<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
FORM 8-K/A NO.2
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 1, 1998
------------------------
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)
300 Crescent Court,
Suite 600
Dallas, Texas 75201
-------------------
(Address of Principal
Executive Offices)
(214) 922-8700
--------------
(Registrant's telephone
number, including area code)
<PAGE> 2
This Amendment to the Current Report on Form 8-K dated December 1, 1998 and
filed on December 15, 1998 by Chancellor Media Corporation and Chancellor Media
Corporation of Los Angeles is submitted to provide pro forma financial
information for the acquisition of Whiteco Industries, Inc.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
7(b) Pro Forma Financial Information
Pro Forma information required pursuant to Article 11 of Regulation
S-X as of September 30, 1998 and for the year ended December 31, 1997
and the nine months ended September 30, 1998 for Chancellor Media
Corporation and Chancellor Media Corporation of Los Angeles are
filed herewith on pages A1 - A48 and B1 - B24, respectively.
2
<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.
Chancellor Media Corporation Chancellor Media Corporation of Los Angeles
By: /s/ Thomas P. McMillin By: /s/ Thomas P. McMillin
-------------------------- ---------------------------------
Thomas P. McMillin Thomas P. McMillin
Senior Vice President and Senior Vice President and
Chief Financial Officer Chief Financial Officer
Date: February 12, 1999
3
<PAGE> 4
CHANCELLOR MEDIA CORPORATION
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements of
Chancellor Media Corporation, (together with its subsidiaries, the "Company")
are presented using the purchase method of accounting for all acquisitions and
reflect the combination of consolidated historical financial data of the Company
and each of the companies acquired in the transactions completed by the Company
during 1997 and 1998 and the elimination of the consolidated historical data of
the stations disposed in the transactions completed by the Company and
Chancellor Broadcasting Company ("Chancellor") (which merged into a subsidiary
of Chancellor Media in September 1997) during 1997 and 1998 (the "Completed
Transactions"). The unaudited pro forma condensed combined balance sheet data at
September 30, 1998 presents adjustments for the Completed Transactions, the
offering by Chancellor Media Corporation of Los Angeles ("CMCLA") of $750,000
aggregate principal amount of 8% Senior Notes due 2008 which was completed on
November 17, 1998 and the Pending Transactions, as if each such transaction had
occurred at September 30, 1998. The unaudited pro forma condensed combined
statement of operations data for the twelve months ended December 31, 1997 and
the nine months ended September 30, 1998 presents adjustments for the Completed
Transactions, financing transactions undertaken by the Company and Chancellor
during 1997 and 1998 and the Pending Transactions, as if each such transaction
occurred on January 1, 1997.
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 in the Completed Transactions have been allocated based
primarily on information furnished by management of the acquired or to be
acquired assets. The final allocation of the respective purchase prices of the
assets acquired in the Completed 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.
A-1
<PAGE> 5
CHANCELLOR MEDIA CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY
LIN AS AS ADJUSTED
PRO FORMA COMPANY ADJUSTED FOR THE
ADJUSTMENTS AS ADJUSTED FOR THE PRO FORMA COMPLETED
COMPANY FOR THE FOR THE PENDING ADJUSTMENTS TRANSACTIONS
HISTORICAL COMPLETED COMPLETED LIN FOR THE AND THE LIN
AT 9/30/98 TRANSACTIONS TRANSACTIONS TRANSACTIONS(3) LIN MERGER MERGER
---------- ------------ ------------ --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets..................... $ 376,797 $ 40,186(1) $ 416,983 $ 99,614 $ -- $ 516,597
Note receivable from affiliate..... 150,000 -- 150,000 -- -- 150,000
Property and equipment, net........ 299,906 628,519(1) 928,425 119,783 -- 1,048,208
Intangible assets, net............. 5,036,250 737,458(1) 5,773,708 1,531,306 410,077(4) 7,861,488
146,397(5)
Other assets....................... 162,142 27,164(1) 203,306 174,048 (48,138)(4) 329,216
(6,000)(1)
20,000(2)
---------- ---------- ---------- ---------- -------- -----------
Total assets............... $6,025,095 $1,447,327 $7,472,422 $1,924,751 $508,336 $ 9,905,509
========== ========== ========== ========== ======== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities
Current portion of long-term
debt............................. $ -- $ -- $ -- $ 7,742 $ -- $ 7,742
Other current liabilities.......... 177,472 5,088(1) 182,560 46,187 -- 228,747
---------- ---------- ---------- ---------- -------- -----------
Total current
liabilities.............. 177,472 5,088 182,560 53,929 -- 236,489
Long-term debt..................... 3,018,000 1,386,412(1) 4,424,412 797,893 25,673(4) 5,247,978
750,000(2)
(730,000)(2)
Deferred tax liabilities........... 360,618 35,827(1) 396,445 523,950 146,397(5) 1,066,792
Other liabilities.................. 60,403 -- 60,403 10,898 -- 71,301
---------- ---------- ---------- ---------- -------- -----------
Total liabilities.......... 3,616,493 1,447,327 5,063,820 1,386,670 172,070 6,622,560
Redeemable preferred stock......... -- -- -- -- -- --
STOCKHOLDERS' EQUITY:
Preferred stock.................... 409,500 -- 409,500 -- -- 409,500
Common stock....................... 1,424 -- 1,424 5,393 (5,231)(4) 1,586
Additional paid in capital......... 2,243,350 -- 2,243,350 553,655 320,530(4) 3,117,535
Accumulated deficit................ (245,672) -- (245,672) (20,967) 20,967(4) (245,672)
---------- ---------- ---------- ---------- -------- -----------
Total stockholders'
equity................... 2,408,602 -- 2,408,602 538,081 336,266 3,282,949
---------- ---------- ---------- ---------- -------- -----------
Total liabilities and
stockholders' equity..... $6,025,095 $1,447,327 $7,472,422 $1,924,751 $508,336 $ 9,905,509
========== ========== ========== ========== ======== ===========
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
PENDING COMPANY
TRANSACTIONS PRO FORMA
------------ -----------
<S> <C> <C>
ASSETS:
Current assets..................... $ 195,250(6) $ 711,847
Note receivable from affiliate..... (150,000)(7) --
Property and equipment, net........ 255,065(6) 1,303,273
Intangible assets, net............. 6,030,398(6) 13,891,886
Other assets....................... 28,509(6) 357,725
---------- -----------
Total assets............... $6,359,222 $16,264,731
========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities
Current portion of long-term
debt............................. $ -- $ 7,742
Other current liabilities.......... 161,920(6) 390,667
---------- -----------
Total current
liabilities.............. 161,920 398,409
Long-term debt..................... 2,178,165(6) 7,276,143
(150,000)(7)
Deferred tax liabilities........... 1,477,367(6) 2,544,159
Other liabilities.................. 962(6) 72,263
---------- -----------
Total liabilities.......... 3,668,414 10,290,974
Redeemable preferred stock......... 278,694(6) 278,694
STOCKHOLDERS' EQUITY:
Preferred stock.................... -- 409,500
Common stock....................... 516(6) 2,102
Additional paid in capital......... 2,402,005(6) 5,519,540
Accumulated deficit................ 9,593(6) (236,079)
---------- -----------
Total stockholders'
equity................... 2,412,114 5,695,063
---------- -----------
Total liabilities and
stockholders' equity..... $6,359,222 $16,264,731
========== ===========
</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, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
COMPANY AS LIN AS PENDING FOR THE
ADJUSTED FOR ADJUSTED FOR LIN PENDING LIN
COMPLETED COMPLETED LIN TRANSACTIONS LIN PRO FORMA
YEAR ENDED DECEMBER 31, 1997 TRANSACTIONS(8) TRANSACTIONS(9) HISTORICAL(10) TRANSACTIONS AS ADJUSTED
- ---------------------------- --------------- --------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Gross revenues................................... $1,411,160 $224,845 $ 2,563 $ -- $227,408
Less: agency commissions......................... (154,451) (28,730) (1,275) -- (30,005)
---------- -------- ------- -------- --------
Net revenues..................................... 1,256,709 196,115 1,288 -- 197,403
Operating expenses excluding depreciation and
amortization................................... 704,936 119,069 (2,260) 305(11) 117,114
Depreciation and amortization.................... 464,160 47,595 (113) 2,487(12) 49,969
Corporate general and administrative............. 45,669 6,763 -- -- 6,763
Restructuring charge............................. 15,958 -- -- -- --
Stock option compensation........................ 3,083 -- -- -- --
Other nonrecurring costs......................... -- 2,697 (450) -- 2,247
---------- -------- ------- -------- --------
Operating income (loss).......................... 22,903 19,991 4,111 (2,792) 21,310
Interest expense................................. 349,584 71,031 -- 9,375(13) 80,406
Interest income.................................. (3,188) (1,332) -- (3,000)(14) (4,332)
Gain on disposition of assets.................... (18,380) -- -- -- --
Other (income) expense........................... (1,216) 4,989 -- -- 4,989
---------- -------- ------- -------- --------
Income (loss) before income taxes................ (303,897) (54,697) 4,111 (9,167) (59,753)
Income tax benefit............................... (108,107) (20,873) (1,068) (3,155)(15) (25,096)
Dividends and accretion on preferred stock of
subsidiary..................................... -- -- -- -- --
---------- -------- ------- -------- --------
Net income (loss)................................ (195,790) (33,824) 5,179 (6,012) (34,657)
Preferred stock dividends........................ 17,446 -- -- -- --
---------- -------- ------- -------- --------
Income (loss) attributable to common
stockholders................................... $ (213,236) $(33,824) $ 5,179 $ (6,012) $(34,657)
========== ======== ======= ======== ========
Basic and diluted income (loss) per common
share.......................................... $ (1.64)
==========
Weighted average common shares outstanding(24)... 130,253
==========
<CAPTION>
COMPANY AS
ADJUSTED FOR PRO FORMA
PRO FORMA COMPLETED ADJUSTMENTS
ADJUSTMENTS TRANSACTIONS PENDING FOR THE
FOR THE AND THE TRANSACTIONS PENDING COMPANY
YEAR ENDED DECEMBER 31, 1997 LIN MERGER LIN MERGER HISTORICAL(19) TRANSACTIONS PRO FORMA
- ---------------------------- ----------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Gross revenues................................... $ -- $1,638,568 $ 768,146 $ (54,058)(20) $2,352,656
Less: agency commissions......................... -- (184,456) (73,302) -- (257,758)
-------- ---------- --------- --------- ----------
Net revenues..................................... -- 1,454,112 694,844 (54,058) 2,094,898
Operating expenses excluding depreciation and
amortization................................... -- 822,050 451,221 (4,173)(20) 1,269,098
Depreciation and amortization.................... 28,993(16) 543,122 154,802 (38)(20) 977,600
279,714(21)
Corporate general and administrative............. -- 52,432 31,565 -- 83,997
Restructuring charge............................. -- 15,958 -- -- 15,958
Stock option compensation........................ -- 3,083 11,589 -- 14,672
Other nonrecurring costs......................... -- 2,247 16,353 -- 18,600
-------- ---------- --------- --------- ----------
Operating income (loss).......................... (28,993) 15,220 29,314 (329,561) (285,027)
Interest expense................................. (8,340)(17) 421,650 188,552 (15,122)(22) 595,080
Interest income.................................. -- (7,520) (8,572) -- (16,092)
Gain on disposition of assets.................... -- (18,380) (4,306) -- (22,686)
Other (income) expense........................... -- 3,773 4,251 -- 8,024
-------- ---------- --------- --------- ----------
Income (loss) before income taxes................ (20,653) (384,303) (150,611) (314,439) (849,353)
Income tax benefit............................... (1,215)(18) (134,418) (43,180) (110,954)(23) (288,552)
Dividends and accretion on preferred stock of
subsidiary..................................... -- -- 26,048 -- 26,048
-------- ---------- --------- --------- ----------
Net income (loss)................................ (19,438) (249,885) (133,479) (203,485) (586,849)
Preferred stock dividends........................ -- 17,446 -- -- 17,446
-------- ---------- --------- --------- ----------
Income (loss) attributable to common
stockholders................................... $(19,438) $ (267,331) $(133,479) $(203,485) $ (604,295)
======== ========== ========= ========= ==========
Basic and diluted income (loss) per common
share.......................................... $ (1.83) $ (3.05)
========== ==========
Weighted average common shares outstanding(24)... 16,180 146,433 51,644 198,077
======== ========== ========= ==========
</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, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
COMPANY AS LIN AS PENDING FOR THE
ADJUSTED FOR ADJUSTED FOR LIN PENDING LIN
NINE MONTHS ENDED COMPLETED COMPLETED LIN TRANSACTIONS LIN PRO FORMA
SEPTEMBER 30, 1998 TRANSACTIONS(8) TRANSACTIONS(9) HISTORICAL(10) TRANSACTIONS AS ADJUSTED
- ------------------ --------------- --------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Gross revenues....................... $1,220,541 $186,555 $(3,250) $ -- $183,305
Less: agency commissions............. (137,298) (22,234) (651) -- (22,885)
---------- -------- ------- -------- --------
Net revenues......................... 1,083,243 164,321 (3,901) -- 160,420
Operating expenses excluding
depreciation and amortization...... 583,968 95,565 (7,914) 270(11) 87,921
Depreciation and amortization........ 399,271 40,199 (272) 1,923(12) 41,850
Corporate general and
administrative..................... 31,163 6,140 -- -- 6,140
Stock option compensation............ -- -- -- -- --
Executive severance charge........... 59,475 -- -- -- --
Other nonrecurring costs............. -- 3,055 (3,055) -- --
---------- -------- ------- -------- --------
Operating income (loss).............. 9,366 19,362 7,340 (2,193) 24,509
Interest expense..................... 262,188 50,189 -- 7,031(13) 57,220
Interest income...................... (10,640) (836) -- (2,250)(14) (3,086)
Gain on disposition of representation
contracts.......................... (29,767) -- -- -- --
Other (income) expense............... (121,916) 6,440 -- -- 6,440
---------- -------- ------- -------- --------
Income (loss) before income taxes.... (90,499) (36,431) 7,340 (6,974) (36,065)
Income tax benefit................... (23,362) (13,726) -- (1,421)(15) (15,147)
Dividends and accretion on preferred
stock of subsidiary................ -- -- -- -- --
---------- -------- ------- -------- --------
Net income (loss).................... (67,137) (22,705) 7,340 (5,553) (20,918)
Preferred stock dividends............ 19,252 -- -- -- --
---------- -------- ------- -------- --------
Income (loss) attributable to common
stockholders....................... $ (86,389) $(22,705) $ 7,340 $ (5,553) $(20,918)
========== ======== ======= ======== ========
Basic and diluted income (loss) per
common share....................... $ (0.63)
==========
Weighted average common shares
outstanding(24).................... 136,427
==========
<CAPTION>
COMPANY AS
ADJUSTED FOR PRO FORMA
PRO FORMA COMPLETED ADJUSTMENTS
ADJUSTMENTS TRANSACTIONS PENDING FOR THE
NINE MONTHS ENDED FOR THE AND THE TRANSACTIONS PENDING COMPANY
SEPTEMBER 30, 1998 LIN MERGER LIN MERGER HISTORICAL(19) TRANSACTIONS PRO FORMA
- ------------------ ----------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Gross revenues....................... $ -- $1,403,846 $ 585,984 $ (48,072)(20) $1,941,758
Less: agency commissions............. -- (160,183) (63,863) -- (224,046)
-------- ---------- --------- --------- ----------
Net revenues......................... -- 1,243,663 522,121 (48,072) 1,717,712
Operating expenses excluding
depreciation and amortization...... -- 671,889 310,358 (10,251)(20) 971,996
Depreciation and amortization........ 17,808(16) 458,929 110,811 (16,475)(20) 765,331
212,066(21)
Corporate general and
administrative..................... -- 37,303 18,793 -- 56,096
Stock option compensation............ -- -- 14,002 -- 14,002
Executive severance charge........... -- 59,475 -- -- 59,475
Other nonrecurring costs............. -- -- 7,505 -- 7,505
-------- ---------- --------- --------- ----------
Operating income (loss).............. (17,808) 16,067 60,652 (233,412) (156,693)
Interest expense..................... (3,170)(17) 316,238 141,682 (6,100)(20) 446,310
(5,510)(22)
Interest income...................... -- (13,726) (2,304) 6,100(20) (9,930)
Gain on disposition of representation
contracts.......................... -- (29,767) -- -- (29,767)
Other (income) expense............... -- (115,476) 30,894 -- (84,582)
-------- ---------- --------- --------- ----------
Income (loss) before income taxes.... (14,638) (141,202) (109,620) (227,902) (478,724)
Income tax benefit................... (554)(18) (39,063) (24,277) (86,592)(23) (149,932)
Dividends and accretion on preferred
stock of subsidiary................ -- -- 21,984 -- 21,984
-------- ---------- --------- --------- ----------
Net income (loss).................... (14,084) (102,139) (107,327) (141,310) (350,776)
Preferred stock dividends............ -- 19,252 -- -- 19,252
-------- ---------- --------- --------- ----------
Income (loss) attributable to common
stockholders....................... $(14,084) $ (121,391) $(107,327) $(141,310) $ (370,028)
======== ========== ========= ========= ==========
Basic and diluted income (loss) per
common share....................... $ (0.80) $ (1.81)
========== ==========
Weighted average common shares
outstanding(24).................... 16,180 152,607 51,644 204,251
======== ========== ========= ==========
</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
(1) Reflects the Completed Transactions that were completed after September
30, 1998 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
---------------------------------------------------------------------------------------------
PROPERTY AND DEFERRED
COMPLETED PURCHASE CURRENT EQUIPMENT, INTANGIBLE OTHER CURRENT TAX
TRANSACTIONS PRICE ASSETS NET(a) ASSETS, NET(b) ASSETS LIABILITIES LIABILITIES(c)
- ------------ ---------- ------- ------------ -------------- ------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Z-Spanish
Acquisition(d)......... $ 25,000 $ -- $ -- $ -- $25,000 $ -- $ --
Primedia
Acquisition(e)......... 74,770 -- 4,323 70,447 -- -- --
Kunz Option(f)........... 39,289 -- 23,573 15,716 -- -- --
Whiteco Acquisition(g)... 974,221 29,180 598,509 349,327 2,164 (4,959) --
Cleveland
Acquisitions(h)........ 279,132 11,006 2,114 301,968 -- (129) (35,827)
---------- ------- -------- -------- ------- ------- --------
$1,392,412 $40,186 $628,519 $737,458 $27,164 $(5,088) $(35,827)
========== ======= ======== ======== ======= ======= ========
<CAPTION>
FINANCING
-------------------------
DECREASE IN INCREASE IN
COMPLETED OTHER LONG-TERM
TRANSACTIONS ASSETS DEBT
- ------------ ----------- -----------
<S> <C> <C>
Z-Spanish
Acquisition(d)......... $ -- $ 25,000
Primedia
Acquisition(e)......... -- 74,770
Kunz Option(f)........... 6,000 33,289
Whiteco Acquisition(g)... -- 974,221
Cleveland
Acquisitions(h)........ -- 279,132
------ ----------
$6,000 $1,386,412
====== ==========
</TABLE>
- -------------------------
(a) The Company has assumed that the historical balances of net
property and equipment acquired approximate fair value for the
preliminary allocation of the purchase price. Such amounts are
based on information provided by management of the respective
companies acquired in the Completed Transactions.
(b) The Company, on a preliminary basis, has allocated the intangible
assets of the radio acquisitions to broadcast licenses with an
estimated average life of 15 years and has allocated the
intangible assets of the outdoor acquisitions to goodwill with an
estimated average life of 40 years. The amounts allocated to net
intangible assets are preliminary and are based upon historical
information from prior radio acquisitions and preliminary
appraisals for the outdoor acquisitions.
(c) Reflects the tax effect upon consummation of the transaction.
(d) On October 9, 1998, the Company acquired approximately a 24.1%
non-voting interest in Z-Spanish Media Corporation for $25,000 in
cash. Z-Spanish Media, which is headquartered in Sacramento,
California, is the owner and operator of 22 Hispanic format radio
stations in California, Texas, Arizona and Illinois.
(e) On October 23, 1998, the Company acquired Primedia Broadcast
Group, Inc. and certain of its affiliates, which own and operate
eight FM stations in Puerto Rico, for approximately $76,050 in
cash less working capital deficit of $1,280 plus various other
direct acquisition costs.
(f) On November 13, 1998, the Company acquired approximately 1,000
display faces from Kunz & Company for $33,289 in cash plus various
other direct acquisition costs (the "Kunz Option"). Martin had
previously paid $6,000 in cash to Kunz & Company on July 31, 1997.
Martin began operating these 1,000 display faces under a
management agreement effective July 31, 1997.
(g) On December 1, 1998, the Company acquired the assets of the
Outdoor Advertising division of Whiteco Industries, Inc., an
outdoor advertising company with over 22,000 billboards and
outdoor displays in 34 states, for $930,000 in cash plus working
capital of $24,221 subject to certain adjustments and various
other direct acquisition costs of approximately $20,000.
(h) On January 28, 1999, the Company acquired Wincom Broadcasting
Corporation which owns WQAL-FM in Cleveland. The Company began
operating WQAL-FM under a time brokerage agreement effective
October 1, 1998. On February 2, 1999, the Company acquired
additional radio stations in Cleveland including (i) WDOK-FM and
WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM
from Zapis Communications and (iii) Zebra Broadcasting Corporation
which owns WZJM-FM and WJMO-AM. The six Cleveland stations were
acquired for an aggregate purchase price of $275,000 in cash plus
working capital of $4,132 subject to certain adjustments (the
"Cleveland Acquisitions").
A-5
<PAGE> 9
(2) Reflects the proceeds of $730,000 received on November 17, 1998 from
the issuance of $750,000 of CMCLA's 8% Senior Notes due 2008, net of
deferred debt issuance costs of $20,000. The net proceeds from the 8%
senior notes offering were used to reduce bank borrowings under the
revolving credit portion of the senior credit facility and the excess
proceeds will be invested in short-term investment grade securities.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING LIN TRANSACTIONS
(3) The historical balance sheet of LIN at September 30, 1998 and the pro
forma adjustments related to the Pending LIN Transactions are
summarized below:
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS LIN AS
FOR THE ADJUSTED FOR
LIN PENDING THE PENDING
HISTORICAL LIN LIN
AT 9/30/98 TRANSACTIONS(a) TRANSACTIONS
---------- --------------- ------------
<S> <C> <C> <C>
ASSETS:
Current assets................................... $ 97,887 $ 9,709 $ 99,614
(7,982)
Property and equipment, net...................... 121,522 (1,739) 119,783
Intangible assets, net........................... 1,450,821 80,485 1,531,306
Other assets..................................... 127,537 11 174,048
46,500
---------- -------- ----------
Total assets........................... $1,797,767 $126,984 $1,924,751
========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Current portion of long-term debt................ $ 7,742 $ -- $ 7,742
Other current liabilities........................ 45,691 496 46,187
---------- -------- ----------
Total current liabilities.............. 53,433 496 53,929
Long-term debt, excluding current portion........ 672,893 125,000 797,893
Deferred tax liabilities......................... 523,294 656 523,950
Other liabilities................................ 11,051 (153) 10,898
---------- -------- ----------
Total liabilities...................... 1,260,671 125,999 1,386,670
Stockholders' equity:
Common stock..................................... 5,393 -- 5,393
Additional paid-in capital....................... 553,655 -- 553,655
Accumulated deficit.............................. (21,952) 985 (20,967)
---------- -------- ----------
Total stockholders' equity............. 537,096 985 538,081
---------- -------- ----------
Total liabilities and stockholders'
equity............................... $1,797,767 $126,984 $1,924,751
========== ======== ==========
</TABLE>
A-6
<PAGE> 10
- -------------------------
(a) Reflects the Pending LIN Transactions as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
-----------------------------------------------------------------------------------------
PROPERTY
AND INTANGIBLE DEFERRED
PENDING LIN PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT TAX
TRANSACTIONS PRICE ASSETS NET(i) NET ASSETS LIABILITIES LIABILITIES(ii)
- ------------ -------- -------- ---------- ---------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
WOOD-TV/
WOTV-TV(iv)..... $132,982 $ 19,353 $ 13,505 $105,822 $ 1,592 $(5,416) $ --
KXTX-TV(v)....... (46,500) (9,644) (15,244) (25,337) (1,581) 4,920 (656)
-------- -------- -------- -------- -------- ------- -----
Total...... $86,482 $ 9,709 $ (1,739) $ 80,485 $ 11 $ (496) $(656)
======== ======== ======== ======== ======== ======= =====
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
-------------------------- -----------------------------------------
DECREASE IN INCREASE IN INCREASE IN
PENDING LIN OTHER ACCUMULATED CURRENT INVESTMENT LONG-TERM
TRANSACTIONS LIABILITIES DEFICIT(iii) ASSETS IN SPORTS CO. DEBT
- ------------ ----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
WOOD-TV/
WOTV-TV(iv)..... $(1,874) $ -- $7,982 $ -- $125,000
KXTX-TV(v)....... 2,027 (985) -- (46,500) --
------- ------ ------ -------- --------
Total...... $ 153 $ (985) $7,982 $(46,500) $125,000
======= ====== ====== ======== ========
</TABLE>
(i) The Company has assumed that historical balances of net property and
equipment to be 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 LIN Transactions.
(ii) Reflects the tax effect upon consummation of the transaction.
(iii) Represents the loss on sale, net of tax, upon consummation of the
transaction.
(iv) On August 12, 1997, LIN entered into an agreement to acquire certain
assets and assume certain liabilities of WOOD-TV and the LMA rights
related to WOTV-TV (the "Grand Rapid Stations"), which are both located
in the Grand Rapids-Kalamazoo-Battle Creek market, from AT&T Corporation
for approximately $125,500 in cash plus accretion of 8.0% (which
commenced on January 1, 1998) of $7,482. LIN currently provides services
to the Grand Rapid Stations pursuant to a consulting agreement with
AT&T. LIN, on a preliminary basis, has allocated the intangible assets
to network affiliations and broadcast licenses with an estimated average
life of 40 years. The amounts allocated to intangible assets are
preliminary and are based upon historical information from prior
acquisitions.
