<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 20, 1996
------------------
Evergreen Media Corporation
-----------------------------------
(Exact Name of Registrant as
Specified in Charter)
Delaware 75-2247099
--------------- -------------------
(State or Other (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
----------------------------------
(Address of Principal
Executive Offices)
(214) 869-9020
--------------------------
(Registrant's telephone
number, including area code)
<PAGE>
ITEM 5. Other Events.
-------------
Financial Information for Century Chicago Broadcasting, L.P.
------------------------------------------------------------
On July 15, 1996, Evergreen Media Corporation (the "Company") entered
into an agreement to purchase from Century Chicago Broadcasting L.P. the assets
used in the operation of WPNT-FM, 100.3 MHz, Chicago, Illinois, for a purchase
price of $73.75 million (including $5.0 million already paid by the Company for
an option to purchase the station). The Company hereby provides the following
financial information, not otherwise called for by this form but of importance
to securityholders, in regard to Century Chicago Broadcasting, L.P.: (a) Report
of Independent Accountants, included on page A-1 of this report and incorporated
by reference herein; (b) Balance Sheets of Century Chicago Broadcasting, L.P. at
December 31, 1995 and at June 30, 1996 (unaudited), included on page A-2 of this
report and incorporated by reference herein; (c) Statements of Operations and
Partners' Deficit of Century Chicago Broadcasting, L.P. for (i) the year ended
December 31, 1995 and (ii) the six months ended June 30, 1995 and 1996
(unaudited), included on page A-3 of this report and incorporated by reference
herein; (d) Statements of Cash Flows Century Chicago Broadcasting, L.P. for (i)
the year ended December 31, 1995 and of (ii) the six months ended June 30, 1995
and 1996 (unaudited), included on page A-4 of this report and incorporated by
reference herein; and (e) Notes to Financial Statements included on pages A-5 to
A-10 of this report and incorporated by reference herein.
Financial Information for WJLB/WMXD, Detroit
--------------------------------------------
On August 12, 1996, the Company entered into an agreement to purchase
from Secret Communications L.P. the assets used in the operation of WJLB-FM,
97.9 MHz and WMXD-FM, 92.3 MHz, Detroit, Michigan, for a purchase price of
$168.0 million. The Company hereby provides the following financial information,
not otherwise called for by this form but of importance to securityholders, in
regard to WJLB/WMXD, Detroit: (a) Independent Auditors' Report, included on page
B-1 of this report and incorporated by reference herein; (b) Combined Balance
Sheets of WJLB/WMXD, Detroit at June 30, 1995 and at June 30, 1996, included on
page B-2 of this report and incorporated by reference herein; (c) Combined
Statements of Operations of WJLB/WMXD, Detroit for (i) the year ended June 30,
1996 and (ii) the eleven months ended June 30, 1995, included on page B-3 of
this report and incorporated by reference herein; (d) Combined Statements of
Cash Flows for (i) the year ended June 30, 1996 and (ii) the eleven months ended
June 30, 1995, included on page B-4 of this report and incorporated by
reference herein; and (e) Notes to Financial Statements included on pages B-5 to
B-9 of this report and incorporated by reference herein.
Financial Information for KYLD-FM (A Division of
------------------------------------------------
Crescent Communications, L.P.)
------------------------------
On August 14, 1996, the Company acquired the assets used in the
operation of KYLD-FM, 107.7 MHz, San Francisco, California, from Crescent
Communications, L.P. for a purchase price of $44.0 million (the "KYLD-FM
Acquisition"). The Company hereby provides the following financial information,
not otherwise called for by this form but of importance to securityholders, in
regard to KYLD-FM (A Division of Crescent Communications, L.P.): (a) Independent
Auditors' Report, included on page C-1 of this report and incorporated by
reference herein; (b) Balance Sheet of KYLD-FM (A Division of Crescent
Communications, L.P.) at December 31, 1995 and at June 30, 1996 (unaudited),
included on page C-2 of this report and incorporated by reference herein; (c)
Statements of Operations and Partners' Deficiency of KYLD-FM (A Division of
Crescent Communications, L.P.) for (i) the year ended December 31, 1995 and (ii)
the six months ended June 30, 1995 and 1996 (unaudited), included on page C-3
of this report and incorporated by reference herein; (d) Statements of Cash
Flows for (i) the year ended December 31, 1995 and (ii) the six months ended
June 30, 1995 and 1996 (unaudited), included on page C-4 of this report and
incorporated by reference herein; and (e) Notes to Financial Statements included
on pages C-5 to C-10 of this report and incorporated by reference herein.
Pending Transactions
--------------------
. On June 13, 1996, the Company entered an asset exchange agreement with
Greater Media under which the Company will exchange WKLB-FM for WGAY-FM.
After also initially agreeing to purchase from Greater Media WWRC-AM in
Washington, D.C. for $22.5 million in cash, the Company has subsequently
agreed with Greater Media to exchange WQRS-FM in Detroit (which, as discussed
below, the Company has agreed to acquire from Secret Communications, L.P. for
$32.0 million in cash) for WWRC-AM and $9.5 million in cash. The Company has
been operating WGAY-FM and WWRC-AM under a time brokerage agreement with
Greater Media, and Greater Media has been operating WKLB-FM under a time
brokerage agreement with the Company, in each case since June 17, 1996. The
Company expects that the exchange of WKLB-FM for WGAY-FM will be completed in
the fourth quarter of 1996 and that the exchange of WQRS-FM for WWRC-AM will
be completed in the first quarter of 1997. The Company retains the right to
acquire WWRC-AM from Greater Media under the original contract irrespective
of whether the acquisition of WQRS-FM from Secret Communications, L.P. is
consummated.
. On June 27, 1996, the Company entered into an agreement with an affiliate of
The Rivers Group to acquire WEDR-FM in Miami for $65.0 million in cash
(including $3.0 million paid by the Company in escrow). The Company expects
that this transaction, which provides the Company with a significant FM
presence in the nation's twelfth largest radio market, will be completed in
the fourth quarter of 1996.
. On July 15, 1996, the Company entered into an agreement with Century Chicago
Broadcasting, L.P. to acquire WPNT-FM in Chicago for $73.8 million in cash
(including $5.0 million already paid by the Company for an option to purchase
the station and $0.5 million paid by the Company in escrow). Consummation of
the acquisition of WPNT-FM would result in the Company's ownership of six FM
radio stations in the Chicago market, or one station in excess of the maximum
number of FM stations under common ownership in a market of Chicago's size
established by the 1996 Act. Accordingly, under the terms of the contract to
purchase WPNT-FM, the Company has agreed to dispose of one FM station in
Chicago on or prior to March 15, 1997. The contract also requires the Company
to file an application with the Federal Communications Commission (the "FCC")
seeking approval of the disposition of one of the Company's Chicago FM
stations on or prior to September 30, 1996. The acquisition of WPNT-FM is
expected to be completed in the first quarter of 1997.
. On August 12, 1996, the Company entered into an agreement with Secret
Communications, L.P. ("Secret") to acquire WMXD-FM and WJLB-FM in Detroit for
$168.0 million in cash and WFLN-FM in Philadelphia for $37.8 million in cash.
The Company also agreed with Secret that the Company would operate the
stations to be acquired from Secret under time brokerage agreements effective
September 1, 1996. Under the agreement, the Company has the right to
consummate the acquisition of WFLN-FM prior to consummating the acquisition
of WMXD-FM and WJLB-FM. Finally, on August 12, 1996, the Company entered into
a separate agreement with Secret to purchase WQRS-FM in Detroit from Secret
for $32.0 million in cash, which station the Company, as discussed above,
will swap at closing to Greater Media for WWRC-AM in Washington and $9.5
million in cash. These transactions are expected to be completed in the first
quarter of 1997.
. On August 12, 1996, the Company entered into an agreement with Chancellor
Broadcasting Company ("Chancellor") to acquire WWWW-FM and WDFN-AM in Detroit
for $30.0 million in cash (including $1.5 million paid in escrow by the
Company). Prior to entering into this agreement, the Company had provided
certain sales and promotional functions to these Detroit stations and, since
April 1, 1996, has operated the stations under a time brokerage agreement.
The purchase agreement replaced a put and call arrangement regarding the
stations that had been in place between the Company and Chancellor since
January 9, 1996. The acquisition of WWWW-FM and WDFN-AM is expected to be
completed in the fourth quarter of 1996. Consummation of the acquisitions of
WWWW-FM from Chancellor and of WMXD-FM and WJLB-FM from Secret will result in
the Company's owning a superduopoly of five FM stations in the Detroit
market.
. On September 4, 1996, the Company entered into a binding letter of intent
with EZ Communications, Inc. ("EZ") to swap five of the Company's six
stations in the Charlotte market (WPEG-FM, WBAV-AM, WBAV-FM, WRFX-FM and
WFNZ-AM), which were acquired as part of the Pyramid Acquisition and the BPI
Acquisition, for WIOQ-FM and WUSL-FM in Philadelphia. As part of this
transaction, the Company has also agreed to sell to EZ its sixth radio
station in Charlotte, WNKS-FM, for $10.0 million in cash (the exchange and
the sale being referred to herein as the "Philadelphia/Charlotte
Transaction"). The consummation of the sale of WNKS-FM is contingent on
consummation of the exchange of the Company's five other Charlotte stations
for EZ's two Philadelphia stations, but consummation of the exchange is not
contingent on consummation of the sale. The consummation of the
Philadelphia/Charlotte Transaction would result in EZ's ownership of stations
in excess of the maximum number of stations under common ownership in a
market of Charlotte's size established by the 1996 Act. Accordingly, EZ has
agreed with a third party to dispose of certain of its Charlotte FM stations
in order to consummate the exchange with the Company. Following completion of
definitive agreements relating to the Philadelphia/Charlotte Transaction and
the expiration of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), it is
expected that the Company will begin operating WIOQ-FM and WUSL-FM under a
time brokerage agreement and that the Company's Charlotte stations will be
operated by EZ or a third party under time brokerage agreements. The
Philadelphia/Charlotte Transaction is expected to be completed in the first
quarter of 1997.
. On September 19, 1996, the Company entered into an agreement with The Brown
Organization to acquire KKSF-FM, KDFC-FM and KDFC-AM in San Francisco for
$115.0 million in cash (including $10.0 million paid by the Company in escrow)
(the "San Francisco Transaction"). Following expiration of the applicable
waiting period under the HSR Act, the Company expects to begin operating the
two FM radio stations being acquired in the San Francisco Transaction under a
time brokerage agreement. KDFC-AM is currently operated by a third party under
a time brokerage agreement, and the Company expects this arrangement to
continue after consummation of the San Francisco Transaction. The San
Francisco Transaction is expected to be completed in the first quarter of
1997. Upon consummation of the San Francisco Transaction, the Company will own
a superduopoly of five FM stations in the San Francisco market.
. On September 19, 1996, the Company entered into an agreement with Beasley FM
Acquisition Corp. and certain of its affiliates to acquire WDAS-FM and WDAS-
AM in Philadelphia for $103.0 million in cash (the "WDAS-AM/FM Transaction").
In connection with the WDAS-AM/FM Transaction, the Company issued a $5.0
million letter of credit for the benefit of the seller. Consummation of the
WDAS-AM/FM Transaction, the Philadelphia/Charlotte Transaction and the
acquisition of WFLN-FM from Secret would result in the Company's ownership of
six FM radio stations in the Philadelphia market, or one station in excess of
the maximum number of FM stations under common ownership in a market of
Philadelphia's size established by the 1996 Act. Accordingly, in order to
comply with the FCC's multiple ownership rules, the Company will dispose of
one Philadelphia FM station or will transfer one Philadelphia FM station to a
trust through which the Company would retain the economic interest in the
station but no control, pending sale of the station by the trust. The
contract relating to the WDAS-AM/FM Transaction requires that such
disposition or transfer occur by May 1, 1997. The WDAS-AM/FM Transaction is
expected to be completed in the first quarter of 1997. Upon consummation of
the WDAS-AM/FM Transaction, the Philadelphia/Charlotte Transaction, the
acquisition of WFLN-FM from Secret and the disposition of one Philadelphia FM
station as described above, the Company will own a superduopoly of five FM
stations in the Philadelphia market.
Consummation of each of the above transactions is subject to various
conditions, including approval from the FCC and review under the HSR Act. To
date, only FCC approval of the pending acquisition of WEDR-FM in Miami has been
obtained, and this approval has not become a "final" order. The Company believes
that FCC approval of the other transactions will be forthcoming in the ordinary
course, but there can be no assurance that this will be the case.
