
<PAGE> 12
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS, Continued
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation; depreciation is provided on the straight-line basis over
the estimated useful lives of the assets as follows:
Land improvements 20 Years
Buildings 25 Years
Equipment 3 to 20 Years
Furniture and fixtures 5 to 12 Years
Leasehold improvements Life of lease
Intangible Assets
Intangible assets are stated at cost less accumulated amortization;
amortization is provided principally on the straight-line basis over
the following lives:
FCC Broadcasting licenses 40 Years
Goodwill 40 Years
Contracts and other
intellectual property 3 to 25 Years
Effective January 1, 1996, the Company adopted Statement of Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." Prior to 1996, the
Company accounted for the impairment of intangible assets under
Accounting Principles Board (APB) Opinion No. 17. The adoption of this
statement did not impact the Company's policy for reviewing the
carrying value of intangible assets.
The carrying value of intangible assets is reviewed by the Company when
events or circumstances suggest that the recoverability of an asset may
be impaired. If this review indicates that goodwill, FCC licenses and
other intangible assets will not be recoverable, as determined based on
the undiscounted cash flows of the entity over the remaining
amortization period, the carrying value of the goodwill, FCC licenses,
and other intangible assets will be reduced to their respective fair
values.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at
the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
Fair Value of Financial Instruments
The fair value of the Company's publicly traded debt is based on quoted
market prices. It was not practicable to estimate the fair value of
borrowings under the Company's Credit Facility since there is no liquid
market for this debt.
<PAGE> 13
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS, Continued
Earnings Per Share
Basic earnings per share equals net earnings divided by the weighted
average number of common shares outstanding. Diluted earnings per share
equals net earnings divided by the weighted average number of common
shares outstanding after giving effect to other dilutive securities.
Stock Based Compensation Plans
The Company accounts for its employee and director stock based
compensation plans in accordance with APB Opinion No. 25. The Company
has elected not to adopt the cost recognition provisions of Statement
of Financial Accounting Standards No. 123, ("SFAS 123") "Accounting for
Stock Based Compensation". The Company follows only the disclosure
provisions of SFAS 123 as permitted by the statement.
Reclassifications
Certain prior year amounts have been reclassed to conform to 1998
presentation. These changes had no impact on previously reported
results of operations or shareholders' equity.
<PAGE> 14
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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"). Upon consummation of the Merger, each outstanding
share of Jacor common stock will be converted into Clear Channel common
stock, based upon the average closing price of Clear Channel common
stock during the twenty-five consecutive trading days ending on the
second trading day prior to the closing date, as follows:
<TABLE>
<S> <C>
AVERAGE CLOSING PRICE OF CLEAR CHANNEL STOCK CONVERSION RATIO
Less than or equal to $42.86........................... 1.400
Above $42.86 but less than or equal to $44.44.......... 1.400 to 1.350
Above $44.44 but less than $50.00...................... 1.350
</TABLE>
If the average closing price is $50.00 or more, the Conversion Ratio
will be calculated as the quotient obtained by dividing (A) $67.50 plus
the product of .675 and the amount by which the average closing price
exceeds $50.00, by (B) the average closing price. If the average
closing price is less than or equal to $37.50, the Merger agreement may
be terminated by the Company, upon notice to Clear Channel, on one of
the two trading days prior to the closing date.
Completion of the Merger is conditioned on, among other things,
stockholder approval and receipt of Federal Communications Commission
and other regulatory approvals. The Company expects to consummate the
Merger by September 30, 1999.
Upon consummation of the Merger, a change in control event will have
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 would give the credit
facility lenders the right to require repayment of amounts borrowed
under the facility, and require 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
become fully vested and exercisable one day before the effective time
of the Merger. Clear Channel will assume 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 stockholder, 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. The Zell/Chilmark Fund L.P. has entered into a voting agreement
pursuant to which it agreed to vote its shares in favor of the proposal
to approve the Merger.
<PAGE> 15
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS
COMPLETED 1998 ACQUISITIONS AND DISPOSITIONS
Nationwide Related Transactions
In August 1998, the Company completed the acquisition of substantially
all broadcast related assets of Nationwide Communications Inc.
("Nationwide") for total cash consideration of approximately $555
million, of which $30.0 million was placed in escrow in 1997, plus
acquisition costs. Simultaneously with the Nationwide acquisition, but
in separate transactions, the Company effected the exchange and sale of
certain radio stations in order to satisfy antitrust concerns raised by
the Department of Justice in connection with the Nationwide
acquisition. For financial reporting purposes, the Company recorded the
exchange of eight radio stations as sale transactions, receiving
non-cash consideration in the form of nine radio stations with
aggregate fair values of $195 million. Additionally, one other radio
station was sold for $10.l million in cash. The Company recorded net
pre-tax gains of $10.9 million, which was measured by the difference
between the fair value of the radio stations exchanged or sold and the
carrying value of the properties. The Company believes that certain of
the transactions qualify as tax-deferred like-kind exchanges,
therefore, the income tax expense of approximately $14 million
associated with the gains is included in the deferred component of
income tax expense. The radio stations received in the exchange
transactions were recorded as purchase transactions at their respective
fair values. The following radio stations were included in the
transactions:
<TABLE>
<CAPTION>
Stations Received
in Exchange
Stations Transaction or
Purchased from Exchanged Purchased from
Nationwide or Sold Other Parties
-------------- --------- -----------------
<S> <C> <C>
WCOL-FM, WFII-AM, WLVQ-FM, WAZU-FM, WMJI-FM, WMMS-FM
WNCI-FM (Columbus, OH) WHOK-FM (Columbus, OH) (Cleveland)
WPOC-FM (Baltimore) WKNR-FM (Cleveland) KUFX-FM (Fremont, CA)
WGAR-FM (Cleveland) KSGS-AM, KMJZ-FM WOCT-FM, WCAO-AM
(Minneapolis) (Baltimore)
KDMX-FM, KEGL-FM KKLQ-FM, KJQY-FM KLOU-FM, KSD-FM
(Dallas) (San Diego) (St. Louis)
KHMX-FM, KTBZ-FM KOME-FM
(Houston) (San Jose, CA)
KSGS-AM, KMJZ-FM WTAE-AM (Pittsburgh)
(Minneapolis)
KGLQ-FM, KZZP-FM
(Phoenix)
KMCG-FM, KXGL-FM
(San Diego)
</TABLE>
<PAGE> 16
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS, Continued
Other Transactions
Also during 1998, the Company completed acquisitions of 47 radio
stations in 10 existing and 17 new broadcast areas for a purchase price
consisting of approximately $237.0 million in cash, of which $18.8
million was placed in escrow in 1997, and the assumption of
approximately $10.7 million in debt owed to wholly-owned subsidiaries
of the Company.
The Company also completed two separate exchanges of broadcast
properties, exchanging five stations in two broadcast areas for seven
stations in two broadcast areas. The Company sold six broadcast
properties in three broadcast areas for approximately $1.1 million in
cash.
During 1998, the Company completed acquisitions of two broadcasting
service companies and the assets of five other broadcasting service
companies for a purchase price of approximately $14.5 million in cash,
a note payable of approximately $0.8 million, plus additional
contingent consideration of up to $1.6 million payable over three
years.
COMPLETED 1997 ACQUISITIONS AND DISPOSITIONS
During 1997, the Company completed acquisitions of 86 radio stations in
33 broadcast areas for a purchase price consisting of (i) $344.4
million in cash, of which $26.1 million was placed in escrow in 1996,
(ii) the issuance of approximately 4.3 million shares of common stock
valued at $126.8 million, and (iii) the issuance of warrants to acquire
500,000 shares of common stock at $40 per share valued at $5.0 million.