(v) On August 1, 1998, LIN Television of Texas, L.P., a subsidiary of LIN
("LIN Texas"), and Southwest Sports Group, Inc. entered into an Asset
Purchase Agreement pursuant to which LIN Texas will assign its purchase
option and LMA rights on KXTX-TV and sell certain assets and liabilities
of KXTX-TV to Southwest Sports Group. In exchange, LIN Texas will
receive 500,000 shares of Southwest Sports Group's series A convertible
preferred stock, par value $100.00 per share. The intangible assets of
KXTX-TV of $25,337 represent option value and LMA rights.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE LIN MERGER
(4) Merger Purchase Price Information. In connection with the LIN merger,
each outstanding share of LIN common stock will be converted into the
right to receive 0.0300 shares of Chancellor Media common stock. For
purposes of the unaudited pro forma condensed combined financial
statements, the fair market value of Chancellor Media common stock is
calculated by using $51.00 per share which is based on the market price
of Chancellor Media common stock on or around the announcement date of
the LIN merger on July 7, 1998. The aggregate purchase price is
summarized below:
<TABLE>
<S> <C> <C>
EXCHANGE OF LIN COMMON STOCK:
Shares of LIN common stock outstanding...................... 539,321,532
Exchange ratio.............................................. .0300
-----------
Shares of Chancellor Media common stock issued in connection
with the LIN merger....................................... 16,179,646
===========
</TABLE>
A-7
<PAGE> 11
<TABLE>
<S> <C> <C>
AGGREGATE PURCHASE PRICE:
Estimated fair value of Chancellor Media common stock issued
in connection with the LIN merger (16,179,646 shares @
$51.00 per share)......................................... $ 825,162
LIN debt and equity assumed at fair values:
Long-term debt outstanding:
LIN term loan.......................................... 295,000
LIN 8 3/8% Senior Subordinated Notes due 2008.......... 292,620
LIN 10% Senior Discount Notes due 2008................. 213,688
-----------
Total long-term debt outstanding.................. 801,308
Stock options issued to LIN stock option holders.......... 27,532
Phantom stock outstanding................................. 21,653
Financial advisors, legal, accounting and other
professional fees...................................... 30,000
-----------
Aggregate purchase price.................................. $ 1,705,655
===========
</TABLE>
To record the aggregate purchase price of the LIN merger and eliminate
certain LIN historical balances as follows:
<TABLE>
<CAPTION>
ELIMINATION
OF LIN
PURCHASE HISTORICAL LIN
PRICE BALANCES MERGER NET
ALLOCATION AS ADJUSTED FINANCING ADJUSTMENT
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Current assets.......................... $ 99,614 $ (99,614) $ -- $ --
Property and equipment, net(a).......... 119,783 (119,783) -- --
Intangible assets(a).................... 1,941,383 (1,531,306) -- 410,077
Other assets............................ 125,910 (174,048) -- (48,138)
Current liabilities..................... (46,187) 46,187 -- --
Long-term debt(b)....................... -- 805,635 (831,308) (25,673)
Deferred tax liability.................. (523,950) 523,950 -- --
Other liabilities....................... (10,898) 10,898 -- --
Common Stock(c)......................... -- 5,393 (162) 5,231
Additional paid-in capital(d)........... -- 553,655 (874,185) (320,530)
Accumulated deficit..................... -- (20,967) -- (20,967)
---------- ----------- ----------- ---------
Aggregate purchase price................ $1,705,655 $ -- $(1,705,655) $ --
========== =========== =========== =========
</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. The Company, on a preliminary basis, has
allocated the $1,941,383 of intangible assets to goodwill and network
affiliations and broadcast licenses with estimated average lives of 40
years. This preliminary allocation is based upon historical information
from prior acquisitions provided by the management of LIN.
(b) Reflects the adjustment to record debt assumed or incurred by the
Company including (i) the fair value of LIN's long-term debt of $801,308
and (ii) additional bank borrowings of $30,000 required to finance
estimated financial advisors, legal, accounting and other professional
fees.
(c) Reflects 16,179,646 shares of Chancellor Media common stock at a par
value of $0.01 to be issued in connection with the LIN merger.
A-8
<PAGE> 12
(d) Reflects (i) additional paid-in capital of $825,000 related to
16,179,646 shares of Chancellor Media common stock issued in connection
with the LIN merger, (ii) additional paid-in capital of $21,653 related
to 424,569 shares of phantom stock to be issued in connection with the
LIN merger and (iii) the fair value of stock options assumed by
Chancellor Media of $27,532. The $27,532 fair value of the LIN stock
options was estimated using the Black-Scholes option pricing model and
the LIN merger exchange ratio of .0300 applied to LIN's outstanding
options and exercise prices. At September 30, 1998, LIN had 35,694,087
options outstanding with exercise prices ranging from $0.50 to $1.00.
(5) To record a $146,397 deferred tax liability related to the difference
between the financial statement carrying amount and the tax basis of
LIN acquired assets.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING TRANSACTIONS
(6) Reflects the Pending Transactions as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
-----------------------------------------------------------------------
PROPERTY
PURCHASE/ AND INTANGIBLE
(SALES) CURRENT EQUIPMENT, ASSETS, OTHER CURRENT
PENDING TRANSACTIONS PRICE ASSETS NET(a) NET(b) ASSETS LIABILITIES
- -------------------- ---------- -------- ---------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Chicago Disposition(e)... $ (21,000) $ -- $ (2,167) $ (2,844) $ -- $ --
Capstar Merger(f)........ 4,720,780 178,069 241,402 5,890,919 28,509 (146,997)
Pegasus Acquisition(g)... 69,600 17,181 14,042 54,111 -- (14,923)
Phoenix Acquisition(h)... 90,000 -- 1,788 88,212 -- --
---------- -------- -------- ---------- ------- ---------
Total.............. $4,859,380 $195,250 $255,065 $6,030,398 $28,509 $(161,920)
========== ======== ======== ========== ======= =========
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
------------------------------------------ -------------------------------------------------
INCREASE
(DECREASE) INCREASE IN INCREASE INCREASE IN
DEFERRED IN REDEEMABLE IN ADDITIONAL
TAX OTHER ACCUMULATED LONG-TERM PREFERRED COMMON PAID-IN
PENDING TRANSACTIONS LIABILITIES(c) LIABILITIES DEFICIT(d) DEBT STOCK STOCK CAPITAL
- -------------------- -------------- ----------- ----------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Chicago Disposition(e)... $ (6,396) $ -- $(9,593) $ (21,000) $ -- $ -- $ --
Capstar Merger(f)........ (1,470,971) (151) -- 2,039,565 278,694 516 2,402,005
Pegasus Acquisition(g)... -- (811) -- 69,600 -- -- --
Phoenix Acquisition(h)... -- -- -- 90,000 -- -- --
----------- ----- ------- ---------- -------- ---- ----------
Total.............. $(1,477,367) $(962) $(9,593) $2,178,165 $278,694 $516 $2,402,005
=========== ===== ======= ========== ======== ==== ==========
</TABLE>
- -------------------------
(a) The Company has assumed that historical balances of net property and
equipment to be 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 companies to be
acquired in the Pending Transactions.
(b) The Company, on a preliminary basis, has allocated the intangible assets to
broadcast licenses with an estimated average life of 15 years. The amounts
allocated to net intangible assets are preliminary and are based upon
historical information from prior acquisitions.
(c) Reflects the tax effect upon consummation of the transaction.
(d) Reflects the gain on sale, net of tax, upon consummation of the
transaction.
(e) On August 20, 1998, the Company entered into an agreement to sell WMVP-AM
in Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition").
The Company entered into a time brokerage agreement to sell substantially
all of the broadcast time of WMVP-AM effective September 10, 1998.
(f) On August 26, 1998, the Company and Capstar Broadcasting Corporation and
its subsidiaries entered into an agreement to merge in a stock-for-stock
transaction that will create the nation's largest radio broadcasting
entity. Pursuant to this agreement, the Company will acquire Capstar in a
reverse merger in which Capstar will be renamed Chancellor Media
Corporation. Each share of Chancellor Media common stock will represent one
share in the combined entity. Each share of Capstar common stock will
represent 0.480 shares of common stock in the combined entity, subject to
an upward adjustment not to exceed 0.025 shares to the extent that
Capstar's 1998 cash flow from specified assets exceeds certain specified
targets. Capstar will own and operate or program more than 340 radio
stations serving 82 mid-sized markets nationwide upon completion of the
Pending Capstar Transactions.
Merger Purchase Price Information. In connection with the Capstar merger,
each outstanding share of Capstar common stock will be converted into the
right to receive 0.480 shares of the combined entity. For
A-9
<PAGE> 13
purposes of the unaudited pro forma condensed combined financial
statements, the fair market value of common stock is calculated by using
$44.75 per share which is based on the market price of the Chancellor Media
common stock on and around the announcement date of the Capstar merger on
August 26, 1998. The aggregate purchase price is summarized below:
<TABLE>
<S> <C> <C>
EXCHANGE OF CAPSTAR COMMON STOCK:
Shares of Capstar common stock outstanding.................. 107,591,598
Exchange ratio.............................................. 0.480
-----------
Shares of common stock to be issued in connection with the
Capstar merger............................................ 51,643,967
===========
AGGREGATE PURCHASE PRICE:
Estimated fair value of common stock to be issued in
connection with the Capstar merger (51,643,967 shares @
$44.75 per share)......................................... $ 2,311,068
Capstar debt and equity assumed at fair values:
Long-term debt outstanding:
Capstar credit facility................................ 1,087,300
Capstar 12 3/4% Senior Discount Notes due 2009......... 209,246
Capstar 9 1/4% Senior Subordinated Notes due 2007...... 200,580
Capstar 10 3/4% Senior Subordinated Notes due 2006..... 330,136
Capstar note payable to affiliate...................... 150,000
Capital lease obligation and other notes payable....... 12,303
---------
Total long-term debt outstanding.......................... 1,989,565
Capstar's 12% senior exchangeable preferred stock......... 128,652
Capstar's series E 12 5/8% cumulative preferred stock..... 150,042
Stock options issued by Capstar........................... 91,453
Financial advisors, legal, accounting and other professional
fees...................................................... 50,000
-----------
Aggregate purchase price.................................... $ 4,720,780
===========
</TABLE>
To record the aggregate purchase price of the Capstar merger as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 178,069
Property and equipment, net................................. 241,402
Intangible assets........................................... 5,890,919
Other assets................................................ 28,509
Current liabilities......................................... (146,997)
Deferred tax liabilities.................................... (1,470,971)
Other liabilities........................................... (151)
----------
$4,720,780
==========
</TABLE>
To record the financing of the Capstar merger as follows:
<TABLE>
<S> <C>
Long-term debt.............................................. $2,039,565(1)
Redeemable preferred stock.................................. 278,694(2)
Common stock................................................ 516(3)
Additional paid-in capital.................................. 2,402,005(4)
----------
$4,720,780
==========
</TABLE>
- -------------------------
(1) Reflects the adjustment to record the fair value of the debt assumed or
incurred by the Company including (i) the fair value of Capstar's
long-term debt of $1,989,565 and (ii) additional bank borrowings of
$50,000 required to finance estimated financial advisors, legal,
accounting and other professional fees.
A-10
<PAGE> 14
(2) Reflects the adjustment to record the estimated fair value of
redeemable preferred stock to be issued by the Company in exchange for
(i) Capstar's 12% senior exchangeable preferred stock of $128,652 and
(ii) Capstar's series E cumulative exchangeable preferred stock of
$150,042.
(3) Reflects 51,643,967 shares of Chancellor Media common stock at a par
value of $0.01 to be issued in connection with the Capstar merger.
(4) Reflects additional paid-in capital of $2,402,005 related to 51,643,967
shares of Chancellor Media common stock to be issued in connection with
the Capstar merger and the fair value of stock options and warrants
assumed by the Company of $91,453. The $91,453 fair value of Capstar's
stock options and warrants was estimated using the Black-Scholes option
pricing model and the Capstar merger exchange ratio of 0.48 applied to
Capstar's outstanding options and warrants and exercise prices. At
September 30, 1998, Capstar had 3,976,218 options outstanding with
exercise prices ranging from $7.10 to $19.00 and 2,696,406 warrants
outstanding with exercise prices ranging from $14.00 to $18.10.
(g) On September 3, 1998, the Company entered into an agreement to acquire
Pegasus Broadcasting of San Juan, L.L.C., a television broadcasting company
which owns a television station in Puerto Rico, for approximately $69,600
in cash plus various other direct acquisition costs.
(h) On September 15, 1998, the Company entered into an agreement to acquire
KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000
in cash plus various other direct acquisition costs. The Company began
operating KKFR-FM and KFYI-AM under a time brokerage agreement effective
November 5, 1998.
(7) Reflects the elimination of the $150,000 Capstar loan (as described on
page A-35) in connection with the Capstar merger.
A-11
<PAGE> 15
COMPANY'S HISTORICAL CONDENSED COMBINED STATEMENTS OF OPERATIONS AND ADJUSTMENTS
RELATED TO THE COMPLETED TRANSACTIONS
(8) The Company's historical condensed combined statement of operations for the
year ended December 31, 1997 and for the nine months ended September 30,
1998 and pro forma adjustments related to the Completed Transactions are
summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
----------------------------------------------------------------------------------------
CHANCELLOR AS
EVERGREEN ADJUSTED FOR
WUSL-FM VIACOM COMPLETED KDGE-FM
WDAS-FM/AM WIOQ-FM ACQUISITION CHANCELLOR KZPS-FM
COMPANY HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL
YEAR ENDED DECEMBER 31, 1997 HISTORICAL 1/1 - 5/1(a) 1/1 - 5/15(b) 1/1 - 7/2(c) 1/1 - 9/5(d) 1/1 - 7/31(e)
- ---------------------------- ---------- ------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues..................... $663,804 $5,028 $7,088 $38,972 $241,481 $7,616
Less: agency commissions........... (81,726) (680) (829) (5,470) (30,754) (929)
-------- ------ ------ ------- -------- ------
Net revenues....................... 582,078 4,348 6,259 33,502 210,727 6,687
Operating expenses excluding
depreciation and amortization..... 316,248 2,533 3,649 14,936 119,328 5,293
Depreciation and amortization...... 185,982 875 -- 2,279 30,505 280
Corporate general and
administrative.................... 21,442 172 141 682 7,580 --
Merger expense..................... -- -- -- -- 6,124 --
Restructuring charge............... -- -- -- -- -- --
Stock option compensation.......... -- -- -- -- 3,083 --
Profit participation fee........... -- -- -- -- -- --
-------- ------ ------ ------- -------- ------
Operating income (loss)............ 58,406 768 2,469 15,605 44,107 1,114
Interest expense................... 85,017 19 990 -- 56,600 --
Interest income.................... (1,922) (21) -- -- (218) --
Gain on disposition of assets...... (18,380) -- -- -- -- --
Other (income) expense............. 383 884 -- -- (584) 12
-------- ------ ------ ------- -------- ------
Income (loss) before income
taxes............................. (6,692) (114) 1,479 15,605 (11,691) 1,102
Income tax expense (benefit)....... 7,802 -- -- 5,892 (1,676) --
Dividends and accretion on
preferred stock of subsidiary..... 12,901 -- -- -- 27,321 --
-------- ------ ------ ------- -------- ------
Net income (loss).................. (27,395) (114) 1,479 9,713 (37,336) 1,102
Preferred stock dividends.......... 12,165 -- -- -- 5,281 --
-------- ------ ------ ------- -------- ------
Income (loss) attributable to
common stockholders............... $(39,560) $ (114) $1,479 $ 9,713 $(42,617) $1,102
======== ====== ====== ======= ======== ======
Basic and diluted income (loss) per
common share...................... $ (0.41)
========
Weighted average common shares
outstanding(ii)................... 95,636
========
<CAPTION>
ACQUISITIONS
---------------------------------------------------------------------------------
KATZ KBIG-FM
ACQUISITION GANNETT KXPK-FM KLDE-FM
HISTORICAL HISTORICAL HISTORICAL WBIX-FM KODA-FM
YEAR ENDED DECEMBER 31, 1997 1/1 - 10/28(f) 1/1 - 12/29(g) 1/1 - 8/31(h) 1/1 - 10/10(i) 1/1 - 12/31(j)
- ---------------------------- -------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Gross revenues..................... $144,886 $61,057 $3,460 $33,125 $20,869
Less: agency commissions........... -- (8,052) (458) (4,636) (2,889)
-------- ------- ------ ------- -------
Net revenues....................... 144,886 53,005 3,002 28,489 17,980
Operating expenses excluding
depreciation and amortization..... 109,341 26,303 2,816 18,277 7,535
Depreciation and amortization...... 141 1,736 198 -- 1,848
Corporate general and
administrative.................... 8,105 -- -- -- --
Merger expense..................... -- -- -- -- --
Restructuring charge............... 15,958 -- -- -- --
Stock option compensation.......... -- -- -- -- --
Profit participation fee........... -- -- -- -- --
-------- ------- ------ ------- -------
Operating income (loss)............ 11,341 24,966 (12) 10,212 8,597
Interest expense................... 18,310 -- -- -- --
Interest income.................... (170) -- -- -- --
Gain on disposition of assets...... -- -- -- -- --
Other (income) expense............. -- (375) (81) -- --
-------- ------- ------ ------- -------
Income (loss) before income
taxes............................. (6,799) 25,341 69 10,212 8,597
Income tax expense (benefit)....... 1,912 10,127 -- -- --
Dividends and accretion on
preferred stock of subsidiary..... -- -- -- -- --
-------- ------- ------ ------- -------
Net income (loss).................. (8,711) 15,214 69 10,212 8,597
Preferred stock dividends.......... -- -- -- -- --
-------- ------- ------ ------- -------
Income (loss) attributable to
common stockholders............... $ (8,711) $15,214 $ 69 $10,212 $ 8,597
======== ======= ====== ======= =======
Basic and diluted income (loss) per
common share......................
Weighted average common shares
outstanding(ii)...................
<CAPTION>
ACQUISITIONS
----------------------------------------------------------------------------------
MARTIN AS
ADJUSTED FOR
COMPLETED PRIMEDIA WHITECO CLEVELAND
MARTIN ACQUISITION ACQUISITION ACQUISITIONS
WWDC-FM/AM TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1997 1/1 - 12/31(k) 1/1 - 12/31(l) 1/1 - 12/31(m) 1/1 - 12/31(n) 1/1 - 12/31(o)
- ---------------------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Gross revenues..................... $11,416 $84,882 $15,732 $126,801 $ 33,728
Less: agency commissions........... (1,430) (8,983) (3,482) (8,703) (4,102)
------- ------- ------- -------- --------
Net revenues....................... 9,986 75,899 12,250 118,098 29,626
Operating expenses excluding
depreciation and amortization..... 5,597 38,836 7,986 63,984 16,433
Depreciation and amortization...... 90 25,326 2,916 11,525 673
Corporate general and
administrative.................... -- 1,080 -- 6,074 481
Merger expense..................... -- -- -- -- --
Restructuring charge............... -- -- -- -- --
Stock option compensation.......... -- -- -- -- --
Profit participation fee........... -- -- -- 2,322 --
------- ------- ------- -------- --------
Operating income (loss)............ 4,299 10,657 1,348 34,193 12,039
Interest expense................... 123 17,013 2,102 4 714
Interest income.................... (36) (293) (25) -- (513)
Gain on disposition of assets...... -- -- -- -- --
Other (income) expense............. (98) 1,767 66 (1,833) (1,357)
------- ------- ------- -------- --------
Income (loss) before income
taxes............................. 4,310 (7,830) (795) 36,022 13,195
Income tax expense (benefit)....... -- -- (53) -- 75
Dividends and accretion on
preferred stock of subsidiary..... -- -- -- -- --
------- ------- ------- -------- --------
Net income (loss).................. 4,310 (7,830) (742) 36,022 13,120
Preferred stock dividends.......... -- -- -- -- --
------- ------- ------- -------- --------
Income (loss) attributable to
common stockholders............... $ 4,310 $(7,830) $ (742) $ 36,022 $ 13,120
======= ======= ======= ======== ========
Basic and diluted income (loss) per
common share......................
Weighted average common shares
outstanding(ii)...................
</TABLE>
A-12
<PAGE> 16
<TABLE>
<CAPTION>
DISPOSITIONS
---------------------------------------------------------------------------------------------
WPEG-FM
WBAV-FM/AM
WRFX-FM WPNT-FM SAN FRANCISCO
WFNZ-AM WNKS-FM HISTORICAL WEJM-FM/AM WJZW-FM FREQUENCY
HISTORICAL HISTORICAL 5/30 - HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1997 1/1 - 5/15(b) 1/1 - 5/15(p) 6/19(q) 1/1 - 8/26(r) 1/1 - 7/7(s) 1/1 - 7/7(t)
- ---------------------------- ------------- ------------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues..................... $(7,788) $(1,332) $(567) $(1,279) $(4,137) $(1,370)
Less: agency commissions........... 1,029 142 93 135 567 178
------- ------- ----- ------- ------- -------
Net revenues....................... (6,759) (1,190) (474) (1,144) (3,570) (1,192)
Operating expenses excluding
depreciation and amortization.... (3,569) (994) (285) (1,276) (2,161) (1,738)
Depreciation and amortization...... -- (212) (279) (305) (315) (84)
Corporate general and
administrative................... -- -- -- -- (70) --
Merger expense..................... -- -- -- -- -- --
Restructuring charge............... -- -- -- -- -- --
Stock option compensation.......... -- -- -- -- -- --
Profit participation fee........... -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Operating income (loss)............ (3,190) 16 90 437 (1,024) 630
Interest expense................... -- -- -- -- -- --
Interest income.................... -- -- -- -- -- --
Gain on disposition of assets...... -- -- -- -- -- --
Other (income) expense............. -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Income (loss) before income
taxes............................ (3,190) 16 90 437 (1,024) 630
Income tax expense (benefit)....... -- -- -- -- (260) --
Dividends and accretion on
preferred stock of subsidiary.... -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Net income (loss).................. (3,190) 16 90 437 (764) 630
Preferred stock dividends.......... -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Income (loss) attributable to
common stockholders.............. $(3,190) $ 16 $ 90 $ 437 $ (764) $ 630
======= ======= ===== ======= ======= =======
Basic and diluted income (loss) per
common share.....................
Weighted average common shares
outstanding(ii)..................
<CAPTION>
DISPOSITIONS
----------------------------------------------------------------------------------------------
WBAB-FM
WBZS-AM WBLI-FM
WZHF-AM WGBB-AM
KDFC-FM KDFC-AM BONNEVILLE WFLN-FM WHFM-FM
HISTORICAL HISTORICAL WLUP-FM OPTION HISTORICAL HISTORICAL
1/1 - 1/1 - HISTORICAL HISTORICAL 1/1 - 1/1 -
YEAR ENDED DECEMBER 31, 1997 1/31(u) 8/13(v) 1/1 - 7/14(e) 1/1 - 10/1(i) 4/30(w) 12/31(x)
- ---------------------------- ------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues..................... $(278) $(1,091) $(6,928) $(31,429) $(1,298) $(12,794)
Less: agency commissions........... 26 23 935 3,951 134 1,459
----- ------- ------- -------- ------- --------
Net revenues....................... (252) (1,068) (5,993) (27,478) (1,164) (11,335)
Operating expenses excluding
depreciation and amortization.... (224) (665) (5,642) (14,434) (728) (8,048)
Depreciation and amortization...... -- (54) (1,443) -- (800) --
Corporate general and
administrative................... -- (18) -- -- -- --
Merger expense..................... -- -- -- -- -- --
Restructuring charge............... -- -- -- -- -- --
Stock option compensation.......... -- -- -- -- -- --
Profit participation fee........... -- -- -- -- -- --
----- ------- ------- -------- ------- --------
Operating income (loss)............ (28) (331) 1,092 (13,044) 364 (3,287)
Interest expense................... -- -- -- (1) -- --
Interest income.................... -- -- -- 10 -- --
Gain on disposition of assets...... -- -- -- -- -- --
Other (income) expense............. -- -- -- -- -- --
----- ------- ------- -------- ------- --------
Income (loss) before income
taxes............................ (28) (331) 1,092 (13,053) 364 (3,287)
Income tax expense (benefit)....... -- (98) -- -- -- --
Dividends and accretion on
preferred stock of subsidiary.... -- -- -- -- -- --
----- ------- ------- -------- ------- --------
Net income (loss).................. (28) (233) 1,092 (13,053) 364 (3,287)
Preferred stock dividends.......... -- -- -- -- -- --
----- ------- ------- -------- ------- --------
Income (loss) attributable to
common stockholders.............. $ (28) $ (233) $ 1,092 $(13,053) $ 364 $ (3,287)
===== ======= ======= ======== ======= ========
Basic and diluted income (loss) per
common share.....................
Weighted average common shares
outstanding(ii)..................
<CAPTION>
COMPANY AS
ADJUSTED FOR
PRO FORMA COMPLETED
YEAR ENDED DECEMBER 31, 1997 ADJUSTMENTS TRANSACTIONS
- ---------------------------- ----------- ------------
<S> <C> <C>
Gross revenues..................... $ (17,651)(y) $1,411,160
(843)(z)
Less: agency commissions........... -- (154,451)
--------- ----------
Net revenues....................... (18,494) 1,256,709
Operating expenses excluding
depreciation and amortization.... (14,395)(y) 704,936
Depreciation and amortization...... (2,677)(y) 464,160
154,167(aa)
51,788(bb)
Corporate general and
administrative................... -- 45,669
Merger expense..................... (6,124)(dd) --
Restructuring charge............... -- 15,958
Stock option compensation.......... -- 3,083
Profit participation fee........... (2,322)(ee) --
--------- ----------
Operating income (loss)............ (198,931) 22,903
Interest expense................... (579)(y) 349,584
169,272(ff)
Interest income.................... -- (3,188)
Gain on disposition of assets...... -- (18,380)
Other (income) expense............. -- (1,216)
--------- ----------
Income (loss) before income
taxes............................ (367,624) (303,897)
Income tax expense (benefit)....... (131,828)(gg) (108,107)
Dividends and accretion on
preferred stock of subsidiary.... (40,222)(hh) --
--------- ----------
Net income (loss).................. (195,574) (195,790)
Preferred stock dividends.......... -- 17,446
--------- ----------
Income (loss) attributable to
common stockholders.............. $(195,574) $ (213,236)
========= ==========
Basic and diluted income (loss) per
common share..................... $ (1.64)
==========
Weighted average common shares
outstanding(ii).................. 34,617 130,253
========= ==========
</TABLE>
A-13
<PAGE> 17
<TABLE>
<CAPTION>
ACQUISITIONS
---------------------------------------------------------------------------------------
MARTIN AS
ADJUSTED FOR
COMPLETED PRIMEDIA WHITECO CLEVELAND
KODA-FM WWDC-FM/AM MARTIN ACQUISITION ACQUISITION ACQUISITIONS
NINE MONTHS ENDED COMPANY HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL
SEPTEMBER 30, 1998 HISTORICAL 1/1-5/29 (j) 1/1-6/1 (k) 1/1-7/31 (l) 1/1-9/30 (m) 1/1-9/30 (n) 1/1-9/30 (o)
- ------------------ ---------- ------------ ----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues....... $1,015,562 $ 9,132 $4,273 $54,186 $11,749 $103,694 $27,008
Less: agency
commissions......... (116,466) (1,250) (528) (5,768) (3,070) (7,191) (3,539)
---------- ------- ------ ------- ------- -------- -------
Net revenues......... 899,096 7,882 3,745 48,418 8,679 96,503 23,469
Operating expenses
excluding
depreciation and
amortization........ 491,924 2,771 2,158 23,171 4,954 49,625 12,696
Depreciation and
amortization........ 315,772 841 45 15,083 2,158 8,760 174
Corporate general and
administrative...... 25,188 -- -- 1,035 317 5,193 --
Executive severance
charge.............. 59,475 -- -- -- -- -- --
Profit participation
fee................. -- -- -- -- -- 1,756 --
---------- ------- ------ ------- ------- -------- -------
Operating income
(loss).............. 6,737 4,270 1,542 9,129 1,250 31,169 10,599
Interest expense..... 145,992 -- 62 11,057 1,679 98 156
Interest income...... (10,283) -- (18) (261) -- (32) (46)
Gain on disposition
of representation
contracts........... (29,767) -- -- -- -- -- --
Other (income)
expense............. (127,404) -- (49) 5,461 23 (820) 873
---------- ------- ------ ------- ------- -------- -------
Income (loss) before
income taxes........ 28,199 4,270 1,547 (7,128) (452) 31,923 9,616
Income tax expense
(benefit)........... 32,507 -- -- -- -- -- --
Dividends on
preferred stock of
subsidiary.......... 17,601 -- -- -- -- -- --
---------- ------- ------ ------- ------- -------- -------
Net income (loss).... (21,909) 4,270 1,547 (7,128) (452) 31,923 9,616
Preferred stock
dividends........... 19,252 -- -- -- -- -- --
---------- ------- ------ ------- ------- -------- -------
Income (loss)
attributable to
common
stockholders........ $ (41,161) $ 4,270 $1,547 $(7,128) $ (452) 31,923 $ 9,616
========== ======= ====== ======= ======= ======== =======
Basic and diluted
income (loss) per
common share........ $ (0.30)
==========
Weighted average
common shares
outstanding(ii)..... 136,427
==========
<CAPTION>
DISPOSITIONS
------------
WBAB-FM
WBLI-FM
WGBB-AM COMPANY
WHFM-FM AS ADJUSTED FOR
NINE MONTHS ENDED HISTORICAL PRO FORMA COMPLETED
SEPTEMBER 30, 1998 1/1-5/29 (x) ADJUSTMENTS TRANSACTIONS
- ------------------ ------------ ----------- ---------------
<S> <C> <C> <C>
Gross revenues....... $(5,063) $ -- $1,220,541
Less: agency
commissions......... 514 -- (137,298)
------- --------- ----------
Net revenues......... (4,549) -- 1,083,243
Operating expenses
excluding
depreciation and
amortization........ (3,331) -- 583,968
Depreciation and
amortization........ -- 20,409(aa) 399,271
36,029(bb)
Corporate general and
administrative...... -- (570)(cc) 31,163
Executive severance
charge.............. -- -- 59,475
Profit participation
fee................. -- (1,756)(ee) --
------- --------- ----------
Operating income
(loss).............. (1,218) (54,112) 9,366
Interest expense..... -- 103,144(ff) 262,188
Interest income...... -- -- (10,640)
Gain on disposition
of representation
contracts........... -- -- (29,767)
Other (income)
expense............. -- -- (121,916)
------- --------- ----------
Income (loss) before
income taxes........ (1,218) (157,256) (90,499)
Income tax expense
(benefit)........... -- (55,869)(gg) (23,362)
Dividends on
preferred stock of
subsidiary.......... -- (17,601)(hh) --
------- --------- ----------
Net income (loss).... (1,218) (83,786) (67,137)
Preferred stock
dividends........... -- -- 19,252
------- --------- ----------
Income (loss)
attributable to
common
stockholders........ $(1,218) $ (83,786) $ (86,389)
======= ========= ==========
Basic and diluted
income (loss) per
common share........ $ (0.63)
==========
Weighted average
common shares
outstanding(ii)..... 136,427
==========
</TABLE>
A-14
<PAGE> 18
- -------------------------
(a) On May 1, 1997, the Company acquired, in the Beasley Acquisition,
WDAS-FM/AM in Philadelphia for $103,000 in cash plus various other direct
acquisition costs.
