<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): January 13, 1998
<TABLE>
<C> <C>
CHANCELLOR MEDIA CORPORATION CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(Exact Name of Registrant as (Exact Name of Registrant as
Specified in Charter) Specified in Charter)
000-21570 333-32259
(Commission File No.) (Commission File No.)
75-2247099 75-2451687
(IRS Employer (IRS Employer
Identification No.) Identification No.)
DELAWARE DELAWARE
(State or Other Jurisdiction (State or Other Jurisdiction
of Incorporation) of Incorporation)
</TABLE>
433 EAST LAS COLINAS BOULEVARD
SUITE 1130
IRVING, TEXAS 75039
(Address of Principal
Executive Offices
(972) 869-9020
(Registrant's telephone
number, including area code)
================================================================================
<PAGE> 2
ITEM 5. OTHER EVENTS
On January 13, 1998, Chancellor Media Corporation ("Chancellor Media") and
its wholly-owned subsidiary, Chancellor Media Corporation of Los Angeles
("CMCLA"), completed the Unaudited Pro Forma Financial Statements which are
filed with this Current Report on Form 8-K. Chancellor Media and CMCLA deem the
Unaudited Pro Forma Financial Statements to be of importance to its security
holders.
The following Unaudited Pro Forma Financial Statements are filed with this
report:
<TABLE>
<S> <C>
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES:
Unaudited Pro Forma Condensed Combined Balance Sheet at
September 30, 1997..................................... A-2
Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1996........ A-3
Unaudited Pro Forma Condensed Combined Statement of
Operations for the nine months ended September 30,
1997................................................... A-4
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements............................................. A-5
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND
SUBSIDIARIES:
Unaudited Pro Forma Condensed Combined Balance Sheet at
September 30, 1997..................................... B-2
Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1996........ B-3
Unaudited Pro Forma Condensed Combined Statement of
Operations for the nine months ended September 30,
1997................................................... B-4
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements............................................. B-5
</TABLE>
1
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
of the registrants has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
<S> <C>
CHANCELLOR MEDIA CORPORATION CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By: /s/ MATTHEW E. DEVINE By: /s/ MATTHEW E. DEVINE
------------------------------------------------- -------------------------------------------------
Matthew E. Devine Matthew E. Devine
Chief Financial Officer Chief Financial Officer
</TABLE>
Date: January 13, 1998
2
<PAGE> 4
CHANCELLOR MEDIA CORPORATION
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements of
Chancellor Media Corporation ("Chancellor Media" and, together with its
subsidiaries, the "Company") are presented using the purchase method of
accounting for all acquisitions and reflect (i) the combination of consolidated
historical financial data of the Company, each of the stations acquired by the
Company in the transactions completed by the Company (the "Completed
Transactions") and each of the stations to be acquired by the Company in the
transactions of the Company pending as of the date hereof (the "Pending
Transactions") and (ii) the elimination of the consolidated historical data of
the stations disposed in the Completed Transactions and stations to be disposed
in the Pending Transactions. The unaudited pro forma condensed combined balance
sheet data at September 30, 1997 presents adjustments for those Completed
Transactions consummated since such date, the Pending Transactions and the
offering by Chancellor Media Corporation of Los Angeles ("CMCLA"), Chancellor
Media's wholly-owned subsidiary, of $500.0 million aggregate principal amount of
8 1/8% Senior Subordinated Notes due 2007, which was completed on December 22,
1997 (the "Offering"), as if each such transaction had occurred at September 30,
1997. The unaudited pro forma condensed combined statements of operations data
for the twelve months ended December 31, 1996 and the nine months ended
September 30, 1997 present adjustments for the Completed Transactions, the
Pending Transactions, certain other financing transactions undertaken during
1997 (the "Financing Transactions"), certain financing transactions undertaken
during 1996, and the Offering and the application of the net proceeds therefrom,
as if each such transaction occurred on January 1, 1996.
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 the assets acquired and to be acquired in the Completed Transactions and the
Pending Transactions have been allocated based primarily on information
furnished by management of the acquired assets. The final allocation of the
respective purchase prices of the assets acquired and to be acquired in the
Completed Transactions and the Pending Transactions are determined a reasonable
time after consummation of such transactions and are 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; however, such allocations are not expected to differ materially from
the preliminary amounts.
In the opinion of the Company's 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 which have been previously reported. 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 achieved had the transactions reflected
therein been consummated as of the dates indicated, or of the results of
operations or financial positions for any future periods or dates.
A-1
<PAGE> 5
CHANCELLOR MEDIA CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PRO FORMA
PRO FORMA AS ADJUSTED ADJUSTMENTS
COMPANY ADJUSTMENTS FOR THE FOR THE COMPANY
HISTORICAL FOR COMPLETED COMPLETED PENDING PRO FORMA
AT 9/30/97 TRANSACTIONS TRANSACTIONS TRANSACTIONS COMBINED
---------- ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets................................... $ 210,544 $ 58,542(1) $ 269,086 $ -- $ 269,086
Property and equipment, net...................... 136,405 24,098(1) 160,503 4,176(3) 164,679
Intangible assets, net........................... 3,828,014 691,953(1) 4,519,967 92,824(3) 4,612,791(4)
Other assets..................................... 38,413 26,761(1) 71,824 (4,650)(3) 67,174
(8,350)(1)
15,000(2)
---------- -------- ---------- ------- ----------
Total assets................................... $4,213,376 $808,004 $5,021,380 $92,350 $5,113,730
========== ======== ========== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities......................................
Current liabilities.............................. $ 86,739 $ 46,880(1) $ 133,619 $ -- $ 133,619
Long-term debt, excluding current portion........ 1,857,000 714,373(1) 2,586,373 92,350(3) 2,678,723
500,000(2)
(485,000)(2)
Deferred tax liabilities (assets)................ 421,408 (16,921)(1) 404,487 -- 404,487
Other liabilities................................ 997 48,672(1) 49,669 -- 49,669
---------- -------- ---------- ------- ----------
Total liabilities.............................. 2,366,144 808,004 3,174,148 92,350 3,266,498
Redeemable preferred stock....................... 449,614 -- 449,614 -- 449,614
STOCKHOLDERS' EQUITY:
Preferred stock.................................. 299,500 -- 299,500 -- 299,500
Common stock..................................... 596 -- 596 -- 596
Additional paid in capital....................... 1,223,273 -- 1,223,273 -- 1,223,273
Accumulated deficit.............................. (125,751) -- (125,751) -- (125,751)
---------- -------- ---------- ------- ----------
Total stockholders' equity..................... 1,397,618 -- 1,397,618 -- 1,397,618
---------- -------- ---------- ------- ----------
Total liabilities and stockholders' equity..... $4,213,376 $808,004 $5,021,380 $92,350 $5,113,730
========== ======== ========== ======= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
A-2
<PAGE> 6
CHANCELLOR MEDIA CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMPANY
ADJUSTMENTS AS ADJUSTED
COMPLETED FOR THE FOR THE PENDING
COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996 HISTORICAL HISTORICAL(5) TRANSACTIONS TRANSACTIONS HISTORICAL(14)
---------------------------- ---------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Gross revenues............................... $337,405 $662,800 $ (15,964)(6) $ 984,241 $30,022
Less: agency commissions..................... (43,555) (64,874) -- (108,429) (5,395)
-------- -------- --------- --------- -------
Net revenues................................. 293,850 597,926 (15,964) 875,812 24,627
Station operating expenses excluding
depreciation and amortization.............. 174,344 375,802 (15,964)(6) 524,147 13,718
(10,035)(7)
Depreciation and amortization................ 93,749 68,856 190,750(8) 353,355 1,818
Corporate general and administrative
expenses................................... 7,797 11,440 10,035(7) 22,925 1,024
(6,347)(10)
Stock option compensation.................... -- 3,800 -- 3,800 --
-------- -------- --------- --------- -------
Operating income (loss)...................... 17,960 138,028 (184,403) (28,415) 8,067
Interest expense............................. 37,527 110,081 50,445(11) 198,053 (367)
Other (income) expense....................... (477) (795) -- (1,272) (48)
-------- -------- --------- --------- -------
Income (loss) before income taxes............ (19,090) 28,742 (234,848) (225,196) 8,482
Income tax expense (benefit)................. (2,896) 9,883 (64,199)(12) (57,212) --
Dividends and accretion on preferred stock of
subsidiary................................. -- 38,400 -- 38,400 --
-------- -------- --------- --------- -------
Net income (loss)............................ (16,194) (19,541) (170,649) (206,384) 8,482
Preferred stock dividends.................... 3,820 7,700 14,150(13) 25,670 --
-------- -------- --------- --------- -------
Income (loss) attributable to common
stockholders............................... $(20,014) $(27,241) $(184,799) $(232,054) $ 8,482
======== ======== ========= ========= =======
Income (loss) per common share............... $ (0.33)
========
Weighted average common shares
outstanding(19)............................ 60,414 58,513
======== =========
Broadcast cash flow.......................... $119,506 $222,124 $ 10,035 $ 351,665 $10,909
======== ======== ========= ========= =======
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE COMPANY
PENDING PRO FORMA
YEAR ENDED DECEMBER 31, 1996 TRANSACTIONS COMBINED
---------------------------- ------------ ----------
<S> <C> <C>
Gross revenues............................... $(1,963)(15) $1,012,300
Less: agency commissions..................... -- (113,824)
------- ----------
Net revenues................................. (1,963) 898,476
Station operating expenses excluding
depreciation and amortization.............. (4,000)(15) 533,865
Depreciation and amortization................ 4,231(16) 359,404
Corporate general and administrative
expenses................................... -- 23,949
Stock option compensation.................... -- 3,800
------- ----------
Operating income (loss)...................... (2,194) (22,542)
Interest expense............................. 6,465(17) 204,151
Other (income) expense....................... -- (1,320)
------- ----------
Income (loss) before income taxes............ (8,659) (225,373)
Income tax expense (benefit)................. (62)(18) (57,274)
Dividends and accretion on preferred stock of
subsidiary................................. -- 38,400
------- ----------
Net income (loss)............................ (8,597) (206,499)
Preferred stock dividends.................... -- 25,670
------- ----------
Income (loss) attributable to common
stockholders............................... $(8,597) $ (232,169)
======= ==========
Income (loss) per common share............... $ (1.95)
==========
Weighted average common shares
outstanding(19)............................ 118,927
==========
Broadcast cash flow.......................... $ 2,037 $ 364,611
======= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
A-3
<PAGE> 7
CHANCELLOR MEDIA CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMPANY
ADJUSTMENTS AS ADJUSTED
COMPLETED FOR THE FOR THE PENDING
COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 HISTORICAL HISTORICAL(5) TRANSACTIONS TRANSACTIONS HISTORICAL(14)
------------------------------------ ---------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Gross revenues............................... $382,994 $447,178 $ (15,119)(6) $ 815,053 $ 4,436
Less: agency commissions..................... (49,711) (41,306) -- (91,017) (1,364)
-------- -------- --------- --------- -------
Net revenues................................. 333,283 405,872 (15,119) 724,036 3,072
Station operating expenses excluding
depreciation and amortization.............. 184,713 255,874 (15,119)(6) 417,297 6,783
(8,171)(7)
Depreciation and amortization................ 104,386 29,870 117,885(8) 252,141 (602)
Corporate general and administrative
expenses................................... 11,646 8,133 8,171(7) 26,108 --
(1,842)(10)
Merger expense............................... -- 6,124 (6,124)(9) -- --
Restructuring charge......................... -- 7,095 -- 7,095 --
Stock option compensation.................... -- 3,083 -- 3,083 --
-------- -------- --------- --------- -------
Operating income (loss)...................... 32,538 95,693 (109,919) 18,312 (3,109)
Interest expense............................. 45,036 73,368 43,988(11) 162,392 --
Other (income) expense....................... (18,380) 128 -- (18,252) (68)
-------- -------- --------- --------- -------
Income (loss) before income taxes............ 5,882 22,197 (153,907) (125,828) (3,041)
Income tax expense (benefit)................. 5,244 7,086 (40,165)(12) (27,835) --
Dividends and accretion on preferred stock of
subsidiary................................. 2,779 27,321 -- 30,100 --
-------- -------- --------- --------- -------
Net income (loss)............................ (2,141) (12,210) (113,742) (128,093) (3,041)
Preferred stock dividends.................... 5,748 5,281 8,287(13) 19,316 --
-------- -------- --------- --------- -------
Income (loss) attributable to common
stockholders............................... $ (7,889) $(17,491) $(122,029) $(147,409) $(3,041)
Income (loss) per common share............... $ (0.09)
========
Weighted average common shares
outstanding(19)............................ 87,690 31,412
======== =========
Broadcast cash flow.......................... $148,570 $149,998 $ 8,171 $ 306,739 $(3,711)
======== ======== ========= ========= =======
<CAPTION>
COMPANY AS
PRO FORMA ADJUSTED FOR
ADJUSTMENTS THE
FOR THE COMPLETED
PENDING AND PENDING
NINE MONTHS ENDED SEPTEMBER 30, 1997 TRANSACTIONS TRANSACTIONS
------------------------------------ ------------ ------------
<S> <C> <C>
Gross revenues............................... $ (2,711)(15) $ 816,778
Less: agency commissions..................... -- (92,381)
-------- ---------
Net revenues................................. (2,711) 724,397
Station operating expenses excluding
depreciation and amortization.............. (3,201)(15) 420,879
Depreciation and amortization................ 3,441(16) 254,980
Corporate general and administrative
expenses................................... -- 26,108
Merger expense............................... -- --
Restructuring charge......................... -- 7,095
Stock option compensation.................... -- 3,083
-------- ---------
Operating income (loss)...................... (2,951) 12,252
Interest expense............................. 4,849(17) 167,241
Other (income) expense....................... -- (18,320)
-------- ---------
Income (loss) before income taxes............ (7,800) (136,669)
Income tax expense (benefit)................. (3,794)(18) (31,629)
Dividends and accretion on preferred stock of
subsidiary................................. -- 30,100
-------- ---------
Net income (loss)............................ (4,006) (135,140)
Preferred stock dividends.................... -- 19,316
-------- ---------
Income (loss) attributable to common
stockholders............................... $ (4,006) $(154,456)
Income (loss) per common share............... $ (1.30)
=========
Weighted average common shares
outstanding(19)............................ 119,102
=========
Broadcast cash flow.......................... $ 490 $ 303,518
======== =========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
A-4
<PAGE> 8
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE COMPLETED TRANSACTIONS COMPLETED AFTER SEPTEMBER 30, 1997
(1) Reflects the Completed Transactions that were completed after September 30,
1997 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
-----------------------------------------------------------------------------------------------------
PURCHASE PROPERTY AND INTANGIBLE DEFERRED
PRICE/(SALES CURRENT EQUIPMENT, ASSETS, OTHER CURRENT TAX OTHER
COMPLETED TRANSACTIONS PRICE) ASSETS NET(a) NET(a) ASSETS LIABILITIES ASSET LIABILITIES
- ----------------------- ------------ -------- ------------ ---------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chicago/Dallas
Exchange(b).......... $ 3,500 $ -- $ 4,084 $ (584) $ -- $ -- $ -- $ --
Katz Acquisition(c).... 379,223 58,542 14,770 357,781 26,761 (46,880) 16,921 (48,672)
Gannett
Acquisition(d)....... 340,000 -- 5,244 334,756 -- -- -- --
-------- ------- ------- -------- ------- -------- ------- --------
Total............ $722,723 $58,542 $24,098 $691,953 $26,761 $(46,880) $16,921 $(48,672)
======== ======= ======= ======== ======= ======== ======= ========
<CAPTION>
FINANCING
--------------------------
(INCREASE) INCREASE
DECREASE (DECREASE) IN
IN OTHER LONG-TERM
COMPLETED TRANSACTIONS ASSETS DEBT
- ----------------------- ---------- -------------
<S> <C> <C>
Chicago/Dallas
Exchange(b).......... $8,350 $ (4,850)
Katz Acquisition(c).... -- 379,223
Gannett
Acquisition(d)....... -- 340,000
------ --------
Total............ $8,350 $714,373
====== ========
</TABLE>
- ---------------
(a) The Company has assumed that historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based primarily on information provided
by the management of Katz Media Group, Inc. ("KMG") and by the management of
the respective stations acquired. The Company, on a preliminary basis, has
allocated the $357,781 of intangible assets related to the Katz Acquisition
(as defined) to representation contracts and goodwill. This preliminary
allocation is based upon information provided by the management of KMG.
(b) On October 7, 1997, the Company acquired, in the Bonneville Acquisition,
KZPS-FM and KDGE-FM in Dallas for $83,500 in cash. On July 14, 1997, the
Company completed the disposition of WLUP-FM in Chicago to Bonneville
International Corporation ("Bonneville") and placed $80,000 in a trust
pending the completion of the deferred exchange of WLUP-FM in Chicago for
KZPS-FM and KDGE-FM in Dallas (the "Chicago/Dallas Exchange"). The
Chicago/Dallas Exchange was accounted for as a like-kind exchange and no
gain or loss was recognized upon consummation of the exchange. The decrease
in long-term debt of $4,850 represents the refund of $8,350 in escrow funds
previously paid by the Company on June 29, 1997 and classified as other
assets at September 30, 1997 less $3,500 in cash boot paid to Bonneville.
(c) On October 28, 1997, the Company acquired KMG, a full service media
representation firm, in a tender offer transaction for a total purchase
price of approximately $379,223 (the "Katz Acquisition") which included (i)
the conversion of each outstanding share of KMG Common Stock into the right
to receive $11.00 in cash, resulting in total cash payments of $149,601,
(ii) the assumption of long-term debt of KMG and its subsidiaries of
$222,122 which includes borrowings outstanding under the senior credit
facility of KMG and its subsidiaries of $115,122 and $100,000 of 10 1/2%
Senior Subordinated Notes due 2007 of Katz Media Corporation (the "10 1/2%
Notes") and (iii) estimated acquisition costs of $7,500.
(d) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5
radio stations in 3 major markets from Pacific & Southern Co. ("P&S"), a
subsidiary of Gannett Co., including WGCI-FM/AM in Chicago, KHKS-FM in
Dallas, and KKBQ-FM/AM in Houston, for $340,000 in cash.
(2) Reflects the estimated proceeds of $485,000 received on December 22, 1997
from the issuance of $500,000 of CMCLA's 8 1/8% Senior Subordinated Notes
due 2007 (the "8 1/8% Notes"), net of deferred debt issuance costs of
$15,000. The net proceeds of the Offering were used to reduce bank
borrowings under the Senior Credit Facility (as defined).
A-5
<PAGE> 9
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING TRANSACTIONS
(3) Reflects the Pending Transactions as follows:
<TABLE>
<CAPTION>
PROPERTY AND INCREASE IN
PURCHASE EQUIPMENT, INTANGIBLE DECREASE IN LONG-TERM
PENDING TRANSACTIONS PRICE NET(A) ASSETS, NET(A) OTHER ASSETS DEBT
-------------------- -------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
SFX Exchange(b).............................. $11,000 $1,680 $ 9,320 $ -- $11,000
Denver Acquisition(c)........................ 26,000 446 25,554 1,650 24,350
Bonneville Option(d)......................... 60,000 2,050 57,950 3,000 57,000
------- ------ ------- ------ -------
Total................................ $97,000 $4,176 $92,824 $4,650 $92,350
======= ====== ======= ====== =======
</TABLE>
- ---------------
(a) The Company has assumed that historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based primarily on information provided
by management of the respective stations to be acquired in the Pending
Transactions. The Company, on a preliminary basis, has allocated the $92,824
of intangible assets related to the Pending Transactions to broadcast
licenses. This preliminary allocation is based on historical information
from prior acquisitions.
(b) On July 1, 1996, Chancellor Broadcasting Company ("Chancellor") entered into
an agreement to exchange, in the SFX Exchange, WAPE-FM and WFYV-FM in
Jacksonville, Florida (which were acquired as part of the Omni Acquisition
(as defined) on February 13, 1997, see 5(k)(v) below), and $11,000 in cash
to SFX Broadcasting, Inc. ("SFX") for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM
in Long Island. The amounts allocated to net property and equipment and net
intangible assets (consisting of broadcast licenses) are based upon
preliminary appraisals of the assets to be acquired.
(c) On July 30, 1997, Chancellor entered into an agreement to acquire, in the
Denver Acquisition, KXPK-FM in Denver from Evergreen Wireless LLC (which is
unrelated to the Company) for $26,000 in cash and paid $1,650 in escrow
funds which were classified as other assets at September 30, 1997.
(d) On August 6, 1997, the Company and Chancellor paid $3,000 to Bonneville for
an option to exchange the Company's station WTOP-AM in Washington and
Chancellor's stations KZLA-FM in Los Angeles and WGMS-FM in Washington plus
an additional $57,000 in cash for Bonneville's stations WNSR-FM in New York,
KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The
Bonneville Option was exercised on October 1, 1997.