Unaudited Pro Forma Condensed Combined Financial Information
------------------------------------------------------------
In addition, the Company hereby provides the following pro forma
financial information, not otherwise called for by this form but of importance
to securityholders, in regard to (i) the acquisition (the "BPI Acquisition") of
Broadcasting Partners, Inc. ("BPI") on May 12, 1995, (ii) the acquisition (the
"Pyramid Aquisition") of Pyramid Communications, Inc. ("Pyramid")on January 17,
1996, (iii) the acquisition of KYLD-FM and the dispositions of WHTT-FM/AM and
WSJZ-FM in Buffalo ("the Buffalo Dispositions") (the transactions described in
clause (iii) are referred to collectively as the "Other Completed Transactions")
and (iv) the pending acquisitions of WWWW-FM/WDFN-AM in Detroit, WWRC-AM in
Washington, D.C., WEDR-FM in Miami, WPNT-FM in Chicago, WJLB-FM/WMXD-FM in
Detroit, WFLN-FM in Philadelphia, WUSL-FM/WIOQ-FM in Philadelphia, WDAS-FM/AM in
Philadelphia and KKSF-FM and KDFC-FM/AM in San Francisco and the pending
dispositions of WPEG-FM, WBAV-FM/AM, WRFX-FM/AM and WNKS-FM in Charlotte (the
transactions described in clause (iv) are collectively referred to as the
"Pending Transactions") and reflect (a) the combination of consolidated
historical financial data of the Company, BPI, Pyramid, KYLD-FM and the stations
to be acquired in the Pending Transactions and (b) elimination of the
consolidated historical data of the stations sold in the Buffalo Dispositions
and of the Charlotte stations being swapped or sold to EZ Communications, Inc.
("EZ") in the Philadelphia/Charlotte Transaction.
The Company is actively engaged in negotiations with the lenders party
to the Company's existing $625.0 million senior credit facility (the "Senior
Credit Facility") regarding the establishment of a new, expanded credit facility
(the "Financing Transaction") that would (i) replace the Senior Credit Facility,
(ii) provide the Company with as much as $1.2 billion in total borrowing
capacity and (iii) fund the financing requirements of the Pending Transactions
as well as other potential acquisitions. In the event the Financing Transaction
is not consummated, the Company will need to consider sales of non-core assets
or pursue other sources of debt or equity capital in order to consummate the
Pending Transactions, and the Company may pursue these possible sources in any
event. There can be no assurance that the Company will be successful in
establishing an expanded credit facility, or that alternative sources of funding
will be available on acceptable terms.
The unaudited pro forma condensed combined financial statements are
presented using the purchase method of accounting for all acquisitions including
the BPI Acquisition, the Pyramid Acquisition, the KYLD-FM Acquisition and the
Pending Transactions. The unaudited pro forma condensed combined balance sheet
data at June 30, 1996 present adjustments for the following transactions as if
each had occurred at June 30, 1996: (i) the Other Completed Transactions, (ii)
the Pending Transactions, (iii) the Financing Transaction and (iv) the
anticipated sale of 8,000,000 shares of the Company's Class A Common Stock (the
"Offering") and the application of estimated net proceeds therefrom. The
unaudited pro forma condensed combined statement of operations data for the
twelve months ended December 31, 1995 and the six months ended June 30, 1996
present adjustments for the following transactions as if each had occurred on
January 1, 1995: (i) the BPI Acquisition, (ii) the sale on July 25, 1995 by the
Company and certain warrant holders of shares of Class A Common Stock in a
public offering that resulted in net proceeds of $132.7 million to the Company
(the "1995 Offering"), (iii) the Pyramid Acquisition, (iv) the Other Completed
Transactions, (v) the Pending Transactions, (vi) the Financing Transaction and
(vii) the Offering and the application of estimated net proceeds therefrom.
In the opinion of Company management, all adjustments have been made
that are necessary to present fairly the pro forma data.
The unaudited pro forma condensed combined financial statements should
be read in conjunction with the respective financial statements and related
notes thereto of the Company, BPI, Pyramid (and its predecessor), WEDR, Inc.,
Century Chicago Broadcasting, L.P., WJLB/WMXD, Detroit, and KYLD-FM (A Division
of Crescent Communications, L.P.), all of which are either included in this
report or in the Company's other periodic reports filed pursuant to the Exchange
Act of 1934, as amended. The unaudited pro forma condensed combined financial
statements are presented for illustrative purposes only and are not necessarily
indicative of the results of operations or financial position that would have
been acheived had the transactions reflected therein been consumated as of the
dates indicated, or of the results of operations or financial position for any
future dates or periods.
The unaudited pro forma condensed combined financial statements do
not reflect the dispositions of one FM station in Chicago and one FM station in
Philadelphia that the Company is required to effect in order to comply with the
FCC's multiple ownership rules.
Concurrently with the filing of this Form 8-K, the Company is filing
with the Commission a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the registration of the shares to be sold in the Offering.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
-------------------------------------------------------------------
7(a) Financial Statements of Business to Be Acquired
-----------------------------------------------
The following information called for by Item 7(a) is included on pages
A-1 through A-10 of this report and is incorporated herein by
reference:
(1) Report of Independent Accountants;
(2) Balance Sheets of Century Chicago Broadcasting, L.P. at December
31, 1995 and at June 30, 1996 (unaudited);
(3) Statements of Operations and Partners' Deficit of Century Chicago
Broadcasting, L.P. for (i) the year ended December 31, 1995 and
(ii) the six months ended June 30, 1995 and 1996 (unaudited); and
(4) Statements of Cash Flows of Century Chicago Broadcasting L.P. for
(i) the year ended December 31, 1995 and (ii) the six months
ended June 30, 1995 and 1996 (unaudited);
(5) Notes to Financial Statements.
7(a) Financial Statements of Business to Be Acquired
-----------------------------------------------
The following information called for by Item 7(a) is included on pages
B-1 through B-9 of this report and is incorporated herein by
reference:
(1) Report of Independent Public Accountants;
(2) Balance Sheets of WJLB/WMXD, Detroit at June 30, 1996 and at
June 30, 1995;
(3) Statements of Earnings and Retained Earnings of WJLB/WMXD,
Detroit for (i) the year ended June 30, 1996 and (ii) the eleven
months ended June 30, 1995; and
(4) Statements of Cash Flows of WJLB/WMXD, Detroit for (i) the year
ended June 30, 1996 and (ii) the eleven months ended June 30,
1995;
(5) Notes to Financial Statements.
7(a) Financial Statements of Business to Be Acquired
-----------------------------------------------
The following information called for by Item 7(a) is included on pages
C-1 through C-10 of this report and is incorporated herein by
reference:
(1) Independent Auditors' Report;
(2) Balance Sheets of KYLD-FM (A Division of Crescent Communications,
L.P.) at December 31, 1995 and at June 30, 1996 (unaudited);
(3) Statements of Operations and Partners' Deficiency of KYLD-FM
(A Division of Crescent Communications, L.P.) for (i) the year
ended December 31, 1995 and (ii) the six months ended June 30,
1995 and 1996 (unaudited); and
(4) Statements of Cash Flows of KYLD-FM (A Division of Crescent
Communications, L.P.) for (i) the year ended December 31, 1995
and (ii) the six months ended June 30, 1995 and 1996 (unaudited);
(5) Notes to Financial Statements.
7(c) Exhibits
--------
**(23.1) Consent of Price Waterhouse LLP, independent accountants.
**(23.2) Consent of Arthur Andersen LLP, independent accountants.
**(23.3) Consent of Miller, Kaplan, Arase & Co., independent
accountants.
**(99.2) Unaudited Pro Forma Condensed Combined Financial Statements
as of June 30, 1996 and December 31, 1995.
________________________________
** 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.
Evergreen Media Corporation
By: /s/ Matthew E. Devine
------------------------------
Matthew E. Devine
Chief Financial Officer
Date: September 20, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Partners of Century Chicago Broadcasting, L.P.
In our opinion, the accompanying balance sheet and the related statements of
operations and partners' deficit and of cash flows present fairly, in all
material respects, the financial position of Century Chicago Broadcasting, L.P.
at December 31, 1995, and the results of its operations and its cash flows for
the year then ended, 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 audit. We conducted our audit 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 audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
August 22, 1996
A-1
<PAGE>
CENTURY CHICAGO BROADCASTING, L.P.
----------------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
June 30, 1996 December 31,
(unaudited) 1995
------------- -------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 4,555,838 $ 33,481
Accounts receivable, net of allowance
for doubtful accounts of $230,000
and $229,000, respectively 2,028,148 2,155,587
Prepaid expenses and other assets 96,353 165,934
------------ ------------
Total current assets 6,680,339 2,355,002
------------ ------------
Property and equipment:
Technical equipment 1,183,900 1,183,479
Office furniture and fixtures 363,190 338,791
Leasehold improvements 213,342 212,814
------------ ------------
1,760,432 1,735,084
Less - Accumulated depreciation (1,015,431) (926,931)
- --------------------------------- ------------ ------------
Total property and equipment 745,001 808,153
------------ ------------
Intangible assets, net 1,970,658 1,994,538
------------ ------------
Deferred charges, net 508,227 509,520
------------ ------------
Total assets $ 9,904,225 $ 5,667,213
============ ============
LIABILITIES AND PARTNERS' DEFICIT
- ----------------------------------
Current liabilities:
Promissory note $ 5,681,502 $ 8,890,781
Accounts payable and accrued expenses 2,120,389 2,170,030
Due to Century Broadcasting 13,527,789 10,034,589
Deferred option payment 5,000,000 -
------------ ------------
Total current liabilities 26,329,680 21,095,400
------------ ------------
Commitments and contingencies ------------ ------------
Partners' deficit, per accompanying statement (16,425,455) (15,428,187)
------------ ------------
Total liabilities and partners' deficit $ 9,904,225 $ 5,667,213
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-2
<PAGE>
CENTURY CHICAGO BROADCASTING, L.P.
----------------------------------
STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIT
----------------------------------------------
<TABLE>
<CAPTION>
(unaudited)
--------------
For the six
months ended For the
June 30, year ended
-------------- December 31,
1996 1995 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Gross revenues $ 3,623,363 $ 4,027,035 $ 8,806,066
Less - Agency commissions (501,106) (568,412) (1,206,219)
---- ------------- ------------- -------------
Net revenues 3,122,257 3,458,623 7,599,847
------------- ------------- -------------
Operating expenses:
Programming 676,142 858,702 1,727,625
Selling 1,115,270 1,210,003 2,393,959
Promotion - Television advertising 775,154 556,528 860,535
Promotion - Other 111,147 207,602 423,224
Technical 23,484 21,999 48,980
General and administrative 578,898 612,552 1,072,523
Corporate overhead allocation 90,000 90,000 180,000
Depreciation and amortization 112,380 107,880 216,913
------------- ------------- -------------
Total operating expenses 3,482,475 3,665,266 6,923,759
------------- ------------- -------------
Income (loss) from operations (360,218) (206,643) 676,088
Interest expense (637,050) (565,307) (1,176,628)
------------- ------------- -------------
Net loss (997,268) (771,950) (500,540)
Partners' deficit:
Beginning of period (15,428,187) (14,927,647) (14,927,647)
------------- ------------- -------------
End of period ($16,425,455) ($15,699,597) ($15,428,187)
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-3
<PAGE>
CENTURY CHICAGO BROADCASTING, L.P.
----------------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
(Unaudited)
-----------
For the six
months ended For the
June 30, year ended
-------------------------- December 31,
1996 1995 1995
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($ 997,268) ($ 771,950) ($ 500,540)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization expense 112,380 107,880 216,913
Corporate overhead allocation 90,000 90,000 180,000
Amortization of deferred financing costs 78,000 36,780 103,595
Changes in assets and liabilities:
Accounts receivable, prepaid expenses
and other current assets 197,020 (518,766) (796,320)
Accounts payable and accrued expenses (49,641) 880,766 1,215,276
----------- ----------- -----------
Net cash provided by (used in)
operating activities (569,509) (175,290) 418,924
----------- ----------- -----------
Cash flows from investing activities:
Additions to property and equipment (25,348) (33,647) (88,706)
Deferred option payment 5,000,000 - -
----------- ----------- -----------
Net cash provided by (used in)
investing activities 4,974,652 (33,647) (88,706)
----------- ----------- -----------
Cash flows from financing activities:
Repayment of promissory note (4,500,000) - -
Deferred charges (76,707) (289,843) (302,435)
Increase (decrease) in due to Century
Broadcasting Corporation 3,403,200 (2,060,000) (3,113,133)
Proceeds from issuance of promissory note 1,290,721 2,561,407 3,095,348
----------- ----------- -----------
Net cash provided by (used in)
financing activities 117,214 211,564 (320,220)
----------- ----------- -----------
Net change in cash and cash equivalents 4,522,357 2,627 9,998
Cash and cash equivalents:
Beginning of period 33,481 23,483 23,483
----------- ----------- -----------
End of period $ 4,555,838 $ 26,110 $ 33,481
=========== =========== ===========
Cash paid for interest $ 100,000 $ 45,000 $ 45,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-4
<PAGE>
CENTURY CHICAGO BROADCASTING, L.P.
----------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - ORGANIZATION:
- ---------------------
Century Chicago Broadcasting, L.P. (CCBLP) is a limited partnership and the
licensee of Chicago radio station WPNT-FM (the Station). The general partner of
CCBLP is Century Broadcasting Corporation (Century) and the two limited partners
of CCBLP are directors and controlling stockholders of Century.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------------------
Interim financial information (unaudited)
- -----------------------------------------
The interim financial data as of June 30, 1996 and for the six months ended June
30, 1996 and 1995 is unaudited. The accompanying unaudited financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments necessary for a fair presentation
of results of the interim periods have been made and all such adjustments were
of a normal and recurring nature. The results of operations and cash flows for
the six months ended June 30, 1996 are not necessarily indicative of the results
that can be expected for the entire fiscal year ending December 31, 1996.