(b) 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.
(c) 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 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, the
Company issued 5,990,000 shares of $3.00 convertible exchangeable 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 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 sold
on August 13, 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 8(s) and 8(v)).
(d) 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 Media 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 with and into EMHC, a direct, wholly-owned subsidiary of Evergreen,
with EMHC remaining as the surviving corporation and (ii) CRBC was merged
with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA
remaining as the surviving corporation (collectively, the "Chancellor
Merger"). Upon consummation of the transactions, Evergreen was renamed
Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine
Holdings Corporation ("CMHC"), and EMCLA was renamed 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 Media common stock into
0.9091 shares of Chancellor Media common stock, resulting in the issuance
of 34,617,460 shares of Chancellor Media common stock at $15.50 per share,
(ii) the assumption of long-term debt of CRBC of $949,000 which included
$549,000 of borrowings outstanding under the CRBC senior credit facility,
$200,000 of CRBC's 9 3/8% senior subordinated notes due 2004 and $200,000
of CRBC's 8 3/4% senior subordinated notes due 2007, (iii) the issuance of
2,117,629 shares of CMCLA's 12% exchangeable preferred stock in exchange
for CRBC's substantially identical securities with a fair value of $215,570
including accrued and unpaid dividends of $3,807, (iv) the issuance of
1,000,000 shares of CMCLA's 12 1/4% series A senior cumulative exchangeable
preferred stock in exchange for CRBC's substantially identical securities
with a fair value of $120,217 including accrued and unpaid dividends of
$772, (v) the issuance of 2,200,000 shares of the Company's 7% convertible
preferred stock in exchange for Chancellor Media's substantially identical
securities with a fair value of $111,048 including accrued and unpaid
dividends of $1,048, (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-15
<PAGE> 19
Chancellor's historical condensed combined statement of operations for the
year ended December 31, 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 DISPOSITIONS
------------------------- ------------- PRO FORMA CHANCELLOR
CHANCELLOR ADJUSTMENTS AS ADJUSTED
VIACOM FOR THE FOR
CHANCELLOR COLFAX ACQUISITION WDRQ-FM COMPLETED COMPLETED
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR
DECEMBER 31, 1997 1/1-9/5 1/1-1/23(i) 1/1-7/2(ii) 1/1-8/11(iii) TRANSACTIONS TRANSACTIONS
- ----------------- ---------- ----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $215,018 $3,183 $29,214 $(2,395) $ (3,539)(iv) $241,481
Less: agency commissions.............. (26,575) (384) (4,046) 251 -- (30,754)
-------- ------ ------- ------- -------- --------
Net revenues.......................... 188,443 2,799 25,168 (2,144) (3,539) 210,727
Operating expenses excluding
depreciation and amortization....... 110,548 1,872 13,326 (1,986) (4,432)(iv) 119,328
Depreciation and amortization......... 23,919 -- 2,370 (186) 4,484(v) 30,505
(82)(vi)
Corporate general and
administrative...................... 7,102 -- 520 (42) -- 7,580
Merger expense........................ 6,124 -- -- -- -- 6,124
Stock option compensation............. 3,083 -- -- -- -- 3,083
-------- ------ ------- ------- -------- --------
Operating income (loss)............... 37,667 927 8,952 70 (3,509) 44,107
Interest expense...................... 40,024 -- 3,178 -- 13,398(vii) 56,600
Interest income....................... (218) -- -- -- -- (218)
Other income.......................... (584) -- -- -- -- (584)
-------- ------ ------- ------- -------- --------
Income (loss) before income taxes..... (1,555) 927 5,774 70 (16,907) (11,691)
Income tax expense (benefit).......... 1,378 -- 1,558 18 (4,630)(viii) (1,676)
Dividends and accretion on preferred
stock of subsidiary................. 25,817 -- -- -- 1,504(ix) 27,321
-------- ------ ------- ------- -------- --------
Net income (loss)..................... (28,750) 927 4,216 52 (13,781) (37,336)
Preferred stock dividends............. 4,810 -- -- -- 471(x) 5,281
-------- ------ ------- ------- -------- --------
Income (loss) attributable to common
stock............................... $(33,560) $ 927 $ 4,216 $ 52 $(14,252) $(42,617)
======== ====== ======= ======= ======== ========
</TABLE>
- -------------------------
(i) On January 23, 1997, Chancellor acquired 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 acquisition of
Colfax 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. 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 acquisition of Colfax. 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 year ended December 31, 1997.
(ii) 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
A-16
<PAGE> 20
with (i) bank borrowings of $273,159 under CRBC's restated senior credit
agreement, dated July 2, 1997; (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 (iii) below).
(iii)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 8(d)(ii)).
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.
(iv) Reflects the elimination of time brokerage agreement fees received and paid
by Chancellor as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 MARKET PERIOD REVENUE EXPENSE
---------------------------- ------ ------ ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM(1).......................................... Detroit 1/1-1/31 $ (235) $ (16)
WOMX-FM, WXXL-FM, WJHM-FM(2)................................ Orlando 1/1-2/13 -- (911)
WEAT-FM/AM, WOLL-FM(2)...................................... West Palm Beach 1/1-3/28 (593) (304)
WAPE-FM, WFYV-FM(3)......................................... Jacksonville 1/1-9/5 (2,711) (490)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM(3)....................... Long Island 1/1-9/5 -- (2,711)
------- -------
Total adjustment for decrease in gross revenues and
expenses.............................................. $(3,539) $(4,432)
======= =======
</TABLE>
- -------------------------
(1) On January 31, 1997, Chancellor sold WWWW-FM and WDFN-AM in Detroit 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.
(2) On February 13, 1997, Chancellor acquired substantially all of the
assets and assumed certain liabilities of the OmniAmerica Group
including WOMX-FM, WXXL-FM and WJHM-FM in Orlando, WEAT-FM/AM and
WOLL-FM in West Palm Beach, Florida and WAPE-FM AND WFYV-FM in
Jacksonville. The total purchase price, including acquisition costs,
allocated to net assets acquired was approximately $181,046. Prior to
the consummation of the acquisition of Omni, Chancellor had entered
into an agreement to program the stations under a time brokerage
agreement effective July 1, 1996. Additionally, prior to the
consummation of Chancellor's exchange of WEAT-FM/AM and WOLL-FM in West
Palm Beach for KSTE-FM in Sacramento and $33,000 in cash on March 28,
1997, 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.
(3) On July 1, 1996, Chancellor entered into an agreement to exchange, in
the SFX Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida, 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
program 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. On
November 6, 1997, the DOJ filed suit against the Company seeking to
enjoin under the HSR Act the acquisition of the four Long Island
properties under the SFX Exchange. On March 30, 1998, the Company and
SFX entered into a consent decree under which the Company and SFX
agreed that the SFX Exchange would not be consummated and that the time
brokerage agreements under which the Company programmed the Long Island
properties would be terminated as soon as possible but no later than
August 1, 1998. On May 29, 1998, the Company's time brokerage
agreements
A-17
<PAGE> 21
regarding the Long Island properties were terminated as part of the
Capstar/SFX Transaction. Furthermore, on May 29, 1998, the Company
exchanged WAPE-FM and WFYV-FM in Jacksonville plus $90,250 in cash to
Capstar in return for KODA-FM in Houston.
(v) Reflects incremental amortization related to the Completed Chancellor
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 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 consisting of broadcast licenses, goodwill and
advertising contracts were amortized on a straight-line basis over
lives ranging from two to 40 years by Chancellor. In connection with
purchase accounting for the Chancellor Merger, intangible assets are
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.
(vi) Reflects the elimination of disposed stations' historical depreciation and
amortization expense of $82 for the year ended December 31, 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.
(vii)Reflects the adjustment to interest expense in connection with the
consummation of the Completed Chancellor Transactions, the issuance by
Chancellor of its 12 1/4% series A senior cumulative exchangeable preferred
stock, the refinancing of Chancellor's previous senior credit agreement on
January 23, 1997 and the offering on June 24, 1997 by Chancellor of $200.0
million aggregate principal amount of its 8 3/4% Senior Notes due 2007:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Additional bank borrowings related to:
Completed Chancellor Acquisitions......................... $727,192
Completed Chancellor Dispositions......................... (141,253)
New Loan Fees............................................. 8,573
--------
Total additional bank borrowings............................ $594,512
========
Interest expense on additional bank borrowings at 7 1/2%.... $ 16,118
Less: historical interest expense of the stations acquired
in the Completed Chancellor Transactions.................. (3,178)
--------
Net increase in interest expense............................ 12,940
</TABLE>
A-18
<PAGE> 22
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7 1/2%:
Chancellor 8 3/4% Senior Subordinated Notes due 2007
proceeds of $194,083 for the period January 1, 1997 to
June 24, 1997............................................. (7,036)
Reduction in interest expense resulting from the redemption
of Chancellor's 12 1/2% Senior Subordinated Notes of
$60,000 on June 5, 1997................................... (3,229)
Interest expense on $70,133 additional bank borrowings at
7 1/2% related to the redemption of Chancellor's 12 1/2%
Senior Subordinated Notes on June 5, 1997................. 2,265
Interest expense on Chancellor's $200,000 8 3/4% notes
issued June 24, 1997...................................... 8,458
--------
Total adjustment for net increase in interest expense....... $ 13,398
========
</TABLE>
(viii) 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.
(ix) Reflects incremental dividends and accretion of $1,504 on CRBC's 12%
exchangeable preferred stock for the period January 1, 1997 to January
23, 1997.
(x) Reflects incremental dividends on the Chancellor's 7% convertible
preferred stock of $471 for the period January 1, 1997 to January 23,
1997.
(e) On July 14, 1997, the Company completed the disposition of WLUP-FM in
Chicago to Bonneville for net proceeds of $80,000 which were held by a
qualified intermediary pending the completion of the deferred exchange of
WLUP-FM for KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the
Company applied the net proceeds from the disposition of WLUP-FM of
$80,000 in cash, plus an additional $3,500 and various other direct
acquisition costs, in a deferred exchange of WLUP-FM for KZPS-FM and
KDGE-FM in Dallas. The Company had previously operated KZPS-FM and
KDGE-FM under time brokerage agreements effective August 1, 1997.
(f) On October 28, 1997, the Company acquired Katz Media Group, Inc., a
full-service media representation firm, in a tender offer transaction for
a total purchase price of approximately $379,101 which included (i) the
conversion of each outstanding share of Katz 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 Katz and its subsidiaries of
$222,000 which included $122,000 of borrowings outstanding under the Katz
senior credit facility and $100,000 of the 10 1/2% Notes and (iii)
estimated acquisition costs of $7,500.
(g) 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 plus various other direct acquisition costs.
(h) On January 30, 1998, the Company acquired, in the Denver Acquisition,
KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the
Company) for $26,000 in cash (including $1,650 paid by Chancellor in
escrow) plus various other direct acquisition costs. The Company had
previously been programming KXPK-FM under a time brokerage agreement
since September 1, 1997.
(i) On April 3, 1998, the Company exchanged WTOP-FM in Washington, KZLA-FM in
Los Angeles and WGMS-FM in Washington plus $57,000 in cash for
Bonneville's stations WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM
in Los Angeles (the "Bonneville Option"). The Company had previously paid
$3,000 in cash to Bonneville on August 6, 1997. The Company had
previously entered into time brokerage agreements to program KLDE-FM and
KBIG-FM effective October 1, 1997 and WBIX-FM effective October 10, 1997
and had 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.
A-19
<PAGE> 23
(j) On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and
KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WVTY-FM, WJJJ-FM,
WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX
Stations") for an aggregate purchase price of approximately $637,500 plus
various other direct acquisition costs in a series of purchases and
exchanges over a period of three years (the "Capstar/SFX Transaction"). The
Capstar/SFX Stations were acquired by Capstar as part of Capstar's
acquisition of SFX on May 29, 1998. On May 29, 1998, as part of the
Capstar/SFX Transaction, the Company exchanged WAPE-FM and WFYV-FM in
Jacksonville (valued for purposes of the Capstar/SFX Transaction at
$53,000) plus $90,250 in cash to Capstar in return for KODA-FM in Houston
(the "Houston Exchange"). Chancellor entered into a time brokerage
agreement to sell substantially all of the broadcast time of WAPE-FM and
WFYV-FM effective July 1, 1996 (see 8 (d) (iv) (3)). Therefore, the results
of operations of WAPE-FM and WFYV-FM are not included in the Company's
historical condensed statements of operations for the year ended December
31, 1997 and the nine months ended September 30, 1998.
(k) On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from
Capitol Broadcasting Company and its affiliates for $74,062 in cash
(including $2,062 for the purchase of the stations' accounts receivable)
plus various other direct acquisition costs, of which $4,000 was previously
paid by the Company as escrow funds.
(l) On July 31, 1998, the Company acquired Martin Media and certain affiliated
companies, an outdoor advertising company with over 14,500 billboards and
outdoor displays in 12 states serving 23 markets, for $591,674 in cash plus
working capital of $19,443 subject to certain adjustments and direct
acquisition costs of approximately $10,000.
Martin's historical condensed combined statements of operations for the
year ended December 31, 1997 and the nine months ended September 30, 1998
and pro forma adjustments related to the significant transactions completed
by Martin prior to the acquisition of Martin (the "Completed Martin
Transactions") are summarized below. The pro forma adjustments for the
acquisition of Martin do not reflect certain acquisitions of assets by
Martin with an aggregate purchase price of approximately $17,000 which, in
the opinion of the Company's management is not material to such pro forma
presentations either individually or in the aggregate.
A-20
<PAGE> 24
<TABLE>
<CAPTION>
MARTIN LAS VEGAS NEWMAN
ACQUISITION KUNZ CONNELL OUTDOOR OUTDOOR POA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1997 1/1-12/31 1/1-7/31(i) 1/1-12/23(ii) 1/1-12/31(iii) 1/1-12/31(iv) 1/1-12/31(v)
- ---------------------------- ----------- ------------ ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues..................... $70,044 $5,569 $3,459 $1,840 $2,400 $1,570
Less: agency commissions........... (7,894) -- (413) (181) (180) (315)
------- ------ ------ ------ ------ ------
Net revenues....................... 62,150 5,569 3,046 1,659 2,220 1,255
Operating expenses excluding
depreciation and amortization.... 31,196 2,318 1,553 1,353 1,628 788
Depreciation and amortization...... 12,084 281 518 30 279 --
Corporate general and
administrative................... 2,334 80 91 -- -- --
------- ------ ------ ------ ------ ------
Operating income (loss)............ 16,536 2,890 884 276 313 467
Interest expense................... 10,507 -- -- -- 243 --
Interest income.................... (293) -- -- -- -- --
Other expense...................... 1,737 -- -- -- 30 --
------- ------ ------ ------ ------ ------
Net income (loss).................. $ 4,585 $2,890 $ 884 $ 276 $ 40 $ 467
======= ====== ====== ====== ====== ======
<CAPTION>
PRO FORMA
ADJUSTMENTS MARTIN AS
FOR THE ADJUSTED
COMPLETED FOR COMPLETED
MARTIN MARTIN
YEAR ENDED DECEMBER 31, 1997 TRANSACTIONS TRANSACTIONS
- ---------------------------- ------------- -------------
<S> <C> <C>
Gross revenues..................... $ -- $84,882
Less: agency commissions........... -- (8,983)
--------- -------
Net revenues....................... -- 75,899
Operating expenses excluding
depreciation and amortization.... -- 38,836
Depreciation and amortization...... 12,134(vi) 25,326
Corporate general and
administrative................... (1,425)(vii) 1,080
--------- -------
Operating income (loss)............ (10,709) 10,657
Interest expense................... 6,263(viii) 17,013
Interest income.................... -- (293)
Other expense...................... -- 1,767
--------- -------
Net income (loss).................. $ (16,972) $(7,830)
========= =======
</TABLE>
A-21
<PAGE> 25
<TABLE>
<CAPTION>
PRO FORMA MARTIN AS
ADJUSTMENTS ADJUSTED
MARTIN FOR THE FOR
ACQUISITION POA COMPLETED COMPLETED
HISTORICAL HISTORICAL MARTIN MARTIN
NINE MONTHS ENDED SEPTEMBER 30, 1998 1/1-7/31 1/1-7/9(v) TRANSACTIONS TRANSACTIONS
- ------------------------------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues................................... $53,285 $ 901 $ -- $54,186
Less: agency commissions......................... (5,612) (156) -- (5,768)
------- ----- ------ -------
Net revenues..................................... 47,673 745 -- 48,418
Operating expenses excluding depreciation and
amortization................................... 22,671 500 -- 23,171
Depreciation and amortization.................... 14,694 88 301(vi) 15,083
Corporate general and administrative............. 3,030 -- (1,995)(vii) 1,035
------- ----- ------ -------
Operating income (loss).......................... 7,278 157 1,694 9,129
Interest expense................................. 10,781 1 275(viii) 11,057
Interest income.................................. (261) -- -- (261)
Other (income) expense........................... 5,448 13 -- 5,461
------- ----- ------ -------
Net income (loss)................................ $(8,690) $ 143 $1,419 $(7,128)
======= ===== ====== =======
</TABLE>
- -------------------------
(i) On July 31, 1997, Martin acquired approximately 500 display faces of the
Kunz Outdoor Advertising division from Kunz & Company, an outdoor
advertising company with approximately 1,500 billboards and outdoor
displays in five markets, for $20,500 in cash plus various other direct
acquisition costs.
(ii) On December 23, 1997, Martin acquired Connell Outdoor Advertising Co., an
outdoor advertising company with 88 billboards and outdoor displays in the
Las Vegas market, for $30,000 in cash plus various other direct
acquisition costs.
(iii) On January 2, 1998, Martin acquired Las Vegas Outdoor Advertising, Inc.,
an outdoor advertising company with 90 billboards and outdoor displays in
the Las Vegas market, for $16,800 in cash plus various other direct
acquisition costs.
(iv) On January 2, 1998, Martin acquired Newman Outdoor of Texas, Inc., an
outdoor advertising company with over 1,200 billboards and outdoor
displays in three markets, for $12,500 in cash plus various other direct
acquisition costs.
(v) On July 9, 1998, Martin acquired POA, an outdoor advertising company with
over 1,240 billboards and outdoor displays in the Pittsburgh market, for
$5,867 in cash plus various other direct acquisition costs.
(vi) Reflects incremental amortization related to the Completed Martin
Transactions and is based on the following allocation to intangible
assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE
- ---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Kunz Acquisition.............. 1/1-7/31 $17,260 $ 2,014 $ 42 $ 1,972
Connell Acquisition........... 1/1-12/23 25,650 5,030 373 4,657
Las Vegas Outdoor
Acquisition................. 1/1-12/31 14,408 2,882 -- 2,882
Newman Acquisition............ 1/1-12/31 10,249 2,050 -- 2,050
POA Acquisition............... 1/1-12/31 2,867 573 -- 573
------- ------- ---- -------
Total............... $70,434 $12,549 $415 $12,134
======= ======= ==== =======
</TABLE>
A-22
<PAGE> 26
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE
- ------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
POA Acquisition.................. 1/1-7/9 $ 2,867 $301 $-- $301
======= ==== === ====
</TABLE>
- ---------------
(1) Intangible assets were amortized on a straight-line basis over an
estimated average 5 year life by Martin.
Historical depreciation expense of the Completed Martin Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(vii)On July 31, 1997, Martin paid $6,000 to Kunz for an option to purchase
approximately 1,000 display faces from its Kunz Outdoor Advertising
division for $33,289 in cash plus various other direct acquisition costs.
Martin began operating these 1,000 display faces under a management
agreement effective July 31, 1997. Pursuant to the management agreement,
Martin paid a management fee of $285 per month to Kunz. Reflects the
elimination of management fees paid by Martin to Kunz of $1,425 for the
year ended December 31, 1997 and $1,995 for the period January 1, 1998
through July 31, 1998.
(viii)
Reflects the adjustment to interest expense in connection with the
consummation of the Completed Martin Transactions:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Martin Acquisitions............................. $85,667 $35,167
------- -------
Interest expense on additional bank borrowings at 8.5%...... $ 6,506 $ 276
Less: historical interest expense of the companies acquired
in the Completed Martin Transactions...................... (243) (1)
------- -------
Net increase in interest expense............................ $ 6,263 $ 275
======= =======
</TABLE>
(m) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc.
and certain of its affiliates, which own and operate eight FM stations in
Puerto Rico, for approximately $76,050 in cash less working capital deficit
of $1,280 plus various other direct acquisition costs.
(n) On December 1, 1998, the Company acquired the assets of the Outdoor
Advertising division of Whiteco Industries, Inc., an outdoor advertising
company with over 22,000 billboards and outdoor displays in 34 states, for
$930,000 in cash plus working capital of $24,221 subject to certain
adjustments and various other direct acquisition costs of approximately
$20,000.
(o) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company began operating WQAL-FM under
a time brokerage agreement effective October 1, 1998. On February 2, 1999,
the Company acquired additional radio stations in Cleveland including (i)
WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii)
WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation
which owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired
for an aggregate purchase price of $275,000 in cash plus working capital of
$4,132 subject to certain adjustments (the "Cleveland Acquisitions").
(p) On May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for
$10,000 in cash.
(q) 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
A-23
<PAGE> 27
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.
(r) 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.
(s) 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 8(c)). 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.
(t) 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.
(u) 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 programming 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 were 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 July 21, 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 year ended December 31, 1997.
(v) 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 8(c)) and KDFC-AM in San Francisco for $18,000 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 8(c)). 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.
(w) On April 13, 1998, the Company and Secret entered into a settlement
agreement regarding WFLN-FM in Philadelphia. Previously in August 1996, the
Company and Secret had entered into an agreement under which the Company
would acquire WFLN-FM from Secret for $37,750 in cash. In April 1997, the
Company entered into an agreement to sell WFLN-FM to Greater Media for
$41,800 in cash. 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 rights to acquire WFLN-FM. Pursuant to a court
settlement entered in August 1997 and the settlement agreement between the
Company and Secret entered on April 13, 1998, (i) Secret sold WFLN-FM
directly to Greater Media for $37,750, (ii) Greater Media deposited $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 received $3,500 of such
amount deposited by Greater Media with the court, plus interest earned
during the period which the court held such amounts (the "WFLN
Settlement"), and Secret received the balance of such amounts.
(x) Chancellor began programming WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long
Island under a time brokerage agreement effective July 1, 1996 (see
8(d)(iv)(3)). On May 29, 1998, as part of the Capstar/SFX Transaction, the
Company's time brokerage agreements regarding the Long Island properties
were terminated. The results of operations of WBAB-FM, WBLI-FM, WGBB-AM and
WHFM-FM in Long Island are included in Chancellor's historical condensed
statement of operations for January 1, 1997 through September 5, 1997 and
in the Company's historical condensed statement of
A-24
<PAGE> 28
operations for September 6, 1997 through December 31, 1997. Additionally,
the Company's historical condensed statement of operations for the nine
months ended September 30, 1998 includes the results of operations of
WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island for January 1, 1998
through May 29, 1998.
(y) Reflects the elimination of intercompany transactions between the Company
and Katz for the year ended December 31, 1997.
(z) Reflects the elimination of time brokerage agreement fees received by the
Company as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 MARKET PERIOD REVENUE
---------------------------- ------ ------ -------
<S> <C> <C> <C>
KZLA-FM............................................ Los Angeles 10/1-12/31 $(567)
WTOP-AM............................................ Washington, D.C. 10/1-12/31 (276)
-----
$(843)
=====
</TABLE>
(aa) Reflects incremental amortization related to the Completed Transactions and
is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
ADJUSTMENT
INCREMENTAL HISTORICAL FOR NET
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION INCREASE
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) ASSETS, NET EXPENSE(i) EXPENSE (DECREASE)
---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................................. 1/1-1/31 $ 26,590 $ 148 $ -- $ 148
KKSF-FM(ii)...................................... 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(iii)................ 1/1-7/2 515,654 17,379 793 16,586
Chancellor Media Merger(iv)...................... 1/1-9/5 2,178,137 98,823 23,638 75,185
Chicago/Dallas Exchange.......................... 1/1-10/7 (613) (31) -- (31)
Katz Acquisition(v).............................. 1/1-10/28 354,058 10,267 7,616 2,651
Gannett Acquisition.............................. 1/1-12/29 334,892 22,264 1,228 21,036
Denver Acquisition............................... 1/1-12/31 24,589 1,639 268 1,371
Bonneville Option................................ 1/1-12/31 62,504 4,167 -- 4,167
KODA-FM.......................................... 1/1-12/31 93,294 6,220 1,441 4,779
WWDC-FM/AM....................................... 1/1-12/31 64,338 4,289 -- 4,289
Martin Acquisition(vi)........................... 1/1-12/31 382,033 14,276 20,322 (6,046)
Primedia Acquisition............................. 1/1-12/31 70,447 4,696 2,248 2,448
Kunz Option(vii)................................. 1/1-12/31 15,716 393 -- 393
Whiteco Acquisition(vii)......................... 1/1-12/31 349,327 8,733 6,114 2,619
Cleveland Acquisitions........................... 1/1-12/31 301,968 20,131 292 19,839
---------- -------- ------- --------
Total.................................... $5,112,184 $218,947 $64,780 $154,167
========== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
ADJUSTMENT
INCREMENTAL HISTORICAL FOR NET
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION INCREASE
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(i) ASSETS, NET EXPENSE(i) EXPENSE (DECREASE)
------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Denver Acquisition............................... 1/1-1/30 $ 24,589 $ 137 $ -- $ 137
Bonneville Option................................ 1/1-4/3 62,504 1,076 -- 1,076
KODA-FM.......................................... 1/1-5/29 93,294 2,574 656 1,918
WWDC-FM/AM....................................... 1/1-6/1 64,338 1,799 -- 1,799
Martin Acquisition(vi)........................... 1/1-7/31 382,033 8,328 12,009 (3,681)
Primedia Acquisition............................. 1/1-9/30 70,447 3,522 1,620 1,902
Kunz Option(vii)................................. 1/1-9/30 15,716 295 -- 295
Whiteco Acquisition(vii)......................... 1/1-9/30 349,327 6,550 4,666 1,884
Cleveland Acquisitions........................... 1/1-9/30 301,968 15,098 19 15,079
---------- -------- ------- --------
Total.................................... $1,364,216 $ 39,379 $18,970 $ 20,409
========== ======== ======= ========
</TABLE>
- -------------------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life (except for the acquisition of Katz,
the acquisition of Martin, the acquisition of Whiteco and the
A-25
<PAGE> 29
Kunz Option -- see (v) and (vi) below). The incremental amortization
period represents the period of the year that the acquisition was not
completed. Actual amortization may differ based upon final purchase
price allocations.