The Company also completed three separate like-kind exchanges of
broadcast properties, exchanging five stations and net cash of $11.0
million, of which $3.6 million was placed in escrow in 1996, for nine
stations. The Company sold two stations in two broadcast areas for $9.5
million.
In June, the Company acquired by merger Premiere, a company that
produces syndicated network radio programs and services which it
distributes in exchange for commercial broadcast time that is resold to
national advertisers. The total consideration paid by the Company
including payment for certain Premiere warrants and stock options, was
$189.8 million, consisting of $138.8 million in cash and the issuance
of 1,416,886 shares of common stock.
<PAGE> 17
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS, Continued
In April 1997, the Company acquired substantially all the assets
relating to the broadcast distribution and related print and electronic
media publishing businesses of Radio-Active Media (formerly EFM Media
Management), for $50.0 million in cash. Additionally, in October 1997,
the Company acquired the rights to The Dr. Laura Program from Synergy
Broadcasting, Inc. and the assets of Multiverse Networks, L.L.C., a
network radio sales representation firm, for $71.5 million in cash.
The Company completed the acquisition of two additional broadcasting
service companies for a purchase price of approximately $29.0 million.
All of the above 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 each of the 1998 and 1997
acquisitions had taken place at the beginning of 1997, unaudited pro
forma consolidated results of operations would have been as follows:
<TABLE>
<CAPTION>
Pro Forma (Unaudited)
Year Ended December 31,
1998 1997
--------- ---------
<S> <C> <C>
Net revenue $ 824,616 $ 714,853
Net loss before extraordinary loss (9,568) (14,263)
Diluted loss per common share
before extraordinary loss $ (.19) $ (.28)
</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.
Acquisitions Completed Subsequent to December 31, 1998
The Company purchased the FCC licenses and substantially all of the
assets of 21 and the stock of two radio stations in two existing and
nine new broadcast areas and the FCC license and substantially all of
the assets of one television station in one new broadcast area for
approximately $106.9 million in cash, of which approximately $10.0
million was placed in escrow in 1997 and 1998.
<PAGE> 18
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS, Continued
Pending Acquisitions and Dispositions
As of March 5, 1999, the Company has entered into agreements to
purchase FCC licenses and substantially all of the broadcast assets of
13 stations and the stock of one station in six of the Company's
existing broadcast areas and in three new broadcast areas for a total
purchase price of approximately $22.3 million in cash, of which $2.6
million has already been paid in escrow through December 31, 1998.
In connection with the Clear Channel Merger (See Footnote 2) the
Company has signed letters of intent to divest of five stations in
Louisville, Kentucky and the format of one and FCC license of another
station in Tampa, Florida. These dispositions will close simultaneously
with the Clear Channel Merger.
<PAGE> 19
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Land and land improvements $ 28,043 $ 21,128
Buildings 34,671 26,077
Equipment 239,861 162,885
Furniture and fixtures 23,040 19,919
Leasehold improvements 10,587 8,006
--------- ---------
336,202 238,015
Less accumulated depreciation (55,153) (31,206)
--------- ---------
$ 281,049 $ 206,809
========= =========
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets at December 31, 1998 and 1997 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Broadcasting licenses $2,077,776 $1,465,020
Goodwill 452,720 404,684
Contracts and other
intellectual assets 400,674 331,171
---------- ----------
2,931,170 2,200,875
Less accumulated amortization (181,822) (96,654)
---------- ----------
$2,749,348 $2,104,221
========== ==========
</TABLE>
<PAGE> 20
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. OTHER ASSETS
The Company's other assets at December 31, 1998 and 1997 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Deferred finance costs $ 32,607 $ 24,497
Deposits on broadcast properties 38,961 51,410
Marketable securities 27,428 --
Other 37,002 17,354
-------- --------
$135,998 $ 93,261
======== ========
</TABLE>
At December 31, 1998 the Company recorded an unrealized gain, net of
tax, of $25.4 million on an investment in a marketable equity security.
In January 1999 the Company sold the investment and recognized a pretax
gain of $83.5 million.
Included in Other at December 31, 1998 is a $9.2 million note
receivable from a company which provides real estate services to Jacor,
and employs a Director of Jacor in a principal position.
<PAGE> 21
JACOR COMMUNICATIONS,INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT
The Company's debt obligations at December 31, 1998 and 1997 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Credit Facility borrowings........ $ 750,000 $567,500
10 1/8% Senior Subordinated Notes,
due 2006....................... 100,000 100,000
9 3/4% Senior Subordinated Notes,
due 2006....................... 170,000 170,000
8 3/4% Senior Subordinated Notes,
due 2007....................... 150,000 150,000
8% Senior Subordinated Notes,
due 2010....................... 119,574 --
---------- --------
$1,289,574 $987,500
========== ========
</TABLE>
Credit Facility
The Company, through Jacor Communications Company ("JCC"), has a $1.15
billion credit facility (the "Credit Facility") with a group of banks
and other financial institutions. The Credit Facility consists of two
components: (i) a revolving credit facility ("Revolving Credit
Facility") of up to $750.0 million with a mandatory commitment
reduction of $50.0 million on June 30, 2000 continuing semi-annually
through June 2003, and a final maturity date of December 31, 2004; and
(ii) a term loan ("Term Loan") of up to $400.0 million with a scheduled
reduction of $35.0 million on December 31, 1999 with increasing
semi-annual reductions thereafter and a final maturity date of December
31, 2004. Amounts repaid or prepaid under the Term Loan may not be
reborrowed. At December 31, 1998, the Company had $400.0 million of
outstanding indebtedness under the Term Loan, $385.0 million of
outstanding indebtedness under the Revolving Credit Facility and
available borrowings of $365.0 million.
The loans under the Credit Facility are guaranteed by each of the
Company's direct and indirect subsidiaries other than certain
immaterial subsidiaries. JCC's obligations under the Credit Facility
are collateralized by a first priority lien on the capital stock of the
Company's subsidiaries, an assignment of all intercompany debt and of
certain time brokerage agreements, and by the guarantee of JCC's parent
company, Jacor Communications, Inc. ("Jacor").
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 December 31, 1998, the
average interest rate on Credit Facility borrowings was 6.20%. 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.
<PAGE> 22
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT, Continued
The Credit Facility contains covenants and provisions that restrict,
among other things, the Company's ability to: (i) incur additional
indebtedness; (ii) incur liens on its property; (iii) make investments
and advances; (iv) enter into guarantees and other contingent
obligations; (v) merge or consolidate with or acquire another person or
engage in other fundamental changes; (vi) engage in certain sales of
assets; (vii) engage in certain transactions with affiliates; and
(viii) make restricted junior payments. The Credit Facility also
requires the satisfaction of certain financial performance criteria
(including a consolidated interest coverage ratio, a debt-to-operating
cash flow ratio and a consolidated operating cash flow available for
fixed charges ratio) and the repayment of loans under the Credit
Facility with proceeds of certain sales of assets and debt issuances.
In 1997, the Company recognized an extraordinary loss of approximately
$7.5 million, net of income tax credit, related to the write off of
debt financing costs due to significant amendments to the Company's
Credit Facility.
10 1/8% Senior Subordinated Notes Due 2006
Interest on the 10 1/8% Senior Subordinated Notes (the "10 1/8% Notes")
is payable semi-annually. The 10 1/8% Notes will be redeemable at the
option of the Company, in whole or in part, at any time on or after
June 15, 2001. The redemption prices commence at 105.063% and are
reduced by 1.688% annually until June 15, 2004 when the redemption
price is 100%. At December 31, 1998, the market value of the 10 1/8%
Notes exceeded carrying value by approximately $11.5 million. At
December 31, 1997 the market value of the 10 1/8% Notes exceeded
carrying value by approximately $8.6 million.