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 date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and cash equivalents
- -------------------------
CCBLP considers all highly liquid investments with an original maturity of 90
days or less to be cash equivalents.
Revenue recognition
- -------------------
Revenues for radio time sales, which are generated primarily from clients in the
greater Chicago metropolitan area, are recognized when commercials are
broadcast. Accounts receivable are unsecured.
A-5
<PAGE>
Property and equipment
- ----------------------
Property and equipment are stated at cost. Maintenance and repairs are charged
against operations as incurred. Improvements and renewals are capitalized.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, generally ten years.
Intangible assets
- -----------------
Intangible assets represent goodwill and a broadcasting license. Intangible
assets related to acquisitions since 1971 are being amortized on a straight-line
basis over 40 years. Intangible assets of $347,137 related to the pre-1971
license acquisition are not being amortized as CCBLP believes there has been no
diminution of value.
CCBLP periodically evaluates the carrying value of intangible assets in relation
to the future undiscounted cash flows of the Station. In March 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (SFAS No. 121). This Statement requires
that long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 requires an impairment loss to be recognized if the
sum of expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset. Otherwise, an impairment loss is
not recognized. The adoption of SFAS No. 121, required for financial statements
for fiscal years beginning after December 15, 1995, did not have any impact on
CCBLP's financial statements.
Deferred option payment
- -----------------------
On June 27, 1996, CCBLP granted Evergreen Media Corporation of Los Angeles
(Evergreen) an option to purchase the Station. Under the terms of the option
agreement, Evergreen paid $5,000,000 to CCBLP in exchange for CCBLP's agreement
to sell the Station to Evergreen under the terms of a July 1, 1996 letter of
intent. The option price, which is non-refundable, has been recorded as a
deferred credit in the June 30, 1996 balance sheet. See Note 8.
Deferred financing costs
- ------------------------
Deferred financing costs are amortized over the term of the related indebtedness
by the interest method. Such amortization totaled $103,595 in 1995 and is
included in interest expense in the accompanying statement of operations. The
original cost of deferred financing costs being amortized was $636,237 at
December 31, 1995.
Income taxes
- ------------
No provision for income taxes has been provided in the accompanying financial
statements because the tax effects of CCBLP's operations accrue directly to its
partners.
A-6
<PAGE>
Fair value of financial instruments
- -----------------------------------
CCBLP's financial instruments include cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses and a promissory note.
Management believes that the fair values of these financial instruments
approximate their respective carrying values.
NOTE 3 - RELATED PARTY TRANSACTIONS:
- -----------------------------------
Cash provided by or required for CCBLP's operations is transferred between CCBLP
and Century on a periodic basis. The amount recorded as Due to Century
Broadcasting Corporation is non-interest bearing and is not subject to stated
repayment terms. Accordingly, the financial statements do not reflect any
interest costs on the Due to Century Broadcasting Corporation balance. The
average Due to Century Broadcasting balance was $11,407,000 during the year
ended December 31, 1995.
Century provides certain managerial, treasury, accounting, tax and legal
services to CCBLP. An allocation of the estimated cost of these services has
been reflected in the accompanying statements of operations based on the
estimated time spent by Century personnel providing such services. In the
opinion of management, the costs allocated to CCBLP for services provided by
Century are reasonable.
NOTE 4 - INTANGIBLE ASSETS:
- --------------------------
Intangible assets at December 31, 1995 consist of the following:
<TABLE>
<S> <C>
Broadcasting license $2,035,081
Goodwill 222,137
----------
2,257,218
Less - Accumulated amortization (262,680)
---- ----------
$1,994,538
==========
</TABLE>
Amortization expense related to these intangibles was $47,760 for the year ended
December 31, 1995.
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
- ----------------------------------------------
Accounts payable and accrued expenses at December 31, 1995 consist of the
following:
<TABLE>
<S> <C>
Accounts payable $1,250,909
Accrued interest and loan fees 446,272
Accrued employee compensation 91,191
Other accrued expenses 381,658
----------
$2,170,030
==========
</TABLE>
A-7
<PAGE>
NOTE 6 - PROMISSORY NOTE:
- ------------------------
On March 15, 1991, CCBLP entered into a Loan Agreement with a financial
institution. This Loan Agreement was amended and supplemented at various times
since its inception such that as of December 31, 1995, the CCBLP had outstanding
borrowings under the Loan Agreement of $8,890,781.
As of January 31, 1996, an amendment was executed to provide CCBLP the ability
to borrow an additional $1,000,000 ($845,000 for working capital purposes and
$155,000 for the payment of interest). Additionally, the amendment provided that
upon the consummation of Century's sale of its Denver radio stations CCBLP would
prepay $4,500,000 of the promissory note. The sale and prepayment were
completed in June 1996. Following the prepayment, the lender made an additional
$1,000,000 available to CCBLP to fund future debt service payments to the
lender.
Interest, payable quarterly, accrues at a Formula Rate which varies based upon
certain financial measures. Such Formula Rate generally ranges from the prime
lending rate (8.5% at December 31, 1995) plus 2% to the prime lending rate plus
3%. As of December 31, 1995, the Formula Rate in effect for CCBLP was 11.5%.
The lender assessed Loan Fees to the CCBLP in the aggregate amount of $600,000.
Of this amount, $270,000 was paid in April 1995, $30,000 was paid in January
1996 and the balance is due on January 1, 2000. See Note 2.
Principal payments on the promissory note are due in twelve consecutive,
quarterly installments beginning on April 1, 1997 with aggregate annual
principal payments of $450,000 in 1997, $750,000 in 1998, $950,000 in 1999 and
any remaining amounts (including principal, interest and the remainder of the
Loan Fees discussed above) due on January 1, 2000.
The Loan Agreement contains various restrictive covenants that, among other
things, require CCBLP, an affiliated limited partnership and Century to
individually (and on a consolidated basis with respect to Century) maintain
minimum levels of operating cash flow, limit distributions from CCBLP and/or an
affiliated limited partnership to their respective partners and place
restrictions on the assumption and payment of Century expenses by CCBLP or the
affiliated limited partnership.
A-8
<PAGE>
Upon notification from the lender, a prepayment equal to 50% of the adjusted
cash flow, as defined in the Loan Agreement, may be required provided that such
payment does not reduce cash on hand to a level below $1,000,000. The Loan
Agreement provides that a penalty be applied to any other prepayments. The
promissory note evidencing CCBLP's obligation to the lender is secured by
substantially all of the assets of CCBLP and Century (including, but not limited
to, its partnership interests in CCBLP and an affiliated limited partnership)
and is guaranteed by Century and one of CCBLP's limited partners. Additionally,
both of CCBLP's limited partners have pledged their respective interests in
CCBLP as well as an affiliated limited partnership.
As more fully discussed in Note 8, CCBLP has entered into an agreement to sell
the Station and intends to use a portion of the proceeds to prepay the
promissory note in full. Additionally, certain technical covenant violations
have not been waived and there is uncertainty as to whether CCBLP and Century
will be able to meet such covenants prospectively. As such, the amounts
outstanding under the promissory note have been classified as current
liabilities in the accompanying balance sheets.
In the event that the promissory note is not prepaid in conjunction with the
aforementioned sale of the Station, management believes that operating cash
flows together with funds obtained from the additional borrowings as well as
from the option payment discussed above will provide sufficient working capital
to fund CCBLP's current operations. Additionally, management believes that the
lender will continue to forbear and not require CCBLP to repay the obligations
under the promissory note in advance of the stated maturities. Furthermore,
management believes in the event that operating cash flows were not sufficient
to support the Station's current operations and the sale of the Station were not
to be completed that additional financing would be available either from its
current lender or from other sources.
NOTE 7 - COMMITMENTS:
- --------------------
CCBLP leases certain office space and equipment under various operating leases.
Rent expense included in the accompanying statement of operations for the year
ended December 31, 1995 in connection with these various operating leases
totaled $370,000. Future minimum rentals under noncancelable operating leases
in existence at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year Amount
- ---- ----------
<S> <C>
1996 $ 366,000
1997 361,000
1998 361,000
1999 331,000
2000 242,000
Thereafter 1,409,000
</TABLE>
A-9
<PAGE>
CCBLP has entered into certain noncancelable agreements for ratings and news
services which require aggregate payments of approximately $350,000 in 1996,
$356,000 in 1997, $360,000 in 1998 and $172,000 in 1999.
NOTE 8 - SUBSEQUENT EVENTS:
- --------------------------
On July 15, 1996, CCBLP entered into an Asset Purchase Agreement with Evergreen
Media Corporation of Chicago (Evergreen of Chicago) to sell substantially all of
the assets of the Station to Evergreen of Chicago for approximately $68,750,000
in cash, subject to certain closing adjustments. The sale is subject to Federal
Communications Commission (the FCC) approval and is expected to close in the
first quarter of 1997.
On July 30, 1996, an application was filed with the FCC seeking the renewal of
the Station's broadcasting license. Management expects the FCC to renew the
broadcasting license following the expiration of the public comment period on
November 1, 1996.
A-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of
Secret Communications Limited Partnership:
We have audited the accompanying combined balance sheets of WJLB/WMXD, DETROIT,
as further described in Note 1, as of June 30, 1996, and June 30, 1995, and the
related combined statements of operations and cash flows for the year ended June
30, 1996 and the eleven month period ended June 30, 1995. These financial
statements are the responsibility of the Station's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the accompanying combined financial statements referred to above
present fairly, in all material respects, the financial position of WJLB/WMXD,
DETROIT as of June 30, 1996, and June 30, 1995, and the results of their
operations and their cash flows for the year ended June 30, 1996 and the eleven
month period ended June 30, 1995, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
/s/ Arthur Andersen LLP
Chicago, Illinois,
September 10, 1996
B-1
<PAGE>
WJLB/WMXD, DETROIT
-------------------
COMBINED BALANCE SHEETS
-----------------------
AS OF JUNE 30, 1996 AND 1995
---------------------------
ASSETS
-------
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $216,325 $80,205
Accounts receivable (net of allowance for doubtful accounts
of $98,393 and $136,388 for 1996 and 1995, respectively) 4,208,411 3,727,981
Trade receivables 18,394 28,655
Prepaid expenses and other assets 25,924 77,010
-------------- -------------
Total current assets 4,469,054 3,913,851
-------------- -------------
PROPERTY AND EQUIPMENT, net (note 3) 1,101,707 1,197,358
INTANGIBLE ASSETS, net (note 4) 41,884,482 44,029,086
-------------- -------------
TOTAL ASSETS $47,455,243 $49,140,295
============== =============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $1,276,491 $1,311,202
Trade payables 1,875 -
Interest payable 118,964 203,041
Current maturities of long-term debt 2,003,100 -
-------------- -------------
Total current liabilities 3,400,430 1,514,243
-------------- -------------
LONG-TERM DEBT, less current maturities (note 5) 17,777,513 20,390,588
COMMITMENTS AND CONTINGENCIES (note 6)
PARTNERS' CAPITAL AND STATION EQUITY
Balance, beginning of period 27,235,464 -
Net amounts transferred to central office (10,753,934) (5,472,175)
Contributed capital 3,007,748 28,823,288
Net income for the period 6,788,022 3,884,351
-------------- -------------
Balance, end of period 26,277,300 27,235,464
-------------- -------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $47,455,243 $49,140,295
-------------- -------------
</TABLE>
The accompanying notes to financial statements are an integral part of
these balance sheets.
B-2
<PAGE>
WJLB/WMXD, DETROIT
------------------
COMBINED STATEMENTS OF OPERATIONS
---------------------------------
FOR THE YEAR ENDED JUNE 30, 1996
--------------------------------
AND FOR THE ELEVEN MONTHS ENDED JUNE 30, 1995
---------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
GROSS REVENUES $22,841,911 $17,767,185
Less: agency commissions 2,816,084 2,174,122
---------- ----------
Net revenues 20,025,827 15,593,063
---------- ----------
OPERATING EXPENSES:
Station operating expenses excluding
depreciation and amortization 8,518,201 7,223,003
Depreciation and amortization 2,405,907 2,182,087
Central office general and administrative (note 7) 627,300 574,304
---------- ---------
Operating expenses 11,551,408 9,979,394
---------- ---------
OPERATING INCOME 8,474,419 5,613,669
NONOPERATING EXPENSES:
Interest expense (note 5) 1,499,470 1,587,260
--------- ---------
Non operating expenses 1,499,470 1,587,260
--------- ---------
Income before taxes 6,974,949 4,026,409
Provision for state income taxes (note 2) 186,927 142,058
--------- ---------
Net income $6,788,022 $3,884,351
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
B-3
<PAGE>
WJLB/WMXD, DETROIT
------------------
COMBINED STATEMENTS OF CASH FLOWS
---------------------------------
FOR THE YEAR ENDED JUNE 30, 1996
--------------------------------
AND FOR THE ELEVEN MONTHS ENDED JUNE 30, 1995
---------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $6,788,022 $3,884,351
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,405,907 2,182,087
Changes in assets and liabilities:
(Increase) in receivables, net (470,169) (1,484,258)
Decrease (increase) in prepaid expenses and other assets 51,086 (66,171)
(Decrease) increase in payables and accrued expenses (32,836) 910,968
(Decrease) increase in interest payable (84,077) 203,041
---------- ----------
Net cash provided by operating activities 8,657,933 5,630,018
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of radio stations - (47,013,443)
Acquisition of working capital - (1,882,983)
Capital expenditures (165,652) (395,088)
---------- ----------
Net cash used in investing activities (165,652) (49,291,514)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in amounts transferred to central office (10,753,934) (5,472,175)
Net (payments) borrowings of long-term debt (609,975) 20,390,588
Capital contributions 3,007,748 28,823,288
---------- ----------
Net cash (used in) provided by financing activities (8,356,161) 43,741,701
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 136,120 80,205
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 80,205 -
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $216,325 $80,205
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
B-4
<PAGE>
WJLB/WMXD, DETROIT
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND BASIS OF PRESENTATION
WJLB-FM and WMXD-FM (the "Stations") are radio stations owned by Secret
Communications Limited Partnership ("Secret"). The Stations are licensed
to and serve Detroit, Michigan. The accompanying financial statements
include the accounts of the Stations after eliminating all significant
intercompany accounts and transactions.