ALLOCATION OF COMPANY PRO FORMA COMBINED INTANGIBLE ASSETS
(4) The Company Pro Forma Combined intangible assets of $4,612,791 consists of
the following at September 30, 1997:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-----------
<S> <C> <C>
Broadcast licenses......................................... 15-40 $3,656,866
Goodwill................................................... 15-40 714,892
Representation contracts................................... 17 105,000
Other intangibles.......................................... 1-40 388,266
----------
$4,865,024
Less: accumulated amortization............................. (252,233)
----------
Net intangible assets...................................... $4,612,791
==========
</TABLE>
The Company discloses broadcast license value separately from goodwill and
amortizes such intangible assets over an estimated average life of 15 years,
whereas Chancellor grouped all broadcast license value with goodwill and
amortized such intangibles assets over an estimated average life of 40 years. In
connection with the application of purchase accounting for the Chancellor Merger
(as defined), broadcast license value and
A-6
<PAGE> 10
goodwill have been separately identified and disclosed and amortized over an
estimated average life of 15 years in accordance with the Company's policies and
procedures. The intangible assets have been treated in a consistent manner for
the Company in the Unaudited Combined Condensed Pro Forma Financial Statements
and, upon the consummation of the Chancellor Merger, have been accounted for
similarly in the Company's financial statements.
The Company amortizes such intangible assets using the straight-line method
over estimated useful lives ranging from 1 to 40 years. The Company continually
evaluates the propriety of the carrying amount of goodwill and other intangible
assets as well as the amortization period to determine whether current events or
circumstances warrant adjustments to the carrying value and/or revised estimates
of useful lives. This evaluation consists of the projection of undiscounted
operating income before depreciation, amortization, nonrecurring charges and
interest for each of the Company's radio stations over the remaining
amortization periods of the related intangible assets. The projections are based
on a historical trend line of actual results since the acquisitions of the
respective stations adjusted for expected changes in operating results. To the
extent such projections indicate that undiscounted operating income is not
expected to be adequate to recover the carrying amounts of the related
intangible assets, such carrying amounts would be written down by charges to
expense.
A-7
<PAGE> 11
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE COMPLETED TRANSACTIONS
(5) The detail of the historical financial data of the stations to be acquired
or disposed of in the Completed Transactions for the year ended December 31,
1996 and the nine months ended September 30, 1997 has been obtained from the
historical financial statements of the respective stations and is summarized
below:
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------------------------------------------------------------
WWRC-AM WWWW-FM/ KKSF-FM/
PYRAMID KYLD-FM WGAY-FM WEDR-FM WDFN-AM KDFC-FM/AM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-1/17(a) 1/1-4/30(b) 1/1-6/17(c) 1/1-10/18(d) 1/1-2/14(e) 1/1-10/31(f)
----------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $2,144 $ 2,308 $ 3,264 $ 7,933 $ 839 $13,646
Less: agency commissions........... (216) (363) (409) (1,066) (102) (1,746)
------ ------- ------- ------- ----- -------
Net revenues....................... 1,928 1,945 2,855 6,867 737 11,900
Station operating expenses
excluding depreciation and
amortization..................... 1,489 1,885 3,493 2,933 815 6,358
Depreciation and amortization...... 502 749 314 29 45 2,351
Corporate general and
administrative expenses.......... 123 256 477 1,401 -- --
Stock option compensation.......... -- -- -- -- -- --
------ ------- ------- ------- ----- -------
Operating income (loss)............ (186) (945) (1,429) 2,504 (123) 3,191
Interest expense................... 343 1,094 -- -- -- 429
Other (income) expense............. (5) (97) 5 (15) -- (48)
------ ------- ------- ------- ----- -------
Income (loss) before income
taxes............................ (524) (1,942) (1,434) 2,519 (123) 2,810
Income tax expense (benefit)....... -- -- (453) -- -- --
Dividends and accretion on
preferred stock of subsidiary.... -- -- -- -- -- --
------ ------- ------- ------- ----- -------
Net income (loss).................. (524) (1,942) (981) 2,519 (123) 2,810
Preferred stock dividends.......... -- -- -- -- -- --
------ ------- ------- ------- ----- -------
Income (loss) attributable to
common stockholders.............. $ (524) $(1,942) $ (981) $ 2,519 $(123) $ 2,810
====== ======= ======= ======= ===== =======
Broadcast cash flow................ $ 439 $ 60 $ (638) $ 3,934 $ (78) $ 5,542
====== ======= ======= ======= ===== =======
<CAPTION>
ACQUISITIONS
---------------------------------------------------------------------------------------
CHANCELLOR AS
EVERGREEN ADJUSTED FOR
WJLB-FM/ WUSL-FM VIACOM COMPLETED KZPS-FM/
WMXD-FM WDAS-FM/AM WIOQ-FM ACQUISITION CHANCELLOR KDGE-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL
1/1-8/31(g) 1/1-12/31(h) 1/1-12/31(i) 1/1-12/31(j) 1/1-12/31(k) 1/1-12/31(l)
----------- ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $15,408 $16,809 $20,152 $ 66,726 $328,522 $12,174
Less: agency commissions........... (1,881) (2,142) (2,369) (10,493) (43,553) (1,758)
------- ------- ------- -------- -------- -------
Net revenues....................... 13,527 14,667 17,783 56,233 284,969 10,416
Station operating expenses
excluding depreciation and
amortization..................... 5,721 7,759 9,519 26,598 172,729 8,585
Depreciation and amortization...... 2,415 2,763 -- 6,267 46,909 475
Corporate general and
administrative expenses.......... 1,005 620 533 1,617 5,657 --
Stock option compensation.......... -- -- -- -- 3,800 --
------- ------- ------- -------- -------- -------
Operating income (loss)............ 4,386 3,525 7,731 21,751 55,874 1,356
Interest expense................... 1,406 79 3,001 -- 82,655 --
Other (income) expense............. -- (39) 58 (741) (148) 408
------- ------- ------- -------- -------- -------
Income (loss) before income
taxes............................ 2,980 3,485 4,672 22,492 (26,633) 948
Income tax expense (benefit)....... 180 -- -- 10,612 (6,653) --
Dividends and accretion on
preferred stock of subsidiary.... -- -- -- -- 38,400 --
------- ------- ------- -------- -------- -------
Net income (loss).................. 2,800 3,485 4,672 11,880 (58,380) 948
Preferred stock dividends.......... -- -- -- -- 7,700 --
------- ------- ------- -------- -------- -------
Income (loss) attributable to
common stockholders.............. $ 2,800 $ 3,485 $ 4,672 $ 11,880 $(66,080) $ 948
======= ======= ======= ======== ======== =======
Broadcast cash flow................ $7,806 $ 6,908 $ 8,264 $ 29,635 $112,240 $ 1,831
======= ======= ======= ======== ======== =======
<CAPTION>
ACQUISITIONS
---------------------------
KATZ GANNETT
ACQUISITION ACQUISITION
HISTORICAL HISTORICAL
1/1-12/31(m) 1/1-12/31(n)
------------ ------------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $183,239 $52,028
Less: agency commissions........... -- (6,819)
-------- -------
Net revenues....................... 183,239 45,209
Station operating expenses
excluding depreciation and
amortization..................... 139,158 25,031
Depreciation and amortization...... 13,427 1,760
Corporate general and
administrative expenses.......... -- --
Stock option compensation.......... -- --
-------- -------
Operating income (loss)............ 30,654 18,418
Interest expense................... 21,074 --
Other (income) expense............. (173) --
-------- -------
Income (loss) before income
taxes............................ 9,753 18,418
Income tax expense (benefit)....... 7,381 --
Dividends and accretion on
preferred stock of subsidiary.... -- --
-------- -------
Net income (loss).................. 2,372 18,418
Preferred stock dividends.......... -- --
-------- -------
Income (loss) attributable to
common stockholders.............. $ 2,372 $18,418
======== =======
Broadcast cash flow................ $ 44,081 $20,178
======== =======
</TABLE>
A-8
<PAGE> 12
<TABLE>
<CAPTION>
DISPOSITIONS
----------------------------------------------------------------------------------------
WPEG-FM
WBAV-FM/AM
WRFX-FM SAN FRANCISCO
WFNZ-FM WNKS-FM WEJM-FM/AM WJZW-FM FREQUENCY KDFC-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-12/31(I) 1/1-12/31(O) 1/1-12/31(P) 1/1-12/31(Q) 1/1-12/31(R) 1/1-12/31(S)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $(20,818) $ (3,303) $(2,690) $(8,443) $(2,736) $(5,138)
Less: agency commissions........... 2,733 337 293 1,311 358 643
-------- -------- ------- ------- ------- -------
Net revenues....................... (18,085) (2,966) (2,397) (7,132) (2,378) (4,495)
Station operating expenses
excluding depreciation and
amortization..................... (9,509) (2,461) (2,217) (3,998) (3,159) (2,300)
Depreciation and amortization...... -- (548) (1,719) (589) (3,826) (853)
Corporate general and
administrative expenses.......... -- -- -- (206) -- --
Stock option compensation.......... -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Operating income (loss)............ (8,576) 43 1,539 (2,339) 4,607 (1,342)
Interest expense................... -- -- -- -- -- --
Other (income) expense............. -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Income (loss) before income
taxes............................ (8,576) 43 1,539 (2,339) 4,607 (1,342)
Income tax expense (benefit)....... -- -- -- (913) -- --
Dividends and accretion on
preferred stock of subsidiary.... -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Net income (loss).................. (8,576) 43 1,539 (1,426) 4,607 (1,342)
Preferred stock dividends.......... -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Income (loss) attributable to
common stock..................... $ (8,576) $ 43 $ 1,539 $(1,426) $ 4,607 $(1,342)
======== ======== ======= ======= ======= =======
Broadcast cash flow................ $ (8,576) $ (505) $ (180) $(3,134) $ 781 $(2,195)
======== ======== ======= ======= ======= =======
<CAPTION>
DISPOSITIONS
---------------------------
WBZS-AM
WZHF-AM
KDFC-AM WLUP-FM COMPLETED
HISTORICAL HISTORICAL TRANSACTIONS
1/1-12/31(T) 1/1-12/31(L) HISTORICAL
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $(2,240) $(17,024) $662,800
Less: agency commissions........... 36 2,332 (64,874)
------- -------- --------
Net revenues....................... (2,204) (14,692) 597,926
Station operating expenses
excluding depreciation and
amortization..................... (930) (11,697) 375,802
Depreciation and amortization...... (30) (1,585) 68,856
Corporate general and
administrative expenses.......... (43) -- 11,440
Stock option compensation.......... -- -- 3,800
------- -------- --------
Operating income (loss)............ (1,201) (1,410) 138,028
Interest expense................... -- -- 110,081
Other (income) expense............. -- -- (795)
------- -------- --------
Income (loss) before income
taxes............................ (1,201) (1,410) 28,742
Income tax expense (benefit)....... (271) -- 9,883
Dividends and accretion on
preferred stock of subsidiary.... -- -- 38,400
------- -------- --------
Net income (loss).................. (930) (1,410) (19,541)
Preferred stock dividends.......... -- -- 7,700
------- -------- --------
Income (loss) attributable to
common stock..................... $ (930) $ (1,410) $(27,241)
======= ======== ========
Broadcast cash flow................ $(1,274) $ (2,995) $222,124
======= ======== ========
</TABLE>
A-9
<PAGE> 13
<TABLE>
<CAPTION>
ACQUISITIONS
---------------------------------------------------------------------
CHANCELLOR AS
ADJUSTED FOR EVERGREEN
WUSL-FM COMPLETED VIACOM KZPS-FM/
WDAS-FM/AM WIOQ-FM CHANCELLOR ACQUISITION KDGE-FM
NINE MONTHS ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL
SEPTEMBER 30, 1997 1/1-4/30(h) 1/1-5/15(i) 1/1-9/5(k) 1/1-7/2(j) 1/1-7/31(l)
------------------ ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross revenues................ $5,028 $7,088 $244,192 $38,972 $ 7,616
Less: agency
commissions.................. (680) (829) (30,754) (5,470) (929)
------ ------ -------- ------- -------
Net revenues.................. 4,348 6,259 213,438 33,502 6,687
Station operating expenses
excluding depreciation and
amortization................. 2,533 3,649 122,529 14,936 5,293
Depreciation and
amortization................. 875 -- 30,505 2,279 280
Corporate general and
administrative
expenses..................... 172 141 7,226 682 --
Merger expense................ -- -- 6,124 -- --
Restructuring charge.......... -- -- -- -- --
Stock option
compensation................. -- -- 3,083 -- --
------ ------ -------- ------- -------
Operating income (loss)....... 768 2,469 43,971 15,605 1,114
Interest expense.............. 19 990 56,382 -- --
Other (income) expense........ 863 -- (584) -- 12
------ ------ -------- ------- -------
Income (loss) before income
taxes........................ (114) 1,479 (11,827) 15,605 1,102
Income tax expense
(benefit).................... -- -- (1,731) 5,892 --
Dividends and accretion on
preferred stock of
subsidiary................... -- -- 27,321 -- --
------ ------ -------- ------- -------
Net income (loss)............. (114) 1,479 (37,417) 9,713 1,102
Preferred stock
dividends.................... -- -- 5,281 -- --
------ ------ -------- ------- -------
Income (loss) attributable to
common stockholders.......... $ (114) $1,479 $(42,698) $ 9,713 $ 1,102
====== ====== ======== ======= =======
Broadcast cash flow........... $1,815 $2,610 $ 90,909 $18,566 $ 1,394
====== ====== ======== ======= =======
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------- ------------------------------------------------------
WPEG-FM
WBAV-FM/AM
KATZ GANNETT WRFX-FM WEJM-
ACQUISITION ACQUISITION WFNZ-FM WNKS-FM WPNT-FM FM/AM
NINE MONTHS ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
SEPTEMBER 30, 1997 1/1-9/30(m) 1/1-9/30(n) 1/1-5/15(i) 1/1-5/15(o) 5/30-6/19(u) 1/1-8/26(p)
------------------ ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................ $124,713 $44,339 $(7,788) $(1,332) $(567) $(1,279)
Less: agency
commissions.................. -- (5,772) 1,029 142 93 135
-------- ------- ------- ------- ----- -------
Net revenues.................. 124,713 38,567 (6,759) (1,190) (474) (1,144)
Station operating expenses
excluding depreciation and
amortization................. 102,991 20,497 (3,569) (994) (285) (1,276)
Depreciation and
amortization................. (2,059) 384 -- (212) (279) (305)
Corporate general and
administrative
expenses..................... -- -- -- -- -- --
Merger expense................ -- -- -- -- -- --
Restructuring charge.......... 7,095 -- -- -- -- --
Stock option
compensation................. -- -- -- -- -- --
-------- ------- ------- ------- ----- -------
Operating income (loss)....... 16,686 17,686 (3,190) 16 90 437
Interest expense.............. 15,977 -- -- -- -- --
Other (income) expense........ (163) -- -- -- -- --
-------- ------- ------- ------- ----- -------
Income (loss) before income
taxes........................ 872 17,686 (3,190) 16 90 437
Income tax expense
(benefit).................... 3,283 -- -- -- -- --
Dividends and accretion on
preferred stock of
subsidiary................... -- -- -- -- -- --
-------- ------- ------- ------- ----- -------
Net income (loss)............. (2,411) 17,686 (3,190) 16 90 437
Preferred stock
dividends.................... -- -- -- -- -- --
-------- ------- ------- ------- ----- -------
Income (loss) attributable to
common stockholders.......... $ (2,411) $17,686 $(3,190) $ 16 $ 90 $ 437
======== ======= ======= ======= ===== =======
Broadcast cash flow........... $ 21,722 $18,070 $(3,190) $ (196) $(189) $ 132
======== ======= ======= ======= ===== =======
<CAPTION>
DISPOSITIONS
-------------------------------------------------------------------
SAN WBZS-AM
FRANCISCO WZHF-AM
WJZW-FM FREQUENCY KDFC-FM KDFC-AM WLUP-FM
NINE MONTHS ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL COMPLETED
SEPTEMBER 30, 1997 1/1-7/2(q) 1/1-7/7(r) 1/1-1/31(s) 1/1-8/13(t) 1/1-7/14(l) TRANSACTIONS
------------------ ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................ $(4,137) $(1,370) $(278) $(1,091) $(6,928) $447,178
Less: agency
commissions.................. 567 178 26 23 935 (41,306)
------- ------- ----- ------- ------- --------
Net revenues.................. (3,570) (1,192) (252) (1,068) (5,993) 405,872
Station operating expenses
excluding depreciation and
amortization................. (2,161) (1,738) (224) (665) (5,642) 255,874
Depreciation and
amortization................. (315) (84) -- (54) (1,145) 29,870
Corporate general and
administrative
expenses..................... (70) -- -- (18) -- 8,133
Merger expense................ -- -- -- -- -- 6,124
Restructuring charge.......... -- -- -- -- -- 7,095
Stock option
compensation................. -- -- -- -- -- 3,083
------- ------- ----- ------- ------- --------
Operating income (loss)....... (1,024) 630 (28) (331) 794 95,693
Interest expense.............. -- -- -- -- -- 73,368
Other (income) expense........ -- -- -- -- -- 128
------- ------- ----- ------- ------- --------
Income (loss) before income
taxes........................ (1,024) 630 (28) (331) 794 22,197
Income tax expense
(benefit).................... (260) -- -- (98) -- 7,086
Dividends and accretion on
preferred stock of
subsidiary................... -- -- -- -- -- 27,321
------- ------- ----- ------- ------- --------
Net income (loss)............. (764) 630 (28) (233) 794 (12,210)
Preferred stock
dividends.................... -- -- -- -- -- 5,281
------- ------- ----- ------- ------- --------
Income (loss) attributable to
common stockholders.......... $ (764) $ 630 $ (28) $ (233) $ 794 $(17,491)
======= ======= ===== ======= ======= ========
Broadcast cash flow........... $(1,409) $ 546 $ (28) $ (403) $ (351) $149,998
======= ======= ===== ======= ======= ========
</TABLE>
A-10
<PAGE> 14
- ---------------
(a) On January 17, 1996, the Company acquired Pyramid Communications, Inc.
("Pyramid"), a radio broadcasting company with 12 radio stations (9 FM and 3
AM) in five markets (Chicago, Philadelphia, Boston, Charlotte, and Buffalo)
(the "Pyramid Acquisition"). The total purchase price, including acquisition
costs, allocated to net assets acquired was approximately $316,343 of which
$315,500 was financed through additional borrowings under the Company's
prior senior credit facility. The historical financial data of Pyramid for
the period of January 1, 1996 to January 17, 1996 excludes the combined net
losses of approximately $60 for WHTT-FM, WHTT-AM and WSJZ-FM in Buffalo (the
"Buffalo Transactions") which were sold in 1996 for $32,000 in cash.
(b) On August 14, 1996, the Company acquired KYLD-FM in San Francisco for
$44,000 in cash. The Company had previously been operating KYLD-FM under a
time brokerage agreement since May 1, 1996.
(c) On November 26, 1996, the Company exchanged WKLB-FM in Boston (which the
Company acquired on May 3, 1996 for $34,000 in cash) for WGAY-FM in
Washington, D.C. On April 3, 1997, the Company exchanged, in the Greater
Media Exchange, WQRS-FM in Detroit (which the Company acquired on April 3,
1997 for $32,000 in cash) for WWRC-AM in Washington, D.C. and $9,500 in
cash. The net purchase price to the Company of WWRC-AM was therefore
$22,500. The Company had previously been operating WGAY-FM and WWRC-AM under
time brokerage agreements since June 17, 1996.
(d) On October 18, 1996, the Company acquired WEDR-FM in Miami for $65,000 in
cash.
(e) On January 31, 1997, the Company acquired, in the WWWW/WDFN Acquisition,
WWWW-FM and WDFN-AM in Detroit from Chancellor for $30,000 in cash (of which
$1,500 was paid as escrow funds in January 1996). The Company had previously
provided certain sales and promotional functions to WWWW-FM and WDFN-AM
under a joint sales agreement since February 14, 1996 and subsequently
operated the stations under a time brokerage agreement since April 1, 1996.
(f) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition,
KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash (of which
$10,000 was paid as escrow funds in November 1996). The Company had
previously been operating the stations under a time brokerage agreement
since November 1, 1996.
(g) On April 1, 1997, the Company acquired, in the Secret/Detroit Acquisition,
WJLB-FM and WMXD-FM in Detroit for $168,000 in cash. The Company had
previously been operating the stations under a time brokerage agreement
since September 1, 1996.
(h) On May 1, 1997, the Company acquired, in the Beasley Acquisition, WDAS-FM/AM
in Philadelphia for $103,000 in cash.
(i) On May 15, 1997, the Company exchanged, in the EZ Exchange, 5 of its 6
stations in the Charlotte market (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM)
for WUSL-FM and WIOQ-FM in Philadelphia.