9 3/4% Senior Subordinated Notes Due 2006
Interest on the 9 3/4% Senior Subordinated Notes (the "9 3/4% Notes")
is payable semi-annually. The 9 3/4% Notes will be redeemable at the
option of the Company, in whole or part, at any time on or after
December 15, 2001. The redemption prices commence at 104.875% and are
reduced by 1.625% annually until December 15, 2004 when the redemption
price is 100%. At December 31, 1998, the market value of the 9 3/4%
Notes exceeded carrying value by approximately $17.9 million. At
December 31, 1997 the market value of the 9 3/4% Notes exceeded
carrying value by approximately $12.1 million.
<PAGE> 23
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT, Continued
8 3/4% Senior Subordinated Notes Due 2007
In June 1997, the Company completed an offering of $150 million of its
8 3/4% Senior Subordinated Notes (the "8 3/4% Notes"). The 8 3/4% Notes
will mature on June 15, 2007. Interest on the 8 3/4% Notes is payable
semi-annually on June 15 and December 15 of each year, commencing
December 15, 1997. The 8 3/4% Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or after June 15,
2002. The redemption prices commence at 104.375% and are reduced by
1.458% annually until June 15, 2005 when the redemption price is 100%.
At December 31, 1998 the market value of the 8 3/4% Notes exceeded
carrying value by approximately $11.6 million. At December 31, 1997,
the market value of the 8 3/4% Notes exceeded carrying value by
approximately $3.8 million.
8% Senior Subordinated Notes Due 2010
In February 1998, the Company completed an offering of $120 million of
its 8% Senior Subordinated Notes (the "8% Notes"). The 8% Notes will
mature on February 15, 2010. Interest on the 8% Notes is payable
semi-annually on February 15 and August 15 of each year, commencing
August 15, 1998. 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 104.0% and are reduced by 0.8%
annually until February 2008 when the redemption price is 100%. At
December 31, 1998 the market value of the 8% Notes exceeded carrying
value by approximately $6.6 million.
The 10 1/8% Notes, 9 3/4% Notes, 8 3/4% Notes, and 8% Notes (the
"Notes") are obligations of 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. JCC's credit facility and the terms
of the indentures governing the Notes do restrict the ability of JCC
and of the Subsidiary Guarantors to make distributions to the
Registrant.
<PAGE> 24
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT, Continued
Summarized financial information with respect to Jacor and with respect
to the Subsidiary Guarantors on a combined basis as of December 31,
1998 and 1997 and for each of the three years in the period ended
December 31, 1998; and with respect to JCC as of December 31, 1998 and
1997 and for the years ended December 31, 1998, December 31, 1997 and
for the period from June 6, 1996 to December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Jacor JCC
---------------------------------------- ---------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating Statement
Data (in thousands):
Net revenue -- -- -- -- -- --
Equity in earnings
of subsidiaries $ 1,277 $ (1,958) $ 10,237 $ 967 $ 3,191 $ 11,864
Operating (loss)
income (18,954) (15,387) 305 967 3,191 11,864
Income (loss) before
extraordinary items 942 (4,052) 5,105 1,277 5,498 13,203
Net income (loss) 942 (4,052) 5,105 1,277 (1,958) 10,237
Balance Sheet Data
(in thousands):
Current assets $ 6,090 $ 1,316 -- $ 27,634 $ 41,203 --
Non-current assets 1,622,014 1,165,970 -- 2,884,237 2,122,648 --
Current liabilities 22,075 28,853 -- 13,771 13,184 --
Non-current
liabilities 402,964 222,082 -- 2,224,921 1,478,765 --
Shareholders' equity 1,203,065 916,351 -- 673,179 671,902 --
Statement of Cash
Flow Data (in thousands):
Operating activities $ (19,234) $ (13,643) $ (9,482) $ 8,460 $ 2,521 $ 5,266
Investing activities (2,597) 88,460 2,098 (800,211) (731,616) (849,910)
Financing activities 22,444 (76,278) 7,384 782,465 683,829 915,345
Net change in cash and
cash equivalents 613 (1,461) -- (9,286) (45,266) 70,701
Cash and cash equivalents
at beginning of period (613) 848 -- 29,337 74,603 7,436
Cash and cash equivalents
at end of period -- (613) -- 20,051 29,337 78,137
</TABLE>
<PAGE> 25
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT, Continued
<TABLE>
<CAPTION>
Combined
Subsidiary Guarantors
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating Statement
Data (in thousands):
Net revenue $ 754,468 $ 530,574 $ 223,761
Equity in earnings
of subsidiaries -- -- --
Operating income 136,762 95,306 49,292
Income before
extraordinary items 967 3,191 11,864
Net income 967 3,191 11,864
Balance Sheet Data
(in thousands):
Current assets $ 220,589 $ 155,068 --
Non-current assets 3,200,118 2,446,810 --
Current liabilities 92,554 76,212 --
Non-current
liabilities 2,125,088 1,609,315 --
Shareholders' equity 1,203,065 916,351 --
Statement of Cash Flow
Data (in thousands):
Operating activities $ 93,373 $ 67,162 $ 29,123
Investing activities (33,235) (15,177) (11,452)
Financing activities (60,138) (54,671) (17,671)
Net change in cash and
cash equivalents -- (2,686) --
Cash and cash equivalents
at beginning of period -- 2,686 --
Cash and cash equivalents
at end of period -- -- --
</TABLE>
<PAGE> 26
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. LIQUID YIELD OPTION NOTES
1998 Liquid Yield Option Notes
In February 1998, the Company issued 4 3/4% Liquid Yield Option Notes
("1998 LYONs") due 2018 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. At December 31, 1998 the
accreted value of the 1998 LYONs was $174.1 million which included $7.2
million of interest accreted during 1998.
Each 1998 LYON is 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 1998 LYON.
The 1998 LYONs are not redeemable by the Company prior to February 9,
2003. Thereafter, the LYONs are redeemable for cash at any time at the
option of the Company, in whole or in part, at redemption prices equal
to the issue price plus accrued original issue discount to the date of
redemption.
The 1998 LYONs can be purchased by the Company, at the option of the
holder, on February 9, 2003, February 9, 2008, and February 9, 2013 for
a purchase price of $494.52, $625.35 and $790.79 (representing issue
price plus accrued original issue discount to each date), respectively,
representing a 4 3/4% yield per annum to the holder on such date. The
Company, at its option, may elect to pay the purchase price on any such
purchase date in cash or common stock, or any combination thereof.
At December 31, 1998 the market value of the 1998 LYONs exceeded the
carrying value by approximately $31.3 million.
1996 Liquid Yield Option Notes
In June 1996, the Company issued 5 1/2% Liquid Yield Option Notes
("1996 LYONs") due 2011 in the aggregate principal amount at maturity
of $259.9 million. Each 1996 LYON had an issue price of $443.14 and a
principal amount at maturity of $1,000. At December 31, 1998 the
accreted value of the 1996 LYONs was $132.1 million which included $7.0
million of interest accreted during 1998. At December 31, 1997 the
accreted value of the 1996 LYONs was $125.3 million which included $6.6
million of interest accreted during 1997.
Each 1996 LYON is convertible, at the option of the holder, at any time
on or prior to maturity, into Common Stock at a conversion rate of
13.412 shares per 1996 LYON.
The 1996 LYONs are not redeemable by the Company prior to June 12,
2001. Thereafter, the 1996 LYONs are redeemable for cash at any time at
the option of the Company, in whole or in part, at redemption prices
equal to the issue price plus accrued original issue discount to the
date of redemption.
<PAGE> 27
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. LIQUID YIELD OPTION NOTES, Continued
The 1996 LYONs can be purchased by the Company, at the option of the
holder, on June 12, 2001 and June 12, 2006, for a purchase price of
$581.25 and $762.39 (representing issue price plus accrued original
issue discount to each date), respectively, representing a 5 1/2% yield
per annum to the holder on such date. The Company, at its option, may
elect to pay the purchase price on any such purchase date in cash or
common stock, or any combination thereof.