Secret was formed in 1994 and on August 1, 1994, the general partners of
Secret contributed substantially all of the assets and debt of certain
radio stations to Secret. The Stations were included in this initial
contribution.
As further described in Note 9, Secret has entered into an agreement to
sell substantially all of the assets of the Stations to Evergreen Media
Corporation of Los Angeles ("Evergreen").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Cash Equivalents
----------------
Cash equivalents include overnight repurchase agreements backed by
United States securities.
(b) Trade Agreements
----------------
The Stations have entered into trade agreements which provide for the
exchange of advertising time for merchandise or services and are
recorded at the estimated fair market value of the goods or services to
be received. Trade receivables and trade payables represent the
outstanding obligations of the parties to the trade agreements as of the
end of the year. Trade revenues are recognized as the advertisements are
broadcast. Trade expenses are recognized as the services or merchandise
is used.
(c) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated
useful lives of the assets. Repair and maintenance costs are charged to
expense when incurred.
(d) Intangible assets
-----------------
Intangible assets are recorded at their appraised values and are
amortized using the straight-line method over estimated periods of
benefit up to 40 years. Should events or circumstances occur subsequent
to the acquisition of a station which bring into question the realizable
value or impairment of the related goodwill and intangibles, Secret will
evaluate the remaining useful life and balance of intangibles and make
appropriate adjustments. Secret's principal considerations in
determining impairment include the strategic benefit to Secret of the
particular station and the current and expected future operating income
and cash flow levels of that particular station.
(e) Revenue Recognition
-------------------
Advertising revenues are recognized as advertisements are broadcast.
B-5
<PAGE>
(g) Income Taxes
------------
The accompanying financial statements do not reflect provisions for
federal income taxes which are reported by the partners of Secret. The
income taxes reported in the accompanying statements of operations are
Michigan state income taxes paid by the Partnership instead of the
partners.
(h) Statement of Cash Flows
-----------------------
Cash of $1,583,547 and $1,384,219 was paid for interest during the year
ended June 30, 1996, and for the eleven months ended June 30, 1995,
respectively. Cash of $205,228 and $112,000 was paid for state income
taxes during the year ended June 30, 1996, and for the eleven month
period ended June 30, 1995, respectively.
(h) Use of Estimates
----------------
The preparation of these 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
date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at June 30, 1996 and
1995:
<TABLE>
<CAPTION>
Estimated
1996 1995 useful lives
-------- -------- ------------
<S> <C> <C> <C>
Land $ 25,000 $ 25,000 -
Buildings and leasehold improvements 522,913 491,084 5 - 31.5 years
Broadcasting equipment 534,700 521,451 5 - 15 years
Furniture and fixtures 189,678 181,309 5 years
Business equipment 255,555 165,232 5 years
Vehicles 51,279 29,397 5 years
--------- ---------
1,579,125 1,413,473
Less: Accumulated depreciation (477,418) (216,115)
$1,101,707 $1,197,358
========= =========
</TABLE>
(4) INTANGIBLE ASSETS:
Intangible assets consisted of the following at June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Estimated
1996 1995 useful lives
---------- ---------- ------------
<S> <C> <C> <C>
FCC licenses $42,195,592 42,195,592 25
Advertising client base 3,069,762 3,069,762 7
Goodwill 729,704 729,704 40
---------- ----------
45,995,058 45,995,058
Less: accumulated amortization (4,110,576) (1,965,972)
---------- ----------
$41,884,482 $44,029,086
========== ==========
</TABLE>
B-6
<PAGE>
(5) LONG-TERM DEBT:
Long-term debt consisted of a senior reducing revolving credit at June
30, 1996 and 1995, which was used to recapitalize debt and to fund
working capital for Secret at August 1, 1994. The debt was allocated to
the Stations based on the ratio of the Stations' fair market value as
compared to the total fair market value of Secret at August 1, 1994.
Additional borrowings and repayments were allocated based on the same
ratio if these borrowings and repayments were related to the general
operations of all the Secret stations. Interest expense for the year
ended June 30, 1996 and the eleven month period ended June 30, 1995 was
allocated to the Stations based on the same ratio.
Borrowings under the revolving loans bear interest, at the option of
Secret at LIBOR or prime, plus a margin. The margin over LIBOR or prime
varies from time to time depending on Secret's ratio of debt to cash
flow as defined in the agreement. The interest rate on the reducing
revolver at June 30, 1996, ranged from 6.49% to 8.25%, with a weighted
interest rate of 6.54%.
Amounts outstanding under the reducing revolver are payable in quarterly
installments beginning as early as June 30, 1995, and ending December
31, 2001. The amounts payable depend on the amounts then outstanding and
correspondingly reduce the amount available to be borrowed. Based on
debt outstanding during the period from August 1, 1994, through June 30,
1996, there were no amortization payments required to be made. Amounts
outstanding under the revolving credit/term loan convert on June 30,
1997, to a term loan payable in quarterly installments ending December
31, 2001. In addition to scheduled amortization, Secret is required to
repay revolving credit borrowings each calendar year of up to 50% of the
excess cash flow for that calendar year as defined in the agreement,
commencing with the year ending December 31, 1995. Based on financial
ratios at December 31, 1995, there is no excess cash flow repayment due
in 1996.
The senior credit facility limits indebtedness, capital expenditures,
and payment of distributions and requires certain financial ratios to be
maintained among other restrictions. At June 30, 1996, Secret was in
compliance with all provisions of its credit agreement. The senior
credit facility is secured by substantially all of the assets of Secret.
The future maturities of long-term debt are as follows:
1997 $2,003,100
1998 3,035,949
1999 3,380,231
2000 3,974,902
2001 4,757,362
Thereafter 2,629,069
----------
$19,780,613
----------
The fair value of the debt is equal to its carrying value.
B-7
<PAGE>
(6) COMMITMENTS AND CONTINGENCIES:
The Stations have entered into operating leases with initial or
remaining non-cancelable terms in excess of one year. The future minimum
rental payments required for all such leases as of June 30, 1996, are as
follows:
Year ending
June 30,
-----------
1997 $227,084
1998 222,909
1999 165,797
2000 47,220
2001 47,220
Future years 331,125
---------
Total minimum payments required $1,041,355
=========
Rent expense was $231,959 and $200,338 for the year ended June 30, 1996
and for the eleven month period ended June 30, 1995, respectively.
(7) RELATED PARTY TRANSACTIONS:
Central office general and administrative expenses represent an
allocation of charges incurred by Secret's headquarters for various
administrative and management services, including, but not limited to,
salaries, bonuses, management fees and service fees. The charges are
allocated to the Stations based on the total number of markets in which
Secret owns stations. Amounts charged to the Stations do not necessarily
represent the amounts that would have been incurred had the Stations
operated as an unaffiliated entity. However, management believes that
these charges result in a reasonable level of general and administrative
and interest expenses for the Stations.
Included in the central office general and administrative expenses are
fees charged to Secret by its two general partners for management and
consulting services provided to Secret. In addition, Lane Industries,
Inc., a related party to the administrative general partner of Secret,
provides certain tax, legal, financial, risk management and employee
benefits services for an annual fee. The amount allocated to the
Stations for all such services provided by the general partners amounted
to $175,517 and $153,778 for the year ended June 30, 1996 and the eleven
months ended June 30, 1995, respectively.
As described in note 5, a portion of Secret's senior debt and interest
expense has been allocated to the Stations as of June 30, 1996 and 1995,
and for the periods then ended.
The Partners' Capital and Station Equity section of the Balance Sheet
consists of intercompany accounts, capital contributed by the partners
and retained earnings. These accounts reflect a portion of the
original acquisition of the Stations and the activity between the
Stations and Secret, such as cash transfers and expense allocations.
B-8
<PAGE>
(8) DEFERRED SAVINGS PLAN
Secret maintains a 401(k) savings plan in which the employees of the
Stations participate. Employees must have reached age 21 and have
completed one year of consecutive service to participate in the plan.
Employees may contribute up to 15% of their salaries in accordance with
IRS limitations. Secret matches employee contributions at a rate of 75%
(up to 6%) of the employee's salary. Secret's contribution to the plan
related to the Stations was $94,515 and $102,548 for the year ended June
30, 1996 and for the eleven month period ended June 30, 1995,
respectively.
(9) SUBSEQUENT EVENT
On August 12, 1996, Secret entered into a definitive agreement to sell
substantially all of the assets of the Stations to Evergreen. The assets
to be sold include the fixed assets and the intangible assets. In
addition, Secret will enter into a noncompete agreement covering the
Detroit market. In consideration for the assets sold and the noncompete
agreement, Evergreen will pay Secret $168,000,000 on the purchase date.
Pending approval of the acquisition of the Stations, Secret entered into
a time brokerage arrangement which will commence September 1, 1996, and
will expire on the purchase date. The agreement allows Evergreen to
purchase substantially all of the broadcast time on the Stations at an
amount negotiated between Secret and Evergreen.
B-9
<PAGE>
Independent Auditor's Report
----------------------------
KYLD-FM (A Division of Crescent
Communications, L.P.)
San Francisco, California
To the Partners:
We have audited the accompanying balance sheet of KYLD-FM (A Division of
Crescent Communications, L.P.) as of December 31, 1995 and the related
statements of operations and partners' deficiency, and cash flows for the year
then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KYLD-FM (A Division of
Crescent Communications, L.P.) as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended in accordance with
generally accepted accounting principles.
/s/ Miller, Kaplan, Arase & Co.
MILLER, KAPLAN, ARASE & CO.
North Hollywood, California
March 1, 1996 (Except for Note 9 as to
which the date is August 14, 1996).