(j) On July 2, 1997, the Company acquired, in the Evergreen Viacom Acquisition,
WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM, and WBZS-AM
in Washington, D.C. for approximately $612,388 in cash including various
other direct acquisition costs. The Evergreen Viacom Acquisition was
financed with (i) bank borrowings under the Senior Credit Facility (as
defined) of $552,559; (ii) $53,750 in escrow funds paid by the Company on
February 19, 1997 and (iii) $6,079 financed through working capital. In June
1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible
Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") for
net proceeds of approximately $287,800 which were used to repay borrowings
under the Senior Credit Facility and subsequently were reborrowed on July 2,
1997 as part of the financing of the Viacom Acquisition. On July 7, 1997,
the Company sold WJZW-FM in Washington, D.C. to affiliates of Capital
Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the
assets of WZHF-AM and WBZS-AM, which were also sold on August 13, 1997, were
accounted for as assets held for sale in
A-11
<PAGE> 15
connection with the purchase price allocation of the Evergreen Viacom
Acquisition and no gain or loss was recognized by the Company upon
consummation of the sales (see 5(q) and 5(t)). The Viacom results of
operations for the year ended December 31, 1996 reflect the financial
performance of WAXQ-FM for six months of the year that the station was
operated by Viacom (July 1, 1996 to December 31, 1996) combined with net
income of $851 for the first half of the year when the station was under
prior ownership.
(k) On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan
of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among Chancellor, Chancellor
Radio Broadcasting Company ("CRBC"), Evergreen Media Corporation
("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and
Evergreen Media Corporation of Los Angeles ("EMCLA"), (i) Chancellor was
merged (the "Parent Merger") with and into EMHC, a direct, wholly-owned
subsidiary of Evergreen, with EMHC remaining as the surviving corporation
and (ii) CRBC was merged (the "Subsidiary Merger" and, together with the
Parent Merger, the "Chancellor Merger") with and into EMCLA, a direct,
wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving
corporation. Upon consummation of the Parent Merger, Evergreen was renamed
Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine
Holdings Corporation ("CMHC"). Upon consummation of the Subsidiary Merger,
EMCLA was renamed Chancellor Media Corporation of Los Angeles ("CMCLA").
Consummation of the Chancellor Merger added 52 radio stations (36 FM and 16
AM) to the Company's portfolio of stations, including 13 stations in markets
in which the Company previously operated. The total purchase price allocated
to net assets acquired was approximately $1,998,383 which included (i) the
conversion of each outstanding share of Chancellor Class A and Class B
Common Stock into 0.9091 shares of Chancellor Media Common Stock, resulting
in the issuance of 17,308,730 shares of Chancellor Media Common Stock at a
fair value of $31.00 per share, (ii) the assumption of Chancellor's and
CRBC's long-term debt of $949,000, (iii) the issuance of 2,117,629 shares of
CMCLA's 12% Exchangeable Preferred Stock (the "12% Preferred Stock") in
exchange for CRBC's substantially identical securities with a fair value of
$215,570, (iv) the issuance of 1,000,000 shares of CMCLA's 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock (the 12 1/4% Preferred
Stock") in exchange for CRBC's substantially identical securities with a
fair value of $120,217, (v) the issuance of 2,200,000 shares of Chancellor
Media's 7% Convertible Preferred Stock (the "7% Convertible Preferred
Stock") in exchange for Chancellor's substantially identical securities with
a fair value of $111,048, (vi) the assumption of stock options issued to
Chancellor stock option holders with a fair value of $34,977 and (vii)
estimated acquisition costs of $31,000.
A-12
<PAGE> 16
Chancellor's historical condensed combined statement of operations for the year
ended December 31, 1996 and the nine months ended September 30, 1997 and pro
forma adjustments related to the transactions completed by Chancellor prior to
the Chancellor Merger (the "Completed Chancellor Transactions") is summarized
below:
<TABLE>
<CAPTION>
ACQUISITIONS
------------------------------------------------------------------------------------------
KIMN-FM/
SHAMROCK KALC-FM COLFAX KOOL-FM SUNDANCE
CHANCELLOR HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1996 HISTORICAL(I) 1/1-2/14(II) 1/1-3/31(III) 1/1-12/31(IV) 1/1-3/31(IV) 1/1-9/12(IV)
- ------------------------------- ------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................. $203,188 $ 9,698 $2,010 $51,745 $1,665 $13,844
Less: agency commissions....... (24,787) (1,234) (259) (6,626) (234) (1,740)
-------- ------- ------ ------- ------ -------
Net revenues................... 178,401 8,464 1,751 45,119 1,431 12,104
Station operating expenses
excluding depreciation and
amortization.................. 111,210 7,762 1,523 28,584 852 7,678
Depreciation and
amortization.................. 20,877 595 511 4,494 229 1,242
Corporate general and
administrative expenses....... 4,845 2,215 -- -- -- --
Stock option compensation...... 3,800 -- -- -- -- --
-------- ------- ------ ------- ------ -------
Operating income (loss)........ 37,669 (2,108) (283) 12,041 350 3,184
Interest expense............... 35,704 1,380 -- 4,369 299 --
Other (income) expense......... 68 49 312 (179) -- 25
-------- ------- ------ ------- ------ -------
Income (loss) before income
taxes......................... 1,897 (3,537) (595) 7,851 51 3,159
Income tax expense (benefit)... 4,612 -- -- -- -- --
Dividends and accretion on
preferred stock of
subsidiary.................... 11,557 -- -- -- -- --
-------- ------- ------ ------- ------ -------
Net income (loss).............. (14,272) (3,537) (595) 7,851 51 3,159
Preferred stock dividends...... -- -- -- -- -- --
-------- ------- ------ ------- ------ -------
Income (loss) attributable to
common stockholders........... $(14,272) $(3,537) $ (595) $ 7,851 $ 51 $ 3,159
======== ======= ====== ======= ====== =======
Broadcast cash flow............ $ 67,191 $ 702 $ 228 $16,535 $ 579 $ 4,426
======== ======= ====== ======= ====== =======
<CAPTION>
ACQUISITIONS
--------------------------------------------
CHANCELLOR
VIACOM
OMNI KSTE-FM ACQUISITION
HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1996 1/1-6/30(V) 1/1-7/31(VI) 1/1-12/31(VII)
- ------------------------------- ----------- ------------- --------------
<S> <C> <C> <C>
Gross revenues................. $ 8,710 $1,411 $58,806
Less: agency commissions....... (1,211) (149) (9,588)
------- ------ -------
Net revenues................... 7,499 1,262 49,218
Station operating expenses
excluding depreciation and
amortization.................. 4,985 1,244 25,416
Depreciation and
amortization.................. 1,458 375 4,640
Corporate general and
administrative expenses....... -- -- 1,501
Stock option compensation...... -- -- --
------- ------ -------
Operating income (loss)........ 1,056 (357) 17,661
Interest expense............... -- -- 6,374
Other (income) expense......... (404) -- --
------- ------ -------
Income (loss) before income
taxes......................... 1,460 (357) 11,287
Income tax expense (benefit)... -- -- 4,748
Dividends and accretion on
preferred stock of
subsidiary.................... -- -- --
------- ------ -------
Net income (loss).............. 1,460 (357) 6,539
Preferred stock dividends...... -- -- --
------- ------ -------
Income (loss) attributable to
common stockholders........... $ 1,460 $ (357) $ 6,539
======= ====== =======
Broadcast cash flow............ $ 2,514 $ 18 $23,802
======= ====== =======
<CAPTION>
DISPOSITIONS
-------------------------------------------------------------- PRO FORMA
ADJUSTMENTS CHANCELLOR AS
WWWW-FM/ WMIL-FM/ FOR THE ADJUSTED FOR
WDFN-AM KTBZ-FM WOKY-AM WDRQ-FM COMPLETED COMPLETED
HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR
YEAR ENDED DECEMBER 31, 1996 1/1-2/14(VIII) 1/1-2/14(III) 1/1-12/31(IX) 1/1-12/31(X) TRANSACTIONS TRANSACTIONS
- ------------------------------- --------------- ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................. $(839) $(399) $(9,552) $(6,743) $ (5,022)(xi) $328,522
Less: agency commissions....... 102 48 1,070 1,055 -- (43,553)
----- ----- ------- ------- -------- --------
Net revenues................... (737) (351) (8,482) (5,688) (5,022) 284,969
Station operating expenses
excluding depreciation and
amortization.................. (815) (521) (4,896) (4,530) (5,763)(xi) 172,729
Depreciation and
amortization.................. (45) (42) (539) (354) 15,022(xii) 46,909
(1,554)(xiii)
Corporate general and
administrative expenses....... -- -- -- (178) (2,726)(xiv) 5,657
Stock option compensation...... -- -- -- -- -- 3,800
----- ----- ------- ------- -------- --------
Operating income (loss)........ 123 212 (3,047) (626) (10,001) 55,874
Interest expense............... -- -- -- -- 34,529(xv) 82,655
Other (income) expense......... -- -- (19) -- -- (148)
----- ----- ------- ------- -------- --------
Income (loss) before income
taxes......................... 123 212 (3,028) (626) (44,530) (26,633)
Income tax expense (benefit)... -- -- -- (326) (15,687)(xvi) (6,653)
Dividends and accretion on
preferred stock of
subsidiary.................... -- -- -- -- 26,843(xvii) 38,400
----- ----- ------- ------- -------- --------
Net income (loss).............. 123 212 (3,028) (300) (55,686) (58,380)
Preferred stock dividends...... -- -- -- -- 7,700 (xviii) 7,700
----- ----- ------- ------- -------- --------
Income (loss) attributable to
common stockholders........... $ 123 $ 212 $(3,028) $ (300) $(63,386) $(66,080)
===== ===== ======= ======= ======== ========
Broadcast cash flow............ $ 78 $ 170 $(3,586) $(1,158) $ 741 $112,240
===== ===== ======= ======= ======== ========
</TABLE>
A-13
<PAGE> 17
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
-------------------------- ------------ PRO FORMA
CHANCELLOR ADJUSTMENTS CHANCELLOR AS
CHANCELLOR COLFAX VIACOM FOR THE ADJUSTED FOR
HISTORICAL HISTORICAL ACQUISITION WDRQ-FM COMPLETED COMPLETED
1/1- 1/1- HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR
NINE MONTHS ENDED SEPTEMBER 30, 1997 9/5(I) 1/23(IV) 1/1-7/2(VII) 1/1-8/11(X) TRANSACTIONS TRANSACTIONS
------------------------------------ ---------- ----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......................... $215,018 $3,183 $29,214 $(2,395) $ (828)(xi) $244,192
Less: agency commissions................ (26,575) (384) (4,046) 251 -- (30,754)
-------- ------ ------- ------- -------- --------
Net revenues............................ 188,443 2,799 25,168 (2,144) (828) 213,438
Station operating expenses excluding
depreciation and amortization......... 110,548 1,872 13,326 (1,986) (1,231)(xi) 122,529
Depreciation and amortization........... 23,919 -- 2,370 (186) 4,484(xii) 30,505
(82)(xiii)
Corporate general and administrative
expenses.............................. 7,102 -- 520 (42) (354)(xiv) 7,226
Merger expense.......................... 6,124 -- -- -- -- 6,124
Stock option compensation............... 3,083 -- -- -- -- 3,083
-------- ------ ------- ------- -------- --------
Operating income (loss)................. 37,667 927 8,952 70 (3,645) 43,971
Interest expense........................ 39,806 -- 3,178 -- 13,398(xv) 56,382
Other (income) expense.................. (584) -- -- -- -- (584)
-------- ------ ------- ------- -------- --------
Income (loss) before income taxes....... (1,555) 927 5,774 70 (17,043) (11,827)
Income tax expense (benefit)............ 1,378 -- 1,558 18 (4,685)(xvi) (1,731)
Dividends and accretion on preferred
stock of subsidiary................... 25,817 -- -- -- 1,504(xvii) 27,321
-------- ------ ------- ------- -------- --------
Net income (loss)....................... (28,750) 927 4,216 52 (13,862) (37,417)
Preferred stock dividends............... 4,810 -- -- -- 471 (xviii) 5,281
-------- ------ ------- ------- -------- --------
Income (loss) attributable to common
stockholders.......................... $(33,560) $ 927 $ 4,216 $ 52 $(14,333) $(42,698)
======== ====== ======= ======= ======== ========
Broadcast cash flow..................... $ 77,895 $ 927 $11,842 $ (158) $ 403 $ 90,909
======== ====== ======= ======= ======== ========
</TABLE>
A-14
<PAGE> 18
- ---------------
(i) On November 22, 1996, Chancellor acquired WKYN-AM in Cincinnati for $1,400
in cash. Chancellor had been previously operating WKYN-AM under a time
brokerage agreement since January 1, 1996. Therefore, Chancellor's
historical results of operations for the year ended December 31, 1996 and
the nine months ended September 30, 1997 include the results of operations
of WKYN-AM.
(ii) On February 14, 1996, Chancellor acquired Shamrock Broadcasting, Inc., a
radio broadcasting company with 19 radio stations (11 FM and 8 AM) located
in 10 markets (Los Angeles, New York, San Francisco, Houston, Atlanta,
Detroit, Denver, Minneapolis-St. Paul, Phoenix and Pittsburgh). The total
purchase price, including acquisition costs, allocated to net assets
acquired was approximately $408,000.
(iii) On July 31, 1996, Chancellor exchanged KTBZ-FM in Houston (which was
acquired on February 14, 1996 as part of the Shamrock Acquisition) and
$5,600 in cash for KIMN-FM and KALC-FM in Denver. Chancellor had
previously entered into a time brokerage agreement to sell substantially
all of the broadcast time of KTBZ-FM effective February 14, 1996. In
addition, Chancellor had been previously operating KIMN-FM and KALC-FM
under a time brokerage agreement since April 1, 1996.
(iv) On January 23, 1997, Chancellor acquired, in the Colfax Acquisition, Colfax
Communications, a radio broadcasting company, with 12 radio stations (8 FM
and 4 AM) located in 4 markets (Minneapolis-St. Paul, Phoenix, Washington,
D.C. and Milwaukee markets). The total purchase price, including
acquisition costs, allocated to net assets acquired was approximately
$383,700. The Colfax Acquisition was financed through (i) a private
placement by CRBC of $200,000 of 12% Exchangeable Preferred Stock for net
proceeds of $191,817; (ii) a private placement by Chancellor of $110,000 of
7% Convertible Preferred Stock for net proceeds of $105,546; (iii)
additional bank borrowings under CRBC's previous senior credit agreement of
$65,937 and (iv) $20,400 in escrow funds. The historical financial data of
Colfax for the year ended December 31, 1996 excludes the combined net
income of approximately $224 for KLTB-FM, KARO-FM and KIDO-AM in Boise,
Idaho which Chancellor did not acquire as part of the Colfax Acquisition.
The Colfax historical condensed statement of operations for the year ended
December 31, 1996, does not include the results of operations of the
following: (i) KOOL-FM for the period January 1, 1996 to March 31, 1996 and
(ii) WMIL-FM and WOKY-AM in Milwaukee and KZON-FM, KISO-AM, KYOT-FM and
KOY-AM in Phoenix which were owned and operated by Sundance Broadcasting,
Inc. ("Sundance") for the period January 1, 1996 to September 12, 1996. On
March 31, 1997, Chancellor sold WMIL-FM and WOKY-AM in Milwaukee for
$41,253 in cash. The assets of WMIL-FM and WOKY-AM are classified as assets
held for sale in connection with the purchase price allocation of the
Colfax Acquisition. Accordingly, WMIL-FM and WOKY-AM net income of
approximately $41 for the period January 23, 1997 through March 31, 1997
has been excluded from the Colfax historical condensed statement of
operations for the nine months ended September 30, 1997.
(v) On February 13, 1997, Chancellor acquired, in the Omni Acquisition,
substantially all of the assets and assumed certain liabilities of the
OmniAmerica Group including 8 radio stations (7 FM and 1 AM) located in 3
markets (Orlando, West Palm Beach and Jacksonville). The total purchase
price, including acquisition costs, allocated to net assets acquired was
approximately $181,046. The Omni Acquisition was financed through (i)
additional bank borrowings under CRBC's previous senior credit agreement of
$166,046 and (ii) the issuance of 555,556 shares of the Chancellor Class A
Common Stock valued at $15,000 or $27.00 per share. Prior to the
consummation of the Omni Acquisition, Chancellor had entered into an
agreement to operate the stations under a time brokerage agreement
effective July 1, 1996. Additionally, prior to consummation of the West
Palm Beach Exchange (see (vi) below) on March 28, 1997 and the SFX Exchange
(see note 13(a)), Chancellor entered into time brokerage agreements to sell
substantially all of the broadcast time of WEAT-FM/AM and WOLL-FM in West
Palm Beach and WAPE-FM and WFYV-FM in Jacksonville effective July 1, 1996.
The historical financial data of Omni for the period January 1, 1996 to
June 30, 1996 represents the results of operations for the Orlando stations
(WOMX-FM, WXXL-FM and WJHM-FM). The results of operations for WEAT-FM/AM
and WOLL-FM in West Palm Beach and WAPE-FM and WFYV-FM
A-15
<PAGE> 19
in Jacksonville are not included as the acquisition and disposition of these
stations is deemed to have occurred on January 1, 1996.
(vi) On March 28, 1997, Chancellor exchanged, in the West Palm Beach Exchange,
WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida, which were acquired as
part of the Omni Acquisition, for KSTE-FM in Sacramento and $33,000 in
cash. Chancellor had previously been operating KSTE-FM under a time
brokerage agreement since August 1, 1996.
(vii) On July 2, 1997, Chancellor acquired, in the Chancellor Viacom
Acquisition, KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and
WDRQ-FM in Detroit for approximately $500,789 in cash including various
other direct acquisition costs. The Chancellor Viacom Acquisition was
financed with (i) bank borrowings of $273,159 under CRBC's restated senior
credit agreement, dated July 2, 1997 (the "CRBC Restated Credit
Agreement"); (ii) borrowings under an interim loan (the "Chancellor
Broadcasting /Viacom Interim Financing") of $168,300; (iii) escrow funds
of $53,750 paid by Chancellor on February 19, 1997 and (iv) $5,580
financed through working capital. The assets of WDRQ-FM in Detroit are
classified as assets held for sale in connection with the purchase price
allocation of the Chancellor Viacom Acquisition (see (x) below).
(viii) On January 31, 1997, Chancellor sold, in the WWWW/WDFN Disposition,
WWWW-FM and WDFN-AM in Detroit, which were acquired on February 14, 1996
as part of the Shamrock Acquisition, to the Company for $30,000 in cash.
Prior to the completion of the sale, Chancellor had entered into a joint
sales agreement effective February 14, 1996 and a time brokerage
agreement effective April 1, 1996 to sell substantially all of the
broadcast time of WWWW-FM and WDFN-AM to the Company pending the
completion of the sale.
(ix) On March 31, 1997, Chancellor sold, in the Milwaukee Disposition, WMIL-FM
and WOKY-AM in Milwaukee, which were acquired as part of the Colfax
Acquisition on January 23, 1997, for $41,253 in cash.
(x) On August 11, 1997, Chancellor sold, in the ABC/Detroit Disposition,
WDRQ-FM in Detroit for $37,000 in cash. The assets of WDRQ-FM were
classified as assets held for sale in connection with the purchase price
allocation of the Chancellor Viacom Acquisition (see 5(k)(vii)).
Accordingly, WDRQ-FM net income for the period July 2, 1997 to August 11,
1997 has been excluded from Chancellor's historical condensed statement of
operations.
(xi) Reflects the elimination of time brokerage agreement fees received and paid
by Chancellor as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE
- --------------------------------------------------- --------------- ------------- ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................................... Detroit 2/14 -- 12/31 $(2,937) $ (598)
KTBZ-FM............................................ Houston 2/14 -- 7/31 (1,113) (265)
WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 7/1 -- 12/31 -- (3,900)
WEAT-FM/AM, WOLL-FM................................ West Palm Beach 7/1 -- 12/31 (972) (1,000)
------- -------
Total adjustment for decrease in gross
revenues and expenses $(5,022) $(5,763)
======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 MARKET PERIOD REVENUE EXPENSE
- --------------------------------------------------- --------------- ------------- ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................................... Detroit 1/1 -- 1/31 $ (235) $ (16)
WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 1/1 -- 2/13 -- (911)
WEAT-FM/AM, WOLL-FM................................ West Palm Beach 1/1 -- 3/28 (593) (304)
------- -------
Total adjustment for decrease in gross
revenues and expenses $ (828) $(1,231)
======= =======
</TABLE>
Gross revenues of the Completed Chancellor Transactions exclude any time
brokerage agreement payments received from Chancellor.