At December 31, 1998, the market value of the 1996 LYONs exceeded the
carrying value by approximately $99.9 million. At December 31, 1997,
the market value of the 1996 LYONs exceeded the carrying value by
approximately $64.4 million.
9. CAPITAL STOCK
Common Stock
In February 1998, the Company completed an offering of 5,073,000 shares
of common stock at $50.50 per share net of underwriting discounts of
$2.02 per share. Net proceeds to the Company were approximately $244.9
million.
Warrants
In connection with a 1997 acquisition, the Company issued warrants to
acquire 500,000 shares of common stock with an exercise price of $40
per share. The warrants expire in February 2002.
In connection with a 1996 acquisition, the Company issued warrants to
acquire 4,400,000 shares of common stock with an exercise price of $28
per share. The warrants expire in September 2001.
<PAGE> 28
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK BASED COMPENSATION PLANS
1993 Stock Option Plan
Under the Company's 1993 stock option plan (the "1993 Plan"), options
to acquire up to 2,769,218 shares of common stock can be granted to
directors, officers and key employees at no less than the fair market
value of the underlying stock on the date of grant. The 1993 Plan
permits the granting of non-qualified stock options (NQSOs) as well as
incentive stock options(ISOs). Between 25% and 30% of the options vest
on the date of grant and between 20% and 30% vest on each of the next
three anniversaries of the grant date. Options expire 10 years after
grant and the plan will terminate no later than February 7, 2003. At
December 31, 1998, 618 shares were available for grant.
1997 Long-Term Incentive Stock Plan
The 1997 Long-Term Incentive Stock Plan ("the Long-Term Plan")
authorizes the issuance of up to 1,800,000 shares of Common Stock
pursuant to the grant or exercise of stock options, including NQSOs and
ISOs, restricted stock, stock appreciation rights (SARs), and certain
other instruments to executive officers and other key employees,
subject to board approval and certain other restrictions. Stock options
may not be granted at less than the fair market value of the underlying
stock on the date of grant. Twenty-five percent of the options vest on
the date of the grant and 25% vest on each of the next three
anniversaries of the grant date. Options expire 10 years after grant.
At December 31, 1998, 284,512 shares were available for grant.
1997 Non-Employee Directors Stock Plan and Stock Purchase Plan
The 1997 Non-Employee Directors Stock Plan (the "Directors Stock Plan")
authorizes the issuance of up to 350,000 shares of Jacor Common Stock
pursuant to the grant or exercise of NQSOs, SARs, restricted stock and
other performance instruments. Stock options may not be granted at less
than the fair market value of the underlying stock on the date of
grant. Twenty-five percent of the options vest on the date of the grant
and 25% vest on each of the next three anniversaries of the grant date.
Options expire 10 years after grant. At December 31, 1998, 270,000
shares were available for grant. Also, the Company adopted a stock
purchase plan for its non-employee directors authorizing the issuance
of up to 150,000 shares of Jacor common stock. Stock may be purchased
at a 15% discount from fair value and purchases are limited to $100,000
per director in a calendar year.
<PAGE> 29
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK BASED COMPENSATION PLANS, Continued
Information pertaining to the plans for the years ended December 31,
1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
Number of Weighted Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
1996:
Outstanding at beginning of year ...... 1,568,520 $ 7.52
Granted ............................... 594,500 $ 23.63
Exercised ............................. (106,410) $ 6.10
Outstanding at end of year ............ 2,056,610 $ 12.26
Exercisable at end of year ............ 1,507,000 $ 8.68
Available for grant at end of year .... 523,118
1997:
Outstanding at beginning of year ...... 2,056,610 $ 12.26
Granted ............................... 1,196,188 $ 24.92
Exercised ............................. (212,679) $ 11.61
Surrendered ........................... (15,490) $ 26.71
Outstanding at end of year ............ 3,024,629 $ 17.20
Exercisable at end of year ............ 2,228,095 $ 13.72
Available for grant at end of year .... 1,476,930
1998:
Outstanding at beginning of year ...... 3,024,629 $ 17.20
Granted ............................... 921,800 $ 53.31
Exercised ............................. (245,698) $ 15.32
Surrendered ........................... (9,083) $ 22.52
Outstanding at end of year ............ 3,691,648 $ 26.33
Exercisable at end of year ............ 2,435,686 $ 18.37
Available for grant at end of year .... 555,130
</TABLE>
<PAGE> 30
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK BASED COMPENSATION PLANS, Continued
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions for grants in 1998, 1997 and 1996, respectively: risk-free
interest rates are different for each grant and range from 5.24% to
6.51%; the expected lives of options are 5 years; and volatility of
approximately 35% for all grants. A summary of the fair value of
options granted in 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Weighted-average fair value of
options granted at-the-money $30.87 $12.26 $ 9.42
Weighted-average fair value of
options granted at a premium -- -- $ 8.46
Weighted-average fair value of
options granted at a discount -- $28.15 --
Weighted-average fair value of all
options granted during the year $30.87 $16.29 $ 9.07
</TABLE>
The options granted at a discount in 1997 were related to approximately
304,000 options outstanding to purchase Premiere common stock, which
were converted to equivalent Jacor NQSOs at the time of the merger.
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------- ---------------------
Weighted Weighted Weighted
Range of Number Average Average Number Average
Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices at 12/31/98 Life Price at 12/31/98 Price
-------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$5.74 to $9.65 1,109,172 4.32 $ 6.10 1,109,172 $ 6.10
$12.70 to $19.96 300,929 6.48 $ 15.98 295,929 $ 15.93
$21.25 to $30.66 1,313,247 8.13 $ 26.46 779,260 $ 25.93
$37.25 to $45.94 49,000 8.55 $ 39.57 24,500 $ 39.80
$52.87 to $60.66 919,300 9.09 $ 53.28 226,825 $ 53.28
----------- -----------
$ 5.74 to $60.66 3,691,648 8.26 $ 26.34 2,435,686 $ 18.40
=========== ===========
</TABLE>
<PAGE> 31
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK BASED COMPENSATION PLANS, Continued
Employee Stock Purchase Plan
Under the 1995 Employee Stock Purchase Plan, the Company is authorized
to issue up to 700,000 shares of common stock to its full-time and
part-time employees, all of whom are eligible to participate. Under the
terms of the Plan, employees can choose each year to have up to 10
percent of their annual base earnings withheld to purchase the
Company's common stock. The purchase price of the stock is 85% of the
lower of its beginning-of-period or end-of-period market price. Under
the Plan, the Company sold 66,151 shares for approximately $43.80 per
share and 3,441 shares for approximately $52.06 per share in 1998,
74,767 shares for approximately $23.27 per share and 12,376 shares for
approximately $32.19 per share in 1997 and 47,232 shares for $14.24 per
share in 1996. The fair market value of the right to acquire common
stock under the Stock Purchase Plan was $15.74 per share granted on
January 1 and $15.73 per share granted on July 1 in 1998, $8.40 per
share granted on January 1 and $9.80 per share granted on July 1 in
1997 and $4.81 per share in 1996.
Had the compensation cost for the Company's stock-based compensation
plans been determined consistent with SFAS 123, the Company's net
income (loss) and net income (loss) per common share for 1998, 1997 and
1996 would approximate amounts below (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Net income (loss):
As reported $ 942 $ (4,052) $ 5,105
Pro forma $(17,729) $(10,691) $ 3,826
Diluted net income (loss) per
common share:
As reported $ 0.02 $ (0.10) $ 0.19
Pro forma $ (0.31) $ (0.25) $ 0.14
</TABLE>
In 1996, the Company recorded compensation expense of approximately
$1.9 million related to stock units issued to officers and directors
and stock options issued to non-employees of the Company. The expense
related to the stock units was equal to the fair value of the stock for
which the units can be converted into on the date of grant. The fair
value of the options was determined using the Black-Scholes option
pricing model and the following assumptions: risk-free interest rate of
5.79%; expected life of 5 years; and volatility of approximately 35%.