C-1
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
-----------------------------------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
-------------- ------------------
(Unaudited)
--------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
- --------------
Cash $ 2,778,429 $ 3,682,652
Accounts Receivable (Net of Allowance
for Doubtful Accounts of $61,109
and $191,670) 681,009 1,544,291
Trade Receivable - 83,807
Other Receivables 437,710 27,093
Other Prepaid Expenses 40,096 152,722
------------ ------------
TOTAL CURRENT ASSETS $ 3,937,244 $ 5,490,565
--------------------
PROPERTY AND EQUIPMENT, NET OF
- ------------------------------
ACCUMULATED DEPRECIATION (Note 2) 584,361 663,517
------------------------
INTANGIBLE ASSETS, NET OF ACCUMULATED
- -------------------------------------
AMORTIZATION (Note 3) 10,001,449 10,641,698
------------ ------------ ------------
TOTAL ASSETS $ 14,523,054 $ 16,795,780
------------ ============ ============
LIABILITIES
-----------
CURRENT LIABILITIES
- -------------------
Accounts Payable and Accrued Expenses $ 38,703 $ 234,521
Accrued Wages and Commissions 52,819 157,215
Trade Liability - 318,138
Deferred Trade Revenue (Note 9A) 216,013 -
Deferred Income 10,863 14,863
------------ ------------
TOTAL CURRENT LIABILITIES $ 318,398 724,737
-------------------------
INTERDIVISIONAL PAYABLE (Note 4) 23,096,891 23,521,585
- ----------------------- ------------ ------------
TOTAL LIABILITIES $ 23,415,289 $ 24,246,322
-----------------
COMMITMENTS AND CONTINGENCIES (Notes 5
- -----------------------------
and 6)
PARTNERS' DEFICIENCY ( 8,892,235) ( 7,450,542)
-------------------- ------------ ------------
TOTAL LIABILITIES AND
----------------------
PARTNERS' DEFICIENCY $ 14,523,054 $ 16,795,780
-------------------- ============ ============
</TABLE>
(Attached notes are an integral part of this statement)
C-2
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
-----------------------------------------------------
STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIENCY
-------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
---------------------------- ------------
(Unaudited)
---------------------------- ------------
1996 1995 1995
------------ ------------- ------------
<S> <C> <C> <C>
NET REVENUES $ 1,944,978 $ 2,396,002 $ 5,175,744
- ------------ ------------ ------------ ------------
OPERATION EXPENSES
- ------------------
Operating Expenses Excluding Depreciation and
Amortization, General and Administrative,
and Corporate Expenses $ 1,405,805 $ 1,379,037 $ 3,176,328
Depreciation and Amortization 748,707 735,613 1,481,400
General and Administrative Expense 478,709 501,365 1,155,071
Corporate Expense 256,769 219,312 548,694
------------ ------------ ------------
TOTAL OPERATING EXPENSES $ 2,889,990 $ 2,835,327 $ 6,361,493
------------------------ ------------ ------------ ------------
LOSS FROM OPERATIONS ($ 945,012) ($ 439,325) ($1,185,749)
-------------------- ------------ ------------ ------------
OTHER INCOME (EXPENSE)
- ----------------------
Interest Expense ($1,093,924) ($ 923,146) ($2,367,656)
Other Income 597,243 50,185 -
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) ($ 496,681) ($ 872,961) ($2,367,656)
----------------------------- ------------ ------------ ------------
NET LOSS ($1,441,693) ($1,312,286) ($3,553,405)
- --------
PARTNERS' DEFICIENCY - BEGINNING OF PERIOD ( 7,450,542) ( 3,897,137) ( 3,897,137)
- ------------------------------------------ ------------ ------------ ------------
PARTNERS' DEFICIENCY - END OF PERIOD ($8,892,235) ($5,209,423) ($7,450,542)
- ------------------------------------ ============ ============ =============
</TABLE>
(Attached notes are an integral part of this statement)
C-3
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
-----------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
---------------------------- -------------
(Unaudited)
----------------------------
1996 1995 1995
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net Loss ($1,441,693) ($1,312,286) ($3,553,405)
Adjustments to Reconcile Net Loss to Net Cash
Provided (Used) by Operating Activities:
Depreciation 108,457 95,363 200,901
Amortization 640,250 640,250 1,280,499
(Increase) Decrease in:
Accounts Receivable 863,282 123,060 205,034
Trade Receivable 83,806 ( 36,460) 66,898
Other Receivables 6,267 21,614 23,237
Other Prepaid Expenses ( 304,258) 171,358 61,685
Increase (Decrease) in:
Accounts Payable and
Accrued Expenses ( 195,817) ( 225,340) ( 124,887)
Accrued Wages and
Commissions ( 104,396) ( 24,050) 34,295
Trade Liability ( 102,125) - 52,956
Deferred Revenue ( 4,000) ( 16,649) ( 17,986)
Interdivisional Payable ( 424,694) 733,196 5,351,380
------------- ------------- -------------
NET CASH PROVIDED (USED) BY
----------------------------
OPERATING ACTIVITIES ($ 874,921) $ 170,056 $ 3,580,607
-------------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Purchase of Property and Equipment ($ 29,302) ($ 43,391) ($ 125,209)
------------- ------------- -------------
NET CASH (USED) BY INVESTING
----------------------------
ACTIVITIES ($ 29,302) ($ 43,391) ($ 125,209)
---------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
NET CASH PROVIDED BY FINANCING
------------------------------
ACTIVITIES $ - $ - $ -
---------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH ($ 904,223) $ 126,665 $ 3,455,398
- -------------------------------
CASH, BEGINNING OF PERIOD 3,682,652 227,254 227,254
- ------------------------- ------------ ------------ ------------
CASH, END OF PERIOD $ 2,778,429 $ 353,919 $ 3,682,652
- ------------------- ============ ============ ============
</TABLE>
(Attached notes are an integral part of this statement)
C-4
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
--------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
--------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
A. Nature of Business and Basis of Presentation
--------------------------------------------
Radio station KYLD-FM, licensed to San Mateo, California, is a
division of Crescent Communications, L.P. ("the Partnership"). The
Partnership was established as a limited partnership for the purpose
of acquiring and operating radio stations. Operations of the
Partnership commenced with the bulk asset purchase of radio station
KYLD-FM on November 19, 1993. The accompanying financial statements
present only the accounts of KYLD-FM.
B. Unaudited Interim Information
-----------------------------
In the opinion of management, the financial statements for the six
month periods ended June 30, 1996 and 1995 (unaudited) include all
adjustments necessary for a fair presentation in accordance with
generally accepted accounting principles consisting solely of normal
recurring accruals and adjustments. The results of operations and
cash flows for the six months ended June 30, 1996 and 1995 are not
necessarily indicative of results which would be expected for a full
year.
C. Revenue Recognition
-------------------
Revenue is recognized when commercial spot announcements are aired.
Unbilled commercial air time is accrued at year end and included in
accounts receivable. Payments received in advance are included in
deferred revenue.
D. Property and Equipment
----------------------
Property and equipment are stated at cost. Amounts expended for
improvements which increase the useful life or replace major units of
property and equipment are capitalized, while expenditures for
repairs, maintenance and minor renewals are charged to expense as
incurred. The cost and related accumulated depreciation of assets
sold or otherwise disposed of are removed from the accounts and any
gain or loss is reflected in current year earnings.
E. Depreciation
------------
Depreciation of property and equipment is computed using the
straight-line method over the estimated economic lives of the assets
as follows:
Broadcasting Equipment 5 years
Furniture and Fixtures 7 years
Music Library 5 years
Vehicles 3 years
Computers 3 years
F. Amortization
------------
Amortization of intangible assets and loan fees is computed using the
straight-line method over the estimated lives of the assets as
follows:
C-5
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
--------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
--------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------
F. Amortization (Continued)
------------
FCC License 40 years
Customer List 5 years
Goodwill 40 years
Formats 5 years
Going Concern Value 40 years
Organization Costs 5 years
Acquisition Costs 5 years
G. Trades
------
Under trade agreements with certain advertisers, the Partnership
provides commercial spot announcements in exchange for goods and
services, as is customary in the broadcasting industry. These
transactions are recorded at the estimated fair market value of the
goods and services received. Trade sales are recognized when
commercial spot announcements are broadcast and the value of goods or
services is recorded when received or utilized. The value of air
time provided and goods or services received are reflected in the
balance sheet as a trade receivable and a trade liability until they
are paid for and earned, respectively.
H. Concentration of Risk
---------------------
The Partnership maintains bank account balances in excess of amounts
insured by the FDIC. As of June 30, 1996 and December 31, 1995
approximately $2,837,000 and $3,708,000 of bank deposits exceeded the
level of insurance coverage, respectively.
Financial instruments that potentially subject the Partnership to
credit risk consist of accounts receivable. Concentration of credit
risk with respect to accounts receivable is limited due to the large
number of diversified customers and the geographic diversification of
KYLD-FM's national customer base.
I. Allowance for Doubtful Accounts
-------------------------------
The allowance for doubtful accounts is based on management's estimate
of the collectability of accounts receivable.
J. Income Taxes
------------
As a Limited Partnership, all income and losses of Crescent
Communications, L.P. are passed directly to the partners for federal
and state income tax purposes. Accordingly, income tax expense
(other than the California Franchise Tax Board annual minimum tax of
$800) is not reflected on the statement of operations.
K. Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Partnership
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
C-6
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
--------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
--------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------
L. Accounting Estimates
--------------------
The preparation of financial statements in accordance with generally
accepted accounting principles requires that management use estimates
and assumptions in preparing financial statements. Those estimates
and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could differ from
those estimates.
Corporate and interest expenses were allocated among the individual
radio station divisions of Crescent Communications, L.P. on a pro
rata basis. Corporate expenses were allocated based on revenues and
interest expenses were allocated based on station purchase price.
The amounts allocated to KYLD-FM have been reflected in these
financial statements.
The accounting records of KYLD-FM were combined with those of another
station also owned by Crescent Communications, L.P. to which 12.7% of
combined revenues and expenses were allocated based on a combination
of wattage, sales price, spot rate and arbitron ratings.
<TABLE>
<CAPTION>
NOTE 2 - PROPERTY AND EQUIPMENT
- -------------------------------
Property and Equipment consist of the following at December 31, 1995:
<S> <C>
Broadcasting Equipment $ 690,912
Furniture and Fixtures 122,483
Music Library 64,900
Vehicles 81,173
Computers 74,476
------------
$ 1,033,944
Accumulated Depreciation ( 370,427)
------------
$ 663,517
============
<CAPTION>
NOTE 3 - INTANGIBLE ASSETS
- --------------------------
Intangible assets consist of the following at December 31, 1995:
<S> <C>
FCC Licenses $5,000,000
Customer Lists 3,958,000
Goodwill 2,879,585
Formats 1,374,000
Going Concern Value 75,000
Organization Costs 39,000
Acquisition Costs 37,173
----------
$13,362,758
Accumulated Amortization ( 2,721,060)
-----------
$10,641,698
===========
</TABLE>
C-7
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
--------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
--------------------------------------------------
NOTE 4 - INTERDIVISIONAL PAYABLE
- --------------------------------
As discussed in Note 1A, these financial statements present only the
accounts of KYLD-FM. The interdivisional transactions which would have
been eliminated had the financial statements been prepared on a
consolidated basis have resulted in an interdivisional payable to those
entities which have not been included.
This payable consists primarily of KYLD-FM station acquisition debt
subsequently transferred to the books of the Partnership, and
interdivisional allocations of Corporate and interest expenses.
NOTE 5 - COMMITMENTS
- --------------------
A. Long-Term Debt
--------------
The long-term debt guaranteed by the Partnership is not reflected in
these financial statements although interest expense has been
allocated to the station as discussed in Note 1L. This long-term
debt is secured by a lien on all tangible and intangible assets of
the Partnership, including KYLD-FM. This total long-term debt
outstanding of the Partnership (which includes the financing provided
to acquire other radio stations) exceeded the value of the KYLD-FM at
June 30, 1996 and December 31, 1995. On August 16, 1996, immediately
subsequent to the sale of KYLD-FM to Evergreen Media Corporation (See
Note 9) the debt mentioned above was retired and all liens on the
Station were released.
B. Lease Commitments
-----------------
The Partnership is committed to four KYLD-FM operating lease
agreements for office space, automobiles and transmitter facilities
and equipment, which expire in various years through January, 2004.
The two most significant leases include a noncancellable lease for a
transmitter facility for which the payments range from $2,054 to
$2,923 per month, and a noncancellable lease for office space for
which the payments range from $10,311 to $12,645 per month. A number
of the leases include renewal options and call for annual rental
increases ranging from $6,072 to $12,144 per year as provided in the
lease agreement or based on changes in the Consumer Price Index.
KYLD-FM rental expense for the year ending December 31, 1995 was
$228,046.
Future KYLD-FM minimum rental payments under these lease agreements
for each of the years ending December 31 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $176,987
1997 190,136
1998 191,182
1999 198,342
2000 205,545
Thereafter 306,019
----------
$1,268,211
==========
</TABLE>
C-8
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
--------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
--------------------------------------------------
NOTE 6 - COMMITMENTS - RELATED PARTY
- ------------------------------------
A. Management Agreements
---------------------
The Partnership entered into a two year management agreement with a
series of one year automatic renewals with Crescent Communications
Corporation in November, 1993. Two key management members of this
corporation are also related party stockholders of S&W LP Corporation
(Note 7). During the year ended December 31, 1995, the Partnership
paid $520,000 to Crescent Communications Corporation for 1995
management fees which included a bonus of $89,874 based on 1994's
operating cash flow. During the year ended December 31, 1995,
$476,207 was charged to corporate expenses of which $210,483 has been
allocated to KYLD-FM on a pro rata basis.
Crescent Communications Corporation incurs certain costs on behalf of
the Partnership, which are periodically reimbursed. These
reimbursable expenses totalled $132,581 during the year ended
December 31, 1995 of which $58,600 has been allocated to KYLD-FM on a
pro rata basis.
B. Capital Bonus Plan
------------------
During the year ended December 31, 1995, the Partnership implemented
a Capital Bonus Plan as an incentive for certain key employees of the
Partnership whereby the Board of Directors may award "units"
representing the right to receive a percentage of the net equity
growth of the stations owned by the Partnership including KYLD-FM.
No bonuses were awarded under the plan for the six months ended June
30, 1996 or for the year ended December 31, 1995.
NOTE 7 - OTHER RELATED PARTY ACTIVITY
- -------------------------------------
During the year ended December 31, 1995, the Partnership incurred
reimbursable expenses to a related party stockholder of S&W LP
Corporation (a partner of Crescent Communications, L.P.) for expenses
paid on behalf of the Partnership totalling $22,887, of which $10,116 has
been allocated to KYLD-FM on a pro rata basis.
NOTE 8 - EMPLOYEE BENEFIT PLAN
- ------------------------------
The Partnership has adopted a Savings Retirement Program (the "Program")
under Section 401(k) of the Internal Revenue Code. The Program allows
all employees who are at least 21 years of age and have been employed
with the Company for a minimum of three months with a full time status to
defer up to 15% of their income on a pretax basis through contributions
to the Program, limited to an annual maximum ($9,240 in 1995). The
Program does not provide for any matching of contributions, but the
Company pays the annual administration fee which was $2,226 for 1995.