A-16
<PAGE> 20
(xii) Reflects incremental amortization related to the Completed Chancellor
Transactions and is based on the following allocation to intangible
assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1996 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE
--------------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Shamrock......................... 1/1 - 2/14 $ 361,425 $ 1,104 $ 393 $ 711
KIMN-FM/KALC-FM.................. 1/1 - 3/31 8,285 52 341 (289)
Omni............................. 1/1 - 12/31 171,837 4,296 161 4,135
Colfax........................... 1/1 - 12/31 317,894 7,947 3,861 4,086
KSTE-FM.......................... 1/1 - 12/31 (32,475) (812) -- (812)
Chancellor Viacom Acquisition.... 1/1 - 12/31 451,690 11,292 4,101 7,191
---------- ------- ------ -------
Total.................. $1,278,656 $23,879 $8,857 $15,022
---------- ------- ------ -------
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1997 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE
------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Omni................................ 1/1 - 2/13 $ 171,837 $ 525 $ -- $ 525
Colfax.............................. 1/1 - 1/23 317,894 508 -- 508
KSTE-FM............................. 1/1 - 3/28 (32,475) (198) -- (198)
Chancellor Viacom Acquisition....... 1/1 - 7/2 451,690 5,709 2,060 3,649
---------- ------- ------ -------
Total..................... $ 908,946 $ 6,544 $2,060 $ 4,484
---------- ------- ------ -------
</TABLE>
- ---------------
(1) Intangible assets are amortized on a straight-line basis over an
estimated average 40 year life by Chancellor. In connection with
purchase accounting for the Chancellor Merger, intangible assets will
be amortized over an estimated average life of 15 years in accordance
with the Company's accounting policies and procedures.
Historical depreciation expense of the Completed Chancellor Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(xiii) Reflects the elimination of disposed stations' historical depreciation
and amortization expense of $1,554 for the year ended December 31, 1996
(KTBZ-FM of $642 and WWWW-FM/WDFN-AM of $912 for the period of February
14, 1996 to December 31, 1996) and $82 for the nine months ended
September 30, 1997 (WWWW-FM/WDFN-AM for the period of January 1, 1997 to
January 31, 1997) recognized by Chancellor during the time brokerage
agreement holding period.
(xiv) Reflects the elimination of duplicate corporate expenses of $2,726 for the
year ended December 31, 1996 and $354 for the nine months ended September
30, 1997 related to the Completed Chancellor Transactions.
A-17
<PAGE> 21
(xv) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Chancellor Transactions, the February 1996
and August 1996 equity offerings of Chancellor (the "Chancellor
Offerings"), the issuance by CRBC of its 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock, the refinancing of CRBC's
previous senior credit agreement on January 23, 1997 and the offering on
June 24, 1997 by CRBC of $200.0 million aggregate principal amount of its
8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% Notes"):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Chancellor Acquisitions.................... $1,162,592 $ 727,192
Completed Chancellor Dispositions.................... (141,253) (141,253)
New Loan Fees........................................ 8,573 8,573
---------- ---------
Total additional bank borrowings....................... $1,029,912 $ 594,512
========== =========
Interest expense on additional bank borrowings at
7.5%................................................. $ 49,626 $ 16,118
Less: historical interest expense of the stations
acquired in the Completed Chancellor Transactions.... (12,422) (3,178)
---------- ---------
Net increase in interest expense....................... 37,204 12,940
Reduction in interest expense on bank debt related to
the application of net proceeds of the following at
7.5%:
February 1996 Offering proceeds of $155,475 for the
period January 1, 1996 to February 14, 1996.......... (1,425) --
August 1996 Offering proceeds of $23,050 for the period
January 1, 1996 to August 9, 1996.................... (1,052) --
CRBC 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock proceeds of $96,171 for the period
January 1, 1996 to February 14, 1996.............. (902) --
CRBC 8 3/4% Notes proceeds of $194,083 for the year
ended December 31, 1996 and for the period January
1, 1997 to June 24, 1997.......................... (14,556) (7,036)
Reduction in interest expense resulting from the
redemption of CRBC's 12.5% Senior Subordinated Notes
of $60,000 on June 5, 1997........................... (7,500) (3,229)
Interest expense on $70,133 additional bank borrowings
at 7.5% related to the redemption of CRBC's 12.5%
Senior Subordinated Notes on June 5, 1997............ 5,260 2,265
Interest expense on $200,000 8 3/4% Notes issued
June 24, 1997........................................ 17,500 8,458
---------- ---------
Total adjustment for net increase in interest
expense.............................................. $ 34,529 $ 13,398
========== =========
</TABLE>
(xvi) Reflects the 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.
(xvii) Reflects incremental dividends and accretion on preferred stock of
subsidiaries as follows:
<TABLE>
<CAPTION>
NINE MONTHS
DATE OF YEAR ENDED ENDED
ISSUANCE DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ----------------- ------------------
<S> <C> <C> <C>
12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock........ February 26, 1996 $ 1,441 $ --
12% Exchangeable Preferred Stock...... January 23, 1997 25,402 1,504
------- -------
Total dividends and accretion......... $26,843 $1,504
======= =======
</TABLE>
A-18
<PAGE> 22
(xviii) Reflects incremental dividends on Chancellor's 7% Convertible Preferred
Stock (issued on January 23, 1997) of $7,700 for the year ended December
31, 1996 and $471 for the nine months ended September 30, 1997.
(l) On October 7, 1997, the Company acquired, in the Bonneville Acquisition,
KZPS-FM and KDGE-FM in Dallas for $83,500 in cash. On July 14, 1997, the
Company completed the disposition of WLUP-FM in Chicago to Bonneville and
placed $80,000 in a trust pending the completion of the Chicago/Dallas
Exchange. The Chicago/Dallas Exchange was accounted for as a like-kind
exchange and no gain or loss was recognized upon consummation of the
exchange. The Company began operating KZPS-FM and KDGE-FM under a time
brokerage agreement on August 1, 1997.
(m) On October 28, 1997, the Company acquired Katz Media Group, Inc. ("KMG"), a
full-service media representation firm, in a tender offer transaction for a
total purchase price of approximately $379,223 (the "Katz Acquisition")
which included (i) the conversion of each outstanding share of KMG Common
Stock into the right to receive $11.00 in cash, resulting in total cash
payments of $149,601, (ii) the assumption of long-term debt of KMG and its
subsidiaries of $222,122 which includes borrowings outstanding under the
senior credit facility of KMG and its subsidiaries of $115,122 and $100,000
of the 10 1/2% Notes and (iii) estimated acquisition costs of $7,500.
(n) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5
radio stations in 3 major markets from P&S including WGCI-FM/AM in Chicago,
KHKS FM in Dallas, and KKBQ-FM/AM in Houston for $340,000 in cash.
(o) On May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for
$10,000 in cash.
(p) On June 3, 1997, the Company sold, in the Crawford Disposition, WEJM-FM in
Chicago for $14,750 in cash. On August 26, 1997, the Company sold, in the
Douglas Chicago Disposition, WEJM-AM in Chicago for $7,500 in cash.
(q) On July 7, 1997, the Company sold, in the ABC/Washington Disposition,
WJZW-FM in Washington for $68,000 in cash. The assets of WJZW-FM were
classified as assets held for sale in connection with the purchase price
allocation of the Evergreen Viacom Acquisition (see 5(j)). Accordingly,
WJZW-FM net income for the period July 2, 1997 to July 7, 1997 has been
excluded from the Company's historical condensed statement of operations.
(r) On July 7, 1997, the Company sold, in the San Francisco Frequency
Disposition, the San Francisco 107.7 MHz FM dial position and transmission
facility and the call letters from Chancellor's KSAN-FM in San Francisco for
$44,000 in cash.
(s) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition,
KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash. The Company
had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage
agreement since November 1, 1996. On July 21, 1997, the Company sold, in the
Bonneville/KDFC Disposition, KDFC-FM in San Francisco for $50,000 in cash.
The assets of KDFC-FM are classified as assets held for sale in connection
with the purchase price allocation of the acquisition of KKSF-FM/KDFC-FM/AM.
Accordingly, KDFC-FM net income of approximately $791 for the period
February 1, 1997 through September 30, 1997 has been excluded from the
Company's historical condensed statement of operations. Therefore, the
KDFC-FM condensed statement of operations includes the results of operations
for January 1, 1997 through January 31, 1997 (the time brokerage agreement
holding period in 1997) for the nine months ended September 30, 1997.
(t) On August 13, 1997, the Company sold, in the Douglas AM Dispositions,
WBZS-AM and WZHF-AM in Washington (acquired as part of the Evergreen Viacom
Acquisition -- see 5(j)) and KDFC-AM in San Francisco for $5,500, $7,500 and
$5,000, respectively, payable in the form of a promissory note. The assets
of WBZS-AM and WZHF-AM were classified as assets held for sale in connection
with the purchase price allocation of the Evergreen Viacom Acquisition (see
5(j)). Accordingly, WBZS-AM and
A-19
<PAGE> 23
WZHF-AM net income for the period July 2, 1997 to August 13, 1997 has been
excluded from the Company's historical condensed statement of operations.
(u) On May 30, 1997, the Company acquired, in the Century Acquisition, WPNT-FM
in Chicago for $75,750 in cash (including $2,000 for the purchase of the
station's accounts receivable) of which $5,500 was paid as escrow funds in
July 1996. On June 19, 1997, the Company sold, in the Bonneville/WPNT
Disposition, WPNT-FM in Chicago for $75,000 in cash and recognized a gain of
$500.
(6) Reflects the elimination of intercompany Katz revenue and Company expense
related to national representation commissions of $15,964 for the year
ended December 31, 1996 and $15,119 for the nine months ended September 30,
1997 paid to Katz by the Company.
(7) Reflects the reclassification of Katz corporate general and administrative
expenses of $10,035 for the year ended December 31, 1996 and $8,171 for the
nine months ended September 30, 1997 to conform with Company
classification.
(8) Reflects incremental amortization related to the Completed Transactions and
is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1996 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
---------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Pyramid Acquisition (ii)........ 1/1-1/17 $ 325,871 $ 1,026 $ 409 $ 617
KYLD-FM......................... 1/1-8/14 43,659 1,811 640 1,171
WEDR-FM......................... 1/1-10/18 63,757 3,400 -- 3,400
WGAY-FM......................... 1/1-11/26 32,538 1,964 -- 1,964
WWWW-FM/WDFN-AM................. 1/1-12/31 26,590 1,773 7 1,766
KKSF-FM (iii)................... 1/1-12/31 58,698 3,913 868 3,045
WJLB-FM/WMXD-FM................. 1/1-12/31 165,559 11,037 2,145 8,892
WWRC-AM......................... 1/1-12/31 16,808 1,121 -- 1,121
WDAS-FM/AM...................... 1/1-12/31 98,185 6,546 2,470 4,076
Evergreen Viacom Acquisition
(iv).......................... 1/1-12/31 515,654 34,377 5,606 28,771
Chancellor Merger (v)........... 1/1-12/31 2,217,482 147,832 37,834 109,998
Chicago/Dallas Exchange......... 1/1-12/31 (584) (39) -- (39)
Katz Acquisition (vi)........... 1/1-12/31 357,781 12,496 7,616 4,880
Gannett Acquisition............. 1/1-12/31 334,756 22,317 1,229 21,088
---------- -------- ------- --------
Total........................... $4,256,754 $249,574 $58,824 $190,750
========== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1997 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
------------------------------------ ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
WWWW-FM/WDFN-AM..................... 1/1-1/31 $ 26,590 $ 148 $ -- $ 148
KKSF-FM (iii)....................... 1/1-1/31 58,698 326 -- 326
WJLB-FM/WMXD-FM..................... 1/1-3/31 165,559 2,759 -- 2,759
WWRC-AM............................. 1/1-4/2 16,808 286 -- 286
WDAS-FM/AM.......................... 1/1-4/30 98,185 2,182 820 1,362
Evergreen Viacom Acquisition(iv).... 1/1-7/2 515,654 17,379 793 16,586
Chancellor Merger(v)................ 1/1-9/5 2,217,482 100,608 23,638 76,970
Chicago/Dallas Exchange............. 1/1-9/30 (584) (29) -- (29)
Katz Acquisition(vi)................ 1/1-9/30 357,781 9,372 5,712 3,660
Gannett Acquisition................. 1/1-9/30 334,756 16,738 921 15,817
---------- -------- ------- --------
Total............................... $3,790,929 $149,769 $31,884 $117,885
========== ======== ======= ========
</TABLE>
- ---------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life (except for the Katz Acquisition -- see
(vi) below). The incremental amortization period represents the period
of the year that the station was not owned by the Company.
A-20
<PAGE> 24
(ii) Intangible assets for the Pyramid Acquisition of $325,871 includes
$61,218 resulting from the recognition of deferred tax liabilities and
excludes approximately $29,915 of the purchase price allocated to the
Buffalo Stations which were sold during the year ended December 31,
1996.
(iii) Intangible assets for KKSF-FM excludes (1) $50,000 of the purchase
price allocated to KDFC-FM which has been classified as assets held
for sale, (2) $1,500 to be reimbursed by the buyers of KDFC-FM for
costs incurred in connection with relocating KKSF and (3) $4,802 of
the purchase price allocated to KDFC-AM which was sold, in the
Douglas AM Dispositions, on August 13, 1997.
(iv) Intangible assets for the Evergreen Viacom Acquisition of $515,654
excludes (1) $67,231 of the purchase price allocated to WJZW-FM which
was sold in the ABC/Washington Disposition on July 7, 1997 and (2)
$12,148 of the purchase price allocated to WZHF-AM and WBZS-AM which
were sold in the Douglas AM Dispositions on August 13, 1997.
(v) Intangible assets for the Chancellor Merger of $2,217,482 includes
$332,409 resulting from the recognition of deferred tax liabilities.
(vi) Intangible assets for the Katz Acquisition of $357,781 consist of
goodwill of $252,781 and representation contract value of $105,000
with estimated average lives of 40 years and 17 years, respectively.
Historical depreciation expense of the Completed Transactions is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
(9) Reflects the elimination of merger expenses of $6,124 for the nine months
ended September 30, 1997 incurred by Chancellor in connection with the
Chancellor Merger.
(10) Reflects the elimination of duplicate corporate expenses of $6,347 for the
year ended December 31, 1996 and $1,842 for the nine months ended September
30, 1997 related to the Completed Transactions.
(11) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Transactions, the sale in October 1996 by
Evergreen of 9,000,000 shares of its common stock for aggregate net
proceeds of $264,236 (the "1996 Evergreen Offering"), the amendment and
restatement of the Company's senior credit agreement on April 25, 1997 (the
"Senior Credit Facility") and the offering by CMCLA of the 8 1/8% Notes:
A-21
<PAGE> 25
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions............................ $2,158,160 $1,684,160
Chancellor Merger (a)............................. 31,000 31,000
Completed Dispositions............................ (381,250) (349,250)
New Loan Fees..................................... 10,473 10,473
---------- ----------
Total additional bank borrowings.................... $1,818,383 $1,376,383
========== ==========
Interest expense at 7.0%............................ $ 104,308 $ 47,959
Less: historical interest expense................... (5,596) (674)
---------- ----------
Net increase in interest expense.................... 98,712 47,285
Reduction in interest expense on bank debt related
to the application of net proceeds of the
following at 7.0%:
1996 Evergreen Offering contributed to the Company
of $264,236 for the period January 1, 1996 to
October 22, 1996............................... (15,003) --
$3.00 Convertible Preferred Stock Offering
contributed to the Company of $287,808 for the
year ended December 31, 1996 and for the period
January 1, 1997 to June 16, 1997............... (20,147) (9,290)
CMCLA 8 1/8% Notes proceeds of $485,000 for the
year ended December 31, 1996 and for the nine
months ended September 30, 1997................ (33,950) (25,463)
Interest expense on $500,000 8 1/8% Notes issued
December 22, 1997................................. 40,625 30,469
Reduction in interest expense related to the
application of the 7.0% interest rate to the
Company's bank debt prior to the refinancing of
the Senior Credit Facility, to CRBC's bank debt
prior to consummation of the Chancellor Merger and
to KMG's bank debt prior to consummation of the
Katz Acquisition.................................. (19,792) 987
---------- ----------
Total adjustment for net increase in interest
expense........................................... $ 50,445 $ 43,988
========== ==========
</TABLE>
(a) The Company incurred additional bank borrowings of $31,000 to finance
estimated acquisition costs related to the Chancellor Merger.
(12) Reflects the 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.
(13) Reflects the (i) elimination of historical preferred stock dividends of
$3,820 for the year ended December 31, 1996, assuming the conversion of
1,608,297 shares of Chancellor Media's formerly outstanding convertible
exchangeable preferred stock into 5,025,916 shares of Class A Common Stock
(the "1996 Preferred Stock Conversion") and the redemption of the remaining
1,703 shares of formerly outstanding convertible exchangeable preferred
stock occurred on January 1, 1996 and (ii) incremental dividends on the
$3.00 Convertible Preferred Stock (issued on June 16, 1997) of $17,970 for
the year ended December 31, 1996 and $8,287 for the nine months ended
September 30, 1997.
A-22
<PAGE> 26
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED TO THE PENDING TRANSACTIONS
(14) 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,
1996 and the nine months ended September 30, 1997 has been obtained from
the historical financial statements of the respective stations and is
summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
-------------------------------------------- ---------------------------
SFX DENVER BONNEVILLE BONNEVILLE
EXCHANGE ACQUISITION OPTION WFLN-FM OPTION PENDING
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996 1/1-6/30(A) 1/1-12/31(B) 1/1-12/31(C) 9/1-12/31(D) 1/1-12/31(C) HISTORICAL
- -------------------------------------- ------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $ 5,726 $5,624 $55,482 $(1,455) $(35,355) $30,022
Less: agency commissions.............. (619) (780) (8,683) 159 4,528 (5,395)
------- ------ ------- ------- -------- -------
Net revenues.......................... 5,107 4,844 46,799 (1,296) (30,827) 24,627
Station operating expenses excluding
depreciation and amortization........ 3,676 3,947 25,678 (725) (18,858) 13,718
Depreciation and amortization......... 2,141 477 -- (800) -- 1,818
Corporate general and
administrative....................... 1,024 -- -- -- -- 1,024
------- ------ ------- ------- -------- -------
Operating income (loss)............... (1,734) 420 21,121 229 (11,969) 8,067
Interest expense...................... -- 195 -- -- (562) (367)
Other (income) expense................ -- (49) (8) -- 9 (48)
------- ------ ------- ------- -------- -------
Net income (loss)..................... $(1,734) $ 274 $21,129 $ 229 $(11,416) $ 8,482
======= ====== ======= ======= ======== =======
Broadcast cash flow................... $ 1,431 $ 897 $21,121 $ (571) $(11,969) $10,909
======= ====== ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------- -------------------------
DENVER BONNEVILLE BONNEVILLE
ACQUISITION OPTION WFLN-FM OPTION PENDING
HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 1/1-8/31(B) 1/1-9/30(C) 1/1-4/30(D) 1/1-9/30(C) HISTORICAL
- ----------------------------------------------------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues............................................. $3,460 $32,912 $(1,298) $(30,638) $ 4,436
Less: agency commissions................................... (458) (4,992) 134 3,952 (1,364)
------ ------- ------- -------- -------
Net revenues............................................... 3,002 27,920 (1,164) (26,686) 3,072
Station operating expenses excluding depreciation and
amortization.............................................. 2,816 18,901 (728) (14,206) 6,783
Depreciation and amortization.............................. 198 -- (800) -- (602)
Corporate general and administrative....................... -- -- -- -- --
------ ------- ------- -------- -------
Operating income (loss).................................... (12) 9,019 364 (12,480) (3,109)
Interest expense........................................... -- -- -- -- --
Other (income) expense..................................... (81) 4 -- 9 (68)
------ ------- ------- -------- -------
Net income (loss).......................................... $ 69 $ 9,015 $ 364 $(12,489) $(3,041)
====== ======= ======= ======== =======
Broadcast cash flow........................................ $ 186 $ 9,019 $ (436) $(12,480) $(3,711)
====== ======= ======= ======== =======
</TABLE>
(a) On July 1, 1996, Chancellor entered into an agreement to exchange, in the
SFX Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were
acquired as part of the Omni Acquisition) (see 5(k)(v)), and $11,000 in
cash to SFX for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island.
Chancellor entered into time brokerage agreements to operate WBAB-FM,
WBLI-FM, WGBB-AM, and WHFM-FM effective July 1, 1996 and entered into time
brokerage agreements to sell substantially all of the broadcast time of
WAPE-FM and WFYV-FM effective July 1, 1996.
(b) On July 30, 1997, Chancellor entered into an agreement to acquire, in the
Denver Acquisition, KXPK-FM in Denver from Evergreen Wireless LLC (which is
unrelated to the Company) for $26,000 in cash (including $1,650 paid by
Chancellor in escrow). Chancellor began operating KXPK-FM under a time
brokerage agreement on September 1, 1997.
(c) On August 6, 1997, the Company and Chancellor paid $3,000 to Bonneville for
an option to exchange the Company's station WTOP-AM in Washington and
Chancellor's stations KZLA-FM in Los Angeles and WGMS-FM in Washington plus
an additional $57,000 in cash for Bonneville's stations WNSR-FM
A-23
<PAGE> 27
in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville
Option"). The Bonneville Option was exercised on October 1, 1997, and
definitive exchange documentation is presently being negotiated. The
Company has entered into time brokerage agreements to operate KLDE-FM and
KBIG-FM effective October 1, 1997 and WNSR-FM effective October 10, 1997
and has entered into time brokerage agreements to sell substantially all of
the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM effective October 1,
1997.