The options were 100% vested on the date of grant.
<PAGE> 32
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES
Income tax expense for the years ended December 31, 1998, 1997 and 1996
is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Federal State Total
------- -------- -------
<S> <C> <C> <C>
1998:
Current $10,640 $ 2,500 $13,140
Deferred 12,060 2,900 14,960
------- -------- -------
$22,700 $ 5,400 $28,100
======= ======== =======
1997:
Current $13,200 $ 3,000 $16,200
Deferred (5,400) (1,200) (6,600)
------- -------- -------
7,800 1,800 9,600
Tax benefit from
extraordinary loss (4,000) (900) (4,900)
------- -------- -------
$ 3,800 $ 900 $ 4,700
======= ======== =======
1996:
Current $ 6,185 $1,348 $7,533
Deferred (185) (48) (233)
------- -------- -------
6,000 1,300 7,300
Tax benefit from
extraordinary loss (1,600) (380) (1,980)
------- -------- -------
$ 4,400 $ 920 $ 5,320
======= ======== =======
</TABLE>
The provisions for income tax differ from the amount computed by
applying the statutory federal income tax rate due to the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Federal income tax at
the statutory rate $10,167 $ 5,173 $ 5,627
Amortization not deductible 14,446 3,449 1,262
State income taxes, net of any
current federal income tax
benefit 3,498 589 620
Other (11) 389 (209)
------- ------- -------
$28,100 $ 9,600 $ 7,300
======= ======= =======
</TABLE>
<PAGE> 33
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES, continued
The tax effects of the significant temporary differences which comprise
the deferred tax liability at December 31, 1998, 1997 and 1996 are as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Accrued expenses and
reserves $ (4,555) $ (7,479) $(11,104)
Net operating loss
carryforwards (7,235) (11,461) (12,000)
Other (1,682) (4,047) (2,098)
-------- -------- --------
(13,472) (22,987) (25,202)
Deferred tax liabilities:
Property and equipment 40,289 35,614 32,427
Intangibles 317,762 326,240 257,653
-------- -------- --------
358,051 361,854 290,080
-------- -------- --------
Net liability $344,579 $338,867 $264,878
======== ======== ========
</TABLE>
At December 31, 1998 the Company had net operating loss carryforwards
of $18,086. The loss carryforwards expire in the years 2008 through
2012 if not used.
<PAGE> 34
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. COMMITMENTS AND CONTINGENCIES
Lease and Contractual Obligations
The Company and its subsidiaries lease certain land and facilities used
in their operations. The Company also has various employment agreements
with broadcast personalities that provide base compensation. Future
minimum payments under leases and employment agreements as of December
31, 1998 are payable as follows (in thousands):
<TABLE>
<S> <C> <C>
1999 $ 71,811
2000 56,047
2001 40,333
2002 23,960
2003 19,272
Thereafter 38,965
--------
$250,388
========
</TABLE>
Rental expense was approximately $11,955, $8,010 and $3,996 for the
years ended December 31, 1998, 1997 and 1996, respectively.
Legal Proceedings
From time to time, the Company becomes involved in various claims and
lawsuits that are incidental to its business. In the opinion of the
Company's management, there are no material legal proceedings pending
against the Company.
13. RETIREMENT PLAN
The Company maintains a defined contribution retirement plan covering
substantially all employees who have met eligibility requirements. The
Company matches participating employee contributions at a rate of 50%
of the employee's first 4% contributed, up to $160,000 of annual
compensation. Total expense related to this plan was $2,558,647,
$1,977,052 and $756,618 in 1998, 1997 and 1996, respectively.
<PAGE> 35
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted Earnings Per Share ("EPS") computations for
income before extraordinary items for the years ended December 31, as
follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net income before
extraordinary item $ 942 $ 3,404 $ 8,071
Weighted average
shares - basic 50,389 40,460 25,433
Effect of dilutive
securities:
Stock options 1,465 996 658
Warrants 2,326 357 --
Other 385 350 351
------- ------- -------
Weighted average
shares - diluted 54,565 42,163 26,442
======= ======= =======
Basic EPS $ .02 $ .08 $ .32
Diluted EPS $ .02 $ .08 $ .30
</TABLE>
The Company's 1996 LYONs and 1998 LYONs (the "LYONs") can be converted
into approximately 6.2 million shares of Jacor common stock at the
option of the holder. Assuming conversion of the LYONs as of January 1,
1998 and 1997 would result in an increase in per share amounts before
extraordinary items, therefore, the LYONs are not included in the
computation of diluted EPS.
<PAGE> 36
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. 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>
YEAR ENDED DECEMBER 31, 1998 RADIO OTHER CORPORATE ELIMINATIONS CONSOLIDATED
---------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net broadcast revenue $ 700,079 $ 65,496 -- $ (11,107) $ 754,468
Broadcast operating expenses 457,597 51,371 -- (11,107) 497,861
Broadcast cash flow 242,482 14,125 -- -- 256,607
Corporate expenses -- -- $ 19,684 -- 19,684
Depreciation 21,813 3,506 1,138 -- 26,457
Amortization 87,166 5,397 1,372 -- 93,935
Operating income 133,503 5,222 (22,194) -- 116,531
Capital expenditures 28,474 4,761 2,997 -- 36,232
Radio station and other
acquisitions 798,341 1,870 10,000 -- 810,211
Total assets 2,983,481 258,110 201,260 (22,143) 3,420,708
</TABLE>
<PAGE> 37
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. SEGMENT INFORMATION, Continued
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 RADIO OTHER CORPORATE ELIMINATIONS CONSOLIDATED
---------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net broadcast revenue $ 483,548 $ 51,576 -- $ (4,550) $ 530,574
Broadcast operating expenses 325,753 35,580 -- (4,550) 356,783
Broadcast cash flow 157,795 15,996 -- -- 173,791
Corporate expenses -- -- $ 14,093 -- 14,093
Depreciation 14,187 2,995 654 -- 17,836
Amortization 54,573 5,361 715 -- 60,649
Operating income 89,035 7,640 (15,462) -- 81,213
Capital expenditures 11,367 3,810 4,803 -- 19,980
Radio station and other
acquisitions 703,287 28,329 -- -- 731,616
Total assets 2,208,992 253,864 143,020 (3,998) 2,601,878
YEAR ENDED DECEMBER 31, 1996
Net broadcast revenue $ 197,172 $ 28,673 -- $ (2,084) $ 223,761
Broadcast operating expenses 135,284 17,865 -- (2,084) 151,065
Broadcast cash flow 61,888 10,808 -- -- 72,696
Corporate expenses -- -- $ 9,932 -- 9,932
Depreciation 5,956 1,279 426 -- 7,661
Amortization 13,668 2,075 -- -- 15,743
Operating income 42,264 7,454 (10,358) -- 39,360
Capital expenditures 10,945 377 530 -- 11,852
Radio station and other
acquisitions 849,370 540 -- -- 849,910
Total assets 1,311,791 180,811 214,866 (2,526) 1,704,942
</TABLE>
<PAGE> 38
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. RECENTLY ISSUED ACCOUNTING STANDARDS
On January 1, 1999, the Company adopted AICPA Statement of Position
(SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," issued in March 1998. SOP 98-1 requires the
capitalization of certain expenditures for software that are purchased
or internally developed for use in the business. The Company believes
the implementation of SOP 98-1 will not have a material impact on its
financial reporting.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 requires that
an entity recognize all derivatives as either assets or liabilities in
the balance sheet and measure such instruments at fair value. The
statement is effective for fiscal quarters of fiscal years beginning
after June 15, 1999. The Company currently has no derivative
instruments or hedging activities.