(ii) 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.
(iii) 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.
(iv) Intangible assets for the Chancellor Merger of $2,178,137 includes
$293,548 of goodwill resulting from the recognition of deferred tax
liabilities.
(v) Intangible assets for the acquisition of Katz of $354,058 consist of
goodwill of $249,058 and representation contract value of $105,000
with estimated average lives of 40 years and 17 years, respectively.
(vi) Intangible assets for the acquisition of Martin consist of goodwill
and non-compete agreements of $355,033 and $27,000, respectively,
with estimated average lives of 40 years and 5 years, respectively.
The Martin goodwill of $355,033 includes $95,125 resulting from the
recognition of deferred tax liabilities.
(vii) Intangible assets for the Kunz Option and the acquisition of Whiteco
consist of goodwill of $15,716 and $349,327, respectively, with
estimated average lives of 40 years.
(bb) Historical depreciation expense of the Completed Transactions is assumed to
approximate depreciation expense on a pro forma basis, except as noted
below. Actual depreciation may differ based upon final purchase price
allocations. The following adjustments reflect incremental depreciation
related to the Completed Transactions and are based on the following
allocation to property and equipment:
<TABLE>
<CAPTION>
INCREMENTAL PROPERTY AND HISTORICAL ADJUSTMENT
DEPRECIATION EQUIPMENT, DEPRECIATION DEPRECIATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
---------------------------- ------------ -------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Martin Acquisition............................ 1/1-12/31 $310,952 $20,730 $ 5,004 $15,726
Kunz Option................................... 1/1-12/31 23,573 1,572 -- 1,572
Whiteco Acquisition........................... 1/1-12/31 598,509 39,901 5,411 34,490
-------- ------- ------- -------
Total................................. $933,034 $62,203 $10,415 $51,788
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL PROPERTY AND HISTORICAL ADJUSTMENT
DEPRECIATION EQUIPMENT, DEPRECIATION DEPRECIATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
------------------------------------ ------------ -------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Martin Acquisition............................ 1/1- 7/31 $310,952 $12,093 $ 3,074 $ 9,019
Kunz Option................................... 1/1- 9/30 23,573 1,179 -- 1,179
Whiteco Acquisition........................... 1/1- 9/30 598,509 29,925 4,094 25,831
-------- ------- ------- -------
Total................................. $933,034 $43,197 $ 7,168 $36,029
======== ======= ======= =======
</TABLE>
--------------------
(i) Property and equipment is depreciated on a straight-line basis over an
estimated average 15 year life. The incremental depreciation period
represent the period of the year that the acquisition was not
completed.
(cc) Reflects the elimination of management fees paid by the Company to Kunz of
$570 for the period August 1, 1998 through September 30, 1998 in connection
with the Kunz Option.
(dd) Reflects the elimination of merger expenses of $6,124 for the year ended
December 31, 1997 incurred by Chancellor in connection with the Chancellor
Merger.
A-26
<PAGE> 30
(ee) Reflects the elimination of the profit participation fee paid by Whiteco to
Metro Management Associates of $2,322 and $1,756 for the year ended
December 31, 1997 and the nine months ended September 30, 1998,
respectively.
(ff) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Transactions, the amendment and restatement
of CMCLA's senior credit agreement on April 25, 1997 (the "Senior Credit
Facility"), the Company's $3.00 convertible preferred stock offering
completed on June 16, 1997, the offering by CMCLA of the 8 1/8% Notes on
December 22, 1997, the Company's 1998 Equity Offering completed on March
13, 1998, the repurchase of CMCLA's 12% exchange debentures on June 10,
1998, the repurchase of CMCLA's 12 1/4% exchange debentures on August 19,
1998, the offering by CMCLA of the 9% Notes on September 30, 1998 and the
offering by CMCLA of the 8% Senior Notes on November 17, 1998:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions.................................... $3,779,250 $2,252,191
Completed Dispositions.................................... (349,250) --
Chancellor Merger(1)...................................... 31,000 --
Katz Acquisition(2)....................................... 157,101 --
New Loan Fees............................................. 10,473 --
---------- ----------
Total additional bank borrowings............................ $3,628,574 $2,252,191
========== ==========
Interest expense at 7.0%.................................... $ 211,500 $ 104,048
Less: historical interest expense related to completed
station acquisitions and dispositions..................... (20,965) (13,052)
---------- ----------
Net increase in interest expense............................ 190,535 90,996
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7.0%:
$3.00 convertible preferred stock offering proceeds of
$287,808 for the period January 1, 1997 to June 16,
1997................................................... (9,290) --
CMCLA 8 1/8% Senior Subordinated Notes due 2007 proceeds
of $485,000 for the period January 1, 1997 to December
22, 1997............................................... (33,196) --
1998 Equity Offering proceeds used to reduce bank
borrowings by $673,000 for the year ended December 31,
1997................................................... (47,110) (9,553)
CMCLA 9% Senior Subordinated Notes due 2008 proceeds of
$730,000 for the year ended December 31, 1997 and the
nine months ended September 30, 1998................... (51,100) (38,325)
CMCLA 8% Senior Notes due 2008 proceeds of $730,000 for
the year ended December 31, 1997 and the nine months
ended September 30, 1998............................... (51,100) (38,325)
Interest expense on CMCLA's $500,000 8 1/8% Senior
Subordinated Notes due 2007 issued December 22, 1997...... 39,722 --
Interest expense on borrowings to finance the repurchase of
CMCLA's 12% exchange debentures on June 10, 1998.......... 18,200 8,089
Interest expense on borrowings to finance the repurchase of
CMCLA's 12 1/4% exchange debentures on August 19, 1998.... 9,949 6,329
Interest expense on CMCLA's $750,000 9% Senior Subordinated
Notes due 2008 issued September 30, 1998.................. 67,500 50,625
Interest expense on CMCLA's $750,000 8% Senior Notes due
2008 issued November 17, 1998............................. 60,000 45,000
</TABLE>
A-27
<PAGE> 31
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
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
Chancellor's bank debt prior to consummation of the
Chancellor Merger and to Katz's bank debt prior to
consummation of the acquisition of Katz................... (24,838) (11,692)
---------- ----------
Total adjustment for net decrease in interest expense....... $ 169,272 $ 103,144
========== ==========
</TABLE>
- -------------------------
(1) The Company incurred additional bank borrowings of $31,000 to finance
estimated acquisition costs related to the Chancellor Merger.
(2) The Company incurred additional bank borrowings of $149,601 to finance
the payment of $11.00 in cash for each outstanding share of Katz common
stock and $7,500 to finance estimated acquisition costs related to the
acquisition of Katz.
(gg) Reflects the tax effect of the pro forma adjustments at the Company's
statutory tax rate of 42% for the periods presented. The pro forma tax
benefit is primarily the result of the reversal of temporary differences
related to the difference in the carrying amounts of FCC licenses for
financial reporting purposes and the amounts used for income tax purposes.
The deferred tax liability resulting from the temporary differences, which
have arisen out of the Company's various purchase business combinations,
has been recognized in connection with the purchase accounting for the
related acquisitions. The Company has not recorded a valuation allowance
for its pro forma tax benefit as it believes that, in accordance with
Financial Accounting Standards Board Statement No. 109, on a pro forma
basis, it is more likely than not to have adequate future taxable income to
utilize its deferred tax assets.
(hh) Reflects the elimination of preferred stock dividends and accretion on the
12% Preferred Stock and the 12 1/4% Preferred Stock of $40,222 and $17,601
for the year ended December 31, 1997 and the nine months ended September
30, 1998, respectively, in connection with the exchange of the 12%
Preferred Stock and 12 1/4% Preferred Stock into 12% Debentures and 12 1/4%
Debentures, respectively, and the subsequent repurchase of all the 12%
Debentures and 12 1/4% Debentures.
(ii) 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. A summary of shares used in the
pro forma combined loss per common share calculation follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Historical weighted average shares
outstanding............................. 95,636 136,427
Incremental weighted average shares
relating to:
Issuance of 34,617,460 shares of common
stock in connection with the
Chancellor Merger.................... 34,617 --
------- -------
Shares used in the pro forma combined
earnings per share calculation.......... 130,253 136,427
======= =======
</TABLE>
A-28
<PAGE> 32
ADJUSTMENTS TO LIN'S HISTORICAL CONDENSED STATEMENTS OF OPERATIONS RELATED TO
THE COMPLETED LIN TRANSACTIONS
(9) LIN's historical condensed statement of operations for the year ended
December 31, 1997 and the nine months ended September 30, 1998 and pro
forma adjustments related to the Completed LIN Transactions is summarized
below:
<TABLE>
<CAPTION>
PRO FORMA LIN
KXAS ADJUSTMENTS AS ADJUSTED
LIN HISTORICAL FOR COMPLETED FOR COMPLETED
YEAR ENDED DECEMBER 31, 1997 HISTORICAL 1/1-12/31(a) LIN TRANSACTIONS LIN TRANSACTIONS
- ---------------------------- ---------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Gross revenues............................. $335,243 $(110,398) -- $224,845
Less: agency commissions................... (43,724) 14,994 -- (28,730)
-------- --------- --------- --------
Net revenues............................... 291,519 (95,404) -- 196,115
Operating expenses excluding depreciation
and amortization......................... 149,815 (30,746) -- 119,069
Depreciation and amortization.............. 24,789 (2,445) 25,251(b) 47,595
Corporate general and administrative....... 6,763 -- -- 6,763
Tower write-offs........................... 2,697 -- -- 2,697
-------- --------- --------- --------
Operating income (loss).................... 107,455 (62,213) (25,251) 19,991
Interest expense........................... 21,340 -- 49,691(c) 71,031
Interest income............................ (1,332) -- -- (1,332)
Equity in joint venture.................... 1,532 -- 3,457(d) 4,989
Merger expenses............................ 7,206 -- (7,206)(e) --
-------- --------- --------- --------
Income (loss) before income taxes.......... 78,709 (62,213) (71,193) (54,697)
Income tax expense (benefit)............... 30,602 (21,121) (30,354)(f) (20,873)
-------- --------- --------- --------
Net income (loss).......................... $ 48,107 $ (41,092) $ (40,839) $(33,824)
======== ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA LIN
KXAS ADJUSTMENTS AS ADJUSTED
LIN HISTORICAL FOR COMPLETED FOR COMPLETED
NINE MONTHS ENDED SEPTEMBER 30, 1998 HISTORICAL 1/1-3/3(a) LIN TRANSACTIONS LIN TRANSACTIONS
- ------------------------------------ ---------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Gross revenues............................... $201,797 $(15,242) -- $186,555
Less: agency commissions..................... (24,223) 1,989 -- (22,234)
-------- -------- -------- --------
Net revenues................................. 177,574 (13,253) -- 164,321
Operating expenses excluding depreciation and
amortization............................... 100,906 (5,341) -- 95,565
Depreciation and amortization................ 36,436 (436) 4,199(b) 40,199
Corporate general and administrative......... 6,140 -- -- 6,140
KXTX management fee.......................... 3,055 -- -- 3,055
-------- -------- -------- --------
Operating income (loss)...................... 31,037 (7,476) (4,199) 19,362
Interest expense............................. 40,145 -- 10,044(c) 50,189
Interest income.............................. (836) -- -- (836)
Equity in joint venture...................... 4,966 -- 1,474(d) 6,440
Merger expenses.............................. 8,616 -- (8,616)(e) --
-------- -------- -------- --------
Income (loss) before income taxes............ (21,854) (7,476) (7,101) (36,431)
Income tax expense (benefit)................. 2,842 -- (16,568)(f) (13,726)
-------- -------- -------- --------
Net income (loss)............................ $(24,696) $ (7,476) $ 9,467 $(22,705)
======== ======== ======== ========
</TABLE>
A-29
<PAGE> 33
(a) LIN Holdings Corporation and LIN Acquisition Company, two newly formed
affiliates of Hicks Muse, entered into an Agreement and Plan of Merger with
LIN Television Corporation on August 12, 1997. Pursuant to this agreement,
on March 3, 1998, LIN Holdings acquired LIN Television by merging LIN
Acquisition, its wholly-owned subsidiary, with and into LIN Television,
with LIN Television surviving the merger and becoming a direct,
wholly-owned subsidiary of LIN Holdings. Furthermore, on March 3, 1998, in
connection with the acquisition of LIN by Hicks Muse, Hicks Muse and NBC
formed a television station joint venture. The joint venture consists of
KXAS-TV, formerly LIN Holdings' Dallas-Fort Worth NBC Affiliate, and
KNSD-TV, formerly NBC's San Diego station. A wholly-owned subsidiary of NBC
is the general partner of the joint venture and NBC operates the stations
owned by the joint venture. The NBC general partner holds an approximate
80% equity interest and LIN Television holds an approximate 20% equity
interest in the joint venture. Accordingly, this pro forma adjustment
reflects the elimination of KXAS-TV's results of operations from LIN
Television's historical condensed statements of operations for the year
ended December 31, 1997 and for the period of January 1, 1998 through March
3, 1998.
(b) Reflects incremental amortization related to the Completed LIN Transactions
and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ---------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Hicks Muse Acquisition................. 1/1-12/31 $1,472,304 $36,808 $11,557 $25,251
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ------------------------------------ ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Hicks Muse Acquisition................. 1/1-3/3 $1,472,304 $ 6,441 $ 2,242 $ 4,199
</TABLE>
- -------------------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 40 year life. The incremental amortization period
represents the period of the year that the acquisition was not completed.
Historical depreciation expense of the Completed LIN Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(c) Reflects the adjustment to interest expense in connection with the
consummation of the Completed LIN Transactions:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Additional bank borrowings related to:
Hicks Muse Acquisition............................ $170,000 $170,000
======== ========
Interest expense at 7.5%............................ $ 12,750 $ 2,231
Interest expense on LIN Television's $300,000 8 3/8%
Senior Subordinated Notes due 2008 issued March 3,
1998.............................................. 25,125 4,397
Interest expense on LIN Holdings' $325,000 10%
Senior Discount Notes due 2008 issued March 3,
1998.............................................. 32,500 5,688
Interest expense on the unused portion of LIN's loan
commitment of $175,000 at .375%................... 656 492
Less: historical interest expense................... (21,340) (2,764)
-------- --------
Total adjustment for net increase in interest
expense........................................... $ 49,691 $ 10,044
======== ========
</TABLE>
A-30
<PAGE> 34
(d) Reflects LIN's 20% equity interest in the joint venture of $3,457 and
$1,474 for the year ended December 31, 1997 and the period of January 1,
1998 to March 3, 1998, respectively.
(e) Reflects the elimination of merger expenses of $7,206 and $8,616 for the
year ended December 31, 1997 and the nine months ended September 30, 1998,
respectively, incurred by LIN Television in connection with the acquisition
of LIN by Hicks Muse.
(f) 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.
ADJUSTMENTS TO LIN'S HISTORICAL CONDENSED STATEMENT OF OPERATIONS RELATED TO THE
PENDING LIN TRANSACTIONS
(10) The detail of the historical financial data of the stations to be acquired
in the Pending LIN Transactions for the year ended December 31, 1997 and
the nine months ended September 30, 1998 and has been obtained from the
historical financial statements of the respective companies and is
summarized below:
<TABLE>
<CAPTION>
PENDING
WOOD-TV/WOTV-TV KXTX-TV LIN
HISTORICAL HISTORICAL TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997 1/1-12/31(a) 1/1-12/31(b) HISTORICAL
- ---------------------------- --------------- ------------ ------------
<S> <C> <C> <C>
Gross revenues................................. $32,839 $(30,276) $ 2,563
Less: agency commissions....................... (4,487) 3,212 (1,275)
------- -------- -------
Net revenues................................... 28,352 (27,064) 1,288
Operating expenses excluding depreciation and
amortization................................. 16,664 (18,924) (2,260)
Depreciation and amortization.................. 2,720 (2,833) (113)
Tower write-offs............................... -- (450) (450)
------- -------- -------
Income (loss) before income taxes.............. 8,968 (4,857) 4,111
Income tax expense (benefit)................... -- (1,068) (1,068)
------- -------- -------
Net income (loss).............................. $ 8,968 $ (3,789) $ 5,179
======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
PENDING
WOOD-TV/WOTV-TV KXTX-TV LIN
HISTORICAL HISTORICAL TRANSACTIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 1/1 - 9/30(a) 1/1 - 9/30(b) HISTORICAL
- ------------------------------------ --------------- ------------- ------------
<S> <C> <C> <C>
Gross revenues.................................. $26,815 $(30,065) $(3,250)
Less: agency commissions........................ (3,595) 2,944 (651)
------- -------- -------
Net revenues.................................... 23,220 (27,121) (3,901)
Operating expenses excluding depreciation and
amortization.................................. 11,923 (19,837) (7,914)
Depreciation and amortization................... 2,033 (2,305) (272)
KXTX management fee............................. -- (3,055) (3,055)
------- -------- -------
Net income (loss)............................... $ 9,264 $ (1,924) $ 7,340
======= ======== =======
</TABLE>
(a) On August 12, 1997, LIN entered into an agreement to acquire certain
assets and assume certain liabilities of WOOD-TV and WOTV-TV, which are
both located in the Grand Rapids-Kalamazoo-Battle Creek market, from AT&T
Corporation for approximately $125,500 in cash plus accretion of
A-31
<PAGE> 35
8.0% which commenced on January 1, 1998 of $7,482. LIN currently provides
services to WOOD-TV and WOTV-TV pursuant to a consulting agreement with
AT&T.
(b) On August 1, 1998, LIN Texas and Southwest Sports Group, Inc. entered
into an Asset Purchase Agreement pursuant to which LIN Texas will assign
its purchase option and LMA rights on KXTX-TV and sell certain assets and
liabilities of KXTX-TV to Southwest Sports Group. In exchange, LIN will
receive 500,000 shares of Southwest Sports Group's series A convertible
preferred stock, par value $100.00 per share.
(11) Reflects the elimination of fee income received by LIN for services
provided to WOOD-TV and WOTV-TV of $305 and $270 for the year ended
December 31, 1997 and the nine months ended September 30, 1998,
respectively.
(12) Reflects incremental amortization related to the Pending LIN Transactions
and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ---------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
WOOD-TV/WOTV-TV................. 1/1-12/31 $105,822 $2,646 $ 428 $2,218
KXTX-TV......................... 1/1-12/31 (25,337) (633) (903) 270
-------- ------ ----- ------
Total................. $ 80,485 $2,012 $(475) $2,487
======== ====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ------------------------------------ ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
WOOD-TV/WOTV-TV................... 1/1-9/30 $105,822 $1,984 $ 321 $1,663
KXTX-TV........................... 1/1-9/30 (25,337) (475) (735) 260
-------- ------ ----- ------
Total................... $ 80,485 $1,509 $(414) $1,923
======== ====== ===== ======
</TABLE>
- -------------------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 40 year life. The incremental amortization period
represents the period of the year that the acquisition was not completed.
Historical depreciation expense of the Pending LIN Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(13) Reflects the adjustment to interest expense in connection with the
consummation of the Pending LIN Transactions:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Additional bank borrowings related to:
WOOD-TV/WOTV-TV................................... $125,000 $125,000
Interest expense at 7.5%............................ $ 9,375 $ 7,031
======== ========
</TABLE>
(14) Reflects dividend income from the Southwest Sports Co. 6% preferred stock
of $3,000 and $2,250 for the year ended December 31, 1997 and the nine
months ended September 30, 1998, respectively.
(15) 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.
A-32
<PAGE> 36
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE LIN MERGER
(16) Reflects incremental amortization related to the LIN merger and is based on
the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Amortization expense on $2,611,730 additional
intangible assets, which includes $1,941,383 of
intangible assets and $670,347 resulting from the
recognition of deferred tax liabilities amortized
on a straight-line basis over a period of 40
years............................................. $ 65,293 $ 48,970
Less: Historical amortization expense............... (36,300) (31,162)
-------- --------
Adjustment for net increase in amortization
expense........................................... $ 28,993 $ 17,808
======== ========
</TABLE>
Historical depreciation expense of LIN is assumed to approximate
depreciation expense on a pro forma basis. Actual depreciation and
amortization may differ based upon final purchase price allocations.
(17) Reflects the adjustment to interest expense in connection with the
consummation of the LIN Merger:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Interest expense on additional bank borrowings
related to estimated financial advisors, legal,
accounting and other professional fees of $30,000
at 7.0%........................................... $ 2,100 $ 1,575
Reduction in interest expense related to the
application of the 7.0% interest rate to LIN
Television's bank debt prior to the consummation
of the LIN merger................................. (10,440) (4,745)
-------- -------
Net decrease in interest expense.................... $ (8,340) $(3,170)
======== =======
</TABLE>
(18) Reflects the tax effect of the pro forma adjustments at the Company's
statutory tax rate of 42% for the periods presented. The pro forma tax
benefit is primarily the result of the reversal of temporary differences
related to the difference in the carrying amounts of FCC licenses for
financial reporting purposes and the amounts used for income tax purposes.
The deferred tax liability resulting from the temporary differences, which
have arisen out of the Company's various purchase business combinations,
has been recognized in connection with the purchase accounting for the
related acquisitions. The Company has not recorded a valuation allowance
for its pro forma tax benefit as it believes that, in accordance with
Financial Accounting Standards Board Statement No. 109, on a pro forma
basis, it is more likely than not to have adequate future taxable income to
utilize its deferred tax assets.
A-33
<PAGE> 37
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE PENDING TRANSACTIONS
(19) The detail of the historical financial data of the companies to be acquired
in the Pending Transactions for the year ended December 31, 1997 and the
nine months ended September 30, 1998 has been obtained from the historical
financial statements of the respective companies and is summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------------------------------------------ ------------
CAPSTAR AS
ADJUSTED FOR
COMPLETED PHOENIX
CAPSTAR/SFX CAPSTAR AND PEGASUS ACQUISITION CHICAGO
TRANSACTION PENDING CAPSTAR ACQUISITION HISTORICAL DISPOSITION PENDING
YEAR ENDED HISTORICAL TRANSACTIONS HISTORICAL 1/1- HISTORICAL TRANSACTIONS
DECEMBER 31, 1997 1/1-12/31(a) 1/1-12/31(b) 1/1-12/31(c) 12/31(d) 1/1-12/31(e) HISTORICAL
- ----------------- ------------ --------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $60,701 $ 676,509 $32,371 $13,796 $(15,231) $ 768,146
Less: agency commissions.............. (7,657) (61,123) (4,856) (1,656) 1,990 (73,302)
------- --------- ------- ------- -------- ---------
Net revenues.......................... 53,044 615,386 27,515 12,140 (13,241) 694,844
Operating expenses excluding
depreciation and amortization....... 37,857 388,397 34,083 7,132 (16,248) 451,221
Depreciation and amortization......... 7,564 146,084 1,562 184 (592) 154,802
Corporate general and
administrative...................... -- 31,565 -- -- -- 31,565
Stock option compensation............. -- 11,589 -- -- -- 11,589
Profit participation fee.............. -- -- -- -- -- --
Other nonrecurring costs.............. -- 16,353 -- -- -- 16,353
------- --------- ------- ------- -------- ---------
Operating income (loss)............... 7,623 21,398 (8,130) 4,824 3,599 29,314
Interest expense...................... 10 188,526 16 -- -- 188,552
Interest income....................... -- (8,572) -- -- -- (8,572)
Gain on disposition of assets......... -- (4,306) -- -- -- (4,306)
Other (income) expense................ -- 2,441 1,810 -- -- 4,251
------- --------- ------- ------- -------- ---------
Income (loss) before income taxes..... 7,613 (156,691) (9,956) 4,824 3,599 (150,611)
Income tax expense (benefit).......... -- (44,930) -- 1,750 -- (43,180)
Dividends and accretion on preferred
stock of subsidiary................. -- 26,048 -- -- -- 26,048
------- --------- ------- ------- -------- ---------
Net income (loss)..................... $ 7,613 $(137,809) $(9,956) $ 3,074 $ 3,599 $(133,479)
======= ========= ======= ======= ======== =========
</TABLE>
A-34
<PAGE> 38
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------------------------------------------- ------------
CAPSTAR AS
ADJUSTED FOR
THE COMPLETED
CAPSTAR AND
CAPSTAR/SFX PENDING PEGASUS PHOENIX CHICAGO
TRANSACTION CAPSTAR ACQUISITION ACQUISITION DISPOSITION PENDING
NINE MONTHS ENDED HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
SEPTEMBER 30, 1998 1/1 - 5/29(a) 1/1 - 9/30(b) 1/1 - 9/30(c) 1/1 - 9/30(d) 1/1 - 8/20(e) HISTORICAL
- ------------------ ------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues...................... $23,382 $ 536,090 $27,133 $10,310 $(10,931) $ 585,984
Less: agency commissions............ (2,866) (53,742) (7,359) (1,117) 1,221 (63,863)
------- --------- ------- ------- -------- ---------
Net revenues........................ 20,516 482,348 19,774 9,193 (9,710) 522,121
Operating expenses excluding
depreciation and amortization..... 14,269 285,956 20,916 5,243 (13,026) 310,358
Depreciation and amortization....... 3,101 106,724 1,207 146 (367) 110,811
Corporate general and
administrative.................... -- 18,793 -- -- -- 18,793
Stock option compensation........... -- 14,002 -- -- -- 14,002
Other nonrecurring costs............ -- 7,505 -- -- -- 7,505
------- --------- ------- ------- -------- ---------
Operating income (loss)............. 3,146 52,368 (2,349) 3,804 3,683 60,652
Interest expense.................... 4 141,394 9 275 -- 141,682
Interest income..................... 1 (2,305) -- -- -- (2,304)
Other (income) expense.............. -- 29,515 1,379 -- -- 30,894
------- --------- ------- ------- -------- ---------
Income (loss) before income taxes... 3,141 (116,236) (3,737) 3,529 3,683 (109,620)
Income tax expense (benefit)........ -- (25,548) -- 1,271 -- (24,277)
Dividends and accretion on preferred
stock of subsidiary............... -- 21,984 -- -- -- 21,984
------- --------- ------- ------- -------- ---------
Net income (loss)................... $ 3,141 $(112,672) $(3,737) $ 2,258 $ 3,683 $(107,327)
======= ========= ======= ======= ======== =========
</TABLE>
- -------------------------
(a) On February 20, 1998, the Company entered into an agreement to acquire from
Capstar the Capstar/ SFX Stations for an aggregate purchase price of
approximately $637,500 in the Capstar/SFX Transaction. The Capstar/SFX
Stations were acquired by Capstar as part of Capstar's acquisition of SFX
on May 29, 1998. On May 29, 1998, the Company completed the exchange of
WACE-FM and WFYV-FM in Jacksonville (valued for purposes of the Capstar/SFX
Transaction at $53,000) plus $90,250 in cash to Capstar in return for
KODA-FM in Houston and began programming the remaining ten Capstar/SFX
Stations under time brokerage agreements. The Company also provided a loan
to Capstar in the principal amount of $150,000 as part of the Capstar/SFX
Transaction. A portion of the Capstar loan will be prepaid in connection
with the Company's acquisition of, and the proceeds of such prepayment
would be used by the Company as a portion of the purchase price for, each
Capstar/SFX Station. The Company is currently assessing whether the terms
of the Capstar/SFX Transaction will be modified upon the consummation of
the Capstar merger. The purchase price for the remaining ten Capstar/SFX
Stations will be approximately $494,250.