(d) On August 12, 1996, the Company entered into an agreement to acquire
WFLN-FM in Philadelphia from Secret for $37,750 in cash. The Company also
entered into an agreement to operate WFLN-FM under a time brokerage
agreement effective September 1, 1996. The Company subsequently entered
into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash. On
May 1, 1997, the Company assigned its time brokerage agreement to operate
WFLN-FM to Greater Media. On July 16, 1997, Secret purported to terminate
the sale of WFLN-FM to the Company. The Company subsequently brought suit
against Secret to enforce its right to acquire WFLN-FM. In August 1997,
pursuant to a court settlement, the Company, Secret and Greater Media
agreed that (i) Secret would sell WFLN-FM directly to Greater Media for
$37,750, (ii) Greater Media would deposit $4,050 (the difference between
the Company's proposed acquisition price for WFLN-FM from Secret and the
Company's proposed sale price for WFLN-FM to Greater Media) with the court
and (iii) the Company and Secret would litigate each party's entitlement to
the amount deposited with the court. As of the date hereof, no further
resolution to this dispute has occurred.
(15) Reflects the elimination of time brokerage agreement fees received and paid
by Chancellor as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE
---------------------------- ----------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM................................ Jacksonville 7/1-12/31 $(1,963) $(2,000)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 7/1-12/31 -- (2,000)
------- -------
Total adjustment for decrease in gross revenues and expenses............ $(1,963) $(4,000)
======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 MARKET PERIOD REVENUE EXPENSE
------------------------------------ ----------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM................................ Jacksonville 1/1-9/5 $(2,711) $ (490)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 1/1-9/5 -- (2,711)
------- -------
Total adjustment for decrease in gross revenues and expenses............ $(2,711) $(3,201)
======= =======
</TABLE>
(16) Reflects incremental amortization related to the Pending Transactions and
is based on the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Amortization expense on $92,824 additional intangible
assets amortized on a straight-line basis over a 15
year period......................................... $ 6,188 $ 4,641
Less: historical amortization expense................. (1,957) (1,200)
------- -------
Adjustment for net increase in amortization expense... $ 4,231 $ 3,441
======= =======
</TABLE>
Historical depreciation expense of the Pending Transactions is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
A-24
<PAGE> 28
(17) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Transactions:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions...................................... $92,350 $92,350
======= =======
Interest expense on additional bank borrowings at 7.0%...... $ 6,465 $ 4,849
======= =======
</TABLE>
(18) Reflects the 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.
(19) 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. On December 18, 1997, the Company
declared a 2-for-1 split of its Common Stock effected as a stock dividend
(the "Stock Split"). The stock dividend is payable January 12, 1998, to
stockholders of record on December 29, 1997. Stockholders will receive one
additional share of Common Stock for each share held on the record date.
The following summary of shares used in the pro forma combined loss per
common share calculation gives effect to the Stock Split.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Historical weighted average shares outstanding.............. 60,414 87,690
Incremental weighted average shares relating to:
Issuance of 18,000,000 shares of Class A Common Stock on
October 17, 1996........................................ 14,650 --
Conversion of 1,608,297 shares of preferred stock in
1996.................................................... 9,246 --
Issuance of 34,617,460 shares of Common Stock in
connection with the Chancellor Merger................... 34,617 31,412
-------- -------
Total incremental weighted average shares.......... 58,513 31,412
======== =======
Shares used in the pro forma combined earnings per share
calculation............................................... 118,927 119,102
======== =======
</TABLE>
A-25
<PAGE> 29
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements of
Chancellor Media Corporation of Los Angeles ("CMCLA" and, together with its
subsidiaries, the "Company") are presented using the purchase method of
accounting for all acquisitions and reflect (i) the combination of consolidated
historical financial data of the Company, each of the stations acquired in the
transactions completed by the Company (the "Completed Transactions") and each of
the stations to be acquired in the transactions of the Company pending as of the
date hereof (the "Pending Transactions") and (ii) the elimination of the
consolidated historical data of the stations disposed in the Completed
Transactions and stations to be disposed in the Pending Transactions. The
unaudited pro forma condensed combined balance sheet data at September 30, 1997
presents adjustments for those Completed Transactions consummated since such
date, the Pending Transactions and the offering by CMCLA of $500.0 million
aggregate principal amount of 8 1/8% Senior Subordinated Notes due 2007, which
was completed on December 22, 1997 (the "Offering") as if each such transaction
had occurred at September 30, 1997. The unaudited pro forma condensed combined
statements of operations data for the twelve months ended December 31, 1996 and
the nine months ended September 30, 1997 present adjustments for the Completed
Transactions, the Pending Transactions, certain other financing transactions
undertaken during 1997 (the "Financing Transactions"), certain financing
transactions undertaken during 1996, and the Offering and the application of the
net proceeds therefrom, as if each such transaction occurred on January 1, 1996.
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 the assets acquired and to be acquired in the Completed Transactions and the
Pending Transactions have been allocated based primarily on information
furnished by management of the acquired assets. The final allocation of the
respective purchase prices of the assets acquired and to be acquired in the
Completed Transactions and the Pending Transactions are determined a reasonable
time after consummation of such transactions and are 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; however, such allocations are not expected to differ materially from
the preliminary amounts.
In the opinion of the Company's 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 which have previously been reported. 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 achieved had the transactions reflected
therein been consummated as of the dates indicated, or of the results of
operations or financial positions for any future periods or dates.
B-1
<PAGE> 30
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PRO FORMA
PRO FORMA AS ADJUSTED ADJUSTMENTS
COMPANY ADJUSTMENTS FOR THE FOR THE COMPANY
HISTORICAL FOR COMPLETED COMPLETED PENDING PRO FORMA
AT 9/30/97 TRANSACTIONS TRANSACTIONS TRANSACTIONS COMBINED
---------- ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets................................... $ 210,544 $ 58,542(1) $ 269,086 $ -- $ 269,086
Property and equipment, net...................... 136,405 24,098(1) 160,503 4,176(3) 164,679
Intangible assets, net........................... 3,828,014 691,953(1) 4,519,967 92,824(3) 4,612,791(4)
Other assets..................................... 38,413 26,761(1) 71,824 (4,650)(3) 67,174
(8,350)(1)
15,000(2)
---------- -------- ---------- -------- ----------
Total assets................................... $4,213,376 $808,004 $5,021,380 $ 92,350 $5,113,730
========== ======== ========== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities
Current liabilities.............................. $ 86,739 $ 46,880(1) $ 133,619 $ -- $ 133,619
Long-term debt, excluding current portion........ 1,857,000 714,373(1) 2,586,373 92,350(3) 2,678,723
500,000(2)
(485,000)(2)
Deferred tax liabilities (assets)................ 421,408 (16,921)(1) 404,487 -- 404,487
Other liabilities................................ 997 48,672(1) 49,669 -- 49,669
---------- -------- ---------- -------- ----------
Total liabilities.............................. 2,366,144 808,004 3,174,148 92,350 3,266,498
Redeemable preferred stock....................... 338,566 -- 338,566 -- 338,566
STOCKHOLDER'S EQUITY:
Common stock..................................... 1 -- 1 -- 1
Additional paid in capital....................... 1,628,668 -- 1,628,668 -- 1,628,668
Accumulated deficit.............................. (120,003) -- (120,003) -- (120,003)
---------- -------- ---------- -------- ----------
Total stockholder's equity..................... 1,508,666 -- 1,508,666 -- 1,508,666
---------- -------- ---------- -------- ----------
Total liabilities and stockholder's equity..... $4,213,376 $808,004 $5,021,380 $ 92,350 $5,113,730
========== ======== ========== ======== ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
B-2
<PAGE> 31
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMPANY PRO FORMA
ADJUSTMENTS AS ADJUSTED ADJUSTMENTS
COMPLETED FOR THE FOR THE PENDING FOR THE
COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS PENDING
YEAR ENDED DECEMBER 31, 1996 HISTORICAL HISTORICAL(5) TRANSACTIONS TRANSACTIONS HISTORICAL(13) TRANSACTIONS
---------------------------- ---------- ------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues..................... $337,405 $662,800 $ (15,964)(6) $ 984,241 $ 30,022 $ (1,963)(14)
Less: agency commissions........... (43,555) (64,874) -- (108,429) (5,395) --
-------- -------- --------- --------- -------- --------
Net revenues....................... 293,850 597,926 (15,964) 875,812 24,627 (1,963)
Station operating expenses
excluding depreciation and
amortization..................... 174,344 375,802 (15,964)(6) 524,147 13,718 (4,000)(14)
(10,035)(7)
Depreciation and amortization...... 93,749 68,856 190,750(8) 353,355 1,818 4,231(15)
Corporate general and
administrative expenses.......... 7,797 11,440 10,035(7) 22,925 1,024 --
(6,347)(10)
Stock option compensation.......... -- 3,800 -- 3,800 -- --
-------- -------- --------- --------- -------- --------
Operating income (loss)............ 17,960 138,028 (184,403) (28,415) 8,067 (2,194)
Interest expense................... 37,527 100,106 60,420(11) 198,053 (367) 6,465(16)
Other (income) expense............. (477) (795) -- (1,272) (48) --
-------- -------- --------- --------- -------- --------
Income (loss) before income
taxes............................ (19,090) 38,717 (244,823) (225,196) 8,482 (8,659)
Income tax expense (benefit)....... (2,896) 13,873 (68,189)(12) (57,212) -- (62)(17)
-------- -------- --------- --------- -------- --------
Net income (loss).................. (16,194) 24,844 (176,634) (167,984) 8,482 (8,597)
Preferred stock dividends.......... -- 38,400 -- 38,400 -- --
-------- -------- --------- --------- -------- --------
Income (loss) attributable to
common stock..................... $(16,194) $(13,556) $(176,634) $(206,384) $ 8,482 $ (8,597)
======== ======== ========= ========= ======== ========
Broadcast cash flow................ $119,506 $222,124 $ 10,035 $ 351,665 $ 10,909 $ 2,037
======== ======== ========= ========= ======== ========
<CAPTION>
COMPANY
PRO FORMA
YEAR ENDED DECEMBER 31, 1996 COMBINED
---------------------------- ----------
<S> <C>
Gross revenues..................... $1,012,300
Less: agency commissions........... (113,824)
----------
Net revenues....................... 898,476
Station operating expenses
excluding depreciation and
amortization..................... 533,865
Depreciation and amortization...... 359,404
Corporate general and
administrative expenses.......... 23,949
Stock option compensation.......... 3,800
----------
Operating income (loss)............ (22,542)
Interest expense................... 204,151
Other (income) expense............. (1,320)
----------
Income (loss) before income
taxes............................ (225,373)
Income tax expense (benefit)....... (57,274)
----------
Net income (loss).................. (168,099)
Preferred stock dividends.......... 38,400
----------
Income (loss) attributable to
common stock..................... $ (206,499)
==========
Broadcast cash flow................ $ 364,611
==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
B-3
<PAGE> 32
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMPANY PRO FORMA
ADJUSTMENTS AS ADJUSTED ADJUSTMENTS
COMPLETED FOR THE FOR THE PENDING FOR THE
COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS PENDING
NINE MONTHS ENDED SEPTEMBER 30, 1997 HISTORICAL HISTORICAL(5) TRANSACTIONS TRANSACTIONS HISTORICAL(13) TRANSACTIONS
------------------------------------ ---------- ------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $382,994 $447,178 $ (15,119)(6) $ 815,053 $ 4,436 $ (2,711)(14)
Less: agency commissions.............. (49,711) (41,306) -- (91,017) (1,364) --
-------- -------- --------- --------- ------- --------
Net revenues.......................... 333,283 405,872 (15,119) 724,036 3,072 (2,711)
Station operating expenses excluding
depreciation and amortization....... 184,713 255,874 (15,119)(6) 417,297 6,783 (3,201)(14)
(8,171)(7)
Depreciation and amortization......... 104,386 29,870 117,885(8) 252,141 (602) 3,441(15)
Corporate general and administrative
expenses............................ 11,646 8,133 8,171(7) 26,108 -- --
(1,842)(10)
Merger expense........................ -- 6,124 (6,124)(9) -- -- --
Restructuring charge.................. -- 7,095 -- 7,095 -- --
Stock option compensation............. -- 3,083 -- 3,083 -- --
-------- -------- --------- --------- ------- --------
Operating income (loss)............... 32,538 95,693 (109,919) 18,312 (3,109) (2,951)
Interest expense...................... 45,036 66,580 50,776(11) 162,392 -- 4,849(16)
Other (income) expense................ (18,380) 128 -- (18,252) (68) --
-------- -------- --------- --------- ------- --------
Income (loss) before income taxes..... 5,882 28,985 (160,695) (125,828) (3,041) (7,800)
Income tax expense (benefit).......... 5,244 9,801 (42,880)(12) (27,835) -- (3,794)(17)
-------- -------- --------- --------- ------- --------
Net income (loss)..................... 638 19,184 (117,815) (97,993) (3,041) (4,006)
Preferred stock dividends............. 2,779 27,321 -- 30,100 -- --
-------- -------- --------- --------- ------- --------
Income (loss) attributable to common
stock............................... $ (2,141) $ (8,137) $(117,815) $(128,093) $(3,041) $ (4,006)
======== ======== ========= ========= ======= ========
Broadcast cash flow................... $148,570 $149,998 $ 8,171 $ 306,739 $(3,711) $ 490
======== ======== ========= ========= ======= ========
<CAPTION>
COMPANY
PRO FORMA
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMBINED
------------------------------------ ---------
<S> <C>
Gross revenues........................ $ 816,778
Less: agency commissions.............. (92,381)
---------
Net revenues.......................... 724,397
Station operating expenses excluding
depreciation and amortization....... 420,879
Depreciation and amortization......... 254,980
Corporate general and administrative
expenses............................ 26,108
Merger expense........................ --
Restructuring charge.................. 7,095
Stock option compensation............. 3,083
---------
Operating income (loss)............... 12,252
Interest expense...................... 167,241
Other (income) expense................ (18,320)
---------
Income (loss) before income taxes..... (136,669)
Income tax expense (benefit).......... (31,629)
---------
Net income (loss)..................... (105,040)
Preferred stock dividends............. 30,100
---------
Income (loss) attributable to common
stock............................... $(135,140)
=========
Broadcast cash flow................... $ 303,518
=========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
B-4
<PAGE> 33
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE COMPLETED TRANSACTIONS COMPLETED AFTER SEPTEMBER 30, 1997
(1) Reflects the Completed Transactions that were completed after September 30,
1997 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
----------------------------------------------------------------------------------------------------
PURCHASE PROPERTY AND INTANGIBLE DEFERRED
PRICE/(SALES CURRENT EQUIPMENT, ASSETS, OTHER CURRENT TAX OTHER
COMPLETED TRANSACTIONS PRICE) ASSETS NET(A) NET(A) ASSETS LIABILITIES ASSET LIABILITIES
- ------------------------ ------------ ------- ------------ ---------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chicago/Dallas
Exchange(b)........... $ 3,500 $ -- $ 4,084 $ (584) $ -- $ -- $ -- $ --
Katz Acquisition(c)..... 379,223 58,542 14,770 357,781 26,761 (46,880) 16,921 (48,672)
Gannett
Acquisition(d)........ 340,000 -- 5,244 334,756 -- -- -- --
-------- ------- ------- -------- ------- -------- ------- --------
Total............. $722,723 $58,542 $24,098 $691,953 $26,761 $(46,880) $16,921 $(48,672)
======== ======= ======= ======== ======= ======== ======= ========
<CAPTION>
FINANCING
--------------------------
(INCREASE) INCREASE
DECREASE (DECREASE) IN
IN OTHER LONG-TERM
COMPLETED TRANSACTIONS ASSETS DEBT
- ------------------------ ---------- -------------
<S> <C> <C>
Chicago/Dallas
Exchange(b)........... $8,350 $ (4,850)
Katz Acquisition(c)..... -- 379,223
Gannett
Acquisition(d)........ -- 340,000
------ --------
Total............. $8,350 $714,373
====== ========
</TABLE>
- ---------------
(a) The Company has assumed that historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based primarily on information provided
by the management of Katz Media Group, Inc. ("KMG") and by the management of
the respective stations acquired. The Company, on a preliminary basis, has
allocated the $357,781 of intangible assets related to the Katz Acquisition
(as defined) to representation contracts and goodwill. This preliminary
allocation is based upon information provided by the management of KMG.
(b) On October 7, 1997, the Company acquired, in the Bonneville Acquisition,
KZPS-FM and KDGE-FM in Dallas for $83,500 in cash. On July 14, 1997, the
Company completed the disposition of WLUP-FM in Chicago to Bonneville
International Corporation ("Bonneville") and placed $80,000 in a trust
pending the completion of the deferred exchange of WLUP-FM in Chicago for
KZPS-FM and KDGE-FM in Dallas (the "Chicago/Dallas Exchange"). The
Chicago/Dallas Exchange was accounted for as a like-kind exchange and no
gain or loss was recognized upon consummation of the exchange. The decrease
in long-term debt of $4,850 represents the refund of $8,350 in escrow funds
previously paid by the Company on June 29, 1997 and classified as other
assets at September 30, 1997 less $3,500 in cash boot paid to Bonneville.
(c) On October 28, 1997, Chancellor Media Corporation ("Chancellor Media") and
the Company acquired KMG, a full service media representation firm, in a
tender offer transaction for a total purchase price of approximately
$379,223 (the "Katz Acquisition") which included (i) the conversion of each
outstanding share of KMG Common Stock into the right to receive $11.00 in
cash, resulting in total cash payments of $149,601, (ii) the assumption of
long-term debt of KMG and its subsidiaries of $222,122 which includes
borrowings outstanding under the senior credit facility of KMG and its
subsidiaries of $115,122 and $100,000 of 10 1/2% Senior Subordinated Notes
due 2007 of Katz Media Corporation (the "10 1/2% Notes") and (iii) estimated
acquisition costs of $7,500.
(d) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5
radio stations in 3 major markets from Pacific & Southern Co. ("P&S"), a
subsidiary of Gannett Co., including WGCI-FM/AM in Chicago, KHKS-FM in
Dallas, and KKBQ-FM/AM in Houston, for $340,000 in cash.
(2) Reflects the estimated proceeds of $485,000 received on December 22, 1997
from the issuance of $500,000 of CMCLA's 8 1/8% Senior Subordinated Notes
due 2007 (the "8 1/8% Notes"), net of deferred debt issuance costs of
$15,000. The net proceeds of the Offering were used to reduce bank
borrowings under the Senior Credit Facility (as defined).
B-5
<PAGE> 34
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING TRANSACTIONS
(3) Reflects the Pending Transactions as follows:
<TABLE>
<CAPTION>
PROPERTY AND INCREASE IN
PURCHASE EQUIPMENT, INTANGIBLE DECREASE IN LONG-TERM
PENDING TRANSACTIONS PRICE NET(A) ASSETS, NET(A) OTHER ASSETS DEBT
-------------------- -------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
SFX Exchange(b).......................................... $11,000 $1,680 $ 9,320 $ -- $11,000
Denver Acquisition(c).................................... 26,000 446 25,554 1,650 24,350
Bonneville Option(d)..................................... 60,000 2,050 57,950 3,000 57,000
------- ------ ------- ------ -------
Total............................................ $97,000 $4,176 $92,824 $4,650 $92,350
======= ====== ======= ====== =======
</TABLE>
- ---------------
(a) The Company has assumed that historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based primarily on information provided
by management of the respective stations to be acquired in the Pending
Transactions. The Company, on a preliminary basis, has allocated the $92,824
of intangible assets related to the Pending Transactions to broadcast
licenses. This preliminary allocation is based on historical information
from prior acquisitions.
(b) On July 1, 1996, Chancellor Radio Broadcasting Company ("CRBC") entered into
an agreement to exchange, in the SFX Exchange, WAPE-FM and WFYV-FM in
Jacksonville, Florida (which were acquired as part of the Omni Acquisition
(as defined) on February 13, 1997, see 5(k)(v) below), and $11,000 in cash
to SFX Broadcasting, Inc. ("SFX") for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM
in Long Island. The amounts allocated to net property and equipment and net
intangible assets (consisting of broadcast licenses) are based upon
preliminary appraisals of the assets to be acquired.
(c) On July 30, 1997, CRBC entered into an agreement to acquire, in the Denver
Acquisition, KXPK-FM in Denver from Evergreen Wireless LLC (which is
unrelated to the Company) for $26,000 in cash and paid $1,650 in escrow
funds which were classified as other assets at September 30, 1997.
(d) On August 6, 1997, the Company and Chancellor paid $3,000 to Bonneville for
an option to exchange the Company's station WTOP-AM in Washington and CRBC's
stations KZLA-FM in Los Angeles and WGMS-FM in Washington plus an additional
$57,000 in cash for Bonneville's stations WNSR-FM in New York, KLDE-FM in
Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The Bonneville
Option was exercised on October 1, 1997.