<PAGE> 39
Supplementary Data
Quarterly Financial Data
for the years ended December 31, 1998 and 1997 (in thousands, except per share
data) (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998
Net revenue $ 142,028 $ 183,836 $ 204,508 $ 224,096 $ 754,468
Operating income 3,581 29,726 39,692 43,532 116,531
Net (loss) income (6,898) 5,022 439 2,379 942
Basic net (loss)
income per
common share (1) (0.14) 0.10 0.01 0.05 0.02
Diluted net (loss) income
per common share (1) (0.14) 0.09 0.01 0.04 0.02
</TABLE>
<PAGE> 40
Quarterly Financial Data
for the years ended December 31, 1998 and 1997 (in thousands, except per share
data) (Unaudited), Continued
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1997
Net revenue $ 88,828 $ 135,553 $ 144,560 $ 161,633 $ 530,574
Operating income 5,392 24,179 25,520 26,122 81,213
Net (loss) income before
extraordinary loss (2,584) 4,145 483 1,360 3,404
Net (loss) income (8,140) 4,145 (1,417) 1,360 (4,052)
Basic net (loss)
income per
common share: (1)
Before extraordinary
loss (0.08) 0.ll 0.01 0.03 0.08
Extraordinary loss (0.17) -- (0.04) -- (0.18)
--------- --------- --------- --------- ---------
Basic net (loss)
income per
common share (0.25) 0.11 (0.03) 0.03 (0.10)
Diluted net (loss) income
per common share: (1)
Before extraordinary
loss (0.08) 0.10 0.01 0.03 0.08
Extraordinary loss (0.17) -- (0.04) -- (0.18)
--------- --------- ---------- --------- ---------
Diluted net (loss)
income per
common share (0.25) 0.10 (0.03) 0.03 (0.10)
</TABLE>
- -------------------------
NOTE:
(1) The sum of the quarterly net income (loss) per share amounts does not
equal the annual amount reported as per share amounts are computed
independently for each quarter.
<PAGE> 41
(b) Pro forma financial information.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the merger. For accounting purposes Clear Channel will account
for the merger as a purchase of Jacor; accordingly the net assets of Jacor
Communications, Inc. ("Jacor") have been adjusted to their estimated fair values
based upon a preliminary purchase price allocation.
The unaudited pro forma combined condensed statement of operations for the
year ended December 31, 1998 give effect to the merger as if it had occurred on
January 1, 1998. The unaudited pro forma combined condensed balance sheet at
December 31, 1998 gives effect to the merger as if it occurred on December 31,
1998.
The unaudited pro forma combined condensed statement of operations for the
year ended December 31, 1998 was prepared based upon the historical statement of
operations of Clear Channel, adjusted to reflect the merger with Universal
Outdoor Holding, Inc. ("Universal"), and the acquisition of More Group, Plc
("More"), as if such merger and acquisition had occurred on January 1, 1998
("Clear Channel Pro Forma"), and based upon the historical statement of
operations of Jacor adjusted to reflect the acquisition of the assets of 17
radio stations from Nationwide Communications ("Nationwide") as if such
acquisition had occurred on January 1, 1998 ("Jacor Pro Forma"). The unaudited
pro forma combined condensed balance sheet was prepared based upon the
historical balance sheet of Clear Channel and the historical balance sheet of
Jacor. Certain amounts in Jacor's financial statements have been reclassified to
conform to Clear Channel's presentation.
The unaudited pro forma combined condensed financial statements should be
read in conjunction with the historical financial statements of Jacor and Clear
Channel.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the actual results of operations or financial position
that would have occurred had the merger and the above described acquisitions and
merger transactions of Clear Channel and Jacor occurred on the dates indicated
nor are they necessarily indicative of future operating results or financial
position.
<PAGE> 42
CLEAR CHANNEL AND JACOR
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
CLEAR CHANNEL
PRO FORMA AND JACOR
CLEAR CHANNEL JACOR MERGER PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENT MERGER
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 36,498 $ 20,051 $ (50,000) $ 6,549
Accounts receivable, net..................... 307,372 201,466 -- 508,838
Other current assets......................... 66,090 32,796 -- 98,886
------------ ------------ ------------ ------------
Total Current Assets................... 409,960 254,313 (50,000) 614,273
Property, plant & equipment, net............... 1,915,787 281,049 -- 2,196,836
Intangible assets:
Contract valuations.......................... 393,748 400,674 -- 794,422
Licenses and goodwill........................ 4,223,432 2,530,496 2,487,582 9,241,510
Other intangible assets...................... 89,577 -- -- 89,577
------------ ------------ ------------ ------------
4,706,757 2,931,170 2,487,582 10,125,509
Less accumulated amortization.................. (315,275) (181,822) 181,822 (315,275)
------------ ------------ ------------ ------------
4,391,482 2,749,348 2,669,404 9,810,234
Other assets:
Notes receivable............................. 53,675 -- -- 53,675
Investments in and advances to,
nonconsolidated affiliates................. 324,835 -- -- 324,835
Other assets................................. 109,269 135,998 -- 245,267
Other investments............................ 334,910 -- -- 334,910
------------ ------------ ------------ ------------
TOTAL ASSETS........................... $ 7,539,918 $ 3,420,708 $ 2,619,404 $ 13,580,030
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other
current liabilities........................ $ 250,180 $ 128,400 $ -- $ 378,580
Current portion of long-term debt............ 7,964 35,000 -- 42,964
------------ ------------ ------------ ------------
Total Current Liabilities.............. 258,144 163,400 -- 421,544
Long-term debt................................. 2,323,643 1,289,574 -- 3,613,217
Deferred income taxes.......................... 383,564 345,478 -- 729,042
Other long-term liabilities.................... 75,533 112,988 -- 188,521
Liquid yield options notes..................... -- 306,202 131,195 437,397
Minority interest.............................. 15,605 -- -- 15,605
Shareholders' equity:
Preferred stock.............................. -- -- -- --
Common stock................................. 26,370 512 6,086 32,968
Additional paid-in capital................... 4,067,297 1,124,057 2,521,424 7,712,778
Common stock warrants........................ -- 30,819 8,377 39,196
Retained earnings............................ 223,662 22,250 (22,250) 223,662
Other........................................ 6,888 -- -- 6,888
Unrealized gain on investments............... 161,185 25,428 (25,428) 161,185
Cost of shares held in treasury.............. (1,973) -- -- (1,973)
------------ ------------ ------------ ------------
Total Shareholders' Equity............. 4,483,429 1,203,066 2,488,209 8,174,704
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY............................... $ 7,539,918 $ 3,420,708 $ 2,619,404 $ 13,580,030
============ ============ ============ ============
</TABLE>
<PAGE> 43
CLEAR CHANNEL AND JACOR
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CLEAR CHANNEL
PRO FORMA AND JACOR
CLEAR CHANNEL JACOR MERGER PRO FORMA
PRO FORMA PRO FORMA ADJUSTMENT MERGER
------------- --------- ---------- -------------
<S> <C> <C> <C> <C>
Net revenue.......................... $ 1,550,906 $ 813,280 $ -- $ 2,364,186
Operating expenses................... 908,918 539,294 -- 1,448,212
Depreciation and amortization........ 355,473 130,300 99,160 584,933
Corporate expenses................... 44,950 21,090 -- 66,040
----------- ----------- ----------- -----------
Operating income (loss).............. 241,565 122,596 (99,160) 265,001
Interest expense..................... 174,992 121,797 -- 296,789
Other income (expense) -- net........ 3,211 19,802 -- 23,013
----------- ----------- ----------- -----------
Income (loss) before income taxes.... 69,784 20,601 (99,160) (8,775)
Income tax (expense) benefit......... (68,926) (24,275) -- (93,201)
----------- ----------- ----------- -----------
Income (loss) before equity in
earnings of nonconsolidated
affiliates......................... 858 (3,674) (99,160) (101,976)
Equity in earnings of
nonconsolidated affiliates......... 8,091 -- -- 8,091
----------- ----------- ----------- -----------
Net income (loss) before