(b) On August 26, 1998, the Company and Capstar entered into an agreement to
merge in a stock-for-stock transaction that will create the nation's
largest radio broadcasting entity. Pursuant to this agreement, the Company
will acquire Capstar in a reverse merger in which Capstar will be renamed
Chancellor Media Corporation. Each share of Chancellor Media common stock
will represent one share in the combined entity. Each share of Capstar
common stock will represent 0.480 shares of common stock in the combined
entity, subject to an upward adjustment not to exceed 0.025 shares to the
extent that Capstar's 1998 cash flow from specified assets exceeds certain
specified targets. Capstar will own and operate or program more than 340
radio stations serving 82 mid-sized markets nationwide upon completion of
the Pending Capstar Transactions. Capstar's historical condensed combined
statement of operations for the year ended December 31, 1997 and the nine
months ended September 30, 1998 and
A-35
<PAGE> 39
pro forma adjustments related to the transactions completed by Capstar
prior to the Capstar merger (the "Completed Capstar Transactions") and the
transactions to be completed by Capstar as of October 31, 1998 ("Pending
Capstar Transactions") is summarized below:
<TABLE>
<CAPTION>
CAPSTAR AS
ADJUSTED
PRO FORMA CAPSTAR PRO FORMA FOR THE
ADJUSTMENTS AS ADJUSTED ADJUSTMENTS COMPLETED
COMPLETED FOR THE FOR THE PENDING FOR THE CAPSTAR AND
CAPSTAR COMPLETED COMPLETED CAPSTAR PENDING PENDING
YEAR ENDED CAPSTAR TRANSACTIONS CAPSTAR CAPSTAR TRANSACTIONS CAPSTAR CAPSTAR
DECEMBER 31, 1997 HISTORICAL HISTORICAL(A) TRANSACTIONS TRANSACTIONS HISTORICAL(L) TRANSACTIONS TRANSACTIONS
- ----------------- ---------- ------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues............ $189,820 $445,173 $ -- $ 634,993 $41,516 $ -- $ 676,509
Less: agency
commissions............. (14,375) (42,694) -- (57,069) (4,054) -- (61,123)
-------- -------- --------- --------- ------- -------- ---------
Net revenues.............. 175,445 402,479 -- 577,924 37,462 -- 615,386
Operating expenses
excluding depreciation
and amortization........ 122,135 238,998 -- 361,133 27,264 -- 388,397
Depreciation and
amortization............ 28,934 47,329 62,575(B) 138,838 4,874 2,372(M) 146,084
Corporate general and
administrative.......... 14,221 15,276 -- 29,497 2,068 -- 31,565
Stock option
compensation............ 10,575 624 -- 11,199 390 -- 11,589
Other nonrecurring
costs................... -- 20,174 (3,821)(D) 16,353 -- -- 16,353
-------- -------- --------- --------- ------- -------- ---------
Operating income (loss)... (420) 80,078 (58,754) 20,904 2,866 (2,372) 21,398
Interest expense.......... 47,012 81,014 44,195(F) 172,221 5,341 10,964(N) 188,526
Interest income........... (4,572) (3,599) -- (8,171) (401) -- (8,572)
Gain (loss) on disposition
of assets............... (908) 5,214 -- 4,306 -- -- 4,306
Increase in the fair value
of redeemable
warrants................ -- (2,022) 2,022(G) -- -- -- --
Other (income) expense.... 4,729 (2,901) -- 1,828 613 -- 2,441
-------- -------- --------- --------- ------- -------- ---------
Income (loss) before
income taxes............ (48,497) 8,756 (100,927) (140,668) (2,687) (13,336) (156,691)
Income tax expense
(benefit)............... (11,720) 2,691 (31,042)(I) (40,071) -- (4,859)(O) (44,930)
Dividends and accretion on
preferred stock of
subsidiary.............. 6,560 -- 19,488(J) 26,048 -- -- 26,048
-------- -------- --------- --------- ------- -------- ---------
Net income (loss)......... (43,337) 6,065 (89,373) (126,645) (2,687) (8,477) (137,809)
Preferred stock
dividends............... 7,071 38,510 (45,581)(K) -- 5,507 (5,507)(P) --
-------- -------- --------- --------- ------- -------- ---------
Loss attributable to
common stockholders..... $(50,408) $(32,445) $ (43,792) $(126,645) $(8,194) $ (2,970) $(137,809)
======== ======== ========= ========= ======= ======== =========
</TABLE>
A-36
<PAGE> 40
<TABLE>
<CAPTION>
PRO FORMA CAPSTAR PRO FORMA
ADJUSTMENTS AS ADJUSTED ADJUSTMENTS
COMPLETED FOR THE FOR THE PENDING FOR THE
CAPSTAR COMPLETED COMPLETED CAPSTAR PENDING
NINE MONTHS ENDED CAPSTAR TRANSACTIONS CAPSTAR CAPSTAR TRANSACTIONS CAPSTAR
SEPTEMBER 30, 1998 HISTORICAL HISTORICAL(A) TRANSACTIONS TRANSACTIONS HISTORICAL(L) TRANSACTIONS
- ------------------ ---------- ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $375,569 $ 127,904 $ -- $ 503,473 $32,617 $ --
Less: agency commissions.............. (37,666) (12,162) -- (49,828) (3,914) --
-------- --------- -------- --------- ------- -------
Net revenues.......................... 337,903 115,742 -- 453,645 28,703 --
Operating expenses excluding
depreciation and amortization....... 204,135 59,409 -- 263,544 19,412 --
Depreciation and amortization......... 64,823 12,833 23,813(B) 101,469 3,573 1,682(M)
Corporate general and
administrative...................... 13,996 3,208 -- 17,204 1,589 --
Stock option compensation............. 13,673 74,199 (73,969)(C) 13,903 99 --
Other nonrecurring costs.............. -- 35,318 (11,213)(D) 7,505 -- --
(16,600)(E)
-------- --------- -------- --------- ------- -------
Operating income (loss)............... 41,276 (69,225) 77,969 50,020 4,030 (1,682)
Interest expense...................... 79,164 32,284 17,718(F) 129,166 4,532 7,696(N)
Interest income....................... (1,846) (459) -- (2,305) -- --
Other (income) expense................ 28,475 3,269 (3,163)(H) 28,581 934 --
-------- --------- -------- --------- ------- -------
Income (loss) before income taxes..... (64,517) (104,319) 63,414 (105,422) (1,436) (9,378)
Income tax expense (benefit).......... (15,583) 459 (6,954)(I) (22,078) -- (3,470)(O)
Dividends and accretion on preferred
stock of subsidiary................. 15,206 -- 6,778(J) 21,984 -- --
-------- --------- -------- --------- ------- -------
Net income (loss)..................... (64,140) (104,778) 63,590 (105,328) (1,436) (5,908)
Preferred stock dividends............. -- 17,264 (17,264)(K) -- 4,131 (4,131)(P)
-------- --------- -------- --------- ------- -------
Income (loss) attributable to common
stockholders........................ $(64,140) $(122,042) $ 80,854 $(105,328) $(5,567) $(1,777)
======== ========= ======== ========= ======= =======
<CAPTION>
CAPSTAR
AS ADJUSTED
FOR THE
COMPLETED
CAPSTAR AND
PENDING
NINE MONTHS ENDED CAPSTAR
SEPTEMBER 30, 1998 TRANSACTIONS
- ------------------ ------------
<S> <C>
Gross revenues........................ $ 536,090
Less: agency commissions.............. (53,742)
---------
Net revenues.......................... 482,348
Operating expenses excluding
depreciation and amortization....... 282,956
Depreciation and amortization......... 106,724
Corporate general and
administrative...................... 18,793
Stock option compensation............. 14,002
Other nonrecurring costs.............. 7,505
---------
Operating income (loss)............... 52,368
Interest expense...................... 141,394
Interest income....................... (2,305)
Other (income) expense................ 29,515
---------
Income (loss) before income taxes..... (116,236)
Income tax expense (benefit).......... (25,548)
Dividends and accretion on preferred
stock of subsidiary................. 21,984
---------
Net income (loss)..................... (112,672)
Preferred stock dividends............. --
---------
Income (loss) attributable to common
stockholders........................ $(112,672)
=========
</TABLE>
A-37
<PAGE> 41
(A) The detail of the historical financial data of the stations to be acquired
or disposed of in the Completed Transactions by Capstar for the year ended
December 31, 1997 and the nine months ended September 30, 1998 has been
obtained from the historical financial statements of the respective stations
and is summarized below:
<TABLE>
<CAPTION>
COMMUNITY
OSBORN OSBORN PACIFIC BENCHMARK BENCHMARK MADISON
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
DECEMBER 31, 1997 1/1-2/20(i) TRANSACTION(ii) 1/1-7/11(iii) 1/1-8/6(iv) TRANSACTION(v) 1/2-8/20(vi)
- ----------------- ----------- --------------- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues...................... $3,698 $349 $2,627 $21,362 $4,417 $4,647
Less: agency commissions............ (121) (79) (169) (1,796) (371) (517)
------ ---- ------ ------- ------ ------
Net revenues........................ 3,577 270 2,458 19,566 4,046 4,130
Operating expenses excluding
depreciation and amortization...... 2,937 201 1,315 12,956 2,048 2,588
Depreciation and amortization....... 418 -- 713 3,657 -- 752
Corporate general and
administrative..................... 268 -- 373 348 -- 75
Stock option compensation........... -- -- -- -- -- --
Other nonrecurring costs............ -- -- -- -- -- --
------ ---- ------ ------- ------ ------
Operating income (loss)............. (46) 69 57 2,605 1,998 715
Interest expense.................... 385 -- 469 4,689 -- 686
Interest income..................... -- -- -- -- -- --
Gain (loss) on disposition of
assets............................. 5,348 -- -- -- -- --
Increase in fair value of redeemable
warrants........................... -- -- -- -- -- --
Other (income) expense.............. (212) -- 3 (64) -- --
------ ---- ------ ------- ------ ------
Income (loss) before income taxes... 5,129 69 (415) (2,020) 1,998 29
Income tax expense.................. 32 -- -- -- -- --
------ ---- ------ ------- ------ ------
Net income (loss)................... 5,097 69 (415) (2,020) 1,998 29
Preferred stock dividends........... -- -- -- -- -- --
------ ---- ------ ------- ------ ------
Income (loss) attributable to common
stockholders....................... $5,097 $ 69 $ (415) $(2,020) $1,998 $ 29
====== ==== ====== ======= ====== ======
<CAPTION>
AMERON PATTERSON PATTERSON GULFSTAR SFX
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION
YEAR ENDED HISTORICAL HISTORICAL 1/1- HISTORICAL HISTORICAL HISTORICAL
DECEMBER 31, 1997 1/1-10/3(vii) 12/31(viii) TRANSACTION(ix) TRANSACTION(x) 1/1-12/31(xi)
- ----------------- ------------- --------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Gross revenues...................... $6,885 $58,358 $739 $399 $306,842
Less: agency commissions............ (790) (5,305) (67) (30) (36,478)
------ ------- ---- ---- --------
Net revenues........................ 6,095 53,053 672 369 270,364
Operating expenses excluding
depreciation and amortization...... 4,352 37,334 489 273 167,063
Depreciation and amortization....... 506 5,273 -- -- 38,232
Corporate general and
administrative..................... -- 4,946 -- -- 6,837
Stock option compensation........... -- -- -- -- 624
Other nonrecurring costs............ -- -- -- -- 20,174
------ ------- ---- ---- --------
Operating income (loss)............. 1,237 5,500 183 96 37,434
Interest expense.................... 659 7,574 -- -- 64,506
Interest income..................... (13) (13) -- -- (2,821)
Gain (loss) on disposition of
assets............................. -- -- -- -- --
Increase in fair value of redeemable
warrants........................... -- (2,022) -- -- --
Other (income) expense.............. 160 63 -- -- --
------ ------- ---- ---- --------
Income (loss) before income taxes... 431 (4,146) 183 96 (24,251)
Income tax expense.................. -- 1,704 -- -- 810
------ ------- ---- ---- --------
Net income (loss)................... 431 (5,850) 183 96 (25,061)
Preferred stock dividends........... -- -- -- -- 38,510
------ ------- ---- ---- --------
Income (loss) attributable to common
stockholders....................... $ 431 $(5,850) $183 $ 96 $(63,571)
====== ======= ==== ==== ========
<CAPTION>
OTHER
SFX CHANCELLOR COMPLETED COMPLETED
HISTORICAL MEDIA CAPSTAR CAPSTAR
YEAR ENDED ACQUISITIONS EXCHANGE TRANSACTIONS TRANSACTIONS
DECEMBER 31, 1997 COMBINED(xii) HISTORICAL(xiii) COMBINED(xiv) HISTORICAL
- ----------------- ------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
Gross revenues...................... $(52,188) $49,425 $37,612 $445,173
Less: agency commissions............ 7,469 -- (4,439) (42,694)
-------- ------- ------- --------
Net revenues........................ (44,719) 49,425 33,173 402,479
Operating expenses excluding
depreciation and amortization...... (24,446) -- 31,888 238,998
Depreciation and amortization....... (2,854) -- 632 47,329
Corporate general and
administrative..................... -- -- 2,429 15,276
Stock option compensation........... -- -- -- 624
Other nonrecurring costs............ -- -- -- 20,174
-------- ------- ------- --------
Operating income (loss)............. (17,419) 49,425 (1,776) 80,078
Interest expense.................... 492 -- 1,554 81,014
Interest income..................... -- -- (752) (3,599)
Gain (loss) on disposition of
assets............................. -- -- (134) 5,214
Increase in fair value of redeemable
warrants........................... -- -- -- (2,022)
Other (income) expense.............. (1,067) -- (1,784) (2,901)
-------- ------- ------- --------
Income (loss) before income taxes... (16,844) 49,425 (928) 8,756
Income tax expense.................. -- -- 145 2,691
-------- ------- ------- --------
Net income (loss)................... (16,844) 49,425 (1,073) 6,065
Preferred stock dividends........... -- -- -- 38,510
-------- ------- ------- --------
Income (loss) attributable to common
stockholders....................... $(16,844) $49,425 $(1,073) $(32,445)
======== ======= ======= ========
</TABLE>
A-38
<PAGE> 42
<TABLE>
<CAPTION>
OTHER
PATTERSON SFX SFX CHANCELLOR COMPLETED COMPLETED
ACQUISITION ACQUISITION HISTORICAL MEDIA CAPSTAR CAPSTAR
NINE MONTHS ENDED HISTORICAL HISTORICAL ACQUISITIONS EXCHANGE TRANSACTIONS TRANSACTIONS
SEPTEMBER 30, 1998 1/1-1/29(viii) 1/1-5/29(xi) COMBINED(xii) HISTORICAL(xiii) COMBINED(xiv) HISTORICAL
- ------------------ -------------- ------------- ------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................ $ 3,853 $ 141,369 $(45,485) $20,594 $ 7,573 $ 127,904
Less: agency commissions...... (350) (16,692) 5,479 -- (599) (12,162)
------- --------- -------- ------- ------- ---------
Net revenues.................. 3,503 124,677 (40,006) 20,594 6,974 115,742
Operating expenses excluding
depreciation and
amortization................ 2,523 78,235 (26,619) -- 5,270 59,409
Depreciation and
amortization................ 497 17,668 (4,875) -- (457) 12,833
Corporate general and
administrative.............. 171 3,069 -- -- (32) 3,208
Stock option compensation..... -- 74,199 -- -- -- 74,199
Other nonrecurring costs...... -- 35,318 -- -- -- 35,318
------- --------- -------- ------- ------- ---------
Operating income (loss)....... 312 (83,812) (8,512) 20,594 2,193 (69,225)
Interest expense.............. 645 31,565 (4) -- 78 32,284
Interest income............... -- (353) -- -- (106) (459)
Other expense................. 3,163 -- 160 -- (54) 3,269
------- --------- -------- ------- ------- ---------
Income (loss) before income
taxes....................... (3,496) (115,024) (8,668) 20,594 2,275 (104,319)
Income tax expense............ -- 210 -- -- 249 459
------- --------- -------- ------- ------- ---------
Net income (loss)............. (3,496) (115,234) (8,668) 20,594 2,026 (104,778)
Preferred stock dividends..... -- 17,264 -- -- -- 17,264
------- --------- -------- ------- ------- ---------
Income (loss) attributable to
common stockholders......... $(3,496) $(132,498) $ (8,668) $20,594 $ 2,026 $(122,042)
======= ========= ======== ======= ======= =========
</TABLE>
- ---------------
(i) On February 20, 1997, Capstar acquired Osborn Communications for
approximately $118,800 consisting of $117,000 in cash and $1,800 in common
stock. The purchase price includes $113,000 for 18 stations (12 FM and 6
AM) in 6 markets and $25,700 for five stations in Huntsville and
Tuscaloosa, Alabama which were pending acquisitions of Osborn and excludes
$11,000 received by Capstar upon the disposition of three stations in Ft.
Myers, Florida which were sold by Osborn.
(ii) Reflects the historical operating results and/or LMA or JSA expense and/or
revenue of the following stations which were acquired or sold by Osborn
prior to December 31, 1997: WYNU-FM and WTXT-FM.
(iii) In July 1997, Capstar acquired 11 stations (6 FM and 5 AM) in Des Moines,
Iowa; Modesto-Stockton, California and Anchorage, Alaska from Community
Pacific for approximately $35,000 in cash.
(iv) In August 1997, Capstar acquired 30 radio stations (20 FM and 10 AM) in 11
markets from Benchmark Partnerships.
(v) Reflects the historical operating results and/or LMA or JSA expense and/or
revenue of the following stations which were acquired or sold by Benchmark
prior to December 31, 1997: WSCQ-FM, WZHT-FM and WMCZ-FM.
(vi) In August 1997, Capstar acquired WIBA-AM, WIBA-FM, WMAD-FM, WTSO-AM,
WZEE-FM, and WMLI-FM (4 FM and 2 AM) in Madison, Wisconsin from Madison
Radio Group for approximately $38,800 in cash.
(vii) In October 1997, Capstar acquired WMJJ-FM, WERC-AM and WOWC-FM (2 FM and 1
AM) in Birmingham, Alabama from Ameron Broadcasting, Inc. for
approximately $31,500 in cash.
(viii)In January 1998, Capstar acquired 39 radio stations (25 FM and 14 AM) in
Savannah, Georgia; Allentown and Harrisburg, Pennsylvania; Fresno,
California; Honolulu, Hawaii; Battle Creek and Grand Rapids, Michigan;
Reno, Nevada; Springfield, Illinois; and Pensacola, Florida from Patterson
Broadcasting, Inc. for approximately $215,000 in cash.
A-39
<PAGE> 43
(ix) Reflects the historical operating results and/or LMA or JSA expense and/or
revenue of the following stations which were acquired or sold by Patterson
prior to December 31, 1997: WMEZ-FM, KRDU-AM and KJOI-FM.
(x) Reflects the historical operating results and/or LMA or JSA expense and/or
revenue of the following stations which were acquired or sold by GulfStar
Communications, Inc. prior to December 31, 1997: KTRA-FM, KCQL-AM, KDAG-FM
and KKFG-FM.
(xi) On May 19, 1998, pursuant to a merger agreement dated as of August 24,
1997 among SBI Holdings Corporation, a wholly owned subsidiary of Capstar,
and SFX Broadcasting, Inc., SBI Radio Acquisition Corporation, a wholly
owned subsidiary of Capstar, was merged with and into SFX, with SFX
remaining as the surviving corporation (the "SFX Merger"). Upon
consummation of the SFX Merger, SFX was renamed Capstar Communications,
Inc. ("CCI"). Consummation of the SFX Merger added 67 radio stations (50
FM and 17 AM) and two FM/AM radio stations in which SFX sold commercial
air time under a Joint Sales Agreement. The total purchase price allocated
to net assets acquired was approximately $1,500,000 which included (i) the
purchase and cancellation of 9,838,276 shares of SFX class A common stock
at $75 per share, (ii) the purchase and cancellation of 1,047,037 shares
of SFX class B common stock at $97.50 per share, (iii) the redemption of
SFX series D cumulative convertible exchangeable preferred stock at
$82.4025 per share, (iv) the redemption of SFX series C redeemable
preferred stock at $1,009.73 per share, (v) the repayment of borrowings
under the SFX credit facility of $313,000 and (vi) estimated transaction
costs of $54,000.
(xii) Reflects the combined historical results of operations of (i) the
following acquisitions and dispositions completed by SFX prior to the
consummation of the SFX Acquisition: WPYX-FM, WHFS-FM, KTXQ-FM, KRRW-FM,
WDSY-FM, WRFX-FM, WWYZ-FM, WISN-AM, WLTQ-FM, WVGO-FM, WLEE-FM, WKHK-FM,
WBZU-FM, WFBQ-FM, WRZX-FM, WNDE-AM, WQFN-FM, WJZC-FM, WLAC-FM and WLAC-AM,
(ii) the following completed acquisitions, dispositions and LMA's in
connection with the SFX acquisition: Austin, Jacksonville, Greenville,
Upper Fairfield, Daytona Beach -- WGNE, Houston -- KODA, Long Island and
Houston -- KKPN, (iii) the following stations included in the Chancellor
Exchange Agreement: WDVE-FM, WJJJ-FM, WXDX-FM, WVTY-FM, KPLN-FM, KYXY-FM,
KKRW-FM, KQUE-AM, KBFB-FM and KTXQ-FM, and (iv) stations WJDX-FM and
WTAE-AM to comply with the SFX Consent Decree.
(xiii)The adjustment represents the LMA fee revenue attributable to 10 SFX
stations in the Dallas, Houston, San Diego and Pittsburgh markets that the
Company began operating under time brokerage agreements effective May 29,
1998. The 10 SFX stations will be sold to the Company in connection with
the Chancellor Exchange Agreement. In accordance with Capstar's policy,
since Capstar's ownership costs, comprised of interest expense,
depreciation and amortization, exceed the LMA revenue for these stations,
the entire LMA fee has been recognized.
(xiv) Reflects the historical results of operations for various other Completed
Capstar Transactions as follows: (a) acquisitions including the Knight,
Quass, COMCO, Osborn Tuscaloosa, Osborn Huntsville, Space Coast, WRIS,
Cavalier, Griffith, Emerald City, American General, Booneville, KJEM,
McForhun, Livingston, KLAW, Class Act, Grant, East Penn, KOSO,
Commonwealth, KDOS, Prophet Systems, Americom, KRNA, University of Alaska,
ARS, Ogallala, the Reynolds Acquisitions, and Gibbons, (b) the Americom
Fresno/Reno Exchange and (c) dispositions including Wilmington, Osborn Ft.
Myers, Bryan, Allentown, Jackson, Westchester, Dayton, Salisbury-Ocean
City, and KASH.
A-40
<PAGE> 44
(B) Reflects incremental amortization related to the Completed Transactions
and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD ASSETS, NET EXPENSE EXPENSE INCREASE
---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Osborn Acquisition............... 1/1-2/20 $ 140,028 $ 3,012 $ 246 $ 2,766
Community Pacific Acquisition.... 1/1-7/11 31,120 409 478 (69)
Benchmark Acquisition............ 1/1-8/6 168,583 2,517 2,011 506
Madison Acquisition.............. 1/1-8/20 38,246 608 474 134
Ameron Acquisition............... 1/1-10/3 29,264 553 278 275
Patterson Acquisition............ 1/1-12/31 268,220 6,706 2,795 3,911
SFX Acquisition.................. 1/1-12/31 3,185,515 79,638 27,277 52,361
Other Completed Capstar
Transactions................... Various 243,518 3,070 379 2,691
---------- ------- ------- -------
$4,104,494 $96,513 $33,938 $62,575
========== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD ASSETS, NET EXPENSE EXPENSE INCREASE
------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Patterson Acquisition............. 1/1-1/29 $ 268,220 $ 533 $ 263 $ 270
SFX Acquisition................... 1/1-5/29 3,185,515 32,510 9,515 22,995
Other Completed Capstar
Transactions.................... Various 7,358 91 (457) 549
---------- ------- ------- -------
$3,461,093 $33,134 $ 9,321 $23,813
========== ======= ======= =======
</TABLE>
(C) Reflects the elimination of non-recurring transaction-related compensation
expense of $73,969 attributable to the voluntary settlement of the
outstanding options, SARs and unit purchase options by SFX in connection
with Capstar's acquisition of SFX.
(D) Reflects the elimination of non-recurring transaction-related charges of
$3,821 and $11,213 for the year ended December 31, 1997 and the nine
months ended September 30, 1998, respectively, recorded by SFX in
connection with Capstar's acquisition of SFX and the spin-off of SFX
Entertainment. These charges consist primarily of legal, accounting and
regulatory fees.
(E) Reflects the elimination of the consent solicitation payments to the
holders of the 10 3/4% Senior Subordinated Notes due 2006 and series E
cumulative preferred stock of SFX incurred in connection with the spin-off
of SFX Entertainment of $16,600 for the nine months ended September 30,
1998. The spin-off of SFX Entertainment was consummated in April 1998.
(F) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Capstar Transactions:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions
9 1/4% Senior Subordinated Notes due
2007..................................... $ 199,262 $ 199,262
12 3/4% Senior Discount Notes due 2009..... 177,676 177,676
Capstar credit facility at 8 1/10%......... 1,126,278 1,126,278
Chancellor loan at 12%..................... 150,000 150,000
10 3/4% Senior Subordinated Notes due
2006..................................... 341,805 341,805
Completed Dispositions........................ (218,627) (218,627)
New loan fees................................. 26,300 26,300
---------- ----------
Total additional borrowings..................... $1,802,694 $1,802,694
========== ==========
</TABLE>
A-41
<PAGE> 45
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
Interest expense on additional bank borrowings
9 1/4% Senior Subordinated Notes due 2007..... $ 19,332 $ 14,499
12 3/4% Senior Discount Notes due 2009........ 23,354 17,516
Capstar credit facility at 8 1/10%............ 74,791 56,093
Chancellor loan at 12%........................ 18,000 13,500
10 3/4% Senior Subordinated Notes due 2006.... 53,500 40,125
---------- ----------
Total interest expense on additional bank
borrowings.................................... 188,977 141,733
Less: historical interest expense of the
stations
acquired in the Completed Transactions........ (81,014) (32,284)
Less: historical interest expense of the
Company....................................... (47,012) (79,164)
---------- ----------
Net increase in interest expense................ 60,951 30,285
Reduction in interest expense on July 3, 1998
redemption of $154,000 aggregate principal
amount of the 10 3/4% Senior Subordinated
Notes due 2006................................ (16,555) (12,416)
Reduction in interest expense on July 10, 1998
redemption of $1,866 aggregate principal
amount of the 10 3/4% Senior Subordinated
Notes due 2006................................ (201) (151)
---------- ----------
Total adjustment for net increase in interest
expense....................................... $ 44,195 $ 17,718
========== ==========
</TABLE>
(G) Reflects the elimination of the increase in the fair value of the
redeemable warrants which were repurchased in connection with Capstar's
acquisition of Patterson.