C-9
<PAGE>
KYLD-FM (A DIVISION OF CRESCENT COMMUNICATIONS, L.P.)
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
--------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
--------------------------------------------------
NOTE 9 - SUBSEQUENT EVENTS
- --------------------------
A. Local Marketing Agreement
-------------------------
On April 19, 1996, the Partnership entered into a Program Service and
Time Brokerage Agreement (the LMA) with Evergreen Media Corporation
("Evergreen"), the purchaser of KYLD-FM. The LMA went into effect on
May 1, 1996, at which time Evergreen began operating the Station
until the purchase closed. During this time Evergreen retained all
the revenue and paid virtually all the expenses related to the
Station. The LMA fees collected were $250,000 per month which
continued through August 14, 1996, the date of purchase. Included in
the LMA agreement was a stipulation where Evergreen would assume the
$216,013 negative trade liability (deferred trade revenue) which is
comprised of KYLD-FM's net trade liability and receivable at May 1,
1996.
B. Sale of Station
---------------
On April 19, 1996, the Partnership entered into an Asset Purchase
Agreement to sell substantially all the assets of radio station KYLD-
FM for $44,000,000 in cash pending FCC approval. On August 14, 1996,
subsequent to the FCC approval the sale closed transferring ownership
of KYLD-FM to Evergreen.
C-10
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-93874) of
Evergreen Media Corporation and in the Registration Statements on Form S-8 (Nos.
333-04379 and 33-83124) of Evergreen Media Corporation of our report dated
August 22, 1996 relating to the financial statements of Century Chicago
Broadcasting, L.P. as of December 31, 1995 and for the year then ended, which
appears in the Current Report on Form 8-K of Evergreen Media Corporation dated
September 20, 1996.
PRICE WATERHOUSE LLP
Chicago, Illinois
September 20, 1996
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
Evergreen Media Corporation:
We consent to incorporation by reference in the Registration Statements on Form
S-3 (No. 33-93874) and Form S-8 (Nos. 33-83124 and 333-04379) of Evergreen Media
Corporation of our report dated September 10, 1996, relating to the consolidated
balance sheets of WJLB/WMXD, Detroit as of June 30, 1996, and June 30, 1995 and
the related combined statements of operations, stockholders' equity, and cash
flows for the year ended June 30, 1996 and the eleven month period ended June
30, 1995, which report appears in the Form 8-K dated September 20, 1996 filed
by Evergreen Media Corporation.
Arthur Andersen LLP
Chicago, Illinois
September 20, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in the Registration Statements on Form S-3 (No. 33-93874) and Form S-8
(Nos. 33-83124 and 333-04379) of Evergreen Media Corporation of our report dated
March 1, 1996 (except for Note 9 to the accompanying financial statements as of
December 31, 1995 and for the year then ended as to which the date is
August 14, 1996), included in Evergreen Media Corporation's Form 8K dated
September 20, 1996.
/s/ Miller, Kaplan, Arase & Co.
MILLER, KAPLAN, ARASE & CO.
North Hollywood, California
September 20, 1996
<PAGE>
EXHIBIT 99.2
THE COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AT JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS FOR
ADJUSTMENTS FOR PRO FORMA THE PENDING
THE OTHER ADJUSTMENTS COMPANY PRO TRANSACTIONS COMPANY
COMPANY COMPLETED FOR THE FORMA AS AND FINANCING PRO FORMA
HISTORICAL TRANSACTIONS OFFERING ADJUSTED TRANSACTION COMBINED
---------- --------------- ----------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets.......... $ 77,148 $ -- $ -- $ 77,148 $ -- $ 77,148
Assets held for sale.... 32,000 (32,000)(3) -- -- -- --
Property and equipment,
net.................... 46,293 584 (2) -- 46,877 10,877 (15) 57,754
Intangible assets, net.. 779,237 43,416 (2) -- 822,653 594,123 (15) 1,416,776
Other assets............ 21,866 (5,000)(2) -- 16,866 (9,500)(15) 7,366
--------- ------- --------- --------- -------- ----------
Total assets........ $ 956,544 $ 7,000 $ -- $ 963,544 $595,500 $1,559,044
========= ======= ========= ========= ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Liabilities
Current portion of long-
term debt.............. $ 29,250 $ -- $ -- $ 29,250 $ -- $ 29,250
Other current
liabilities............ 28,107 -- -- 28,107 -- 28,107
--------- ------- --------- --------- -------- ----------
Total current
liabilities........ 57,357 -- -- 57,357 -- 57,357
Long-term debt,
excluding current
portion................ 524,750 39,000 (2) (243,200)(12) 288,550 595,500 (15) 884,050
(32,000)(3)
Other liabilities....... 1,497 -- -- 1,497 -- 1,497
Deferred Income Taxes... 86,746 -- -- 86,746 -- 86,746
--------- ------- --------- --------- -------- ----------
Total liabilities... 670,350 7,000 (243,200) 434,150 595,500 1,029,650
--------- ------- --------- --------- -------- ----------
STOCKHOLDERS' EQUITY:
Convertible Preferred
stock.................. 80,500 -- -- 80,500 -- 80,500
Common stock............ 280 -- 80 (12) 360 -- 360
Additional paid-in
capital................ 317,823 -- 243,120 (12) 560,943 -- 560,943
Accumulated deficit..... (112,409) -- -- (112,409) -- (112,409)
--------- ------- --------- --------- -------- ----------
Total stockholders'
equity............. 286,194 -- 243,200 529,394 -- 529,394
--------- ------- --------- --------- -------- ----------
Total liabilities and
stockholders' equity... $ 956,544 $ 7,000 $ -- $ 963,544 $595,500 $1,559,044
========= ======= ========= ========= ======== ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
<PAGE>
THE COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
FOR THE PYRAMID ADJUSTMENTS
ACQUISITION PRO FORMA PENDING FOR THE PENDING
PYRAMID AND THE OTHER ADJUSTMENTS COMPANY PRO TRANSACTIONS TRANSACTIONS COMPANY
COMPANY HISTORICAL COMPLETED FOR THE FORMA AS HISTORICAL AND FINANCING PRO FORMA
HISTORICAL 1/1-1/17 TRANSACTIONS OFFERING ADJUSTED 1/1-6/30 (16) TRANSACTION COMBINED
---------- ---------- --------------- ----------- ----------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA:
Gross revenues... $144,614 $2,301 $2,151 (4) $ -- $149,066 $38,329 $ -- $ 187,395
Less: agency
commissions..... (18,252) (230) (349)(4) (18,831) (4,802) -- (23,633)
-------- ------ ------- ------ -------- ------- -------- ---------
Net revenues..... 126,362 2,071 1,802 -- 130,235 33,527 -- 163,762
Station operating
expenses
excluding
depreciation and
amortization..... 80,313 1,692 1,681 (4) -- 83,686 19,990 -- 103,676
Depreciation and
amortization..... 44,012 519 749 (4) -- 47,732 864 22,904 (17) 71,500
2,452 (5)
Corporate general
and
administrative
expenses......... 3,198 123 256 (4) -- 3,220 2,787 (2,787)(18) 3,220
(357)(6)
-------- ------ ------- ------ -------- ------- -------- ---------
Operating income
(loss)........... (1,161) (263) (2,979) -- (4,403) 9,886 (20,117) (14,634)
Interest expense. 19,027 343 1,094 (4) (8,816)(13) 11,659 3,250 18,681 (19) 34,387
11 (8) 797 (20)
Other (income)
expense, net..... 12 (5) (97)(4) -- (90) 42 -- (48)
-------- ------ ------- ------ -------- ------- -------- ---------
Income (loss)
before income
taxes............ (20,200) (601) (3,987) 8,816 (15,972) 6,594 (39,595) (48,973)
Income tax
expense
(benefit)........ (3,705) -- (2,988)(10) 2,380 (10) (4,313) (368) (8,542)(10) (13,223)
-------- ------ ------- ------ -------- ------- -------- ---------
Net income
(loss)........... (16,495) (601) (999) 6,436 (11,659) 6,962 (31,053) (35,750)
Preferred stock
dividends........ 2,415 -- -- -- 2,415 -- -- 2,415
-------- ------ ------- ------ -------- ------- -------- ---------
Income (loss)
attributable to
common
stockholders..... $(18,910) $ (601) $ (999) $6,436 $(14,074) $ 6,962 $(31,053) $ (38,165)
======== ====== ======= ====== ======== ======= ======== =========
Loss per
common share
before
extraordinary
item (14)........ $ (0.67) -- -- -- $ (0.39) -- -- $ (1.06)
======== ======== =========
Weighted average
common shares
outstanding (14). 28,070 -- -- 8,000 36,070 -- -- 36,070
OTHER FINANCIAL
DATA:
Broadcast cash
flow............. $ 46,049 $ 379 $ 121 $ -- $ 46,549 $13,537 $ -- $ 60,086
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
<PAGE>
THE COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE 1995
OFFERING, THE PRO FORMA
BPI ADJUSTMENT
ACQUISITION, FOR THE
THE PYRAMID PENDING
ACQUISITION PENDING TRANSACTIONS
BPI PYRAMID AND THE OTHER PRO FORMA COMPANY TRANSACTIONS AND
COMPANY HISTORICAL HISTORICAL COMPLETED ADJUSTMENTS PRO FORMA HISTORICAL FINANCING
HISTORICAL 1/1-5/12 1/1-12/31 TRANSACTIONS FOR THE OFFERING AS ADJUSTED 1/1-12/31(16) TRANSACTION
---------- ---------- ---------- ------------- ---------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA:
Gross revenues.. $186,365 $21,689 $ 75,858 $ 113 (4) $ -- $284,025 $88,291 $ --
Less agency
commissions..... (23,434) (2,630) (9,135) (284)(4) -- (35,483) (11,235) --
-------- ------- -------- -------- -------- -------- ------- --------
Net revenues.... 162,931 19,059 66,723 (171) -- 248,542 77,056 --
Station
operating
expenses
excluding
depreciation and
amortization.... 97,674 14,078 41,261 60 (4) -- 153,073 48,826 --
Depreciation and
amortization.... 47,005 3,087 11,038 510 (4) -- 94,848 4,425 45,861 (17)
33,208 (5)
Corporate
general and
administrative
expenses........ 4,475 1,465 4,890 549 (4) -- 5,175 4,968 (4,968)(18)
(6,204)(6)
Merger and
equity plan
expenses........ -- -- 10,932 (10,932)(7) -- -- -- --
-------- ------- -------- -------- -------- -------- ------- --------
Operating income
(loss).......... 13,777 429 (1,398) (17,362) -- (4,554) 18,837 (40,893)
Interest
expense......... 19,199 2,724 9,289 2,368 (4) (18,240)(13) 25,103 7,743 37,632 (19)
9,763 (8) 2,475 (20)
Other (income)
expense, net.... 236 -- 930 (1,370)(9) -- (204) (165) --
-------- ------- -------- -------- -------- -------- ------- --------
Income (loss)
before income
taxes........... (5,658) (2,295) (11,617) (28,123) 18,240 (29,453) 11,259 (81,000)
Income tax
expense
(benefit)....... 192 -- -- (13,069)(10) 4,925 (10) (7,952) 158 (18,988)(10)
-------- ------- -------- -------- -------- -------- ------- --------
Net income
(loss).......... (5,850) (2,295) (11,617) (15,054) 13,315 (21,501) 11,101 (62,012)
Preferred stock
dividends....... 4,830 -- 7,169 (7,169)(11) -- 4,830 -- --
-------- ------- -------- -------- -------- -------- ------- --------
Income (loss)
attributable to
common
stockholders.... $(10,680) $(2,295) $(18,786) $ (7,885) $ 13,315 $(26,331) $11,101 $(62,012)
======== ======= ======== ======== ======== ======== ======= ========
Loss per common
share before
extraordinary
item(14)........ $ (0.52) -- -- -- -- $ (0.73) -- --
======== ========
Weighted average
common shares
outstanding (14). 20,721 -- -- 7,313 (14) 8,000 36,034 -- --
OTHER FINANCIAL
DATA:
Broadcast cash
flow............ $ 65,257 $ 4,981 $ 25,462 $ (231) $ -- $ 95,469 $28,230 $ --
<CAPTION>
COMPANY PRO
FORMA
COMBINED
-----------
<S> <C>
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA:
Gross revenues.. $372,316
Less agency
commissions..... (46,718)
-----------
Net revenues.... 325,598
Station
operating
expenses
excluding
depreciation and
amortization.... 201,899
Depreciation and
amortization.... 145,134
Corporate
general and
administrative
expenses........ 5,175
Merger and
equity plan
expenses........ --
-----------
Operating income
(loss).......... (26,610)
Interest
expense......... 72,953
Other (income)
expense, net.... (369)
-----------
Income (loss)
before income
taxes........... (99,194)
Income tax
expense
(benefit)....... (26,782)
-----------
Net income
(loss).......... (72,412)
Preferred stock
dividends....... 4,830
-----------
Income (loss)
attributable to
common
stockholders.... $(77,242)
===========
Loss per common
share before
extraordinary
item(14)........ $ (2.14)
===========
Weighted average
common shares
outstanding (14). 36,034
OTHER FINANCIAL
DATA:
Broadcast cash
flow............ $123,699
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(TABLES IN THOUSANDS, EXCEPT SHARE DATA)
(1) BASIS OF PRESENTATION. The purchase method of accounting has been used
in the preparation of the unaudited pro forma condensed combined financial
statements. Under this method of accounting, the aggregate purchase price is
allocated to assets acquired and liabilities assumed based on their estimated
fair values. For purposes of the unaudited pro forma condensed combined
financial statements, the purchase prices of Pyramid, KYLD-FM and the stations
to be acquired in the Pending Transactions have been allocated to the fair
value of net assets acquired by Company management based primarily on
information furnished by management of Pyramid, the seller of KYLD-FM and the
sellers of the stations to be acquired in the Pending Transactions,
respectively. The final allocation of the respective purchase price of the
Pyramid Acquisition, the KYLD-FM Acquisition and the stations to be acquired
in the Pending Transactions will not be determined until a reasonable time
after consummation of such transactions and will be based on a complete
evaluation of the assets acquired and liabilities assumed. Accordingly, the
information presented herein may differ from the final purchase price
allocation.