ALLOCATION OF COMPANY PRO FORMA COMBINED INTANGIBLE ASSETS
(4) The Company Pro Forma Combined intangible assets of $4,612,791 consists of
the following at September 30, 1997:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-----------
<S> <C> <C>
Broadcast licenses......................................... 15-40 $3,656,866
Goodwill................................................... 15-40 714,892
Representation contracts................................... 17 105,000
Other intangibles.......................................... 1-40 388,266
----------
$4,865,024
Less: accumulated amortization............................. (252,233)
----------
Net intangible assets...................................... $4,612,791
==========
</TABLE>
The Company discloses broadcast license value separately from goodwill and
amortizes such intangible assets over an estimated average life of 15 years,
whereas CRBC grouped all broadcast license value with goodwill and amortized
such intangibles assets over an estimated average life of 40 years. In
connection with the application of purchase accounting for the Chancellor Merger
(as defined), broadcast license value and goodwill have been separately
identified and disclosed and amortized over an estimated average life of 15
years
B-6
<PAGE> 35
in accordance with the Company's policies and procedures. The intangible assets
have been treated in a consistent manner for the Company in the Unaudited
Combined Condensed Pro Forma Financial Statements and, upon the consummation of
the Chancellor Merger, have been accounted for similarly in the Company's
financial statements.
The Company amortizes such intangible assets using the straight-line method
over estimated useful lives ranging from 1 to 40 years. The Company continually
evaluates the propriety of the carrying amount of goodwill and other intangible
assets as well as the amortization period to determine whether current events or
circumstances warrant adjustments to the carrying value and/or revised estimates
of useful lives. This evaluation consists of the projection of undiscounted
operating income before depreciation, amortization, nonrecurring charges and
interest for each of the Company's radio stations over the remaining
amortization periods of the related intangible assets. The projections are based
on a historical trend line of actual results since the acquisitions of the
respective stations adjusted for expected changes in operating results. To the
extent such projections indicate that undiscounted operating income is not
expected to be adequate to recover the carrying amounts of the related
intangible assets, such carrying amounts would be written down by charges to
expense.
B-7
<PAGE> 36
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE COMPLETED TRANSACTIONS
(5) The detail of the historical financial data of the stations to be acquired
or disposed of in the Completed Transactions for the year ended December 31,
1996 and the nine months ended September 30, 1997 has been obtained from the
historical financial statements of the respective stations and is summarized
below:
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------------------------------------------------------------
WWRC-AM WWWW-FM/ KKSF-FM/
PYRAMID KYLD-FM WGAY-FM WEDR-FM WDFN-AM KDFC-FM/AM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-1/17(a) 1/1-4/30(b) 1/1-6/17(c) 1/1-10/18(d) 1/1-2/14(e) 1/1-10/31(f)
----------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $2,144 $ 2,308 $ 3,264 $ 7,933 $ 839 $13,646
Less: agency commissions........... (216) (363) (409) (1,066) (102) (1,746)
------ ------- ------- ------- ----- -------
Net revenues....................... 1,928 1,945 2,855 6,867 737 11,900
Station operating expenses
excluding depreciation and
amortization..................... 1,489 1,885 3,493 2,933 815 6,358
Depreciation and amortization...... 502 749 314 29 45 2,351
Corporate general and
administrative expenses.......... 123 256 477 1,401 -- --
Stock option compensation.......... -- -- -- -- -- --
------ ------- ------- ------- ----- -------
Operating income (loss)............ (186) (945) (1,429) 2,504 (123) 3,191
Interest expense................... 343 1,094 -- -- -- 429
Other (income) expense............. (5) (97) 5 (15) -- (48)
------ ------- ------- ------- ----- -------
Income (loss) before income
taxes............................ (524) (1,942) (1,434) 2,519 (123) 2,810
Income tax expense (benefit)....... -- -- (453) -- -- --
------ ------- ------- ------- ----- -------
Net income (loss).................. (524) (1,942) (981) 2,519 (123) 2,810
Preferred stock dividends.......... -- -- -- -- -- --
------ ------- ------- ------- ----- -------
Income (loss) attributable to
common stock..................... $ (524) $(1,942) $ (981) $ 2,519 $(123) $ 2,810
====== ======= ======= ======= ===== =======
Broadcast cash flow................ $ 439 $ 60 $ (638) $ 3,934 $ (78) $ 5,542
====== ======= ======= ======= ===== =======
<CAPTION>
ACQUISITIONS
--------------------------------------------------------------------------------------
CRBC AS
EVERGREEN ADJUSTED FOR
WJLB-FM/ WUSL-FM VIACOM COMPLETED KZPS-FM/
WMXD-FM WDAS-FM/AM WIOQ-FM ACQUISITION CHANCELLOR KDGE-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL
1/1-8/31(g) 1/1-12/31(h) 1/1-12/31(i) 1/1-12/31(j) 1/1-12/31(k) 1/1-12/31(l)
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $15,408 $16,809 $20,152 $ 66,726 $328,522 $12,174
Less: agency commissions........... (1,881) (2,142) (2,369) (10,493) (43,553) (1,758)
------- ------- ------- -------- -------- -------
Net revenues....................... 13,527 14,667 17,783 56,233 284,969 10,416
Station operating expenses
excluding depreciation and
amortization..................... 5,721 7,759 9,519 26,598 172,729 8,585
Depreciation and amortization...... 2,415 2,763 -- 6,267 46,909 475
Corporate general and
administrative expenses.......... 1,005 620 533 1,617 5,657 --
Stock option compensation.......... -- -- -- -- 3,800 --
------- ------- ------- -------- -------- -------
Operating income (loss)............ 4,386 3,525 7,731 21,751 55,874 1,356
Interest expense................... 1,406 79 3,001 -- 72,680 --
Other (income) expense............. -- (39) 58 (741) (148) 408
------- ------- ------- -------- -------- -------
Income (loss) before income
taxes............................ 2,980 3,485 4,672 22,492 (16,658) 948
Income tax expense (benefit)....... 180 -- -- 10,612 (2,663) --
------- ------- ------- -------- -------- -------
Net income (loss).................. 2,800 3,485 4,672 11,880 (13,995) 948
Preferred stock dividends.......... -- -- -- -- 38,400 --
------- ------- ------- -------- -------- -------
Income (loss) attributable to
common stock..................... $2,800 $ 3,485 $ 4,672 $ 11,880 $(52,395) $ 948
======= ======= ======= ======== ======== =======
Broadcast cash flow................ $7,806 $ 6,908 $ 8,264 $ 29,635 $112,240 $ 1,831
======= ======= ======= ======== ======== =======
<CAPTION>
ACQUISITIONS
---------------------------
KATZ GANNETT
ACQUISITION ACQUISITION
HISTORICAL HISTORICAL
1/1-12/31(m) 1/1-12/31(n)
------------ ------------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $183,239 $52,028
Less: agency commissions........... -- (6,819)
-------- -------
Net revenues....................... 183,239 45,209
Station operating expenses
excluding depreciation and
amortization..................... 139,158 25,031
Depreciation and amortization...... 13,427 1,760
Corporate general and
administrative expenses.......... -- --
Stock option compensation.......... -- --
-------- -------
Operating income (loss)............ 30,654 18,418
Interest expense................... 21,074 --
Other (income) expense............. (173) --
-------- -------
Income (loss) before income
taxes............................ 9,753 18,418
Income tax expense (benefit)....... 7,381 --
-------- -------
Net income (loss).................. 2,372 18,418
Preferred stock dividends.......... -- --
-------- -------
Income (loss) attributable to
common stock..................... $ 2,372 $18,418
======== =======
Broadcast cash flow................ $ 44,081 $20,178
======== =======
</TABLE>
B-8
<PAGE> 37
<TABLE>
<CAPTION>
DISPOSITIONS
----------------------------------------------------------------------------------------
WPEG-FM
WBAV-FM/AM
WRFX-FM SAN FRANCISCO
WFNZ-FM WNKS-FM WEJM-FM/AM WJZW-FM FREQUENCY KDFC-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-12/31(I) 1/1-12/31(O) 1/1-12/31(P) 1/1-12/31(Q) 1/1-12/31(R) 1/1-12/31(S)
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $(20,818) $ (3,303) $(2,690) $(8,443) $(2,736) $(5,138)
Less: agency commissions........... 2,733 337 293 1,311 358 643
-------- -------- ------- ------- ------- -------
Net revenues....................... (18,085) (2,966) (2,397) (7,132) (2,378) (4,495)
Station operating expenses
excluding depreciation and
amortization..................... (9,509) (2,461) (2,217) (3,998) (3,159) (2,300)
Depreciation and amortization...... -- (548) (1,719) (589) (3,826) (853)
Corporate general and
administrative expenses.......... -- -- -- (206) -- --
Stock option compensation.......... -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Operating income (loss)............ (8,576) 43 1,539 (2,339) 4,607 (1,342)
Interest expense................... -- -- -- -- -- --
Other (income) expense............. -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Income (loss) before income
taxes............................ (8,576) 43 1,539 (2,339) 4,607 (1,342)
Income tax expense (benefit)....... -- -- -- (913) -- --
-------- -------- ------- ------- ------- -------
Net income (loss).................. (8,576) 43 1,539 (1,426) 4,607 (1,342)
Preferred stock dividends.......... -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Income (loss) attributable to
common stock..................... $ (8,576) $ 43 $ 1,539 $(1,426) $ 4,607 $(1,342)
======== ======== ======= ======= ======= =======
Broadcast cash flow................ $ (8,576) $ (505) $ (180) $(3,134) $ 781 $(2,195)
======== ======== ======= ======= ======= =======
<CAPTION>
DISPOSITIONS
---------------------------
WBZS-AM
WZHF-AM
KDFC-AM WLUP-FM COMPLETED
HISTORICAL HISTORICAL TRANSACTIONS
1/1-12/31(T) 1/1-12/31(L) HISTORICAL
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $(2,240) $(17,024) 662,800
Less: agency commissions........... 36 2,332 (64,874)
------- -------- --------
Net revenues....................... (2,204) (14,692) 597,926
Station operating expenses
excluding depreciation and
amortization..................... (930) (11,697) 375,802
Depreciation and amortization...... (30) (1,585) 68,856
Corporate general and
administrative expenses.......... (43) -- 11,440
Stock option compensation.......... -- -- 3,800
------- -------- --------
Operating income (loss)............ (1,201) (1,410) 138,028
Interest expense................... -- -- 100,106
Other (income) expense............. -- -- (795)
------- -------- --------
Income (loss) before income
taxes............................ (1,201) (1,410) 38,717
Income tax expense (benefit)....... (271) -- 13,873
------- -------- --------
Net income (loss).................. (930) (1,410) 24,844
Preferred stock dividends.......... -- -- 38,400
------- -------- --------
Income (loss) attributable to
common stock..................... $ (930) $ (1,410) $(13,556)
======= ======== ========
Broadcast cash flow................ $(1,274) $ (2,995) $222,124
======= ======== ========
</TABLE>
B-9
<PAGE> 38
<TABLE>
<CAPTION>
ACQUISITIONS
--------------------------------------------------------------------
CRBC AS
ADJUSTED FOR EVERGREEN KZPS-
WUSL-FM COMPLETED VIACOM FM/
WDAS-FM/AM WIOQ-FM CHANCELLOR ACQUISITION KDGE-FM
NINE MONTHS ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL
SEPTEMBER 30, 1997 1/1-4/30(h) 1/1-5/15(i) 1/1-9/5(k) 1/1-7/2(j) 1/1-7/31(l)
------------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross revenues................ $5,028 $7,088 $244,192 $38,972 $ 7,616
Less: agency commissions...... (680) (829) (30,754) (5,470) (929)
------ ------ -------- ------- -------
Net revenues.................. 4,348 6,259 213,438 33,502 6,687
Station operating expenses
excluding depreciation and
amortization................. 2,533 3,649 122,529 14,936 5,293
Depreciation and amortization. 875 -- 30,505 2,279 280
Corporate general and
administrative expenses...... 172 141 7,226 682 --
Merger expense................ -- -- 6,124 -- --
Restructuring charge.......... -- -- -- -- --
Stock option compensation..... -- -- 3,083 -- --
------ ------ -------- ------- -------
Operating income (loss)....... 768 2,469 43,971 15,605 1,114
Interest expense.............. 19 990 49,594 -- --
Other (income) expense........ 863 -- (584) -- 12
------ ------ -------- ------- -------
Income (loss) before income
taxes........................ (114) 1,479 (5,039) 15,605 1,102
Income tax expense
(benefit).................... -- -- 984 5,892 --
------ ------ -------- ------- -------
Net income (loss)............. (114) 1,479 (6,023) 9,713 1,102
Preferred stock dividends..... -- -- 27,321 -- --
------ ------ -------- ------- -------
Income (loss) attributable to
common stock................. $ (114) $1,479 $(33,344) $ 9,713 $ 1,102
====== ====== ======== ======= =======
Broadcast cash flow........... $1,815 $2,610 $ 90,909 $18,566 $ 1,394
====== ====== ======== ======= =======
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------- ------------------------------------------------------
WPEG-FM
KATZ WBAV-FM/AM
ACQUISITION GANNETT WRFX-FM WPNT-FM WEJM-
HISTORICAL ACQUISITION WFNZ-FM WNKS-FM HISTORICAL FM/AM
NINE MONTHS ENDED 1/1- HISTORICAL HISTORICAL HISTORICAL 5/30- HISTORICAL
SEPTEMBER 30, 1997 9/30(m) 1/1-9/30(n) 1/1-5/15(i) 1/1-5/15(o) 6/19(u) 1/1-8/26(p)
------------------ ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................ $124,713 $44,339 $(7,788) $(1,332) $(567) $(1,279)
Less: agency commissions...... -- (5,772) 1,029 142 93 135
-------- ------- ------- ------- ----- -------
Net revenues.................. 124,713 38,567 (6,759) (1,190) (474) (1,144)
Station operating expenses
excluding depreciation and
amortization................. 102,991 20,497 (3,569) (994) (285) (1,276)
Depreciation and amortization. (2,059) 384 -- (212) (279) (305)
Corporate general and
administrative expenses...... -- -- -- -- -- --
Merger expense................ -- -- -- -- -- --
Restructuring charge.......... 7,095 -- -- -- -- --
Stock option compensation..... -- -- -- -- -- --
-------- ------- ------- ------- ----- -------
Operating income (loss)....... 16,686 17,686 (3,190) 16 90 437
Interest expense.............. 15,977 -- -- -- -- --
Other (income) expense........ (163) -- -- -- -- --
-------- ------- ------- ------- ----- -------
Income (loss) before income
taxes........................ 872 17,686 (3,190) 16 90 437
Income tax expense
(benefit).................... 3,283 -- -- -- -- --
-------- ------- ------- ------- ----- -------
Net income (loss)............. (2,411) 17,686 (3,190) 16 90 437
Preferred stock dividends..... -- -- -- -- -- --
-------- ------- ------- ------- ----- -------
Income (loss) attributable to
common stock................. $ (2,411) $17,686 $(3,190) $ 16 $ 90 $ 437
======== ======= ======= ======= ===== =======
Broadcast cash flow........... $ 21,722 $18,070 $(3,190) $ (196) $(189) $ 132
======== ======= ======= ======= ===== =======
<CAPTION>
DISPOSITIONS
-------------------------------------------------------------------
SAN WBZS-AM
FRANCISCO KDFC-FM WZHF-AM
WJZW-FM FREQUENCY HISTORICAL KDFC-AM WLUP-FM
NINE MONTHS ENDED HISTORICAL HISTORICAL 1/1- HISTORICAL HISTORICAL COMPLETED
SEPTEMBER 30, 1997 1/1-7/2(q) 1/1-7/7(r) 1/31(s) 1/1-8/13(t) 1/1-7/14(l) TRANSACTIONS
------------------ ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................ $(4,137) $(1,370) $(278) $(1,091) $(6,928) $447,178
Less: agency commissions...... 567 178 26 23 935 (41,306)
------- ------- ----- ------- ------- --------
Net revenues.................. (3,570) (1,192) (252) (1,068) (5,993) 405,872
Station operating expenses
excluding depreciation and
amortization................. (2,161) (1,738) (224) (665) (5,642) 255,874
Depreciation and amortization. (315) (84) -- (54) (1,145) 29,870
Corporate general and
administrative expenses...... (70) -- -- (18) -- 8,133
Merger expense................ -- -- -- -- -- 6,124
Restructuring charge.......... -- -- -- -- -- 7,095
Stock option compensation..... -- -- -- -- -- 3,083
------- ------- ----- ------- ------- --------
Operating income (loss)....... (1,024) 630 (28) (331) 794 95,693
Interest expense.............. -- -- -- -- -- 66,580
Other (income) expense........ -- -- -- -- -- 128
------- ------- ----- ------- ------- --------
Income (loss) before income
taxes........................ (1,024) 630 (28) (331) 794 28,985
Income tax expense
(benefit).................... (260) -- -- (98) -- 9,801
------- ------- ----- ------- ------- --------
Net income (loss)............. (764) 630 (28) (233) 794 19,184
Preferred stock dividends..... -- -- -- -- -- 27,321
------- ------- ----- ------- ------- --------
Income (loss) attributable to
common stock................. $ (764) $ 630 $ (28) $ (233) $ 794 $ (8,137)
======= ======= ===== ======= ======= ========
Broadcast cash flow........... $(1,409) $ 546 $ (28) $ (403) $ (351) $149,998
======= ======= ===== ======= ======= ========
</TABLE>
B-10
<PAGE> 39
- ---------------
(a) On January 17, 1996, the Company acquired Pyramid Communications, Inc.
("Pyramid"), a radio broadcasting company with 12 radio stations (9 FM and 3
AM) in five markets (Chicago, Philadelphia, Boston, Charlotte, and Buffalo)
(the "Pyramid Acquisition"). The total purchase price, including acquisition
costs, allocated to net assets acquired was approximately $316,343 of which
$315,500 was financed through additional borrowings under the Company's
prior senior credit facility. The historical financial data of Pyramid for
the period of January 1, 1996 to January 17, 1996 excludes the combined net
losses of approximately $60 for WHTT-FM, WHTT-AM and WSJZ-FM in Buffalo (the
"Buffalo Transactions") which were sold in 1996 for $32,000 in cash.
(b) On August 14, 1996, the Company acquired KYLD-FM in San Francisco for
$44,000 in cash. The Company had previously been operating KYLD-FM under a
time brokerage agreement since May 1, 1996.
(c) On November 26, 1996, the Company exchanged WKLB-FM in Boston (which the
Company acquired on May 3, 1996 for $34,000 in cash) for WGAY-FM in
Washington, D.C. On April 3, 1997, the Company exchanged, in the Greater
Media Exchange, WQRS-FM in Detroit (which the Company acquired on April 3,
1997 for $32,000 in cash) for WWRC-AM in Washington, D.C. and $9,500 in
cash. The net purchase price to the Company of WWRC-AM was therefore
$22,500. The Company had previously been operating WGAY-FM and WWRC-AM under
time brokerage agreements since June 17, 1996.
(d) On October 18, 1996, the Company acquired WEDR-FM in Miami for $65,000 in
cash.
(e) On January 31, 1997, the Company acquired, in the WWWW/WDFN Acquisition,
WWWW-FM and WDFN-AM in Detroit from CRBC for $30,000 in cash (of which
$1,500 was paid as escrow funds in January 1996). The Company had previously
provided certain sales and promotional functions to WWWW-FM and WDFN-AM
under a joint sales agreement since February 14, 1996 and subsequently
operated the stations under a time brokerage agreement since April 1, 1996.
(f) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition,
KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash (of which
$10,000 was paid as escrow funds in November 1996). The Company had
previously been operating the stations under a time brokerage agreement
since November 1, 1996.
(g) On April 1, 1997, the Company acquired, in the Secret/Detroit Acquisition,
WJLB-FM and WMXD-FM in Detroit for $168,000 in cash. The Company had
previously been operating the stations under a time brokerage agreement
since September 1, 1996.
(h) On May 1, 1997, the Company acquired, in the Beasley Acquisition, WDAS-FM/AM
in Philadelphia for $103,000 in cash.
(i) On May 15, 1997, the Company exchanged, in the EZ Exchange, 5 of its 6
stations in the Charlotte market (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM)
for WUSL-FM and WIOQ-FM in Philadelphia.
(j) On July 2, 1997, the Company acquired, in the Evergreen Viacom Acquisition,
WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM, and WBZS-AM
in Washington, D.C. for approximately $612,388 in cash including various
other direct acquisition costs. The Evergreen Viacom Acquisition was
financed with (i) bank borrowings under the Senior Credit Facility (as
defined) of $552,559; (ii) $53,750 in escrow funds paid by the Company on
February 19, 1997 and (iii) $6,079 financed through working capital. In June
1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible
Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") for
net proceeds of approximately $287,800 which were contributed to the Company
by Evergreen and used to repay borrowings under the Senior Credit Facility
and subsequently were reborrowed on July 2, 1997 as part of the financing of
the Evergreen Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM
in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68,000 in
cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM,
which were also sold on August 13,
B-11
<PAGE> 40
1997, were accounted for as assets held for sale in connection with the
purchase price allocation of the Viacom Acquisition and no gain or loss was
recognized by the Company upon consummation of the sales (see 5(q) and
5(t)). The Viacom results of operations for the year ended December 31, 1996
reflect the financial performance of WAXQ-FM for six months of the year that
the station was operated by Viacom (July 1, 1996 to December 31, 1996)
combined with net income of $851 for the first half of the year when the
station was under prior ownership.