(H) Adjustment represents the elimination of transaction expenses recorded by
Patterson in connection with Capstar's acquisition of Patterson.
(I) Reflects the tax effect of the pro forma adjustments at Capstar's
statutory tax rate of 38% for the periods presented. The pro forma tax
benefit is primarily the result of the reversal of temporary differences
related to the difference in the carrying amounts of FCC licenses for
financial reporting purposes and the amounts used for income tax purposes.
The deferred tax liability resulting from the temporary differences, which
have arisen out of Capstar's various purchase business combinations, has
been recognized in connection with the purchase accounting for the related
acquisitions. Capstar has not recorded a valuation allowance for its pro
forma tax benefit as it believes that, in accordance with Financial
Accounting Standards Board Statement No. 109, on a pro forma basis, it is
more likely than not to have adequate future taxable income to utilize its
deferred tax assets.
A-42
<PAGE> 46
(J) Reflects the pro forma effect of the dividends and accretion as if the
related preferred stock had been outstanding at January 1, 1997, including
the Capstar 12% senior exchangeable preferred stock issued June 17, 1997
as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Preferred stock dividends and accretion related to:
Completed Capstar transactions:
Dividends and accretion on 12% senior exchangeable preferred
stock..................................................... $12,214 $ 9,160
Dividends and accretion on series E 12 5/8% cumulative
preferred
stock..................................................... 13,834 10,376
------- --------
Total dividends and accretion............................... 26,048 19,536
Less: historical dividends and accretion for completed
transactions by Capstar................................... (6,560) (12,758)
------- --------
Total adjustment for net increase in dividends and
accretion................................................. $19,488 $ 6,778
======= ========
</TABLE>
(K) Reflects the elimination of the redeemable preferred stock redeemed in
connection with the acquisition of GulfStar Communications, Inc. and the
elimination of preferred stock dividends and accretion and subsequent
reclassification of a portion of the redeemable preferred stock dividends
and accretion due to the SFX Acquisition and redemption of $119,600 and
$500 liquidation preference on July 3, 1998 and July 10, 1998,
respectively, of the series E 12 5/8% cumulative preferred stock of SFX as
follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Preferred stock dividends related to:
Completed Capstar Transactions:
Redemption of GulfStar preferred stock............... $ 7,071 $ --
Dividends and accretion on series C 6% redeemable
preferred stock..................................... 193 112
Dividends and accretion on series D 6 1/2% cumulative
convertible exchangeable preferred stock............ 15,404 5,841
Dividends and accretion on series E 12 5/8%
cumulative preferred stock.......................... 22,913 11,311
------- -------
Total adjustment for net increase in dividends and
accretion........................................... $45,581 $17,264
======= =======
</TABLE>
A-43
<PAGE> 47
(L) The detail of the historical financial data of the stations to be acquired
or disposed of in the Pending Capstar Transactions for the year ended
December 31, 1997 and the nine months ended September 30, 1998 has been
obtained from the historical financial statements of the respective
stations and is summarized below:
<TABLE>
<CAPTION>
PENDING
CHAMPION CAPSTAR
TRIATHLON HISTORICAL TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997 1/1-12/31(i) 1/1-12/31(ii) HISTORICAL
- ---------------------------- ------------ ------------- ------------
<S> <C> <C> <C>
Gross revenues........................................... $37,174 $ 4,342 $41,516
Less: agency commissions................................. (3,533) (521) (4,054)
------- ------- -------
Net revenues............................................. 33,641 3,821 37,462
Operating expenses excluding depreciation and
amortization........................................... 23,415 3,849 27,264
Depreciation and amortization............................ 4,135 739 4,874
Corporate general and administrative..................... 2,068 -- 2,068
Stock option compensation................................ 390 -- 390
------- ------- -------
Operating income (loss).................................. 3,633 (767) 2,866
Interest expense......................................... 4,766 575 5,341
Interest income.......................................... (401) -- (401)
Other (income) expense................................... 137 476 613
------- ------- -------
Net income (loss)........................................ (869) (1,818) (2,687)
Preferred stock dividends................................ 5,507 -- 5,507
------- ------- -------
Income (loss) attributable to common stockholders........ $(6,376) $(1,818) $(8,194)
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PENDING
CAPSTAR
TRANSACTIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 HISTORICAL(i)
- ------------------------------------ -------------
<S> <C>
Gross revenues.............................................. $ 32,617
Less: agency commissions.................................... (3,914)
--------
Net revenues................................................ 28,703
Operating expenses excluding depreciation and
amortization.............................................. 19,412
Depreciation and amortization............................... 3,573
Corporate general and administrative........................ 1,589
Stock option compensation................................... 99
--------
Operating income (loss)..................................... 4,030
Interest expense............................................ 4,532
Other (income) expense...................................... 934
--------
Net income (loss)........................................... (1,436)
Preferred stock dividends................................... 4,131
--------
Income (loss) attributable to common stockholders........... $ (5,567)
========
</TABLE>
- ---------------
(i) On July 23, 1998, Capstar entered into an agreement to acquire Triathlon
Broadcasting Company for approximately $190,000 consisting of $130,000 in
cash, and the assumption of Triathlon's outstanding debt of approximately
$60,000. Triathlon operates 32 radio stations (22 FM and 10 AM) in six
markets: Wichita, Kansas; Colorado Springs, Colorado; Lincoln, Nebraska;
Omaha, Nebraska; Spokane, Washington; and Tri-Cities, Washington. Triathlon
also owns Pinnacle Sports Productions, L.L.C., a regional sports network
that controls the rights to the University of Nebraska football and other
sports events.
(ii) On January 26, 1998, Capstar entered into an agreement to acquire KRRV-FM,
KKST-FM, KZMZ-FM, and KDBS-AM in Alexandria, LA, KMML-FM, KBUY-FM, KNSY-FM
and KIXZ-AM in Amarillo, TX, and KCDQ-FM, KCHX-FM and KMRK-FM in Midland,
TX (collectively, the "Champion Stations") for $11,300 in cash. In addition
to the $11,300, Capstar will make payments based upon multiples of 1998 and
1999 broadcast cash flow, to be paid in 1999 and
A-44
<PAGE> 48
2000, respectively, pursuant to certain terms of the purchase agreement.
Capstar began programming the Champion Stations under a time brokerage
agreement effective January 1, 1998.
(M) Reflects incremental amortization related to the Pending Capstar
Transactions and is based on the following allocation to intangible
assets:
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENT
PENDING CAPSTAR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD ASSETS, NET EXPENSE EXPENSE INCREASE
---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Triathlon................... 1/1-12/31 $ 200,257 $ 5,006 $ 2,396 $ 2,610
Champion.................... 1/1-12/31 8,210 205 443 (238)
---------- ------- ------- -------
$ 208,467 $ 5,212 $ 2,839 $ 2,372
========== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENT
PENDING CAPSTAR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD ASSETS, NET EXPENSE EXPENSE INCREASE
------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Triathlon....................... 1/1-9/30 200,257 3,754 2,072 1,682
--------- ------ ------ ------
200,257 3,754 2,072 1,682
========= ====== ====== ======
</TABLE>
(N) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Capstar Transactions:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions Capstar credit facility at 8 1/10%... $201,300 $201,300
======== ========
Interest expense on additional bank borrowings Capstar
credit facility at 8 1/10%................................ $ 16,305 $ 12,228
Less: historical interest expense of the stations to be
acquired in the Pending Capstar Transactions.............. (5,341) (4,532)
-------- --------
Total adjustment for net increase in interest expense....... $ 10,964 $ 7,696
======== ========
</TABLE>
(O) Reflects the tax effect of the pro forma adjustments at Capstar's statutory
tax rate of 38% for the periods presented. The pro forma tax benefit is
primarily the result of the reversal of temporary differences related to
the difference in the carrying amounts of FCC licenses for financial
reporting purposes and the amounts used for income tax purposes. The
deferred tax liability resulting from the temporary differences, which have
arisen out of Capstar's various purchase business combinations, has been
recognized in connection with the purchase accounting for the related
acquisitions. Capstar has not recorded a valuation allowance for its pro
forma tax benefit as it believes that, in accordance with Financial
Accounting Standards Board Statement No. 109, on a pro forma basis, it is
more likely than not to have adequate future taxable income to utilize its
deferred tax assets.
(P) Reflects the elimination of Triathlon's preferred stock dividends of $5,507
and $4,131 for the year ended December 31, 1997 and the nine months ended
September 30, 1998, respectively. The Triathlon preferred stock will be
redeemed in connection with Capstar's pending acquisition of Triathlon.
A-45
<PAGE> 49
(c) On September 3, 1998, the Company entered into an agreement to acquire
Pegasus Broadcasting of San Juan, L.L.C., a television broadcasting
company which owns a television station in Puerto Rico, for approximately
$69,600 in cash plus various other direct acquisition costs.
(d) On September 15, 1998, the Company entered into an agreement regarding
the Phoenix Acquisition. The Company began operating KKFR-FM and KFYI-AM
under a time brokerage agreement effective November 5, 1998.
(e) On August 20, 1998, the Company entered into an agreement regarding the
Chicago Disposition. The Company entered into a time brokerage agreement
to sell substantially all of the broadcast time of WMVP-AM effective
September 10, 1998.
(20) Reflects the elimination of intercompany transactions between the Company
and Capstar for the year ended December 31, 1997 and the nine months ended
September 30, 1998.
(21) Reflects incremental amortization related to the assets acquired in the
Pending Transactions and is based on the allocation of the total
consideration as follows:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ---------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Chicago Disposition.......... 1/1-12/31 (2,844) (190) (339) 149
Capstar Merger(ii)........... 1/1-12/31 5,890,919 392,728 122,521 270,207
Pegasus Acquisition.......... 1/1-12/31 54,111 3,607 27 3,580
Phoenix Acquisition.......... 1/1-12/31 88,212 5,881 103 5,778
---------- -------- -------- --------
Total...................... $6,030,398 $402,026 $122,312 $279,714
========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PENDING TRANSACTIONS INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
NINE MONTHS ENDED AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
SEPTEMBER 30, 1998 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- -------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Chicago Disposition.......... 1/1-9/30 (2,844) (142) (189) 47
Capstar Merger(ii)........... 1/1-9/30 5,890,919 294,546 89,546 205,000
Pegasus Acquisition.......... 1/1-9/30 54,111 2,706 20 2,686
Phoenix Acquisition.......... 1/1-9/30 88,212 4,411 78 4,333
---------- -------- ------- --------
Total...................... $6,030,398 $301,521 $89,455 $212,066
========== ======== ======= ========
</TABLE>
- -------------------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life. The incremental amortization period
represents the period of the year that the acquisition was not
completed.
(ii) Intangible assets for the Capstar Merger of $5,890,919 include
$1,470,971 of goodwill resulting from the recognition of deferred
tax liabilities.
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-46
<PAGE> 50
(22) 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,
1997 1998
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions.................................... $159,600 $159,600
Pending Disposition..................................... (21,000) (21,000)
Capstar Merger(i)....................................... 50,000 50,000
-------- --------
Total additional bank borrowings........................ $188,600 $188,600
======== ========
Interest expense at 7.0%................................ $ 13,202 $ 9,901
Less: historical interest expense related to completed
acquisitions and dispositions........................... (26) (288)
Less: 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 Capstar's bank
debt prior to consummation of the Capstar Merger........ (28,298) (15,123)
-------- --------
Total adjustment for net decrease in interest expense..... $(15,122) $ (5,510)
======== ========
</TABLE>
- -------------------------
(i) The Company will incur additional bank borrowings of $50,000 to
finance estimated acquisition costs related to the Capstar merger.
(23) Reflects the tax effect of the pro forma adjustments at the Company's
statutory tax rate of 42% for the periods presented. The pro forma tax
benefit is primarily the result of the reversal of temporary differences
related to the difference in the carrying amounts of FCC licenses for
financial reporting purposes and the amounts used for income tax purposes.
The deferred tax liability resulting from the temporary differences, which
have arisen out of the Company's various purchase business combinations,
has been recognized in connection with the purchase accounting for the
related acquisitions. The Company has not recorded a valuation allowance
for its pro forma tax benefit as it believes that, in accordance with
Financial Accounting Standards Board Statement No. 109, on a pro forma
basis, it is more likely than not to have adequate future taxable income to
utilize its deferred tax assets.
A-47
<PAGE> 51
(24) 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. A summary of shares used in the
pro forma combined loss per common share calculation follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Historical weighted average shares outstanding........ 130,253 136,427
Incremental weighted average shares relating to:
16,179,646 shares of Common Stock to be issued in
connection with the LIN merger................... 16,180 16,180
51,643,967 shares of Common Stock to be issued in
connection with the Capstar merger............... 51,644 51,644
-------- --------
Total incremental weighted average shares............. 67,824 67,824
-------- --------
Shares used in the pro forma combined earnings per
share calculation................................... 198,077 204,251
======== ========
</TABLE>
A-48
<PAGE> 52
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 the combination of consolidated
historical financial data of the Company, each of the companies acquired in the
transactions completed by the Company during 1997 and 1998 (the "Completed
Transactions") and each of the companies to be acquired in the transactions of
the Company pending as of the date hereof (the "Pending Transactions") and 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,
1998 presents adjustments for the Completed Transactions, the offering of
$750,000,000 aggregate principal amount of 8% Senior Notes due 2008 which was
completed on November 17, 1998 (the "8% Senior Notes Offering") and the Pending
Transactions, as if each such transaction had occurred at September 30, 1998.
The unaudited pro forma condensed combined statement of operations data for the
twelve months ended December 31, 1997 and the nine months ended September 30,
1998 presents adjustments for the Completed Transactions, financing transactions
undertaken by the Company and Chancellor Radio Broadcasting Company ("CRBC")
during 1997 and 1998 and the Pending Transactions, as if each such transaction
occurred on January 1, 1997.
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 in the Completed Transactions have been allocated based
primarily on information furnished by management of the acquired or to be
acquired assets. The final allocation of the respective purchase prices of the
assets acquired in the Completed 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> 53
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMPANY PRO FORMA
ADJUSTMENTS AS ADJUSTED ADJUSTMENTS
COMPANY FOR THE FOR THE FOR THE
HISTORICAL COMPLETED COMPLETED PENDING COMPANY
AT 9/30/98 TRANSACTIONS TRANSACTIONS TRANSACTIONS(3) PRO FORMA
---------- ------------ ------------ --------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets.................................... $ 376,797 $ 40,186(1) $ 416,983 $ -- $ 416,983
Note receivable from affiliate.................... 150,000 -- 150,000 (150,000) --
Property and equipment, net....................... 299,906 628,519(1) 928,425 10,036 938,461
Intangible assets, net............................ 5,036,250 737,458(1) 5,773,708 569,203 6,342,911
Other assets...................................... 162,142 27,164(1) 203,306 203,306
(6,000)(1)
20,000(2)
---------- ---------- ---------- --------- ----------
Total assets.............................. $6,025,095 $1,447,327 $7,472,422 $ 429,239 $7,901,661
========== ========== ========== ========= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
LIABILITIES:
Current liabilities............................... $ 177,472 $ 5,088(1) $ 182,560 $ -- $ 182,560
Long-term debt.................................... 3,018,000 1,386,412(1) 4,424,412 413,250 4,837,662
750,000(2)
(730,000)(2)
Deferred tax liabilities.......................... 360,618 35,827(1) 396,445 6,396 402,841
Other liabilities................................. 60,403 -- 60,403 60,403
---------- ---------- ---------- --------- ----------
Total liabilities......................... 3,616,493 1,447,327 5,063,820 419,646 5,483,466
STOCKHOLDER'S EQUITY:
Common stock...................................... 1 -- 1 -- 1
Additional paid in capital........................ 2,654,273 -- 2,654,273 -- 2,654,273
Accumulated deficit............................... (245,672) -- (245,672) 9,593 (236,079)
---------- ---------- ---------- --------- ----------
Total stockholder's equity................ 2,408,602 -- 2,408,602 9,593 2,418,195
---------- ---------- ---------- --------- ----------
Total liabilities and stockholder's
equity.................................. $6,025,095 $1,447,327 $7,472,422 $ 429,239 $7,901,661
========== ========== ========== ========= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
B-2
<PAGE> 54
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS COMPANY AS
COMPLETED FOR THE ADJUSTED FOR PENDING
COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997 HISTORICAL HISTORICAL(4) TRANSACTIONS TRANSACTIONS HISTORICAL(15)
---------------------------- ---------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Gross revenues..................................... $663,804 $765,850 $ (17,651)(5) $1,411,160 $59,266
(843)(6)
Less: agency commissions........................... (81,726) (72,725) -- (154,451) (7,323)
-------- -------- --------- ---------- -------
Net revenues....................................... 582,078 693,125 (18,494) 1,256,709 51,943
Operating expenses excluding depreciation and
amortization..................................... 316,248 403,083 (14,395)(5) 704,936 28,741
Depreciation and amortization...................... 185,982 74,900 (2,677)(5) 464,160 7,156
154,167(7) --
51,788(8)
Corporate general and administrative............... 21,442 24,227 -- 45,669 --
Merger expense..................................... -- 6,124 (6,124)(10) -- --
Restructuring charge............................... -- 15,958 -- 15,958 --
Stock option compensation.......................... -- 3,083 -- 3,083 --
Profit participation fee........................... -- 2,322 (2,322)(11) --
-------- -------- --------- ---------- -------
Operating income (loss)............................ 58,406 163,428 (198,931) 22,903 16,046
Interest expense................................... 85,017 89,086 (579)(5) 349,584 10
176,060(12)
Interest income.................................... (1,922) (1,266) -- (3,188) --
Gain on disposition of assets...................... (18,380) -- -- (18,380) --
Other (income) expense............................. 383 (1,599) -- (1,216) --
-------- -------- --------- ---------- -------
Income (loss) before income taxes.................. (6,692) 77,207 (374,412) (303,897) 16,036
Income tax expense (benefit)....................... 7,802 18,775 (134,684)(13) (108,107) 1,750
-------- -------- --------- ---------- -------
Net income (loss).................................. (14,494) 58,432 (239,728) (195,790) 14,286
Preferred stock dividends.......................... 12,901 27,321 (40,222)(14) -- --
-------- -------- --------- ---------- -------
Income (loss) attributable to common stock......... $(27,395) $ 31,111 $(199,506) $ (195,790) $14,286
======== ======== ========= ========== =======
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
PENDING COMPANY
YEAR ENDED DECEMBER 31, 1997 TRANSACTIONS PRO FORMA
---------------------------- ------------ ----------
<S> <C> <C>
Gross revenues..................................... $ -- $1,470,426
Less: agency commissions........................... -- (161,774)
-------- ----------
Net revenues....................................... -- 1,308,652
Operating expenses excluding depreciation and
amortization..................................... -- 733,677
Depreciation and amortization...................... 32,309(16) 503,625
--
Corporate general and administrative............... -- 45,669
Merger expense..................................... -- --
Restructuring charge............................... -- 15,958
Stock option compensation.......................... -- 3,083
Profit participation fee........................... --
-------- ----------
Operating income (loss)............................ (32,309) 6,640
Interest expense................................... 28,917(17) 378,511
--
Interest income.................................... -- (3,188)
Gain on disposition of assets...................... -- (18,380)
Other (income) expense............................. -- (1,216)
-------- ----------
Income (loss) before income taxes.................. (61,226) (349,087)
Income tax expense (benefit)....................... (20,310)(18) (126,667)
-------- ----------
Net income (loss).................................. (40,916) (222,420)
Preferred stock dividends.......................... -- --
-------- ----------
Income (loss) attributable to common stock......... $(40,916) $ (222,420)
======== ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
B-3
<PAGE> 55
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS COMPANY AS ADJUSTMENTS
COMPLETED FOR THE ADJUSTED FOR PENDING FOR THE
COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS PENDING
NINE MONTHS ENDED SEPTEMBER 30, 1998 HISTORICAL HISTORICAL(4) TRANSACTIONS TRANSACTIONS HISTORICAL(15) TRANSACTIONS
- ------------------------------------ ---------- ------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues..................... $1,015,562 $204,979 $ -- $1,220,541 $22,761 $ --
Less: agency commissions........... (116,466) (20,832) -- (137,298) (2,762) --
---------- -------- --------- ---------- ------- --------
Net revenues....................... 899,096 184,147 -- 1,083,243 19,999 --
Operating expenses excluding
depreciation and amortization.... 491,924 92,044 -- 583,968 6,486 --
Depreciation and amortization...... 315,772 27,061 20,409(7) 399,271 2,880 24,945(16)
36,029(8)
Corporate general and
administrative................... 25,188 6,545 (570)(9) 31,163 --
Executive severance charge......... 59,475 -- -- 59,475 -- --
Profit participation fee........... -- 1,756 (1,756)(11) --
---------- -------- --------- ---------- ------- --------
Operating income (loss)............ 6,737 56,741 (54,112) 9,366 10,633 (24,945)
Interest expense................... 145,992 13,052 103,144(12) 262,188 279 21,416(17)
Interest income.................... (10,283) (357) -- (10,640) 1 --
Gain on disposition of
representation contracts......... (29,767) -- -- (29,767) -- --
Other (income) expense............. (127,404) 5,488 -- (121,916) -- --
---------- -------- --------- ---------- ------- --------
Income (loss) before income taxes... 28,199 38,558 (157,256) (90,499) 10,353 (46,361)
Income tax expense (benefit)....... 32,507 -- (55,869)(13) (23,362) 1,271 (16,079)(18)
---------- -------- --------- ---------- ------- --------
Net income (loss).................. (4,308) 38,558 (101,387) (67,137) 9,082 (30,282)
Preferred stock dividends.......... 17,601 -- (17,601)(14) -- -- --
---------- -------- --------- ---------- ------- --------
Income (loss) attributable to common
stock............................ $ (21,909) $ 38,558 $ (83,786) $ (67,137) $ 9,082 $(30,282)
========== ======== ========= ========== ======= ========
<CAPTION>
COMPANY
NINE MONTHS ENDED SEPTEMBER 30, 1998 PRO FORMA
- ------------------------------------ ----------
<S> <C>
Gross revenues..................... $1,243,302
Less: agency commissions........... (140,060)
----------
Net revenues....................... 1,103,242
Operating expenses excluding
depreciation and amortization.... 590,454
Depreciation and amortization...... 427,096
Corporate general and
administrative................... 31,163
Executive severance charge......... 59,475
Profit participation fee........... --
----------
Operating income (loss)............ (4,946)
Interest expense................... 283,883
Interest income.................... (10,639)
Gain on disposition of
representation contracts......... (29,767)
Other (income) expense............. (121,916)
----------
Income (loss) before income taxes... (126,507)
Income tax expense (benefit)....... (38,170)
----------
Net income (loss).................. (88,337)
Preferred stock dividends.......... --
----------
Income (loss) attributable to common
stock............................ $ (88,337)
==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
B-4
<PAGE> 56
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE COMPLETED TRANSACTIONS
(1) Reflects the Completed Transactions that were completed after September 30,
1998 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
-----------------------------------------------------------------------------------------
PROPERTY AND INTANGIBLE DEFERRED
COMPLETED PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT TAX
TRANSACTIONS PRICE ASSETS NET(a) NET(b) ASSETS LIABILITIES LIABILITIES(c)
------------ ---------- ------- ------------ ---------- ------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Z Spanish Acquisition(d)............. $ 25,000 $ -- $ -- $ -- $25,000 $ -- $ --
Primedia Acquisition(e).............. 74,770 -- 4,323 70,447 -- -- --
Kunz Option(f)....................... 39,289 -- 23,573 15,716 -- -- --
Whiteco Acquisition(g)............... 974,221 29,180 598,509 349,327 2,164 (4,959) --
Cleveland Acquisitions(h)............ 279,132 11,006 2,114 301,968 -- (129) (35,827)
---------- ------- -------- -------- ------- ------- --------
$1,392,412 $40,186 $628,519 $737,458 $27,164 $(5,088) $(35,827)
========== ======= ======== ======== ======= ======= ========
<CAPTION>
FINANCING
-----------------------
DECREASE INCREASE IN
COMPLETED IN OTHER LONG-TERM
TRANSACTIONS ASSETS DEBT
------------ --------- -----------
<S> <C> <C>
Z Spanish Acquisition(d)............. $ -- $ 25,000
Primedia Acquisition(e).............. -- 74,770
Kunz Option(f)....................... 6,000 33,289
Whiteco Acquisition(g)............... -- 974,221
Cleveland Acquisitions(h)............ -- 279,132
------ ----------
$6,000 $1,386,412
====== ==========
</TABLE>
- ---------------
(a) The Company has assumed that the historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation of
the purchase price. Such amounts are based on information provided by
management of the respective companies acquired in the Completed
Transactions.
(b) The Company, on a preliminary basis, has allocated the intangible assets of
the radio acquisitions to broadcast licenses with an estimated average life
of 15 years and has allocated the intangible assets of the outdoor
acquisitions to goodwill with an estimated average life of 40 years. The
amounts allocated to net intangible assets are preliminary and are based
upon historical information from prior radio and outdoor acquisitions.
(c) Reflects the tax effect upon consummation of the transaction.
(d) On October 9, 1998, the Company acquired approximately a 24.1% non-voting
interest in Z-Spanish Media Corporation for $25,000 in cash. Z-Spanish
Media, which is headquartered in Sacramento, California, is the owner and
operator of 22 Hispanic format radio stations in California, Texas, Arizona
and Illinois.
(e) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc.
and certain of its affiliates, which own and operate eight FM stations in
Puerto Rico, for approximately $76,050 in cash less working capital deficit
of $1,280 plus various other direct acquisition costs.
(f) On November 13, 1998, the Company acquired approximately 1,000 display
faces from Kunz & Company for $33,289 in cash plus various other direct
acquisition costs (the "Kunz Option"). Martin had previously paid $6,000 in
cash to Kunz & Company on July 31, 1997. Martin began operating these 1,000
display faces under a management agreement effective July 31, 1997.
(g) On December 1, 1998, the Company acquired the assets of the Outdoor
Advertising division of Whiteco Industries, Inc., an outdoor advertising
company with over 22,000 billboards and outdoor displays in 34 states, for
$930,000 in cash plus working capital of $24,221 subject to certain
adjustments and various other direct acquisition costs of approximately
$20,000.
(h) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company began operating WQAL-FM under
a time brokerage agreement effective October 1, 1998. On February 2, 1999,
the Company acquired additional radio stations in Cleveland including (i)
WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii)
WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation
which owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired
for an aggregate purchase price of $275,000 in cash plus working capital of
$4,132 subject to certain adjustments (the "Cleveland Acquisitions").