extraordinary items................ $ 8,949 $ (3,674) $ (99,160) $ (93,885)
=========== =========== =========== ===========
Net income (loss) before
extraordinary items per common
share:
Basic.............................. $ 0.04 $ (0.30)
=========== ===========
Diluted............................ $ 0.04 $ (0.30)
=========== ===========
</TABLE>
<PAGE> 44
CLEAR CHANNEL AND JACOR
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Clear Channel and Jacor unaudited pro forma combined condensed financial
statements reflect the merger, accounted for as a purchase, as follows:
<TABLE>
<S> <C>
Jacor common stock outstanding (in whole shares)............ 51,184,217
Exchange ratio (based on the estimated value per share of
$38.7054)................................................. 1.289
-------------
Clear Channel's common stock to be issued in the merger (in
whole shares)............................................. 65,976,456
Estimated value per share................................... X $ 55.00
-------------
$ 3,628,705
Estimated value of common stock options..................... 23,374
Estimated transaction costs................................. 50,000
-------------
Total estimated purchase price.................... $ 3,702,079
=============
</TABLE>
For purpose of these statements the total estimated purchase price was
allocated as follows:
<TABLE>
<S> <C>
Total estimated purchase price.............................. $ 3,702,079
Plus -- estimated fair value of LYONs notes in excess of
carrying value............................................ 131,195
Plus -- estimated fair value of Jacor common stock warrants
in excess of carrying value............................... 8,377
Less -- Jacor's net assets exchanged in the merger at
December 31, 1998 adjusted for the elimination of
existing net licenses and goodwill of $2,348,674.......... (1,176,427)
-----------
Estimated excess purchase price (allocated to licenses and
goodwill)................................................. $ 5,018,078
===========
</TABLE>
The estimated excess purchase price allocated to licenses and goodwill of
$5,018,078 will be amortized over a 25 year period using the straight line
method which will result in annual goodwill amortization of $200,723.
This pro forma is based on the maximum exchange ratio of 1.289 shares of
Clear Channel common shares per each share of Jacor common shares, as based on
the average closing price of $55.00 per share calculated using the average
closing prices around December 31, 1998. As the exchange ratio is variable,
based on the moving average market price of Clear Channel's common stock, the
following analysis gives effect to a range of possible pro forma results for
selected items based on market prices varying from $60.00 to $75.00 per share.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NET LOSS PER COMMON SHARES
COMMON SHARE ----------------------
TOTAL ASSETS NET LOSS BASIC & DILUTED BASIC DILUTED
------------ -------- --------------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
At and for the year ended December 31, 1998
Price of Clear Channel Stock:
$60.00 $13,750,813 $(100,716) $(0.33) 308,938 327,171
=========== ========= ====== ======= =======
$65.00 $13,919,120 $(107,449) $(0.35) 306,686 324,735
=========== ========= ====== ======= =======
$70.00 $14,090,327 $(114,297) $(0.38) 304,792 322,687
=========== ========= ====== ======= =======
$75.00 $14,262,032 $(121,165) $(0.40) 303,154 320,915
=========== ========= ====== ======= =======
</TABLE>
<PAGE> 45
CLEAR CHANNEL AND JACOR
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS, CONTINUED
The unaudited pro forma combined condensed balance sheet is based on the
assumption that Jacor's debt holders will accept the transfer of debt to Clear
Channel. However, Clear Channel must offer to purchase all outstanding senior
subordinated notes at 101% of the principal amount. Clear Channel must also
offer to purchase all liquid yield option notes at their accreted value of
$306,202 million. It is unlikely that the debt holders will accept Clear
Channel's offer, as the fair value of this debt is greater than the required
offer. If all of Jacor's debt holders would accept Clear Channel's offer, the
pro forma total debt balance would decrease by $125.8 million.
The unaudited pro forma combined condensed financial statements of
operations excludes the effect of any divestiture of stations, which may be
required for regulatory approval, as Clear Channel intends the funds received
from any divestiture to be reinvested in acquisitions of similar stations in
other markets. Neither Clear Channel nor Jacor anticipates that any required
divestitures will be significant. The unaudited pro forma combined condensed
financial statements of operations also excludes the effect of retired or
refinanced debt as any retirement or refinancing of debt will not occur at or
prior to the closing of the merger.
If the merger agreement is terminated under certain circumstances, Jacor
must pay Clear Channel a fee of $115 million as a result of such termination.
The pro forma merger adjustments at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
----------
<S> <C> <C>
(a) Decrease in cash and cash equivalents resulting from
estimated merger expenses................................. $ (50,000)
(b) Increase in goodwill and licenses equal to the excess
purchase price of the merger.............................. 2,487,582
(c) Decrease in accumulated amortization resulting from the
elimination of Jacor's existing accumulated amortization
on goodwill............................................... 181,822
(d) Record liquid yield option notes at estimated fair value.... 131,195
(e) Increase common stock to account for Clear Channel common
stock given in the merger at $0.10 par value.............. 6,086
(f) Increase additional paid-in capital to account for Clear
Channel common stock given in the merger at $55.00 per
share less $0.10 par value ($2,498,050) plus the value of
Jacor stock options included in the Merger ($23,374)...... 2,521,424
(g) Record common stock warrants at estimated fair value........ 8,377
(h) Eliminate Jacor's existing retained earnings balance........ (22,250)
(i) Eliminate Jacor's existing unrealized gain on investments
balance................................................... (25,428)
</TABLE>
The pro forma merger adjustment for the year ended December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
(DECREASE)
TO INCOME
-------------------
<S> <C> <C> <C>
(j) Increase in amortization expense resulting from the
additional goodwill created by the merger and a
change in the life of goodwill amortization from 40
years (Jacor's policy) to 25 years (Clear Channel's
policy). This amortization expense results in a
permanent difference and will not be deductible for
federal income tax purposes........................ $(99,160)
</TABLE>
<PAGE> 46
CLEAR CHANNEL AND JACOR
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS, CONTINUED
Pro forma basic and diluted share information is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Basic
Clear Channel pro forma weighted average shares
outstanding............................................... 245,572
Jacor pro forma weighted average shares outstanding......... 50,389
Increase weighted average common stock outstanding to
account for Clear Channel's common stock given in the
merger at the exchange ratio of 1.289..................... 15,587
-------
Clear Channel and Jacor Pro Forma Merger.................... 311,548
=======
Diluted
Clear Channel pro forma weighted average shares
outstanding............................................... 258,635
Jacor pro forma weighted average shares outstanding......... 54,565
Increase weighted average common stock outstanding to
account for Clear Channel common stock given in the merger
and to account for the dilution effect of Jacor's common
stock warrants, employee stock options and other dilutive
shares have on the Company at the exchange ratio of
1.289..................................................... 16,794
-------
Clear Channel and Jacor Pro Forma Merger.................... 329,994
=======
</TABLE>
<PAGE> 47
CLEAR CHANNEL
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CLEAR CLEAR
CHANNEL UNIVERSAL PRO FORMA MORE PRO FORMA CHANNEL
HISTORICAL HISTORICAL ADJUSTMENT(1) HISTORICAL ADJUSTMENT(2) PRO FORMA