The Company acquired WKLB-FM in May of 1996, and the preliminary allocation
of the assets acquired and liabilities assumed are reflected in the Company's
June 30, 1996 historical balance sheet. The Company has agreed to exchange
WKLB-FM for Washington D.C. station WGAY-FM in one of the Pending
Transactions. The final allocation of the assets and liabilities assumed in
such exchange will not be determined until a reasonable period of time after
consummation of the exchange, and will be based on a complete evaluation of
the assets acquired and liabilities assumed.
Data on station operating income excluding depreciation and amortization and
corporate general and administrative expense (commonly referred to as
broadcast cash flow), although not calculated in accordance with generally
accepted accounting principles, is widely used in the broadcast industry as a
measure of a company's operating performance. Nevertheless, this measure
should not be considered in isolation or as a substitute for operating income,
cash flows from operating activities or any other measures for determining
operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles. Broadcast cash flow does not take
into account the Company's debt service requirements and other commitments
and, accordingly, broadcast cash flow is not necessarily indicative of amounts
that may be available for dividends, reinvestment in the Company's business or
other discretionary uses.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE OTHER COMPLETED TRANSACTIONS
(2) Reflects the aggregate purchase price of KYLD-FM as follows:
<TABLE>
<CAPTION>
PROPERTY AND
EQUIPMENT, INTANGIBLE ASSETS, DECREASE IN INCREASE IN LONG-
PURCHASE PRICE NET(a) NET(b) OTHER ASSETS(c) TERM DEBT
-------------- ------------ ------------------ --------------- -----------------
<S> <C> <C> <C> <C>
$44,000 $584 $43,416 $5,000 $39,000
</TABLE>
- --------
(a) The Company has assumed that historical balances of net property and
equipment approximate fair value for the preliminary allocation of the
purchase price. The Company did not assume the working capital accounts of
the acquired station.
(b) The Company, on a preliminary basis, has allocated the $43,416 of
intangible assets to broadcast licenses, noncompetition agreements and
other identifiable intangible assets. This preliminary allocation and the
estimated average eleven-year life used for pro forma amortization expense
are based on historical information from prior acquisitions. The Company
expects to definitively allocate the purchase price within a reasonable
time after consummation of the KYLD-FM Acquisition when a complete
evaluation of the assets and liabilities of KYLD-FM can be performed.
(c) Represents funds placed in escrow which were used to fund a portion of the
purchase price.
<PAGE>
(3) Reflects the sales proceeds from the disposition of Buffalo radio
stations WHTT-FM and WHTT-AM for $19,500 and WSJZ-FM for $12,500. These radio
stations are accounted for as assets held for sale as of June 30, 1996. The
net proceeds of $32,000 are used to reduce outstanding borrowings under the
Senior Credit Facility. No gain or loss was recognized by the Company as a
result of these dispositions.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED TO THE 1995 OFFERING, THE BPI ACQUISITION, THE PYRAMID ACQUISITION AND
THE OTHER COMPLETED TRANSACTIONS
(4) Reflects the results of operations for San Francisco radio station KYLD-
FM for the twelve months ended December 31, 1995 and the period from January
1, 1996 to April 30, 1996 and eliminates the results of operations of Buffalo
radio stations WHTT-FM, WHTT-AM and WSJZ-FM contained in the Pyramid
historical results for the twelve months ended December 31, 1995 and the
period from January 1, 1996 to January 17, 1996. Net revenues and station
operating expenses (excluding depreciation and amortization) for KYLD-FM for
the period May 1, 1996 to June 30, 1996 are included in the historical results
of the Company as the time brokerage agreement relating to KYLD-FM began May
1, 1996. The results of operations for WHTT-FM, WHTT-AM and WSJZ-FM for the
period January 18, 1996 to June 30, 1996 have been excluded from the Company's
consolidated statement of operations for the six months ended June 30, 1996 in
accordance with accounting for the stations as assets held for sale.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------------------ ---------------------------------
KYLD-FM BUFFALO NET KYLD-FM BUFFALO NET
HISTORICAL STATIONS ADJUSTMENT HISTORICAL STATIONS ADJUSTMENT
---------- -------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......... $ 6,140 $6,027 $ 113 $ 2,308 $157 $2,151
Less: agency
commissions............ (964) (680) (284) (363) (14) (349)
------- ------ ------- ------- ---- -------
Net revenues............ 5,176 5,347 (171) 1,945 143 1,802
Station operating
expenses excluding
depreciation and
amortization........... 4,331 4,271 60 1,885 204 1,681
Depreciation and
amortization........... 1,481 971 510 749 -- 749
Corporate general and
administrative expense. 549 -- 549 256 -- 256
------- ------ ------- ------- ---- -------
Operating income (loss). (1,185) 105 (1,290) (945) (61) (884)
Interest expense........ 2,368 -- 2,368 1,094 -- 1,094
Other (income) expense,
net.................... -- -- -- (97)(a) -- (97)
------- ------ ------- ------- ---- -------
Income (loss) before
income taxes........... $(3,553) $ 105 $(3,658) $(1,942) $(61) $(1,881)
======= ====== ======= ======= ==== =======
</TABLE>
- --------
(a) Reflects the elimination of payments made by the Company to Crescent
Communications, L.P. of $500 pursuant to a time brokerage agreement for
the period from May 1, 1996 through June 30, 1996.
(5) Reflects incremental amortization related to the BPI Acquisition, the
Pyramid Acquisition and the KYLD-FM Acquisition and is based on the allocation
of the total consideration as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Amortization expense for the period from
January 1, 1995 to May 12, 1995 on $264,650
additional intangible assets related to the
BPI Acquisition, which includes $234,938 of
intangible assets and $29,712 resulting from
the recognition of deferred tax liabilities,
amortized on a straight-line basis over a
weighted average period of 11 years........... $ 9,022
Less: historical BPI amortization expense...... (2,315)
-------
BPI adjustment for net increase in amortization
expense....................................... $ 6,707
=======
Amortization expense for the twelve months
ended December 31, 1995 and for the period
from January 1, 1996 to January 17, 1996 on
$355,995 additional intangible assets related
to the Pyramid Acquisition, which includes
$294,777 of intangible assets and $61,218
resulting from the recognition of deferred tax
liabilities, amortized on a straight-line
basis over a weighted average period of 11
years......................................... $32,363 $1,528
Less: historical Pyramid amortization expense.. (8,529) (409)
------- ------
Pyramid adjustment for net increase in
amortization expense.......................... $23,834 $1,119
======= ======
Amortization expense for the twelve months
ended December 31, 1995 and for the period
from January 1, 1996 to June 30, 1996 on
$43,416 additional intangible assets related
to the KYLD-FM Acquisition amortized on a
straight-line basis over a weighted average
period of 11 years............................ $ 3,947 $1,973
Less: historical KYLD-FM amortization expense (1,280) (640)
------- ------
KYLD-FM adjustment for net increase in
amortization expense.......................... $ 2,667 $1,333
======= ======
Total adjustment for net increase in
amortization expense.......................... $33,208 $2,452
======= ======
</TABLE>
<PAGE>
Historical depreciation expense, of BPI, Pyramid and KYLD-FM is assumed to
approximate depreciation expense on a pro forma basis. Actual amortization and
depreciation expense for Pyramid and KYLD-FM may differ based upon the final
allocation of the total consideration.
(6) For 1995, reflects the elimination of duplicate BPI corporate expenses
for the period from January 1, 1995 to May 12, 1995 of $1,265, the elimination
of duplicate Pyramid corporate expenses of $4,390 and the elimination of
duplicate KYLD-FM corporate expenses of $549, totaling $6,204. For the six
months ended June 30, 1995, reflects the elimination of duplicate Pyramid
corporate expenses of $100 for the period from January 1, 1996 to January 17,
1996, and the elimination of duplicate KYLD-FM corporate expenses of $257,
totalling $357.
(7) Reflects the elimination of merger and equity plan expenses incurred by
Pyramid in connection with the Pyramid Acquisition for the year ended December
31, 1995.
(8) Reflects the adjustment to interest expense in connection with the
consummation of the 1995 Offering, the BPI Acquisition, the Pyramid
Acquisition and the Other Completed Transactions:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Interest expense on $184,000 additional bank
borrowings for the period January 1, 1995 to
May 12, 1995 (the Company borrowed $186,000
on May 12, 1995 and shortly thereafter repaid
$2,000 from available BPI cash) related to
the BPI Acquisition at 7.5%.................. $ 5,175
Less: historical BPI interest expense......... (2,724)
-------
Adjustment for net increase in interest
expense...................................... $ 2,451
=======
Interest expense on $316,500 additional bank
borrowings related to the Pyramid Acquisition
at 7.5% for the twelve months ended December
31, 1995 and 7.25% for the period January 1,
1996 to January 17, 1996..................... $23,738 $1,084
Less: historical Pyramid interest expense..... (9,289) (343)
------- ------
Adjustment for net increase in interest
expense...................................... $14,449 $ 741
======= ======
Interest expense on $12,000 additional bank
borrowings ($44,000 additional bank
borrowings offset by net proceeds of $32,000
received in connection with the Buffalo
Dispositions) related to the KYLD-FM
Acquisition at 7.5% for the twelve months
ended December 31, 1995 and 7.25% for the six
months ended June 30, 1996................... $ 900 $ 435
Less: historical interest expense paid on
escrow funds................................. -- (71)
Less: historical KYLD-FM interest expense..... (2,368) (1,094)
------- ------
Adjustment for net decrease in interest
expense...................................... $(1,468) $ (730)
======= ======
Reduction in interest expense on bank debt
related to the application of the net
proceeds of the 1995 Offering of $132,734 at
7.5% for the period from January 1, 1995 to
July 25, 1995................................ $(5,669)
=======
Total adjustment for net increase in interest
expense...................................... $ 9,763 $ 11
======= ======
</TABLE>
(9) Reflects the elimination of the Pyramid loss on forgiveness of employee
notes receivable of $568 and non-recurring other expenses of $802, totaling
$1,370 for the year ended December 31, 1995. The Pyramid employee notes
receivable were not assumed by the Company.
(10) Reflects income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated effective
tax rate on a pro forma basis to income (loss) before income taxes for
historical and pro forma adjustment amounts. Income tax benefit reflects the
recognition of deferred tax assets to the extent such assets can be realized
through future reversals of existing taxable temporary differences.
<PAGE>
(11) Reflects elimination of preferred stock dividends and accretion to
redemption value of Pyramid preferred stock for the year ended December 31,
1995 as such stock was redeemed in connection with the Pyramid Acquisition.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
RELATED TO THE OFFERING
(12) Reflects the issuance of 8,000,000 shares of Class A Common Stock at an
assumed public offering price of $32.00 per share (the last reported sales
price per share of Class A Common Stock on the Nasdaq National Market on
September 16, 1996) and the application of the estimated net proceeds
therefrom to reduce bank debt as follows:
<TABLE>
<S> <C>
Shares to be issued.............................................. 8,000
Assumed public offering price per share.......................... $ 32.00
========
Gross proceeds to the Company.................................... $256,000
Less estimated underwriting discount and offering expenses....... (12,800)
--------
Estimated net proceeds to the Company used to repay bank debt.... $243,200
========
Increase in additional paid in capital........................... $243,120
========
Increase in Common Stock......................................... $ 80
========
</TABLE>
(13) Reflects the adjustment to interest expense for the repayment of long-
term debt in connection with the consummation of the Offering:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------- ----------------
<S> <C> <C>
Decrease in long-term debt................. $243,200 $243,200
Assumed interest rate...................... 7.5% 7.25%
Decrease in interest expense............... $(18,240) $ (8,816)
</TABLE>
(14) The pro forma combined loss per common share data is computed by
dividing pro forma loss attributable to common stockholders by the weighted
average common shares assumed to be outstanding. The calculation of pro forma
weighted average common shares outstanding for loss per common share excludes
(i) 5,030,455 shares of Class A Common Stock issuable upon conversion of the
Convertible Preferred Stock, which is convertible into Class A Common Stock at
a price of $16.00 per share and which became callable by the Company on August
16, 1996, (ii) 1,521,173 shares of Class A Common Stock that may be issued
from time to time upon the exercise of vested employee and director stock
options having exercise prices ranging from $.01 to $23.33 per share, (iii)
190,500 shares of Class A Common Stock that may be issued from time to time
upon exercise of currently unvested employee and director stock options having
exercise prices ranging from $23.91 to $26.75 per share and (iv) 355,065
shares of Class A Common Stock issuable upon exercise of options authorized
but not yet granted under the Company's employee and director stock option
plans.