(k) On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan
of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting
Company ("Chancellor"), CRBC, Evergreen Media Corporation ("Evergreen"),
Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media
Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged (the "Parent
Merger") with and into EMHC, a direct, wholly-owned subsidiary of Evergreen,
with EMHC remaining as the surviving corporation and (ii) CRBC was merged
(the "Subsidiary Merger" and, together with the Parent Merger, the
"Chancellor Merger") with and into EMCLA, a direct, wholly-owned subsidiary
of EMHC, with EMCLA remaining as the surviving corporation. Upon
consummation of the Parent Merger, Evergreen was renamed Chancellor Media
Corporation and EMHC was renamed Chancellor Mezzanine Holdings Corporation
("CMHC"). Upon consummation of the Subsidiary Merger, EMCLA was renamed
Chancellor Media Corporation of Los Angeles ("CMCLA"). Consummation of the
Chancellor Merger added 52 radio stations (36 FM and 16 AM) to the Company's
portfolio of stations, including 13 stations in markets in which the Company
previously operated. The total purchase price allocated to net assets
acquired was approximately $1,998,383 which included (i) the conversion of
each outstanding share of Chancellor Class A and Class B Common Stock into
0.9091 shares of Chancellor Media Common Stock, resulting in the issuance of
17,308,730 shares of Chancellor Media Common Stock at a fair value of $31.00
per share, (ii) the assumption of Chancellor's and CRBC's long-term debt of
$949,000, (iii) the issuance of 2,117,629 shares of CMCLA's 12% Exchangeable
Preferred Stock (the "12% Preferred Stock") in exchange for CRBC's
substantially identical securities with a fair value of $215,570, (iv) the
issuance of 1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") in exchange for
CRBC's substantially identical securities with a fair value of $120,217, (v)
the issuance of 2,200,000 shares of Chancellor Media's 7% Convertible
Preferred Stock (the "7% Convertible Preferred Stock") in exchange for
Chancellor's substantially identical securities with a fair value of
$111,048, (vi) the assumption of stock options issued to Chancellor stock
option holders with a fair value of $34,977 and (vii) estimated acquisition
costs of $31,000.
B-12
<PAGE> 41
CRBC's historical condensed combined statement of operations for the year ended
December 31, 1996 and the nine months ended September 30, 1997 and pro forma
adjustments related to the transactions completed by CRBC prior to the
Chancellor Merger (the "Completed Chancellor Transactions") is summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
------------------------------------------------------------------------------------------
KIMN-FM/
SHAMROCK KALC-FM COLFAX KOOL-FM SUNDANCE
CRBC HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1996 HISTORICAL(I) 1/1-2/14(II) 1/1-3/31(III) 1/1-12/31(IV) 1/1-3/31(IV) 1/1-9/12(IV)
- ------------------------------- ------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................. $203,188 $ 9,698 $2,010 $51,745 $1,665 $13,844
Less: agency commissions....... (24,787) (1,234) (259) (6,626) (234) (1,740)
-------- ------- ------ ------- ------ -------
Net revenues................... 178,401 8,464 1,751 45,119 1,431 12,104
Station operating expenses
excluding depreciation and
amortization.................. 111,210 7,762 1,523 28,584 852 7,678
Depreciation and
amortization.................. 20,877 595 511 4,494 229 1,242
Corporate general and
administrative expenses....... 4,845 2,215 -- -- -- --
Stock option compensation...... 3,800 -- -- -- -- --
-------- ------- ------ ------- ------ -------
Operating income (loss)........ 37,669 (2,108) (283) 12,041 350 3,184
Interest expense............... 35,704 1,380 -- 4,369 299 --
Other (income) expense......... 68 49 312 (179) -- 25
-------- ------- ------ ------- ------ -------
Income (loss) before income
taxes......................... 1,897 (3,537) (595) 7,851 51 3,159
Income tax expense (benefit)... 4,612 -- -- -- -- --
-------- ------- ------ ------- ------ -------
Net income (loss).............. (2,715) (3,537) (595) 7,851 51 3,159
Preferred stock dividends...... 11,557 -- -- -- -- --
-------- ------- ------ ------- ------ -------
Income (loss) attributable to
common stock.................. $(14,272) $(3,537) $ (595) $ 7,851 $ 51 $ 3,159
======== ======= ====== ======= ====== =======
Broadcast cash flow............ $ 67,191 $ 702 $ 228 $16,535 $ 579 $ 4,426
======== ======= ====== ======= ====== =======
<CAPTION>
ACQUISITIONS
--------------------------------------------
CHANCELLOR
VIACOM
OMNI KSTE-FM ACQUISITION
HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1996 1/1-6/30(V) 1/1-7/31(VI) 1/1-12/31(VII)
- ------------------------------- ----------- ------------- --------------
<S> <C> <C> <C>
Gross revenues................. $ 8,710 $1,411 $58,806
Less: agency commissions....... (1,211) (149) (9,588)
------- ------ -------
Net revenues................... 7,499 1,262 49,218
Station operating expenses
excluding depreciation and
amortization.................. 4,985 1,244 25,416
Depreciation and
amortization.................. 1,458 375 4,640
Corporate general and
administrative expenses....... -- -- 1,501
Stock option compensation...... -- -- --
------- ------ -------
Operating income (loss)........ 1,056 (357) 17,661
Interest expense............... -- -- 6,374
Other (income) expense......... (404) -- --
------- ------ -------
Income (loss) before income
taxes......................... 1,460 (357) 11,287
Income tax expense (benefit)... -- -- 4,748
------- ------ -------
Net income (loss).............. 1,460 (357) 6,539
Preferred stock dividends...... -- -- --
------- ------ -------
Income (loss) attributable to
common stock.................. $ 1,460 $ (357) $ 6,539
======= ====== =======
Broadcast cash flow............ $ 2,514 $ 18 $23,802
======= ====== =======
<CAPTION>
DISPOSITIONS
-------------------------------------------------------------- PRO FORMA
ADJUSTMENTS CRBC AS
WWWW-FM/ WMIL-FM/ FOR THE ADJUSTED FOR
WDFN-AM KTBZ-FM WOKY-AM WDRQ-FM COMPLETED COMPLETED
HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR
YEAR ENDED DECEMBER 31, 1996 1/1-2/14(VIII) 1/1-2/14(III) 1/1-12/31(IX) 1/1-12/31(X) TRANSACTIONS TRANSACTIONS
- ------------------------------- --------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................. $(839) $(399) $(9,552) $(6,743) $ (5,022)(xi) $328,522
Less: agency commissions....... 102 48 1,070 1,055 -- (43,553)
----- ----- ------- ------- -------- --------
Net revenues................... (737) (351) (8,482) (5,688) (5,022) 284,969
Station operating expenses
excluding depreciation and
amortization.................. (815) (521) (4,896) (4,530) (5,763)(xi) 172,729
Depreciation and
amortization.................. (45) (42) (539) (354) 15,022(xii) 46,909
(1,554)(xiii)
Corporate general and
administrative expenses....... -- -- -- (178) (2,726)(xiv) 5,657
Stock option compensation...... -- -- -- -- -- 3,800
----- ----- ------- ------- -------- --------
Operating income (loss)........ 123 212 (3,047) (626) (10,001) 55,874
Interest expense............... -- -- -- -- 24,554(xv) 72,680
Other (income) expense......... -- -- (19) -- -- (148)
----- ----- ------- ------- -------- --------
Income (loss) before income
taxes......................... 123 212 (3,028) (626) (34,555) (16,658)
Income tax expense (benefit)... -- -- -- (326) (11,697)(xvi) (2,663)
----- ----- ------- ------- -------- --------
Net income (loss).............. 123 212 (3,028) (300) (22,858) (13,995)
Preferred stock dividends...... -- -- -- -- 26,843(xvii) 38,400
----- ----- ------- ------- -------- --------
Income (loss) attributable to
common stock.................. $ 123 $ 212 $(3,028) $ (300) $(49,701) $(52,395)
===== ===== ======= ======= ======== ========
Broadcast cash flow............ $ 78 $ 170 $(3,586) $(1,158) $ 741 $112,240
===== ===== ======= ======= ======== ========
</TABLE>
B-13
<PAGE> 42
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
-------------------------- ------------ PRO FORMA
CHANCELLOR ADJUSTMENTS CRBC AS
COLFAX VIACOM FOR THE ADJUSTED FOR
CRBC HISTORICAL ACQUISITION WDRQ-FM COMPLETED COMPLETED
HISTORICAL 1/1- HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR
NINE MONTHS ENDED SEPTEMBER 30, 1997 1/1-9/5(I) 1/23(IV) 1/1-7/2(VII) 1/1-8/11(X) TRANSACTIONS TRANSACTIONS
------------------------------------ ---------- ----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................... $215,018 $3,183 $29,214 $(2,395) $ (828)(xi) $244,192
Less: agency commissions................. (26,575) (384) (4,046) 251 -- (30,754)
-------- ------ ------- ------- -------- --------
Net revenues............................. 188,443 2,799 25,168 (2,144) (828) 213,438
Station operating expenses excluding
depreciation and amortization.......... 110,548 1,872 13,326 (1,986) (1,231)(xi) 122,529
Depreciation and amortization............ 23,919 -- 2,370 (186) 4,484(xii) 30,505
(82)(xiii)
Corporate general and administrative
expenses............................... 7,102 -- 520 (42) (354)(xiv) 7,226
Merger expense........................... 6,124 -- -- -- -- 6,124
Stock option compensation................ 3,083 -- -- -- -- 3,083
-------- ------ ------- ------- -------- --------
Operating income (loss).................. 37,667 927 8,952 70 (3,645) 43,971
Interest expense......................... 37,760 -- 3,178 -- 8,656(xv) 49,594
Other (income) expense................... (584) -- -- -- -- (584)
-------- ------ ------- ------- -------- --------
Income (loss) before income taxes........ 491 927 5,774 70 (12,301) (5,039)
Income tax expense (benefit)............. 2,196 -- 1,558 18 (2,788)(xvi) 984
-------- ------ ------- ------- -------- --------
Net income (loss)........................ (1,705) 927 4,216 52 (9,513) (6,023)
Preferred stock dividends................ 25,817 -- -- -- 1,504 (xvii 27,321
-------- ------ ------- ------- -------- --------
Income (loss) attributable to common
stock.................................. $(27,522) $ 927 $ 4,216 $ 52 $(11,017) $(33,344)
======== ====== ======= ======= ======== ========
Broadcast cash flow...................... $ 77,895 $ 927 $11,842 $ (158) $ 403 $ 90,909
======== ====== ======= ======= ======== ========
</TABLE>
B-14
<PAGE> 43
- ---------------
(i) On November 22, 1996, CRBC acquired WKYN-AM in Cincinnati for $1,400 in
cash. CRBC had been previously operating WKYN-AM under a time brokerage
agreement since January 1, 1996. Therefore, CRBC's historical results of
operations for the year ended December 31, 1996 and the nine months ended
September 30, 1997 include the results of operations of WKYN-AM.
(ii) On February 14, 1996, CRBC acquired Shamrock Broadcasting, Inc., a radio
broadcasting company with 19 radio stations (11 FM and 8 AM) located in 10
markets (Los Angeles, New York, San Francisco, Houston, Atlanta, Detroit,
Denver, Minneapolis-St. Paul, Phoenix and Pittsburgh). The total purchase
price, including acquisition costs, allocated to net assets acquired was
approximately $408,000.
(iii) On July 31, 1996, CRBC exchanged KTBZ-FM in Houston (which was acquired on
February 14, 1996 as part of the Shamrock Acquisition) and $5,600 in cash
for KIMN-FM and KALC-FM in Denver. CRBC had previously entered into a time
brokerage agreement to sell substantially all of the broadcast time of
KTBZ-FM effective February 14, 1996. In addition, CRBC had been previously
operating KIMN-FM and KALC-FM under a time brokerage agreement since April
1, 1996.
(iv) On January 23, 1997, CRBC acquired, in the Colfax Acquisition, Colfax
Communications, a radio broadcasting company, with 12 radio stations (8 FM
and 4 AM) located in 4 markets (Minneapolis-St. Paul, Phoenix, Washington,
D.C. and Milwaukee markets). The total purchase price, including
acquisition costs, allocated to net assets acquired was approximately
$383,700. The Colfax Acquisition was financed through (i) a private
placement by CRBC of $200,000 of 12% Exchangeable Preferred Stock for net
proceeds of $191,817; (ii) a private placement by Chancellor of $110,000 of
7% Convertible Preferred Stock for net proceeds of $105,546; (iii)
additional bank borrowings under CRBC's previous senior credit agreement of
$65,937 and (iv) $20,400 in escrow funds. The historical financial data of
Colfax for the year ended December 31, 1996 excludes the combined net
income of approximately $224 for KLTB-FM, KARO-FM and KIDO-AM in Boise,
Idaho which CRBC did not acquire as part of the Colfax Acquisition. The
Colfax historical condensed statement of operations for the year ended
December 31, 1996, does not include the results of operations of the
following: (i) KOOL-FM for the period January 1, 1996 to March 31, 1996 and
(ii) WMIL-FM and WOKY-AM in Milwaukee and KZON-FM, KISO-AM, KYOT-FM and
KOY-AM in Phoenix which were owned and operated by Sundance Broadcasting,
Inc. ("Sundance") for the period January 1, 1996 to September 12, 1996. On
March 31, 1997, CRBC sold WMIL-FM and WOKY-AM in Milwaukee for $41,253 in
cash. The assets of WMIL-FM and WOKY-AM are classified as assets held for
sale in connection with the purchase price allocation of the Colfax
Acquisition. Accordingly, WMIL-FM and WOKY-AM net income of approximately
$41 for the period January 23, 1997 through March 31, 1997 has been
excluded from the Colfax historical condensed statement of operations for
the nine months ended September 30, 1997.
(v) On February 13, 1997, CRBC acquired, in the Omni Acquisition, substantially
all of the assets and assumed certain liabilities of the OmniAmerica Group
including 8 radio stations (7 FM and 1 AM) located in 3 markets (Orlando,
West Palm Beach and Jacksonville). The total purchase price, including
acquisition costs, allocated to net assets acquired was approximately
$181,046. The Omni Acquisition was financed through (i) additional bank
borrowings under CRBC's previous senior credit agreement of $166,046 and
(ii) the issuance of 555,556 shares of the Chancellor Class A Common Stock
valued at $15,000 or $27.00 per share which was contributed by CRBC by
Chancellor. Prior to the consummation of the Omni Acquisition, CRBC had
entered into an agreement to operate the stations under a time brokerage
agreement effective July 1, 1996. Additionally, prior to consummation of
the West Palm Beach Exchange (see (vi) below) on March 28, 1997 and the SFX
Exchange (see note 13(a)), CRBC entered into time brokerage agreements to
sell substantially all of the broadcast time of WEAT-FM/AM and WOLL-FM in
West Palm Beach and WAPE-FM and WFYV-FM in Jacksonville effective July 1,
1996. The historical financial data of Omni for the period January 1, 1996
to June 30, 1996 represents the results of operations for the Orlando
stations (WOMX-FM, WXXL-FM and WJHM-FM). The results of operations for
WEAT-FM/AM and WOLL-FM in West Palm Beach
B-15
<PAGE> 44
and WAPE-FM and WFYV-FM in Jacksonville are not included as the acquisition and
disposition of these stations is deemed to have occurred on January 1, 1996.
(vi) On March 28, 1997, CRBC exchanged, in the West Palm Beach Exchange,
WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida, which were acquired as
part of the Omni Acquisition, for KSTE-FM in Sacramento and $33,000 in
cash. CRBC had previously been operating KSTE-FM under a time brokerage
agreement since August 1, 1996.
(vii) On July 2, 1997, CRBC acquired, in the Chancellor Viacom Acquisition,
KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in
Detroit for approximately $500,789 in cash including various other direct
acquisition costs. The Chancellor Viacom Acquisition was financed with (i)
bank borrowings of $273,159 under CRBC's restated senior credit agreement,
dated July 2, 1997 (the "CRBC Restated Credit Agreement"); (ii) borrowings
under an interim loan of Chancellor (the "Chancellor Broadcasting/Viacom
Interim Financing") of $168,300 which were contributed to CRBC by
Chancellor; (iii) escrow funds of $53,750 paid by CRBC on February 19,
1997 and (iv) $5,580 financed through working capital. The assets of
WDRQ-FM in Detroit are classified as assets held for sale in connection
with the purchase price allocation of the Chancellor Viacom Acquisition
(see (x) below).
(viii) On January 31, 1997, CRBC sold, in the WWWW/WDFN Disposition, WWWW-FM and
WDFN-AM in Detroit, which were acquired on February 14, 1996 as part of
the Shamrock Acquisition, to the Company for $30,000 in cash. Prior to
the completion of the sale, CRBC had entered into a joint sales agreement
effective February 14, 1996 and a time brokerage agreement effective
April 1, 1996 to sell substantially all of the broadcast time of WWWW-FM
and WDFN-AM to the Company pending the completion of the sale.
(ix) On March 31, 1997, CRBC sold, in the Milwaukee Disposition, WMIL-FM and
WOKY-AM in Milwaukee, which were acquired as part of the Colfax Acquisition
on January 23, 1997, for $41,253 in cash.
(x) On August 11, 1997, CRBC sold, in the ABC/Detroit Disposition, WDRQ-FM in
Detroit for $37,000 in cash. The assets of WDRQ-FM were classified as
assets held for sale in connection with the purchase price allocation of
the Chancellor Viacom Acquisition (see 5(k)(vii)). Accordingly, WDRQ-FM net
income for the period July 2, 1997 to August 11, 1997 has been excluded
from CRBC's historical condensed statement of operations.
(xi) Reflects the elimination of time brokerage agreement fees received and paid
by CRBC as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE
- --------------------------------------------------- --------------- ------------ ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................................... Detroit 2/14 -- 12/31 $(2,937) $ (598)
KTBZ-FM............................................ Houston 2/14 -- 7/31 (1,113) (265)
WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 7/1 -- 12/31 -- (3,900)
WEAT-FM/AM, WOLL-FM................................ West Palm Beach 7/1 -- 12/31 (972) (1,000)
------- -------
Total adjustment for decrease in gross
revenues and expenses $(5,022) $(5,763)
======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 MARKET PERIOD REVENUE EXPENSE
- --------------------------------------------------- --------------- ------------ ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................................... Detroit 1/1 -- 1/31 $ (235) $ (16)
WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 1/1 -- 2/13 -- (911)
WEAT-FM/AM, WOLL-FM................................ West Palm Beach 1/1 -- 3/28 (593) (304)
------- -------
Total adjustment for decrease in gross
revenues and expenses $ (828) $(1,231)
======= =======
</TABLE>
Gross revenues of the Completed Chancellor Transactions exclude any time
brokerage agreement payments received from CRBC.
B-16
<PAGE> 45
(xii) Reflects incremental amortization related to the Completed Chancellor
Transactions and is based on the following allocation to intangible
assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1996 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE
--------------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Shamrock......................... 1/1 - 2/14 $ 361,425 $ 1,104 $ 393 $ 711
KIMN-FM/KALC-FM.................. 1/1 - 3/31 8,285 52 341 (289)
Omni............................. 1/1 - 12/31 171,837 4,296 161 4,135
Colfax........................... 1/1 - 12/31 317,894 7,947 3,861 4,086
KSTE-FM.......................... 1/1 - 12/31 (32,475) (812) -- (812)
Chancellor Viacom Acquisition.... 1/1 - 12/31 451,690 11,292 4,101 7,191
---------- ------- ------ -------
Total.................. $1,278,656 $23,879 $8,857 $15,022
---------- ------- ------ -------
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1997 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE
------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Omni................................ 1/1 - 2/13 $ 171,837 $ 525 $ -- $ 525
Colfax.............................. 1/1 - 1/23 317,894 508 -- 508
KSTE-FM............................. 1/1 - 3/28 (32,475) (198) -- (198)
Chancellor Viacom Acquisition....... 1/1 - 7/2 451,690 5,709 2,060 3,649
---------- ------- ------ -------
Total..................... $ 908,946 $ 6,544 $2,060 $ 4,484
---------- ------- ------ -------
</TABLE>
- ---------------
(1) Intangible assets are amortized on a straight-line basis over an
estimated average 40 year life by CRBC. In connection with purchase
accounting for the Chancellor Merger, intangible assets will be
amortized over an estimated average life of 15 years in accordance with
the Company's accounting policies and procedures.
Historical depreciation expense of the Completed Chancellor Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(xiii) Reflects the elimination of disposed stations' historical depreciation
and amortization expense of $1,554 for the year ended December 31, 1996
(KTBZ-FM of $642 and WWWW-FM/WDFN-AM of $912 for the period of February
14, 1996 to December 31, 1996) and $82 for the nine months ended
September 30, 1997 (WWWW-FM/WDFN-AM for the period of January 1, 1997 to
January 31, 1997) recognized by CRBC during the time brokerage agreement
holding period.
(xiv) Reflects the elimination of duplicate corporate expenses of $2,726 for the
year ended December 31, 1996 and $354 for the nine months ended September
30, 1997 related to the Completed Chancellor Transactions.