---------- ---------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenue......................... $1,350,940 $55,292 $ -- $144,674 $ -- $1,550,906
Operating expenses.................. 767,265 30,826 -- 110,827 -- 908,918
Depreciation and amortization....... 304,972 15,517 7,720 15,699 11,565 355,473
Noncash compensation expense........ -- 106 (106) 3,476 (3,476) --
Corporate expenses.................. 37,825 1,414 -- 5,711 -- 44,950
-------- ------- ------- -------- -------- ----------
Operating income (loss)............. 240,878 7,429 (7,614) 8,961 (8,089) 241,565
Interest expense.................... 135,766 13,159 -- 3,715 22,352 174,992
Other income (expense) -- net....... 12,810 (23) -- (9,576) -- 3,211
-------- ------- ------- -------- -------- ----------
Income (loss) before income taxes... 117,922 (5,753) (7,614) (4,330) (30,441) 69,784
Income tax (expense) benefit........ (72,353) -- -- (3,301) 6,728 (68,926)
-------- ------- ------- -------- -------- ----------
Income (loss) before equity in
earnings of nonconsolidated
affiliates........................ 45,569 (5,753) (7,614) (7,631) (23,713) 858
Equity in earnings (loss) of non-
consolidated affiliates........... 8,462 -- -- (371) -- 8,091
-------- ------- ------- -------- -------- ----------
Net income (loss)................... $ 54,031 $(5,753) $(7,614) $ (8,002) $(23,713) $ 8,949
======== ======= ======= ======== ======== ==========
Net income per common share:
Basic............................. $ 0.23 $ 0.04
======== ==========
Diluted........................... $ 0.22 $ 0.04
======== ==========
</TABLE>
<PAGE> 48
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS, CONTINUED
UNIVERSAL MERGER
(1) The pro forma merger adjustments for the year ended December 31, 1998
are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
IN INCOME
------------------
<S> <C> <C>
(a) Increase in amortization expense resulting from the
additional goodwill created by the merger. ........... $(7,720)
(b) Decrease in noncash compensation to reverse the effect
of Financial Accounting Standards Board Statement
No. 123 ("FAS 123") from the statement of operations as the
Company elected to follow Accounting Principles Board
Opinion Number 25("APB 25") for earnings presentation and
implemented FAS 123 for footnote disclosure only. .... 106
</TABLE>
MORE ACQUISITION
(2) More is headquartered in London. Accordingly, More's financial
statements are reported in British Pounds. The statement of operations
was translated into US Dollars using the average exchange rate for the
period and the balance sheet was translated into US Dollars using the
exchange rate at the end of the period. The pro forma adjustments for
the year ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
IN INCOME
------------------
<S> <C> <C>
(c) Increase in amortization expense resulting from the
additional goodwill created by the acquisition. ...... $(11,565)
(d) Decrease in noncash compensation to reverse the effect
of FAS 123 from the statement of operations as Clear
Channel elected to follow APB 25 for earnings
presentation and implemented FAS 123 for footnote
disclosure only. ..................................... 3,476
(e) Increase in interest expense due to financing the
acquisition price of More at Clear Channel's average
interest rate of 5.78% for 1998. ..................... (22,352)
(f) The tax effect of adjustment (d) at the 1998 UK
statutory rate of 31.5% offset by the tax benefit of
adjustment (e) at Clear Channel's federal U.S. tax
rate in 1998 of 35%. ................................. 6,728
</TABLE>
<PAGE> 49
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
NATIONWIDE
SIX MONTHS NATIONWIDE ACQUISITION
JACOR ENDED PRO FORMA PRO FORMA JACOR
HISTORICAL JUNE 30, 1998 ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue................ $754,468 $50,171 $ -- $ 8,641(e) $813,280
Broadcast operating
expenses................. 497,861 39,623 (738)(a) 2,548(e)(g) 539,294
Depreciation and
amortization............. 120,392 5,044 299(a) 4,565(b) 130,300
Corporate general and
administrative
expenses................. 19,684 1,406 -- --(g) 21,090
-------- ------- ----- -------- --------
Operating income (loss).... 116,531 4,098 439 1,528 122,596
Interest expense, net...... 107,295 (452) -- 14,954(c) 121,797
Gain on sale of radio
stations................. 10,896 -- -- -- 10,896
Other income (expense),
net...................... 8,910 (4) -- -- 8,906
-------- ------- ----- -------- --------
Income (loss) before income
taxes and extraordinary
items.................... 29,042 4,546 439 (13,426) 20,601
Income tax (expense)
credit................... (28,100) (1,546) -- 5,371(d) (24,275)
-------- ------- ----- -------- --------
Income (loss) before
extraordinary items...... $ 942 $ 3,000 $ 439 $ (8,055) $ (3,674)
======== ======= ===== ======== ========
Income (loss) per common
share:
Basic.................... $ 0.02 $ (0.08)(f)
======== ========
Diluted.................. $ 0.02 $ (0.08)(f)
======== ========
</TABLE>
<PAGE> 50
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS)
(a) The adjustments for the six months ended June 30, 1998 represent the
elimination of time brokerage agreement fees and additional depreciation
and amortization expenses resulting from the allocation of Nationwide's
purchase price of KXGL in San Diego.
(b) The adjustment reflects the additional depreciation and amortization
expense resulting from the allocation of Jacor's purchase price to the
assets acquired including an increase in property and equipment and
identifiable intangible assets to their estimated fair market values.
(c) The adjustment reflects additional interest expense related to additional
borrowings under Jacor's credit facility, its 8% Notes and its 4 3/4%
Liquid Yield Option Notes offering completed during February of 1998 to
finance, in part, the acquisition of Nationwide.
(d) To provide for the tax effect of pro forma adjustments using an assumed
rate of 40%.
(e) Additional revenues and expenses related to Nationwide Stations from July
1, 1998 to the date of acquisition consummation, net of elimination of the
results for the divestiture of two San Diego stations.
(f) The pro forma weighted average shares outstanding includes all shares
outstanding as of December 31, 1998. The pro forma weighted averages
shares outstanding of Jacor do not reflect any outstanding options and
warrants or the assumed conversion of the LYON's as they are antidilutive.
(g) The Company has experienced and anticipates continuing to experience
significant expense savings, which are not reflected in the pro forma
statements of operations, resulting from the elimination of redundant
broadcast operating expenses arising from the operation of multiple
stations in broadcast areas, changes in benefit plan and compensation
structures to conform with Jacor's and the elimination of Nationwide's
corporate office function.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
ESTIMATED EXPENSE SAVINGS
Corporate general and administrative..... $1,406
Benefit plan expenses.................... 1,741
Commissions.............................. 413
Promotion and programming................ 1,527
Personnel reductions..................... 1,955
Other.................................... 732
------
TOTAL.......................... 7,774
Income Taxes............................. 3,110
------
TOTAL, net of taxes............ $4,664
======
</TABLE>
(c) Index to Exhibits
23 Consent of PricewaterhouseCoopers LLP. (filed herewith)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Clear Channel Communications, Inc.
Date April 12, 1999 By /s/ HERBERT W. HILL, JR.
Herbert W. Hill, Jr.
Senior Vice President/
Chief Accounting Officer
Index to Exhibits
23 Consent of PricewaterhouseCoopers LLP. (filed herewith)
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Clear Channel Communications, Inc. on Form S-3 (File No. 333-51957), on Form S-4
(File No. 333-57987 and 333-72839) and on Forms S-8 ( File No.'s 33-64463,
333-29717, and 333-61883) of our report dated February 12, 1999 on our audits of
the consolidated financial statements of Jacor Communications, Inc. and
subsidiaries as of December 31, 1998 and 1997 and for each of the three years in
the period ended December 31, 1998, which report is included in Clear Channel
Communications, Inc.'s Current Report on Form 8-K/A dated April 12, 1999.
PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
Cincinnati, Ohio
April 9, 1999