A summary of shares used in the pro forma combined loss per common share
calculation follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------- ----------------
<S> <C> <C>
Historical weighted average shares
outstanding.............................. 20,721 28,070
Incremental weighted average shares
relating to the
BPI Acquisition.......................... 2,042
Incremental weighted average shares
relating to the
1995 Offering............................ 5,271
Shares relating to the Offering........... 8,000 8,000
------ ------
Shares used in the pro forma combined
earnings per share calculation........... 36,034 36,070
====== ======
</TABLE>
<PAGE>
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING TRANSACTIONS AND FINANCING TRANSACTION
(15) Reflects the Pending Transactions as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE) IN
PURCHASE PROPERTY AND INTANGIBLE ASSETS, DECREASE IN OTHER LONG-TERM
ACQUISITION PRICE EQUIPMENT, NET(a) NET(b) ASSETS(c) DEBT(d)
----------- -------- ----------------- ------------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
WWWW-FM/WDFN-AM......... $ 30,000 $ 1,173 $ 28,827 $1,500 $ 28,500
WWRC-AM(e).............. 22,500 2,283 20,217 -- 22,500
WEDR-FM................. 65,000 781 64,219 3,000 62,000
WPNT-FM................. 73,750 745 73,005 5,000 68,750
WJLB-FM/WMXD-FM......... 168,000 1,102 166,898 -- 168,000
WFLN-FM................. 37,750 522 37,228 -- 37,750
KKSF-FM/KDFC-FM/AM...... 115,000 2,211 112,789 -- 115,000
WDAS-FM/AM.............. 103,000 2,060 100,940 -- 103,000
WUSL-FM/WIOQ-FM(f)...... -- -- (10,000) -- (10,000)
-------- ------- -------- ------ --------
Total................... $615,000 $10,877 $594,123 $9,500 $595,500
======== ======= ======== ====== ========
</TABLE>
- --------
(a) The Company has assumed that historical balances of net property and
equipment approximate fair value for the preliminary allocation of the
purchase prices. The Company will not assume the working capital accounts
of the acquired stations.
(b) The Company, on a preliminary basis, has allocated the $594,123 of
intangible assets to broadcast licenses, noncompetition agreements and
other identifiable intangible assets. This preliminary allocation and the
estimated average eleven-year life used for pro forma amortization expense
are based on historical information from prior acquisitions. The Company
expects to definitively allocate the purchase price within a reasonable
time after consummation of the Pending Transactions when a more complete
evaluation of the acquired assets and assumed liabilities can be
performed.
(c) Represents funds used to pre-fund a portion of the purchase prices. In the
case of the acquisition of WWWW-FM/WDFN-AM and WEDR-FM the funds were placed
in escrow; in the case of the acquisition of WPNT-FM, the funds were paid to
the seller in exchange for the option to purchase the station. Does not
include a total of $10,500 of escrow deposits made in connection with
certain of the Pending Transactions after June 30, 1996 or a $5,000 letter
of credit issued for the benefit of the seller in connection with the
WDAS-AM/FM Transaction.
(d) The unaudited pro forma condensed combined balance sheet does not reflect
the write-off as an extraordinary item of the unamortized balance of
deferred loan fees of $7,749 at June 30, 1996 and does not reflect an
estimate of the new loan fees to be incurred in connection with the
Financing Transaction because any such adjustments would be immaterial.
(e) The Company has agreed to swap Detroit station WQRS-FM (which the Company
is acquiring for $32,000 from Secret) to Greater Media in exchange for
Washington, D.C. station WWRC-AM and $9,500 in cash. The net purchase
price to the Company of WWRC-AM is therefore $22,500.
(f) The Company has entered into a binding letter of intent to swap five of
its six Charlotte stations for Philadelphia stations WUSL-FM and WIOQ-FM
and to sell its remaining Charlotte station, WNKS-FM, for $10,000 in cash.
The net proceeds of $10,000 are applied to repay long-term debt. In
accordance with generally accepted accounting principles, the historical
asset balances of the Charlotte stations, less the $10,000 sales proceeds,
represent the Company's asset basis in WUSL-FM and WIOQ-FM.
<PAGE>
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED TO THE PENDING TRANSACTIONS AND FINANCING TRANSACTION
(16) The detail of the historical financial data of the stations to be
acquired or disposed of in the Pending Transactions for the year ended
December 31, 1995 and the six months ended June 30, 1996 has been obtained
from the historical financial statements of the respective stations and is
summarized below:
<TABLE>
<CAPTION>
WWWW-FM/ WGAY-FM/ WJLB-FM/ WUSL-FM/ KKSF-FM/ CHARLOTTE
WDFN-AM WWRC-AM WEDR-FM WPNT-FM WMXD-FM WFLN-FM WIOQ-FM KDFC-FM/AM WDAS-FM/AM STATIONS
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-12/31 1/1-12/31 1/1-12/31 1/1-12/31 1/1-12/31 1/1-12/31 1/1-12/31 1/1-12/31 1/1-12/31 1/1-12/31
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TWELVE MONTHS
ENDED DECEMBER
31, 1995
Gross revenues.. $ 8,937 $10,705 $ 9,555 $ 8,806 $21,585 $4,036 $16,599 $13,739 $14,510 $(20,181)
Less: agency
commissions..... (1,041) (1,310) (1,281) (1,206) (2,669) (482) (2,010) (1,773) (1,897) 2,434
------- ------- ------- ------- ------- ------ ------- ------- ------- --------
Net revenues.... 7,896 9,395 8,274 7,600 18,916 3,554 14,589 11,966 12,613 (17,747)
Station
operating
expenses
excluding
depreciation and
amortization.... 7,191 8,518 3,564 6,527 8,308 1,744 9,197 7,087 7,840 (11,150)
Depreciation and
amortization.... 376 410 49 217 2,475 277 1,331 2,283 2,640 (5,633)
Corporate
general and
administrative
expenses........ -- 781 1,454 180 625 975 508 -- 445 --
------- ------- ------- ------- ------- ------ ------- ------- ------- --------
Operating income
(loss).......... 329 (314) 3,207 676 7,508 558 3,553 2,596 1,688 (964)
Interest
expense......... -- -- -- 1,177 1,658 691 3,369 796 52 --
Other (income)
expense......... 36 60 (22) -- -- (216) 5 (53) 25 --
------- ------- ------- ------- ------- ------ ------- ------- ------- --------
Income (loss)
before income
taxes........... 293 (374) 3,229 (501) 5,850 83 179 1,853 1,611 (964)
Income tax
expense
(benefit)....... -- (55) -- -- 186 27 -- -- -- --
------- ------- ------- ------- ------- ------ ------- ------- ------- --------
Net income
(loss).......... $ 293 $ (319) $ 3,229 $ (501) $ 5,664 $ 56 $ 179 $ 1,853 $ 1,611 $ (964)
======= ======= ======= ======= ======= ====== ======= ======= ======= ========
<CAPTION>
WWWW-FM/ WGAY-FM/ WJLB-FM/ WUSL-FM KKSF-FM CHARLOTTE
WDFN-AM WWRC-AM WEDR-FM WPNT-FM WMXD-FM WFLN-FM WIOQ-FM KDFC-FM/AM WDAS-FM/AM STATIONS
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-2/14 1/1-6/16 1/1-6/30 1/1-6/30 1/1-6/30 1/1-6/30 1/1-6/30 1/1-6/30 1/1-6/30 1/1-6/30
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED
JUNE 30, 1996
Gross revenues.. $ 855 $ 3,264 $ 4,852 $ 3,623 $10,887 $1,875 $ 9,045 $ 7,742 $ 7,189 $(11,003)
Less: agency
commissions..... (102) (409) (652) (501) (1,319) (202) (1,056) (979) (981) 1,399
------- ------- ------- ------- ------- ------ ------- ------- ------- --------
Net revenues.... 753 2,855 4,200 3,122 9,568 1,673 7,989 6,763 6,208 (9,604)
Station
operating
expenses
excluding
depreciation and
amortization.... 822 3,493 1,711 3,280 4,170 755 4,677 3,593 3,302 (5,813)
Depreciation and
amortization.... 14 314 18 112 1,211 139 761 1,177 1,308 (4,190)
Corporate
general and
administrative
expenses........ -- 477 885 90 277 488 260 -- 310 --
------- ------- ------- ------- ------- ------ ------- ------- ------- --------
Operating income
(loss).......... (83) (1,429) 1,586 (360) 3,910 291 2,291 1,993 1,288 399
Interest
expense......... -- -- 637 683 -- 1,667 238 25 --
Other (income)
expense......... -- 5 (15) -- -- -- -- (4) 56 --
------- ------- ------- ------- ------- ------ ------- ------- ------- --------
Income (loss)
before income
taxes........... (83) (1,434) 1,601 (997) 3,227 291 624 1,759 1,207 399
Income tax
expense
(benefit)....... -- (453) -- -- 85 -- -- -- -- --
------- ------- ------- ------- ------- ------ ------- ------- ------- --------
Net income
(loss).......... $ (83) $ (981) $ 1,601 $ (997) $ 3,142 $ 291 $ 624 $ 1,759 $ 1,207 $ 399
======= ======= ======= ======= ======= ====== ======= ======= ======= ========
<CAPTION>
TOTAL
PENDING
TRANSACTIONS
1/1-12/31
------------
<S> <C>
TWELVE MONTHS
ENDED DECEMBER
31, 1995
Gross revenues.. $88,291
Less: agency
commissions..... (11,235)
------------
Net revenues.... 77,056
Station
operating
expenses
excluding
depreciation and
amortization.... 48,826
Depreciation and
amortization.... 4,425
Corporate
general and
administrative
expenses........ 4,968
------------
Operating income
(loss).......... 18,837
Interest
expense......... 7,743
Other (income)
expense......... (165)
------------
Income (loss)
before income
taxes........... 11,259
Income tax
expense
(benefit)....... 158
------------
Net income
(loss).......... $11,101
============
<CAPTION>
TOTAL
PENDING
TRANSACTIONS
1/1-6/30
------------
<S> <C>
SIX MONTHS ENDED
JUNE 30, 1996
Gross revenues.. $38,329
Less: agency
commissions..... (4,802)
------------
Net revenues.... 33,527
Station
operating
expenses
excluding
depreciation and
amortization.... 19,990
Depreciation and
amortization.... 864
Corporate
general and
administrative
expenses........ 2,787
------------
Operating income
(loss).......... 9,886
Interest
expense......... 3,250
Other (income)
expense......... 42
------------
Income (loss)
before income
taxes........... 6,594
Income tax
expense
(benefit)....... (368)
------------
Net income
(loss).......... $ 6,962
============
</TABLE>
<PAGE>
(17) Reflects incremental amortization related to the Pending Transactions
and is based on the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Amortization expense on $594,123 additional
intangible assets amortized on a straight-line
basis over a weighted average period of 11
years......................................... $54,011 $27,006
Less: historical amortization expense of the
stations being acquired in the Pending
Transactions................................... (8,150) (4,102)
------- -------
Adjustment for net increase in amortization
expense....................................... $45,861 $22,904
======= =======
</TABLE>
Historical depreciation expense of the stations to be acquired in the
Pending Transactions is assumed to approximate depreciation expense on a pro
forma basis. Actual amortization and depreciation expense may differ based
upon the final allocation of the total consideration.
(18) Reflects the elimination of duplicate corporate expenses related to the
Pending Transactions.
(19) Reflects the adjustment to interest expense for additional borrowings
in connection with the consummation of the Pending Transactions (without giving
effect to the adjustment in note 20):
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Interest expense on $605,000 additional bank
debt borrowing (615,000 additional bank
borrowings offset by expected net proceeds of
$10,000 related to the Philadelphia/Charlotte
Transaction) at 7.5% for the twelve months
ended December 31, 1995 and 7.25% for the six
months ended June 30, 1996.................... $45,375 $21,931
Less: historical interest expense of the
stations being acquired in the Pending
Transactions.................................. (7,743) (3,250)
------- -------
Adjustment for net increase in interest
expense....................................... $37,632 $18,681
======= =======
</TABLE>
(20) Reflects the adjustment to interest expense in connection with the
purchase of WKLB-FM and its subsequent exchange for WGAY-FM:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Interest expense on $33,000 of bank borrowings
at 7.5% for the twelve months ended December
31, 1995 and 7.25% for the six months ended
June 30, 1996................................. $2,475 $1,196
Less: historical interest expense (May 1,
1996--June 30, 1996).......................... -- (399)
------ ------
Adjustment for net increase in interest
expense....................................... $2,475 $ 797
====== ======
</TABLE>