(2) Reflects the proceeds of approximately $730,000 received on November 17,
1998 from the issuance of $750,000 of 8% Senior Notes due 2008 (the "8%
Senior Notes"), net of deferred debt issuance costs of $20,000 (the "8%
Senior Notes Offering"). The net proceeds from the 8% Senior Notes Offering
will be used to reduce bank borrowings under the revolving credit portion of
the Senior Credit Facility and the excess proceeds will be invested in
short-term investment grade securities.
B-5
<PAGE> 57
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING TRANSACTIONS
(3) Reflects the Pending Transactions as follows:
<TABLE>
<CAPTION>
FINANCING
-------------------------
PURCHASE PRICE ALLOCATION DECREASE INCREASE
-------------------------------------------------------------------- IN NOTES (DECREASE)
PURCHASE/ PROPERTY AND INTANGIBLE DEFERRED RECEIVABLE IN
(SALES) EQUIPMENT, ASSETS, TAX ACCUMULATED FROM LONG-TERM
PENDING TRANSACTIONS PRICE NET(a) NET(b) LIABILITIES(c) DEFICIT(d) AFFILIATE DEBT
-------------------- --------- ------------ ---------- -------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capstar/SFX Acquisition(e)..... $494,250 $10,415 $483,835 $ -- $ -- $150,000 $344,250
Chicago Disposition(f)......... (21,000) (2,167) (2,844) (6,396) (9,593) -- (21,000)
Phoenix Acquisition(g)......... 90,000 1,788 88,212 -- -- -- 90,000
-------- ------- -------- ------- ------- -------- --------
Total.................... $563,250 $10,036 $569,203 $(6,396) $(9,593) $150,000 $413,250
======== ======= ======== ======= ======= ======== ========
</TABLE>
- ---------------
(a) The Company has assumed that historical balances of net property and
equipment to be 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 companies to be
acquired in the Pending Transactions.
(b) The Company, on a preliminary basis, has allocated the intangible assets of
the radio acquisitions to broadcast licenses with an estimated average life
of 15 years. The amounts allocated to net intangible assets are preliminary
and are based upon historical information from prior radio acquisitions.
(c) Reflects the tax effect upon consummation of the transaction.
(d) Reflects the gain on sale, net of tax, upon consummation of the
transaction.
(e) On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and
KQUE-FM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM,
WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX
Stations") for an aggregate purchase price of approximately $637,500 in a
series of purchases and exchanges over a period of three years (the
"Capstar/SFX Transaction"). The Capstar/SFX Stations were acquired by
Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29,
1998, the Company completed the Houston Exchange (as defined) and began
operating the remaining ten Capstar/SFX Stations under time brokerage
agreements. The Company also provided a loan to Capstar in the principal
amount of $150,000 (the "Capstar Loan") as part of the Capstar/SFX
Transaction. A portion of the Capstar Loan will be prepaid by Capstar in
connection with the Company's acquisition of, and the proceeds of such
prepayment would be used by the Company as a portion of the purchase price
for, each Capstar/SFX Station. The purchase price for the remaining ten
Capstar/SFX Stations will be approximately $494,250. The Company is
currently assessing whether the terms of the Capstar/SFX Transaction will
be modified upon the consummation of the Capstar Merger by Chancellor
Media.
(f) On August 20, 1998, the Company entered into an agreement to sell WMVP-AM
in Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition").
The Company entered into a time brokerage agreement to sell substantially
all of the broadcast time of WMVP-AM effective September 10, 1998.
(g) On September 15, 1998, the Company entered into an agreement to acquire
KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000
in cash plus various other direct acquisition costs. The Company began
operating KKFR-FM and KFYI-AM under a time brokerage agreement effective
November 5, 1998.
B-6
<PAGE> 58
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE COMPLETED TRANSACTIONS
(4) The detail of the historical financial data of the companies acquired or
disposed of in the Completed Transactions for the year ended December 31,
1997 and for the nine months ended September 30, 1998 has been obtained from
the historical financial statements of the respective companies and is
summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
-------------------------------------------------------------------------------------------
CRBC AS
EVERGREEN ADJUSTED FOR
WUSL-FM VIACOM COMPLETED KDGE-FM KATZ
WDAS-FM/AM WIOQ-FM ACQUISITION CRBC KZPS-FM ACQUISITION
HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1997 1/1 - 5/1(a) 1/1 - 5/15(b) 1/1 - 7/2(c) 1/1 - 9/5(d) 1/1 - 7/31(e) 1/1 - 10/28(f)
- ---------------------------- ------------ ------------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................... $5,028 $7,088 $38,972 $241,481 $7,616 $144,886
Less: agency commissions......... (680) (829) (5,470) (30,754) (929) --
------ ------ ------- -------- ------ --------
Net revenues..................... 4,348 6,259 33,502 210,727 6,687 144,886
Operating expenses excluding
depreciation and amortization... 2,533 3,649 14,936 119,328 5,293 109,341
Depreciation and amortization.... 875 -- 2,279 30,505 280 141
Corporate general and
administrative.................. 172 141 682 7,580 -- 8,105
Merger expense................... -- -- -- 6,124 -- --
Restructuring charge............. -- -- -- -- -- 15,958
Stock option compensation........ -- -- -- 3,083 -- --
Profit participation fee......... -- -- -- -- -- --
------ ------ ------- -------- ------ --------
Operating income (loss).......... 768 2,469 15,605 44,107 1,114 11,341
Interest expense................. 19 990 -- 49,812 -- 18,310
Interest income.................. (21) -- -- (218) -- (170)
Gain on disposition of assets.... -- -- -- -- -- --
Other (income) expense........... 884 -- -- (584) 12 --
------ ------ ------- -------- ------ --------
Income (loss) before income
taxes........................... (114) 1,479 15,605 (4,903) 1,102 (6,799)
Income tax expense (benefit)..... -- -- 5,892 1,180 -- 1,912
------ ------ ------- -------- ------ --------
Net income (loss)................ (114) 1,479 9,713 (6,083) 1,102 (8,711)
Preferred stock dividends........ -- -- -- 27,321 -- --
------ ------ ------- -------- ------ --------
Income (loss) attributable to
common stock.................... $ (114) $1,479 $ 9,713 $(33,404) $1,102 $ (8,711)
====== ====== ======= ======== ====== ========
<CAPTION>
ACQUISITIONS
---------------------------------------------------------------------------------
KBIG-FM
GANNETT KXPK-FM KLDE-FM
HISTORICAL HISTORICAL WBIX-FM KODA-FM WWDC-FM/AM
YEAR ENDED DECEMBER 31, 1997 1/1 - 12/29(g) 1/1 - 8/31(h) 1/1 - 10/10(i) 1/1 - 12/31(j) 1/1 - 12/31(k)
- ---------------------------- -------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Gross revenues................... $61,057 $3,460 $33,125 $20,869 $11,416
Less: agency commissions......... (8,052) (458) (4,636) (2,889) (1,430)
------- ------ ------- ------- -------
Net revenues..................... 53,005 3,002 28,489 17,980 9,986
Operating expenses excluding
depreciation and amortization... 26,303 2,816 18,277 7,535 5,597
Depreciation and amortization.... 1,736 198 -- 1,848 90
Corporate general and
administrative..................
Merger expense................... -- -- -- -- --
Restructuring charge............. -- -- -- -- --
Stock option compensation........ -- -- -- -- --
Profit participation fee......... -- -- -- -- --
------- ------ ------- ------- -------
Operating income (loss).......... 24,966 (12) 10,212 8,597 4,299
Interest expense................. -- -- -- -- 123
Interest income.................. -- -- -- -- (36)
Gain on disposition of assets.... -- -- -- -- --
Other (income) expense........... (375) (81) -- -- (98)
------- ------ ------- ------- -------
Income (loss) before income
taxes........................... 25,341 69 10,212 8,597 4,310
Income tax expense (benefit)..... 10,127 -- -- -- --
------- ------ ------- ------- -------
Net income (loss)................ 15,214 69 10,212 8,597 4,310
Preferred stock dividends........ -- -- -- -- --
------- ------ ------- ------- -------
Income (loss) attributable to
common stock.................... $15,214 $ 69 $10,212 $ 8,597 $ 4,310
======= ====== ======= ======= =======
<CAPTION>
ACQUISITIONS
-----------------------------------------------------------------
MARTIN AS
ADJUSTED FOR
COMPLETED PRIMEDIA WHITECO CLEVELAND
MARTIN ACQUISITION ACQUISITION ACQUISITIONS
TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1997 1/1 - 12/31(l) 1/1 - 12/31(m) 1/1 - 12/31(n) 1/1 - 12/31(o)
- ---------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Gross revenues................... $84,882 $15,732 $126,801 $33,728
Less: agency commissions......... (8,983) (3,482) (8,703) (4,102)
------- ------- -------- -------
Net revenues..................... 75,899 12,250 118,098 29,626
Operating expenses excluding
depreciation and amortization... 38,836 7,986 63,984 16,433
Depreciation and amortization.... 25,326 2,916 11,525 673
Corporate general and
administrative.................. 1,080 -- 6,074 481
Merger expense................... -- -- -- --
Restructuring charge............. -- -- -- --
Stock option compensation........ -- -- -- --
Profit participation fee......... -- -- 2,322 --
------- ------- -------- -------
Operating income (loss).......... 10,657 1,348 34,193 12,039
Interest expense................. 17,013 2,102 4 714
Interest income.................. (293) (25) -- (513)
Gain on disposition of assets.... -- -- -- --
Other (income) expense........... 1,767 66 (1,833) (1,357)
------- ------- -------- -------
Income (loss) before income
taxes........................... (7,830) (795) 36,022 13,195
Income tax expense (benefit)..... -- (53) -- 75
------- ------- -------- -------
Net income (loss)................ (7,830) (742) 36,022 13,120
Preferred stock dividends........ -- -- -- --
------- ------- -------- -------
Income (loss) attributable to
common stock.................... $(7,830) $ (742) $ 36,022 $13,120
======= ======= ======== =======
</TABLE>
B-7
<PAGE> 59
<TABLE>
<CAPTION>
DISPOSITIONS
--------------------------------------------------------------------------------------------
WPEG-FM
WBAV-FM/AM SAN
WRFX-FM WPNT-FM FRANCISCO
WFNZ-AM WNKS-FM HISTORICAL WEJM-FM/AM WJZW-FM FREQUENCY
HISTORICAL HISTORICAL 5/30 - HISTORICAL HISTORICAL HISTORICAL
1/1 - 5/15(b) 1/1 - 5/15(p) 6/19(q) 1/1 - 8/26(r) 1/1 - 7/7(s) 1/1 - 7/7(t)
------------- ------------- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $(7,788) $(1,332) $(567) $(1,279) $(4,137) $(1,370)
Less: agency commissions.......... 1,029 142 93 135 567 178
------- ------- ----- ------- ------- -------
Net revenues...................... (6,759) (1,190) (474) (1,144) (3,570) (1,192)
Operating expenses excluding
depreciation and amortization.... (3,569) (994) (285) (1,276) (2,161) (1,738)
Depreciation and amortization..... -- (212) (279) (305) (315) (84)
Corporate general and
administrative................... -- -- -- -- (70) --
Merger expense.................... -- -- -- -- -- --
Restructuring charge.............. -- -- -- -- -- --
Stock option compensation......... -- -- -- -- -- --
Profit participation fee.......... -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Operating income (loss)........... (3,190) 16 90 437 (1,024) 630
Interest expense.................. -- -- -- -- -- --
Interest income................... -- -- -- -- -- --
Other (income) expense............ -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Income (loss) before income
taxes............................ (3,190) 16 90 437 (1,024) 630
Income tax benefit................ -- -- -- -- (260) --
------- ------- ----- ------- ------- -------
Net income (loss)................. (3,190) 16 90 437 (764) 630
Preferred stock dividends......... -- -- -- -- -- --
------- ------- ----- ------- ------- -------
Income (loss) attributable to
common stock..................... $(3,190) $ 16 $ 90 $ 437 $ (764) $ 630
======= ======= ===== ======= ======= =======
<CAPTION>
DISPOSITIONS
-------------------------------------------------------------------------------
WBZS-AM
KDFC-FM WZHF-AM BONNEVILLE WFLN-FM
HISTORICAL KDFC-AM WLUP-FM OPTION HISTORICAL
1/1 - HISTORICAL HISTORICAL HISTORICAL 1/1 -
1/31(u) 1/1 - 8/13(v) 1/1 - 7/14(e) 1/1 - 10/1(i) 4/30(w)
------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Gross revenues.................... $(278) $(1,091) $(6,928) $(31,429) $(1,298)
Less: agency commissions.......... 26 23 935 3,951 134
----- ------- ------- -------- -------
Net revenues...................... (252) (1,068) (5,993) (27,478) (1,164)
Operating expenses excluding
depreciation and amortization.... (224) (665) (5,642) (14,434) (728)
Depreciation and amortization..... -- (54) (1,443) -- (800)
Corporate general and
administrative................... -- (18) -- -- --
Merger expense.................... -- -- -- -- --
Restructuring charge.............. -- -- -- -- --
Stock option compensation......... -- -- -- -- --
Profit participation fee.......... -- -- -- -- --
----- ------- ------- -------- -------
Operating income (loss)........... (28) (331) 1,092 (13,044) 364
Interest expense.................. -- -- -- (1) --
Interest income................... -- -- -- 10 --
Other (income) expense............ -- -- -- -- --
----- ------- ------- -------- -------
Income (loss) before income
taxes............................ (28) (331) 1,092 (13,053) 364
Income tax benefit................ -- (98) -- -- --
----- ------- ------- -------- -------
Net income (loss)................. (28) (233) 1,092 (13,053) 364
Preferred stock dividends......... -- -- -- -- --
----- ------- ------- -------- -------
Income (loss) attributable to
common stock..................... $ (28) $ (233) $ 1,092 $(13,053) $ 364
===== ======= ======= ======== =======
<CAPTION>
DISPOSITIONS
---------------
WBAB-FM
WBLI-FM
WGBB-AM
WHFM-FM COMPLETED
HISTORICAL TRANSACTIONS
1/1 - 12/31(x) HISTORICAL
--------------- ------------
<S> <C> <C>
Gross revenues.................... $(12,794) $765,850
Less: agency commissions.......... 1,459 (72,725)
-------- --------
Net revenues...................... (11,335) 693,125
Operating expenses excluding
depreciation and amortization.... (8,048) 403,083
Depreciation and amortization..... -- 74,900
Corporate general and
administrative................... -- 24,227
Merger expense.................... -- 6,124
Restructuring charge.............. -- 15,958
Stock option compensation......... -- 3,083
Profit participation fee.......... -- 2,322
-------- --------
Operating income (loss)........... (3,287) 163,428
Interest expense.................. -- 89,086
Interest income................... -- (1,266)
Other (income) expense............ -- (1,599)
-------- --------
Income (loss) before income
taxes............................ (3,287) 77,207
Income tax benefit................ -- 18,775
-------- --------
Net income (loss)................. (3,287) 58,432
Preferred stock dividends......... -- 27,321
-------- --------
Income (loss) attributable to
common stock..................... $ (3,287) 31,111
======== ========
</TABLE>
B-8
<PAGE> 60
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
----------------------------------------------------------------------------------- ------------
MARTIN AS WBAB-FM
ADJUSTED FOR WBLI-FM
COMPLETED PRIMEDIA WHITECO CLEVELAND WGBB-AM
KODA-FM WWDC-FM/AM MARTIN ACQUISITION ACQUISITION ACQUISITIONS WHFM-FM
NINE MONTHS ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL HISTORICAL
SEPTEMBER 30, 1998 1/1-5/29(j) 1/1-6/1(k) 1/1-7/31(l) 1/1-9/30(m) 1/1-9/30(n) 1/1-9/30(o) 1/1-5/29(x)
- ---------------------- ----------- ---------- ------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenues........ $ 9,132 $4,273 $54,186 $11,749 $103,694 $27,008 $(5,063)
Less: agency
commissions......... (1,250) (528) (5,768) (3,070) (7,191) (3,539) 514
------- ------ ------- ------- -------- ------- -------
Net revenues.......... 7,882 3,745 48,418 8,679 96,503 23,469 (4,549)
Operating expenses
excluding
depreciation and
amortization........ 2,771 2,158 23,171 4,954 49,625 12,696 (3,331)
Depreciation and
amortization........ 841 45 15,083 2,158 8,760 174 --
Corporate general and
administrative...... -- -- 1,035 317 5,193 -- --
Profit participation
fee................. -- -- -- -- 1,756 -- --
------- ------ ------- ------- -------- ------- -------
Operating income
(loss).............. 4,270 1,542 9,129 1,250 31,169 10,599 (1,218)
Interest expense...... -- 62 11,057 1,679 98 156 --
Interest income....... -- (18) (261) -- (32) (46) --
Other expense
(income)............ -- (49) 5,461 23 (820) 873 --
------- ------ ------- ------- -------- ------- -------
Net income (loss)..... $ 4,270 $1,547 $(7,128) $ (452) $ 31,923 $ 9,616 $(1,218)
======= ====== ======= ======= ======== ======= =======
<CAPTION>
COMPLETED
NINE MONTHS ENDED TRANSACTIONS
SEPTEMBER 30, 1998 HISTORICAL
- ---------------------- ------------
<S> <C>
Gross revenues........ $204,979
Less: agency
commissions......... (20,832)
--------
Net revenues.......... 184,147
Operating expenses
excluding
depreciation and
amortization........ 92,044
Depreciation and
amortization........ 27,061
Corporate general and
administrative...... 6,545
Profit participation
fee................. 1,756
--------
Operating income
(loss).............. 56,741
Interest expense...... 13,052
Interest income....... (357)
Other expense
(income)............ 5,488
--------
Net income (loss)..... $ 38,558
========
</TABLE>
- ---------------
(a) On May 1, 1997, the Company acquired, in the Beasley Acquisition,
WDAS-FM/AM in Philadelphia for $103,000 in cash.
(b) 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.
(c) 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 sold on August 13, 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 4(s) and 4(v)).
(d) 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 with and into EMHC, a direct, wholly-owned subsidiary of Evergreen,
with EMHC remaining as the surviving corporation and (ii) CRBC was merged
with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA
remaining as the surviving corporation (collectively, the "Chancellor
Merger"). Upon
B-9
<PAGE> 61
consummation of the Chancellor Merger, Evergreen was renamed Chancellor
Media Corporation, EMHC was renamed Chancellor Mezzanine Holdings
Corporation ("CMHC") and the Company 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 Common Stock into 0.9091 shares of
Chancellor Media Common Stock, resulting in the issuance of 34,617,460
shares of Chancellor Media Common Stock at $15.50 per share, (ii) the
assumption of long-term debt of CRBC of $949,000 which included $549,000 of
borrowings outstanding under the CRBC senior credit facility, $200,000 of
CRBC's 9 3/8% Senior Subordinated Notes due 2004 and $200,000 of CRBC's
8 3/4% Senior Subordinated Notes due 2007, (iii) the issuance of 2,117,629
shares of the Company's 12% Exchangeable Preferred Stock (the "12%
Preferred Stock") in exchange for CRBC's substantially identical securities
with a fair value of $215,570 including accrued and unpaid dividends of
$3,807, (iv) the issuance of 1,000,000 shares of the Company'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 including accrued and unpaid dividends of
$772, (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 including accrued and unpaid dividends of $1,048, (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.
CRBC's historical condensed combined statement of operations for the year
ended December 31, 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 DISPOSITIONS
------------------------- ------------- PRO FORMA
CHANCELLOR ADJUSTMENTS CRBC AS
VIACOM FOR THE ADJUSTED FOR
CRBC COLFAX ACQUISITION WDRQ-FM COMPLETED COMPLETED
HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR
YEAR ENDED DECEMBER 31, 1997 1/1-9/5 1/1-1/23(i) 1/1-7/2(ii) 1/1-8/11(iii) TRANSACTIONS TRANSACTIONS
---------------------------- ---------- ----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues...................... $215,018 $3,183 $29,214 $(2,395) $ (3,539)(iv) $241,481
Less: agency commissions............ (26,575) (384) (4,046) 251 -- (30,754)
-------- ------ ------- ------- -------- --------
Net revenues........................ 188,443 2,799 25,168 (2,144) (3,539) 210,727
Operating expenses excluding
depreciation and amortization..... 110,548 1,872 13,326 (1,986) (4,432)(iv) 119,328
Depreciation and amortization....... 23,919 -- 2,370 (186) 4,484(v) 30,505
(82)(vi)
Corporate general and
administrative.................... 7,102 -- 520 (42) -- 7,580
Merger expense...................... 6,124 -- -- -- -- 6,124
Stock option compensation........... 3,083 -- -- -- -- 3,083
-------- ------ ------- ------- -------- --------
Operating income (loss)............. 37,667 927 8,952 70 (3,509) 44,107
Interest expense.................... 37,978 -- 3,178 -- 8,656(vii) 49,812
Interest income..................... (218) -- -- -- -- (218)
Other income........................ (584) -- -- -- -- (584)
-------- ------ ------- ------- -------- --------
Income (loss) before income taxes... 491 927 5,774 70 (12,165) (4,903)
Income tax expense (benefit)........ 2,196 -- 1,558 18 (2,592)(viii) 1,180
-------- ------ ------- ------- -------- --------
Net income (loss)................... (1,705) 927 4,216 52 (9,573) (6,083)
Preferred stock dividends........... 25,817 -- -- -- 1,504(ix) 27,321
-------- ------ ------- ------- -------- --------
Income (loss) attributable to common
stock............................. $(27,522) $ 927 $ 4,216 $ 52 $(11,077) $(33,404)
======== ====== ======= ======= ======== ========
</TABLE>
- ---------------
(i) 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
B-10
<PAGE> 62
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. 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 year ended December 31, 1997.
(ii) 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 (iii)
below).
(iii)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 4(d)(ii)). 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.
(iv) Reflects the elimination of time brokerage agreement fees received and paid
by CRBC as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 MARKET PERIOD REVENUE EXPENSE
---------------------------- ------ ------ ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM(1)...................... Detroit 1/1-1/31 $ (235) $ (16)
WOMX-FM, WXXL-FM, WJHM-FM(2)............ Orlando 1/1-2/13 -- (911)
WEAT-FM/AM, WOLL-FM(2).................. West Palm Beach 1/1-3/28 (593) (304)
WAPE-FM, WFYV-FM(3)..................... Jacksonville 1/1-9/5 (2,711) (490)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM(3)... Long Island 1/1-9/5 -- (2,711)
------- -------
Total adjustment for decrease in
gross revenues and expenses...... $(3,539) $(4,432)
======= =======
</TABLE>
- ---------------
(1)On January 31, 1997, CRBC sold WWWW-FM and WDFN-AM in Detroit 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.
(2)On February 13, 1997, CRBC acquired, in the Omni Acquisition,
substantially all of the assets and assumed certain liabilities of the
OmniAmerica Group including WOMX-FM, WXXL-FM and WJHM-FM in Orlando,
WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida and WAPE-FM AND
WFYV-FM in Jacksonville. The total purchase price, including
acquisition costs, allocated to net assets acquired was approximately
$181,046. 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 the
consummation of CRBC's exchange of WEAT-FM/AM and WOLL-FM in West Palm
Beach for KSTE-FM in Sacramento and $33,000 in cash on March 28, 1997,
CRBC entered into time brokerage agreements to
B-11
<PAGE> 63
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.
(3)On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX
Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida, 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. On November 6,
1997, the DOJ filed suit against the Company seeking to enjoin under
the HSR Act the acquisition of the four Long Island properties under
the SFX Exchange. On March 30, 1998, the Company and SFX entered into a
Consent Decree under which the Company and SFX agreed that the SFX
Exchange would not be consummated and that the time brokerage
agreements under which the Company operated the Long Island properties
would be terminated as soon as possible but no later than August 1,
1998. On May 29, 1998, the Company's time brokerage agreements
regarding the Long Island properties were terminated as part of the
Capstar Transaction (as defined). Furthermore, on May 29, 1998, the
Company exchanged WAPE-FM and WFYV-FM in Jacksonville plus $90,250 in
cash to Capstar in return for KODA-FM in Houston.
(v) Reflects incremental amortization related to the Completed Chancellor
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
COMPLETED CHANCELLOR INCREMENTAL HISTORICAL ADJUSTMENT
TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 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 consisting of broadcast licenses, goodwill and
advertising contracts were amortized on a straight-line basis over
lives ranging from two to 40 years by CRBC. In connection with purchase
accounting for the Chancellor Merger, intangible assets are 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.
(vi) Reflects the elimination of disposed stations' historical depreciation and
amortization expense of $82 for the year ended December 31, 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.
(vii)Reflects the adjustment to interest expense in connection with the
consummation of the Completed Chancellor Transactions, 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
B-12
<PAGE> 64
the offering on June 24, 1997 by CRBC of $200.0 million aggregate principal
amount of its 8 3/4% Senior Notes due 2007 (the "8 3/4% Notes"):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Additional bank borrowings related to:
Completed Chancellor Acquisitions......................... $558,892
Completed Chancellor Dispositions......................... (104,253)
New Loan Fees............................................. 6,873
--------
Total additional bank borrowings............................ $461,512
========
Interest expense on additional bank borrowings at 7.5%...... $ 11,376
Less: historical interest expense of the stations acquired
in the Completed Chancellor Transactions.................. (3,178)
--------
Net increase in interest expense............................ 8,198
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7.5%:
CRBC 8 3/4% Notes proceeds of $194,083 for the period
January 1, 1997 to June 24, 1997.......................... (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.............................................. (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........................ 2,265
Interest expense on $200,000 8 3/4% Notes issued June 24,
1997...................................................... 8,458
--------
Total adjustment for net increase in interest expense....... $ 8,656
========
</TABLE>
(viii) 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.
(ix) Reflects incremental dividends and accretion of $1,504 on the 12%
Exchangeable Preferred Stock for the period January 1, 1997 to January
23, 1997.
(e) On July 14, 1997, the Company completed the disposition of WLUP-FM in
Chicago to Bonneville for net proceeds of $80,000 which were held by a
qualified intermediary pending the completion of the deferred exchange
of WLUP-FM for KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the
Company applied the net proceeds from the disposition of WLUP-FM of
$80,000 in cash, plus an additional $3,500 and various other direct
acquisition costs, in a deferred exchange of WLUP-FM for KZPS-FM and
KDGE-FM in Dallas. The exchange was accounted for as a like-kind
exchange and no gain or loss was recognized upon consummation of the
transaction. The Company had previously operated KZPS-FM and KDGE-FM
under time brokerage agreements effective August 1, 1997.
(f) On October 28, 1997, the Company and Chancellor Media acquired Katz Media
Group, Inc. ("KMG"), a full-service media representation firm, in a
tender offer transaction for a total purchase price of approximately
$379,101 (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 $222,000
which included $122,000 of borrowings outstanding under the KMG senior
credit facility and $100,000 of the 10 1/2% Notes and (iii) estimated
acquisition costs of $7,500.
(g) 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.
(h) On January 30, 1998, the Company acquired, in the Denver Acquisition,
KXPK-FM in Denver from Ever Green Wireless LLC for $26,000 in cash
(including $1,650 paid by Chancellor in escrow). The
B-13
<PAGE> 65
Company had previously been operating KXPK-FM under a time brokerage
agreement since September 1, 1997.
(i) On April 3, 1998, the Company exchanged WTOP-FM in Washington, KZLA-FM in
Los Angeles and WGMS-FM in Washington plus $57,000 in cash for Bonneville's
stations WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles
(the "Bonneville Option"). The Company had previously paid $3,000 in cash
to Bonneville on August 6, 1997. The Company had previously entered into
time brokerage agreements to operate KLDE-FM and KBIG-FM effective October
1, 1997 and WBIX-FM effective October 10, 1997 and had 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.