B-17
<PAGE> 46
(xv) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Chancellor Transactions, the February 1996
and August 1996 equity offerings of Chancellor (the "Chancellor
Offerings"), the issuance by CRBC of its 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock, the refinancing of CRBC's
previous senior credit agreement on January 23, 1997 and the offering on
June 24, 1997 by CRBC of $200.0 million aggregate principal amount of its
8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% Notes"):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Chancellor Acquisitions.................... $ 994,292 $ 558,892
Completed Chancellor Dispositions.................... (104,253) (104,253)
New Loan Fees........................................ 6,873 6,873
--------- ---------
Total additional bank borrowings....................... $ 896,912 $ 461,512
========= =========
Interest expense on additional bank borrowings at
7.5%................................................. $ 39,651 $ 11,376
Less: historical interest expense of the stations
acquired in the Completed Chancellor Transactions.... (12,422) (3,178)
--------- ---------
Net increase in interest expense....................... 27,229 8,198
Reduction in interest expense on bank debt related to
the application of net proceeds of the following at
7.5%:
February 1996 Offering proceeds contributed to CRBC by
Chancellor of $155,475 for the period January 1, 1996
to February 14, 1996................................. (1,425) --
August 1996 Offering proceeds contributed to CRBC by
Chancellor of $23,050 for the period January 1, 1996
to August 9, 1996.................................... (1,052) --
CRBC 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock proceeds of $96,171 for the period
January 1, 1996 to February 14, 1996.............. (902) --
CRBC 8 3/4% Notes proceeds of $194,083 for the year
ended December 31, 1996 and for the period January
1, 1997 to June 24, 1997.......................... (14,556) (7,036)
Reduction in interest expense resulting from the
redemption of CRBC's 12.5% Senior Subordinated Notes
of $60,000 on June 5, 1997........................... (7,500) (3,229)
Interest expense on $70,133 additional bank borrowings
at 7.5% related to the redemption of CRBC's 12.5%
Senior Subordinated Notes on June 5, 1997............ 5,260 2,265
Interest expense on $200,000 8 3/4% Notes issued
June 24, 1997........................................ 17,500 8,458
--------- ---------
Total adjustment for net increase in interest
expense.............................................. $ 24,554 $ 8,656
========= =========
</TABLE>
(xvi) Reflects the 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.
(xvii) Reflects incremental dividends and accretion on preferred stock as
follows:
<TABLE>
<CAPTION>
NINE MONTHS
DATE OF YEAR ENDED ENDED
ISSUANCE DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ----------------- ------------------
<S> <C> <C> <C>
12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock........ February 26, 1996 $ 1,441 $ --
12% Exchangeable Preferred Stock...... January 23, 1997 25,402 1,504
------- -------
Total dividends and accretion......... $26,843 $1,504
======= =======
</TABLE>
B-18
<PAGE> 47
(l) On October 7, 1997, the Company acquired, in the Bonneville Acquisition,
KZPS-FM and KDGE-FM in Dallas for $83,500 in cash. On July 14, 1997, the
Company completed the disposition of WLUP-FM in Chicago to Bonneville and
placed $80,000 in a trust pending the completion of the Chicago/Dallas
Exchange. The Chicago/Dallas Exchange was accounted for as a like-kind
exchange and no gain or loss was recognized upon consummation of the
exchange. The Company began operating KZPS-FM and KDGE-FM under a time
brokerage agreement on August 1, 1997.
(m) On October 28, 1997, Chancellor Media and the Company acquired Katz Media
Group, Inc. ("KMG"), a full-service media representation firm, in a tender
offer transaction for a total purchase price of approximately $379,223 (the
"Katz Acquisition") which included (i) the conversion of each outstanding
share of KMG Common Stock into the right to receive $11.00 in cash,
resulting in total cash payments of $149,601, (ii) the assumption of
long-term debt of KMG and its subsidiaries of $222,122 which includes
borrowings outstanding under the senior credit facility of KMG and its
subsidiaries of $115,122 and $100,000 of the 10 1/2% Notes and (iii)
estimated acquisition costs of $7,500.
(n) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5
radio stations in 3 major markets from P&S, including WGCI-FM/AM in Chicago,
KHKS-FM in Dallas, and KKBQ-FM/AM in Houston for $340,000 in cash.
(o) On May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for
$10,000 in cash.
(p) On June 3, 1997, the Company sold, in the Crawford Disposition, WEJM-FM in
Chicago for $14,750 in cash. On August 26, 1997, the Company sold, in the
Douglas Chicago Disposition, WEJM-AM in Chicago for $7,500 in cash.
(q) On July 7, 1997, the Company sold, in the ABC/Washington Disposition,
WJZW-FM in Washington for $68,000 in cash. The assets of WJZW-FM were
classified as assets held for sale in connection with the purchase price
allocation of the Evergreen Viacom Acquisition (see 5(j)). Accordingly,
WJZW-FM net income for the period July 2, 1997 to July 7, 1997 has been
excluded from the Company's historical condensed statement of operations.
(r) On July 7, 1997, the Company sold, in the San Francisco Frequency
Disposition, the San Francisco 107.7 MHz FM dial position and transmission
facility and the call letters from CRBC's KSAN-FM in San Francisco for
$44,000 in cash.
(s) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition,
KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash. The Company
had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage
agreement since November 1, 1996. On July 21, 1997, the Company sold, in the
Bonneville/KDFC Disposition, KDFC-FM in San Francisco for $50,000 in cash.
The assets of KDFC-FM are classified as assets held for sale in connection
with the purchase price allocation of the acquisition of KKSF-FM/KDFC-FM/AM.
Accordingly, KDFC-FM net income of approximately $791 for the period
February 1, 1997 through September 30, 1997 has been excluded from the
Company's historical condensed statement of operations. Therefore, the
KDFC-FM condensed statement of operations includes the results of operations
for January 1, 1997 through January 31, 1997 (the time brokerage agreement
holding period in 1997) for the nine months ended September 30, 1997.
(t) On August 13, 1997, the Company sold, in the Douglas AM Dispositions,
WBZS-AM and WZHF-AM in Washington (acquired as part of the Evergreen Viacom
Acquisition -- see 5(j)) and KDFC-AM in San Francisco for $5,500, $7,500 and
$5,000, respectively, payable in the form of a promissory note. The assets
of WBZS-AM and WZHF-AM were classified as assets held for sale in connection
with the purchase price allocation of the Evergreen Viacom Acquisition (see
5(j)). Accordingly, WBZS-AM and WZHF-AM net income for the period July 2,
1997 to August 13, 1997 has been excluded from the Company's historical
condensed statement of operations.
(u) On May 30, 1997, the Company acquired, in the Century Acquisition, WPNT-FM
in Chicago for $75,750 in cash (including $2,000 for the purchase of the
station's accounts receivable) of which $5,500
B-19
<PAGE> 48
was paid as escrow funds in July 1996. On June 19, 1997, the Company sold,
in the Bonneville/WPNT Disposition, WPNT-FM in Chicago for $75,000 in cash
and recognized a gain of $500.
(6) Reflects the elimination of intercompany Katz revenue and Company expense
related to national representation commissions of $15,964 for the year
ended December 31, 1996 and $15,119 for the nine months ended September 30,
1997 paid to Katz by the Company.
(7) Reflects the reclassification of Katz corporate general and administrative
expenses of $10,035 for the year ended December 31, 1996 and $8,171 for the
nine months ended September 30, 1997 to conform with Company
classification.
(8) Reflects incremental amortization related to the Completed Transactions and
is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1996 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
---------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Pyramid Acquisition (ii)........ 1/1-1/17 $ 325,871 $ 1,026 $ 409 $ 617
KYLD-FM......................... 1/1-8/14 43,659 1,811 640 1,171
WEDR-FM......................... 1/1-10/18 63,757 3,400 -- 3,400
WGAY-FM......................... 1/1-11/26 32,538 1,964 -- 1,964
WWWW-FM/WDFN-AM................. 1/1-12/31 26,590 1,773 7 1,766
KKSF-FM (iii)................... 1/1-12/31 58,698 3,913 868 3,045
WJLB-FM/WMXD-FM................. 1/1-12/31 165,559 11,037 2,145 8,892
WWRC-AM......................... 1/1-12/31 16,808 1,121 -- 1,121
WDAS-FM/AM...................... 1/1-12/31 98,185 6,546 2,470 4,076
Evergreen Viacom Acquisition
(iv).......................... 1/1-12/31 515,654 34,377 5,606 28,771
Chancellor Merger (v)........... 1/1-12/31 2,217,482 147,832 37,834 109,998
Chicago/Dallas Exchange......... 1/1-12/31 (584) (39) -- (39)
Katz Acquisition (vi)........... 1/1-12/31 357,781 12,496 7,616 4,880
Gannett Acquisition............. 1/1-12/31 334,756 22,317 1,229 21,088
---------- -------- ------- --------
Total........................... $4,256,754 $249,574 $58,824 $190,750
========== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1997 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
------------------------------------ ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
WWWW-FM/WDFN-AM..................... 1/1-1/31 $ 26,590 $ 148 $ -- $ 148
KKSF-FM (iii)....................... 1/1-1/31 58,698 326 -- 326
WJLB-FM/WMXD-FM..................... 1/1-3/31 165,559 2,759 -- 2,759
WWRC-AM............................. 1/1-4/2 16,808 286 -- 286
WDAS-FM/AM.......................... 1/1-4/30 98,185 2,182 820 1,362
Evergreen Viacom Acquisition(iv).... 1/1-7/2 515,654 17,379 793 16,586
Chancellor Merger(v)................ 1/1-9/5 2,217,482 100,608 23,638 76,970
Chicago/Dallas Exchange............. 1/1-9/30 (584) (29) -- (29)
Katz Acquisition(vi)................ 1/1-9/30 357,781 9,372 5,712 3,660
Gannett Acquisition................. 1/1-9/30 334,756 16,738 921 15,817
---------- -------- ------- --------
Total............................... $3,790,929 $149,769 $31,884 $117,885
========== ======== ======= ========
</TABLE>
- ---------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life (except for the Katz Acquisition -- see
(vi) below). The incremental amortization period represents the period
of the year that the station was not owned by the Company.
(ii) Intangible assets for the Pyramid Acquisition of $325,871 includes
$61,218 resulting from the recognition of deferred tax liabilities and
excludes approximately $29,915 of the purchase price allocated to the
Buffalo Stations which were sold during the year ended December 31,
1996.
(iii) Intangible assets for KKSF-FM excludes (1) $50,000 of the purchase
price allocated to KDFC-FM which has been classified as assets held
for sale, (2) $1,500 to be reimbursed by the buyers of KDFC-FM for
costs incurred in connection with relocating KKSF and (3) $4,802 of
the purchase
B-20
<PAGE> 49
price allocated to KDFC-AM which was sold, in the Douglas AM
Dispositions, on August 13, 1997.
(iv) Intangible assets for the Evergreen Viacom Acquisition of $515,654
excludes (1) $67,231 of the purchase price allocated to WJZW-FM which
was sold in the ABC/Washington Disposition on July 7, 1997 and (2)
$12,148 of the purchase price allocated to WZHF-AM and WBZS-AM which
were sold in the Douglas AM Dispositions on August 13, 1997.
(v) Intangible assets for the Chancellor Merger of $2,217,482 includes
$332,409 resulting from the recognition of deferred tax liabilities.
(vi) Intangible assets for the Katz Acquisition of $357,781 consist of
goodwill of $252,781 and representation contract value of $105,000
with estimated average lives of 40 years and 17 years, respectively.
Historical depreciation expense of the Completed Transactions is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
(9) Reflects the elimination of merger expenses of $6,124 for the nine months
ended September 30, 1997 incurred by CRBC in connection with the Chancellor
Merger.
(10) Reflects the elimination of duplicate corporate expenses of $6,347 for the
year ended December 31, 1996 and $1,842 for the nine months ended September
30, 1997 related to the Completed Transactions.
B-21
<PAGE> 50
(11) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Transactions, the sale in October 1996 by
Evergreen of 9,000,000 shares of its common stock for aggregate net
proceeds of $264,236, which were contributed to the Company (the "1996
Evergreen Offering") and the amendment and restatement of the Company's
senior credit agreement on April 25, 1997 (the "Senior Credit Facility")
and the offering by the Company of the 8 1/8% Notes:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions............................ $2,158,160 $1,684,160
Chancellor Merger(a).............................. 164,000 164,000
Completed Dispositions............................ (381,250) (349,250)
New Loan Fees..................................... 10,473 10,473
---------- ----------
Total additional bank borrowings.................... $1,951,383 $1,509,383
========== ==========
Interest expense at 7.0%............................ $ 113,618 $ 54,295
Less: historical interest expense................... (5,596) (674)
---------- ----------
Net increase in interest expense.................... 108,022 53,621
Reduction in interest expense on bank debt related
to the application of net proceeds of the
following at 7.0%:
1996 Evergreen Offering contributed to the Company
of $264,236 for the period January 1, 1996 to
October 22, 1996............................... (15,003) --
$3.00 Convertible Preferred Stock Offering
contributed to the Company of $287,808 for the
year ended December 31, 1996 and for the period
January 1, 1997 to June 16, 1997............... (20,147) (9,290)
8 1/8% Notes proceeds of $485,000 for the year
ended December 31, 1996 and for the nine months
ended September 30, 1997....................... (33,950) (25,463)
Interest expense on $500,000 8 1/8% Notes issued
December 22, 1997................................. 40,625 30,469
Reduction in interest expense related to the
application of the 7.0% interest rate to the
Company's bank debt prior to the refinancing of
the Senior Credit Facility, to CRBC's bank debt
prior to consummation of the Chancellor Merger and
to KMG's bank debt prior to consummation of the
Katz Acquisition.................................. (19,127) 1,439
---------- ----------
Total adjustment for net increase in interest
expense........................................... $ 60,420 $ 50,776
========== ==========
</TABLE>
(a) The Company incurred additional bank borrowings of $133,000 to
distribute to CMHC to retire outstanding borrowings under the
Chancellor Broadcasting/Viacom Interim Financing and $31,000 to finance
estimated acquisition costs related to the Chancellor Merger.
(12) Reflects the 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.
B-22
<PAGE> 51
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED TO THE PENDING TRANSACTIONS
(13) 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,
1996 and the nine months ended September 30, 1997 has been obtained from
the historical financial statements of the respective stations and is
summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
-------------------------------------------- ---------------------------
SFX DENVER BONNEVILLE BONNEVILLE
EXCHANGE ACQUISITION OPTION WFLN-FM OPTION PENDING
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996 1/1-6/30(A) 1/1-12/31(B) 1/1-12/31(C) 9/1-12/31(D) 1/1-12/31(C) HISTORICAL
- -------------------------------------- ------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $ 5,726 $5,624 $55,482 $(1,455) $(35,355) $30,022
Less: agency commissions.............. (619) (780) (8,683) 159 4,528 (5,395)
------- ------ ------- ------- -------- -------
Net revenues.......................... 5,107 4,844 46,799 (1,296) (30,827) 24,627
Station operating expenses excluding
depreciation and amortization........ 3,676 3,947 25,678 (725) (18,858) 13,718
Depreciation and amortization......... 2,141 477 -- (800) -- 1,818
Corporate general and
administrative....................... 1,024 -- -- -- -- 1,024
------- ------ ------- ------- -------- -------
Operating income (loss)............... (1,734) 420 21,121 229 (11,969) 8,067
Interest expense...................... -- 195 -- -- (562) (367)
Other (income) expense................ -- (49) (8) -- 9 (48)
------- ------ ------- ------- -------- -------
Net income (loss)..................... $(1,734) $ 274 $21,129 $ 229 $(11,416) $ 8,482
======= ====== ======= ======= ======== =======
Broadcast cash flow................... $ 1,431 $ 897 $21,121 $ (571) $(11,969) $10,909
======= ====== ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------- -------------------------
DENVER BONNEVILLE BONNEVILLE
ACQUISITION OPTION WFLN-FM OPTION PENDING
HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 1/1-8/31(B) 1/1-9/30(C) 1/1-4/30(D) 1/1-9/30(C) HISTORICAL
- ----------------------------------------------------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues............................................. $3,460 $32,912 $(1,298) $(30,638) $ 4,436
Less: agency commissions................................... (458) (4,992) 134 3,952 (1,364)
------ ------- ------- -------- -------
Net revenues............................................... 3,002 27,920 (1,164) (26,686) 3,072
Station operating expenses excluding depreciation and
amortization.............................................. 2,816 18,901 (728) (14,206) 6,783
Depreciation and amortization.............................. 198 -- (800) -- (602)
Corporate general and administrative....................... -- -- -- -- --
------ ------- ------- -------- -------
Operating income (loss).................................... (12) 9,019 364 (12,480) (3,109)
Interest expense........................................... -- -- -- -- --
Other (income) expense..................................... (81) 4 -- 9 (68)
------ ------- ------- -------- -------
Net income (loss).......................................... $ 69 $ 9,015 $ 364 $(12,489) $(3,041)
====== ======= ======= ======== =======
Broadcast cash flow........................................ $ 186 $ 9,019 $ (436) $(12,480) $(3,711)
====== ======= ======= ======== =======
</TABLE>
(a) On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX
Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired
as part of the Omni Acquisition) (see 5(k)(v)), and $11,000 in cash to SFX
for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island. CRBC entered
into time brokerage agreements to operate WBAB-FM, WBLI-FM, WGBB-AM, and
WHFM-FM effective July 1, 1996 and entered into time brokerage agreements
to sell substantially all of the broadcast time of WAPE-FM and WFYV-FM
effective July 1, 1996.
(b) On July 30, 1997, CRBC entered into an agreement to acquire, in the Denver
Acquisition, KXPK-FM in Denver from Evergreen Wireless LLC (which is
unrelated to the Company) for $26,000 in cash (including $1,650 paid by
Chancellor in escrow). CRBC began operating KXPK-FM under a time brokerage
agreement on September 1, 1997.
(c) On August 6, 1997, the Company and CRBC paid $3,000 to Bonneville for an
option to exchange the Company's station WTOP-AM in Washington and CRBC's
stations KZLA-FM in Los Angeles and WGMS-FM in Washington plus an
additional $57,000 in cash for Bonneville's stations WNSR-FM in
B-23
<PAGE> 52
New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville
Option"). The Bonneville Option was exercised on October 1, 1997, and
definitive exchange documentation is presently being negotiated. The
Company has entered into time brokerage agreements to operate KLDE-FM and
KBIG-FM effective October 1, 1997 and WNSR-FM effective October 10, 1997
and has entered into time brokerage agreements to sell substantially all of
the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM effective October 1,
1997.
(d) On August 12, 1996, the Company entered into an agreement to acquire
WFLN-FM in Philadelphia from Secret for $37,750 in cash. The Company also
entered into an agreement to operate WFLN-FM under a time brokerage
agreement effective September 1, 1996. The Company subsequently entered
into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash. On
May 1, 1997, the Company assigned its time brokerage agreement to operate
WFLN-FM to Greater Media. On July 16, 1997, Secret purported to terminate
the sale of WFLN-FM to the Company. The Company subsequently brought suit
against Secret to enforce its right to acquire WFLN-FM. In August 1997,
pursuant to a court settlement, the Company, Secret and Greater Media
agreed that (i) Secret would sell WFLN-FM directly to Greater Media for
$37,750, (ii) Greater Media would deposit $4,050 (the difference between
the Company's proposed acquisition price for WFLN-FM from Secret and the
Company's proposed sale price for WFLN-FM to Greater Media) with the court
and (iii) the Company and Secret would litigate each party's entitlement to
the amount deposited with the court. As of the date hereof, no further
resolution to this dispute has occurred.
(14) Reflects the elimination of time brokerage agreement fees received and paid
by CRBC as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE
---------------------------- ----------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM................................ Jacksonville 7/1-12/31 $(1,963) $(2,000)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 7/1-12/31 -- (2,000)
------- -------
Total adjustment for decrease in gross revenues and expenses............ $(1,963) $(4,000)
======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 MARKET PERIOD REVENUE EXPENSE
------------------------------------ ----------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM................................ Jacksonville 1/1-9/5 $(2,711) $ (490)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 1/1-9/5 -- (2,711)
------- -------
Total adjustment for decrease in gross revenues and expenses............ $(2,711) $(3,201)
======= =======
</TABLE>
(15) Reflects incremental amortization related to the Pending Transactions and
is based on the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Amortization expense on $92,824 additional intangible
assets amortized on a straight-line basis over a 15
year period......................................... $ 6,188 $ 4,641
Less: historical amortization expense................. (1,957) (1,200)
------- -------
Adjustment for net increase in amortization expense... $ 4,231 $ 3,441
======= =======
</TABLE>
Historical depreciation expense of the Pending Transactions is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
B-24
<PAGE> 53
(16) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Transactions:
<TABLE>
<CAPTION>
NINE
MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions...................................... $92,350 $92,350
======= =======
Interest expense on additional bank borrowings at 7.0%...... $ 6,465 $ 4,849
======= =======
</TABLE>
(17) Reflects the 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.
B-25