(j) On February 20, 1998, the Company entered into an agreement to acquire from
Capstar Broadcasting Corporation (together with its subsidiaries,
"Capstar") KTXQ-FM and KBFB-FM in Dallas/ Ft. Worth, KODA-FM, KKRW-FM and
KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WVTY-FM, WJJJ-FM,
WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX
Stations") for an aggregate purchase price of approximately $637,500 in a
series of purchases and exchanges over a period of three years (the
"Capstar/SFX Transaction"). The Capstar/ SFX Stations were acquired by
Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29,
1998, as part of the Capstar/SFX Transaction, the Company exchanged WAPE-FM
and WFYV-FM in Jacksonville (valued for purposes of the Capstar/SFX
Transaction at $53,000) plus $90,250 in cash to Capstar in return for
KODA-FM in Houston (the "Houston Exchange"). CRBC entered into a time
brokerage agreement to sell substantially all of the broadcast time of
WAPE-FM and WFYV-FM effective July 1, 1996 (see 4 (d) (iv) (3)). Therefore,
the results of operations of WAPE-FM and WFYV-FM are not included in the
Company's historical condensed statements of operations for the year ended
December 31, 1997 and the nine months ended September 30, 1998.
(k) On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from
Capitol Broadcasting Company and its affiliates for $74,062 in cash
(including $2,062 for the purchase of the stations' accounts receivable)
plus various other direct acquisition costs, of which $4,000 was previously
paid by the Company as escrow funds.
(l) On July 31, 1998, the Company acquired Martin Media and certain affiliated
companies ("Martin"), an outdoor advertising company with over 14,500
billboards and outdoor displays in 12 states serving 23 markets, for
$591,674 in cash plus working capital of $19,443 subject to certain
adjustments and direct acquisition costs of approximately $10,000.
Martin's historical condensed combined statements of operations for the
year ended December 31, 1997 and the nine months ended September 30, 1998
and pro forma adjustments related to the significant transactions completed
by Martin prior to the Martin Acquisition (the "Completed Martin
Transactions") are summarized below. The pro forma adjustments for the
Martin Acquisition do not reflect certain acquisitions of assets by Martin
with an aggregate purchase price of approximately $17,000 which, in the
opinion of the Company's management is not material to such pro forma
presentations either individually or in the aggregate.
B-14
<PAGE> 66
<TABLE>
<CAPTION>
LAS VEGAS NEWMAN
MARTIN KUNZ CONNELL OUTDOOR OUTDOOR POA
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1997 1/1-12/31 1/1-7/31(i) 1/1-12/23(ii) 1/1-12/31(iii) 1/1-12/31(iv) 1/1-12/31(v)
---------------------------- ----------- ------------ ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $70,044 $5,569 $3,459 $1,840 $2,400 $1,570
Less: agency commissions.......... (7,894) -- (413) (181) (180) (315)
------- ------ ------ ------ ------ ------
Net revenues...................... 62,150 5,569 3,046 1,659 2,220 1,255
Operating expenses excluding
depreciation and amortization... 31,196 2,318 1,553 1,353 1,628 788
Depreciation and amortization..... 12,084 281 518 30 279 --
Corporate general and
administrative.................. 2,334 80 91 -- -- --
------- ------ ------ ------ ------ ------
Operating income (loss)........... 16,536 2,890 884 276 313 467
Interest expense.................. 10,507 -- -- -- 243 --
Interest income................... (293) -- -- -- -- --
Other expense..................... 1,737 -- -- -- 30 --
------- ------ ------ ------ ------ ------
Net income (loss)................. $ 4,585 $2,890 $ 884 $ 276 $ 40 $ 467
======= ====== ====== ====== ====== ======
<CAPTION>
PRO FORMA
ADJUSTMENTS MARTIN AS
FOR THE ADJUSTED
COMPLETED FOR COMPLETED
MARTIN MARTIN
YEAR ENDED DECEMBER 31, 1997 TRANSACTIONS TRANSACTIONS
---------------------------- ------------- -------------
<S> <C> <C>
Gross revenues.................... $ -- $84,882
Less: agency commissions.......... -- (8,983)
--------- -------
Net revenues...................... -- 75,899
Operating expenses excluding
depreciation and amortization... -- 38,836
Depreciation and amortization..... 12,134(vi) 25,326
Corporate general and
administrative.................. (1,425)(vii) 1,080
--------- -------
Operating income (loss)........... (10,709) 10,657
Interest expense.................. 6,263(viii) 17,013
Interest income................... -- (293)
Other expense..................... -- 1,767
--------- -------
Net income (loss)................. $ (16,972) $(7,830)
========= =======
</TABLE>
B-15
<PAGE> 67
<TABLE>
<CAPTION>
PRO FORMA MARTIN AS
ADJUSTMENTS ADJUSTED
MARTIN POA FOR THE FOR
ACQUISITION ACQUISITION COMPLETED COMPLETED
HISTORICAL HISTORICAL MARTIN MARTIN
NINE MONTHS ENDED SEPTEMBER 30, 1998 1/1-7/31 1/1-7/9(v) TRANSACTIONS TRANSACTIONS
------------------------------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues................................ $53,285 $ 901 $ -- $54,186
Less: agency commissions...................... (5,612) (156) -- (5,768)
------- ----- ------- -------
Net revenues.................................. 47,673 745 -- 48,418
Operating expenses excluding depreciation and
amortization................................ 22,671 500 -- 23,171
Depreciation and amortization................. 14,694 88 301(vi) 15,083
Corporate general and administrative.......... 3,030 -- (1,995)(vii) 1,035
------- ----- ------- -------
Operating income.............................. 7,278 157 1,694 9,129
Interest expense.............................. 10,781 1 275(viii) 11,057
Interest income............................... (261) -- -- (261)
Other expense................................. 5,448 13 -- 5,461
------- ----- ------- -------
Net income(loss).............................. $(8,690) $ 143 $ 1,419 $(7,128)
======= ===== ======= =======
</TABLE>
- ---------------
(i) On July 31, 1997, Martin acquired approximately 500 display faces of the
Kunz Outdoor Advertising division from Kunz & Company, an outdoor
advertising company with approximately 1,500 billboards and outdoor
displays in five markets, for $20,500 in cash plus various other direct
acquisition costs.
(ii) On December 23, 1997, Martin acquired Connell Outdoor Advertising Co., an
outdoor advertising company with 88 billboards and outdoor displays in the
Las Vegas market, for $30,000 in cash plus various other direct acquisition
costs.
(iii)On January 2, 1998, Martin acquired Las Vegas Outdoor Advertising, Inc., an
outdoor advertising company with 90 billboards and outdoor displays in the
Las Vegas market, for $16,800 in cash plus various other direct acquisition
costs.
(iv) On January 2, 1998, Martin acquired Newman Outdoor of Texas, Inc., an
outdoor advertising company with over 1,200 billboards and outdoor displays
in three markets, for $12,500 in cash plus various other direct acquisition
costs.
(v) On July 9, 1998, Martin acquired POA, an outdoor advertising company with
over 1,240 billboards and outdoor displays in the Pittsburgh market, for
$5,867 in cash plus various other direct acquisition costs.
(vi) Reflects incremental amortization related to the Completed Martin
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE
- ---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Kunz Acquisition................. 1/1-7/31 $17,260 $ 2,014 $ 42 $ 1,972
Connell Acquisition.............. 1/1-12/23 25,650 5,030 373 4,657
Las Vegas Outdoor Acquisition.... 1/1-12/31 14,408 2,882 -- 2,882
Newman Acquisition............... 1/1-12/31 10,249 2,050 -- 2,050
POA Acquisition.................. 1/1-12/31 2,867 573 -- 573
------- ------- ---- -------
Total.................. $70,434 $12,549 $415 $12,134
======= ======= ==== =======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD ASSETS, NET EXPENSE(1) EXPENSE INCREASE
- ------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
POA Acquisition.................... 1/1-7/9 $ 2,867 $301 $ -- $301
======= ==== ==== ====
</TABLE>
- ---------------
(1) Intangible assets were amortized on a straight-line basis over an
estimated average 5 year life by Martin.
B-16
<PAGE> 68
Historical depreciation expense of the Completed Martin Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(vii)On July 31, 1997, Martin paid $6,000 to Kunz & Company for an option to
purchase approximately 1,000 display faces from its Kunz Outdoor
Advertising division for $33,289 in cash plus various other direct
acquisition costs. Martin began operating these 1,000 display faces under a
management agreement effective July 31, 1997. Pursuant to the management
agreement, Martin paid a management fee of $285 per month to Kunz &
Company. Reflects the elimination of management fees paid by Martin to Kunz
& Company of $1,425 for the year ended December 31, 1997 and $1,995 for the
period January 1, 1998 through July 31, 1998.
(viii)
Reflects the adjustment to interest expense in connection with the
consummation of the Completed Martin Transactions:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Martin Acquisitions........................... $85,667 $35,167
------- -------
Interest expense on additional bank borrowings at 8.5%.... $ 6,506 $ 276
Less: historical interest expense of the companies
acquired in the Completed Martin Transactions........... (243) (1)
------- -------
Net increase in interest expense.......................... $ 6,263 $ 275
======= =======
</TABLE>
(m) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc.
and certain of its affiliates, which own and operate eight FM stations in
Puerto Rico, for approximately $76,050 in cash less working capital deficit
of $1,280 plus various other direct acquisition costs.
(n) On December 1, 1998, the Company acquired the assets of the Outdoor
Advertising division of Whiteco Industries, Inc., an outdoor advertising
company with over 22,000 billboards and outdoor displays in 34 states, for
$930,000 in cash plus working capital of $24,221 subject to certain
adjustments and various other direct acquisition costs of approximately
$20,000.
(o) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company began operating WQAL-FM under
a time brokerage agreement effective October 1, 1998. On February 2, 1999,
the Company acquired additional radio stations in Cleveland including (i)
WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii)
WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation
which owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired
for an aggregate purchase price of $275,000 in cash plus working capital of
$4,132 subject to certain adjustments (the "Cleveland Acquisitions").
(p) On May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for
$10,000 in cash.
(q) 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.
(r) 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.
(s) 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 4(c)). 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.
B-17
<PAGE> 69
(t) 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.
(u) 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 were 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 July 21, 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 year ended December 31, 1997.
(v) 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 4(c)) and KDFC-AM in San Francisco for $18,000 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 4(c)). 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.
(w) On April 13, 1998, the Company and Secret entered into a settlement
agreement regarding WFLN-FM in Philadelphia. Previously in August 1996, the
Company and Secret had entered into an agreement under which the Company
would acquire WFLN-FM from Secret for $37,750 in cash. In April 1997, the
Company entered into an agreement to sell WFLN-FM to Greater Media for
$41,800 in cash. 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 rights to acquire WFLN-FM. Pursuant to a court
settlement entered in August 1997 and the settlement agreement between the
Company and Secret entered on April 13, 1998, (i) Secret sold WFLN-FM
directly to Greater Media for $37,750, (ii) Greater Media deposited $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 received $3,500 of such
amount deposited by Greater Media with the court, plus interest earned
during the period which the court held such amounts (the "WFLN
Settlement"), and Secret received the balance of such amounts.
(x) CRBC began operating WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island
under a time brokerage agreement effective July 1, 1996 (see 4(d)(iv)(3)).
On May 29, 1998, as part of the Capstar/SFX Transaction, the Company's time
brokerage agreements regarding the Long Island properties were terminated.
The results of operations of WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long
Island are included in CRBC's historical condensed statement of operations
for January 1, 1997 through September 5, 1997 and in the Company's
historical condensed statement of operations for September 6, 1997 through
December 31, 1997. Additionally, the Company's historical condensed
statement of operations for the nine months ended September 30, 1998
includes the results of operations of WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM
in Long Island for January 1, 1998 through May 29, 1998.
(5) Reflects the elimination of intercompany transactions between the Company
and Katz for the year ended December 31, 1997.
B-18
<PAGE> 70
(6) Reflects the elimination of time brokerage agreement fees received by the
Company as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 MARKET PERIOD REVENUE
- ---------------------------- ------ ------ -------
<S> <C> <C> <C>
KZLA-FM...................................... Los Angeles 10/1-12/31 $(567)
WTOP-AM...................................... Washington, D.C. 10/1-12/31 (276)
-----
$(843)
=====
</TABLE>
(7) Reflects incremental amortization related to the Completed Transactions and
is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) ASSETS, 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(ii)...................... 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(iii)............... 1/1-7/2 515,654 17,379 793 16,586
Chancellor Merger(iv)............ 1/1-9/5 2,178,137 98,823 23,638 75,185
Chicago/Dallas Exchange.......... 1/1-10/7 (613) (31) -- (31)
Katz Acquisition(v).............. 1/1-10/28 354,058 10,267 7,616 2,651
Gannett Acquisition.............. 1/1-12/29 334,892 22,264 1,228 21,036
Denver Acquisition............... 1/1-12/31 24,589 1,639 268 1,371
Bonneville Option................ 1/1-12/31 62,504 4,167 -- 4,167
KODA-FM.......................... 1/1-12/31 93,294 6,220 1,441 4,779
WWDC-FM/AM....................... 1/1-12/31 64,338 4,289 -- 4,289
Martin Acquisition(vi)........... 1/1-12/31 382,033 14,276 20,322 (6,046)
Primedia Acquisition............. 1/1-12/31 70,447 4,696 2,248 2,448
Kunz Option(vii)................. 1/1-12/31 15,716 393 -- 393
Whiteco Acquisition(vii)......... 1/1-12/31 349,327 8,733 6,114 2,619
Cleveland Acquisitions........... 1/1-12/31 301,968 20,131 292 19,839
---------- -------- ------- --------
Total................... $5,112,184 $218,947 $64,780 $154,167
========== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(i) ASSETS, NET EXPENSE(i) EXPENSE INCREASE
- ------------------------------------ ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Denver Acquisition................ 1/1-1/30 $ 24,589 $ 137 $ -- $ 137
Bonneville Option................. 1/1-4/3 62,504 1,076 -- 1,076
KODA-FM........................... 1/1-5/29 93,294 2,574 656 1,918
WWDC-FM/AM........................ 1/1-6/1 64,338 1,799 -- 1,799
Martin Acquisition(vi)............ 1/1-7/31 382,033 8,328 12,009 (3,681)
Primedia Acquisition.............. 1/1-9/30 70,447 3,522 1,620 1,902
Kunz Option(vii).................. 1/1-9/30 15,716 295 -- 295
Whiteco Acquisition(vii).......... 1/1-9/30 349,327 6,550 4,666 1,884
Cleveland Acquisitions............ 1/1-9/30 301,968 15,098 19 15,079
---------- ------- ------- -------
Total.................... $1,364,216 $39,379 $18,970 $20,409
========== ======= ======= =======
</TABLE>
(i) Intangible assets are amortized on a straight-line basis over an estimated
average 15 year life (except for the Katz Acquisition, the Martin
Acquisition, the Kunz Option and the Whiteco Acquisition -- see (v) and
(vi) below). The incremental amortization period represents the period of
the year that the acquisition was not completed. Actual amortization may
differ based upon final purchase price allocations.
(ii) 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
B-19
<PAGE> 71
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.
(iii)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.
(iv) Intangible assets for the Chancellor Merger of $2,178,137 includes $293,548
resulting from the recognition of deferred tax liabilities.
(v) Intangible assets for the Katz Acquisition of $354,058 consist of goodwill
of $249,058 and representation contract value of $105,000 with estimated
average lives of 40 years and 17 years, respectively.
(vi) Intangible assets for the acquisition of Martin consist of goodwill and
non-compete agreements of $355,033 and $27,000, respectively, with
estimated average lives of 40 years and 5 years, respectively. The Martin
goodwill of $355,033 includes $95,125 resulting from the recognition of
deferred tax liabilities.
(vii)Intangible assets for the Kunz Option and the acquisition of Whiteco
consist of goodwill of $15,716 and $349,327, respectively, with estimated
average lives of 40 years.
(8) Historical depreciation expense of the Completed Transactions is assumed to
approximate depreciation expense on a pro forma basis, except as noted
below. Actual depreciation may differ based upon final purchase price
allocation. The following adjustments reflect incremental depreciation
related to the Completed Transactions and are based on the following
allocation to property and equipment:
<TABLE>
<CAPTION>
INCREMENTAL PROPERTY AND HISTORICAL ADJUSTMENT
DEPRECIATION EQUIPMENT, DEPRECIATION DEPRECIATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
---------------------------- ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Martin Acquisition...................... 1/1-12/31 $310,952 $20,730 $ 5,004 $15,726
Kunz Option............................. 1/1-12/31 23,573 1,572 -- 1,572
Whiteco Acquisition..................... 1/1-12/31 598,509 39,901 5,411 34,490
-------- ------- ------- -------
Total........................... $933,034 $62,203 $10,415 $51,788
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL PROPERTY AND HISTORICAL ADJUSTMENT
DEPRECIATION EQUIPMENT, DEPRECIATION DEPRECIATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
---------------------------- ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Martin Acquisition...................... 1/1-7/31 $310,952 $12,093 $ 3,074 $ 9,019
Kunz Option............................. 1/1-9/30 23,573 1,179 -- 1,179
Whiteco Acquisition..................... 1/1-9/30 598,509 29,925 4,094 25,831
-------- ------- ------- -------
Total........................... $933,034 $43,197 $ 7,168 $36,029
======== ======= ======= =======
</TABLE>
--------------------
(i) Property and equipment is depreciated on a straight-line basis over an
estimated average 15 year life. The incremental depreciation period
represents the period of the year that the acquisition was not
completed.
(9) Reflects the elimination of management fees paid by the Company to Kunz &
Company of $570 for the period August 1, 1998 through September 30, 1998 in
connection with the Kunz Option.
(10) Reflects the elimination of merger expenses of $6,124 for the year ended
December 31, 1997 incurred by CRBC in connection with the Chancellor
Merger.
(11) Reflects the elimination of the profit participation fee paid by Whiteco to
Metro Management Associates of $2,322 and $1,756 for the year ended
December 31, 1997 and the nine months ended September 30, 1998,
respectively.
(12) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Transactions, the amendment and restatement
of the Company's senior credit agreement on April 25, 1997 (the "Senior
Credit Facility"), Chancellor Media's $3.00 Convertible Preferred Stock
Offering completed on June 16, 1997, the offering by the Company of the
8 1/8% Notes on December 22, 1997, Chancellor Media's 1998 Equity Offering
completed on March 13, 1998, the repurchase of the Company's 12% Exchange
Debentures on June 10, 1998, the repurchase of the Company's 12 1/4% Ex-
B-20
<PAGE> 72
change Debentures on August 19, 1998, the Company's offering of the 9%
Notes on September 30, 1998 and the Company's offering of the 8% Senior
Notes on November 17, 1998:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions................................. $3,779,250 $2,252,191
Completed Dispositions................................. (349,250) --
Chancellor Merger(a)................................... 164,000 --
Katz Acquisition(b).................................... 157,101 --
New Loan Fees.......................................... 10,473 --
---------- ----------
Total additional bank borrowings......................... $3,761,574 $2,252,191
========== ==========
Interest expense at 7.0%................................. $ 217,836 $ 104,048
Less: historical interest expense related to completed
station acquisitions and dispositions.................. (20,965) (13,052)
---------- ----------
Net increase in interest expense......................... 196,871 90,996
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7.0%:
$3.00 Convertible Preferred Stock Offering proceeds
contributed to the Company of $287,808 for the
period January 1, 1997 to June 16, 1997............. (9,290) --
8 1/8% Notes proceeds of $485,000 for the period
January 1, 1997 to December 22, 1997 to December 22,
1997................................................ (33,196) --
Chancellor Media's 1998 Equity Offering proceeds
contributed to the Company and used to reduce bank
borrowings by $673,000 for the year ended December
31, 1997............................................ (47,110) (9,553)
9% Notes proceeds of $730,000 for the year ended
December 31, 1997 and the nine months ended
September 30, 1998.................................. (51,100) (38,325)
8% Notes proceeds of $730,000 for the year ended
December 31, 1997 and the nine months ended
September 30, 1998.................................. (51,100) (38,325)
Interest expense on the Company's $500,000 8 1/8% Notes
issued December 22, 1997............................... 39,722 --
Interest expense on borrowings to finance the repurchase
of the Company's 12% Exchange Debentures on June 10,
1998................................................... 18,200 8,089
Interest expense on borrowings to finance the repurchase
of the Company's 12 1/4% Exchange Debentures on August
19, 1998............................................... 9,949 6,329
Interest expense on the Company's $750,000 9% Notes
issued September 30, 1998.............................. 67,500 50,625
Interest expense on the Company's $750,000 8% Senior
Notes issued November 17, 1998......................... 60,000 45,000
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................... (24,386) (11,692)
---------- ----------
Total adjustment for net decrease in interest expense.... $ 176,060 $ 103,144
========== ==========
</TABLE>
B-21
<PAGE> 73
- ---------------
(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.
(b) The Company incurred additional bank borrowings of $149,601 to finance
the payment of $11.00 in cash for each outstanding share of Katz Common
Stock and $7,500 to finance estimated acquisition costs related to the
Katz Acquisition.
(13) 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.
(14) Reflects the elimination of preferred stock dividends and accretion on the
12% Preferred Stock and the 12 1/4% Preferred Stock of $40,222 and $17,601
for the year ended December 31, 1997 and the nine months ended September
30, 1998, respectively, in connection with the exchange of the 12%
Preferred Stock and 12 1/4% Preferred Stock into 12% Debentures and 12 1/4%
Debentures, respectively, and the subsequent repurchase of all the 12%
Debentures and 12 1/4% Debentures.
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE PENDING TRANSACTIONS
(15) The detail of the historical financial data of the companies to be acquired
in the Pending Transactions for the year ended December 31, 1997 and the
nine months ended September 30, 1998 has been obtained from the historical
financial statements of the respective companies and is summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------------- --------------
CAPSTAR/SFX PHOENIX CHICAGO
TRANSACTION ACQUISITION DISPOSITION PENDING
HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997 1/1 - 12/31(a) 1/1 - 12/31(b) 1/1 - 12/31(c) HISTORICAL
---------------------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Gross revenues.................................... $60,701 $13,796 $(15,231) $59,266
Less: agency commissions.......................... (7,657) (1,656) 1,990 (7,323)
------- ------- -------- -------
Net revenues...................................... 53,044 12,140 (13,241) 51,943
Operating expenses excluding depreciation and
amortization.................................... 37,857 7,132 (16,248) 28,741
Depreciation and amortization..................... 7,564 184 (592) 7,156
Corporate general and administrative.............. -- -- -- --
------- ------- -------- -------
Operating income.................................. 7,623 4,824 3,599 16,046
Interest expense.................................. 10 -- -- 10
Interest income................................... -- -- -- --
Other (income) expense............................ -- -- -- --
------- ------- -------- -------
Income (loss) before income taxes................. 7,613 4,824 3,599 16,036
Income tax expense................................ -- 1,750 -- 1,750
------- ------- -------- -------
Net income (loss)................................. $ 7,613 $ 3,074 $ 3,599 $14,286
======= ======= ======== =======
</TABLE>
B-22
<PAGE> 74
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
--------------------------------------------- ------------
CAPSTAR/SFX PHOENIX CHICAGO
TRANSACTION ACQUISITION DISPOSITION PENDING
HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 1/1 - 5/29(a) 1/1 - 9/30(b) 1/1 - 8/20(c) HISTORICAL
------------------------------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Gross revenues...................................... $23,382 $10,310 $(10,931) $22,761
Less: agency commissions............................ (2,866) (1,117) 1,221 (2,762)
------- ------- -------- -------
Net revenues........................................ 20,516 9,193 (9,710) 19,999
Operating expenses excluding depreciation and
amortization...................................... 14,269 5,243 (13,026) 6,486
Depreciation and amortization....................... 3,101 146 (367) 2,880
------- ------- -------- -------
Operating income (loss)............................. 3,146 3,804 3,683 10,633
Interest expense.................................... 4 275 -- 279
Interest income..................................... 1 -- -- 1
Other (income) expense.............................. -- -- -- --
------- ------- -------- -------
Income (loss) before income taxes................... 3,141 3,529 3,683 10,353
Income tax expense.................................. -- 1,271 -- 1,271
------- ------- -------- -------
Net income (loss)................................... $ 3,141 $ 2,258 $ 3,683 $ 9,082
======= ======= ======== =======
</TABLE>
- ---------------
(a) On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and
KQUE-FM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM,
WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX
Stations") for an aggregate purchase price of approximately $637,500 in a
series of purchases and exchanges over a period of three years (the
"Capstar/SFX Transaction"). The Capstar/SFX Stations were acquired by
Capstar as part of Capstar's acquisition of SFX on May 29, 1998. On May 29,
1998, the Company completed the Houston Exchange (defined above) and began
operating the remaining ten Capstar/SFX Stations under time brokerage
agreements. The Company also provided a loan to Capstar in the principal
amount of $150,000 (the "Capstar Loan") as part of the Capstar/SFX
Transaction. A portion of the Capstar Loan will be prepaid in connection
with the Company's acquisition of, and the proceeds of such prepayment
would be used by the Company as a portion of the purchase price for, each
Capstar/SFX Station. The Company is currently assessing whether the terms
of the Capstar/SFX Transaction will be modified upon the consummation of
the Capstar Merger by Chancellor Media. The purchase price for the
remaining ten Capstar/SFX Stations will be approximately $494,250.
(b) On September 15, 1998, the Company entered into an agreement to acquire
KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000
in cash plus various other direct acquisition costs (the "Phoenix
Acquisition"). The Company began operating KKFR-FM and KFYI-AM under a time
brokerage agreement effective November 5, 1998.
(c) On August 20, 1998, the Company entered into an agreement to sell WMVP-AM
in Chicago to ABC, Inc. for $21,000 in cash (the "Chicago Disposition").
The Company entered into a time brokerage agreement to sell substantially
all of the broadcast time of WMVP-AM effective September 10, 1998.
(16) Reflects incremental amortization related to the assets acquired in the
Pending Transactions and is based on the allocation of the total
consideration as follows:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1997 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ---------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Capstar/SFX Transaction................. 1/1-12/31 $483,835 $32,256 $5,874 $26,382
Chicago Disposition..................... 1/1-12/31 (2,844) (190) (339) 149
Phoenix Acquisition..................... 1/1-12/31 88,212 5,881 103 5,778
-------- ------- ------ -------
Total........................... $569,203 $37,947 $5,638 $32,309
======== ======= ====== =======
</TABLE>
B-23
<PAGE> 75
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
NINE MONTHS ENDED SEPTEMBER 30, 1998 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ------------------------------------ ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Capstar/SFX Transaction................ 1/1-9/30 $483,835 $24,192 $3,627 $20,565
Chicago Disposition.................... 1/1-9/30 (2,844) (142) (189) 47
Phoenix Acquisition.................... 1/1-9/30 88,212 4,411 78 4,333
-------- ------- ------ -------
Total.......................... $569,203 $28,461 $3,516 $24,945
======== ======= ====== =======
</TABLE>
- ---------------
(i)Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life. The incremental amortization period
represents the period of the year that the company was not owned by the
Company.
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.
(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,
1997 1998
------------ -------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions................................... $434,250 $434,250
Pending Dispositions................................... (21,000) (21,000)
-------- --------
Total additional bank borrowings....................... $413,250 $413,250
======== ========
Interest expense at 7.0%............................... $ 28,928 $ 21,695
Less: historical interest expense related to completed
station acquisitions and dispositions.................. (11) (279)
-------- --------
Total adjustment for net increase in interest expense.... $ 28,917 $ 21,416
======== ========
</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.
B-24
