<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 16, 1999
CHANCELLOR MEDIA CORPORATION
(Exact name of Registrant as specified in charter)
DELAWARE 0-21570 75-2247099
(State or other jurisdiction (Commission file number) (I.R.S. employer
of incorporation) identification no.)
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(Exact name of Registrant as specified in charter)
DELAWARE 333-32259 75-2451687
(State or other jurisdiction (Commission file number) (I.R.S. employer
of incorporation) identification no.)
1845 WOODALL RODGERS FREEWAY, SUITE 1300
DALLAS, TEXAS 75201
(Address of principal executive offices)
Registrants' telephone number, including area code: (214) 922-8700
----------
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 14, 1998, Chancellor Media Corporation of Los Angeles
("CMCLA") entered into an agreement to sell WMVP-AM in Chicago, Illinois to ABC,
Inc. ("ABC") for approximately $21.0 million in cash. CMCLA also entered into a
time brokerage agreement to sell substantially all of the broadcast time of
WMVP-AM effective September 10, 1998. The sale of WMVP-AM was completed by the
parties on April 16, 1999. The sales price was determined by CMCLA through
arms-length negotiations with ABC.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Unaudited Pro Forma Financial Information
The unaudited Pro Forma Financial Information of Chancellor Media
Corporation and Chancellor Media Corporation of Los Angeles begin on page P-1
following the signature page to this report.
(c) Exhibits
2.54 Purchase Agreement between Chancellor Media Corporation of Los Angeles and
ABC, Inc.*
- ----------
*To be filed by amendment.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CHANCELLOR MEDIA CORPORATION
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
Date: May 3, 1999 By: /s/ ANDREA ARCHER HULCY
-----------------------------------------
Andrea Archer Hulcy
Vice President and Controller
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 1998 and 1999 and the elimination of the consolidated historical data of
the stations disposed in the transactions completed by the Company during 1998
and 1999. The unaudited pro forma condensed combined balance sheet data at
December 31, 1998 presents adjustments for the transactions completed in 1999
and the Pending Transactions, as if each such transaction had occurred at
December 31, 1998. The unaudited pro forma condensed combined statement of
operations data for the twelve months ended December 31, 1998 presents
adjustments for the transactions completed by the Company in 1998 and 1999, the
1998 Financing Transactions and the Pending Transactions (excluding the
acquisition of Petry Media Corporation), as if each such transaction occurred on
January 1, 1998. The acquisition of Petry is excluded from the pro forma
information included in this joint proxy statement/prospectus due to uncertainty
regarding DOJ approval of the transaction. In the opinion of management of the
Company, such information is not material to such pro forma presentations.
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 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 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.
P-1
<PAGE> 5
CHANCELLOR MEDIA CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
AT DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
CAPSTAR AS
ADJUSTED
PRO FORMA COMPANY FOR THE PRO FORMA
ADJUSTMENTS AS ADJUSTED COMPLETED CAPSTAR ADJUSTMENTS
COMPANY FOR THE FOR THE AND PENDING FOR THE
HISTORICAL COMPLETED COMPLETED CAPSTAR CAPSTAR
AT 12/31/98 TRANSACTIONS(1) TRANSACTIONS TRANSACTIONS(2) MERGER
----------- --------------- ------------ ----------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets.......................... $ 424,811 $ 12,564 $ 437,375 $ 160,112 $ --
Property and equipment, net............. 1,388,156 18,168 1,406,324 260,006 --
Intangible assets, net.................. 5,056,047 332,169 5,388,216 4,468,312 1,593,702(3)
Other assets............................ 358,893 -- 358,893 51,107 (150,000)(4)
---------- -------- ---------- ---------- ----------
Total assets.................... $7,227,907 $362,901 $7,590,808 $4,939,537 $1,443,702
========== ======== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt....... $ -- $ -- $ -- $ 29,834 $ --
Other current liabilities............... 236,618 2,585 239,203 120,090 --
---------- -------- ---------- ---------- ----------
Total current liabilities....... 236,618 2,585 239,203 149,924 --
Long-term debt, excluding current
portion............................... 4,096,000 307,962 4,403,962 2,019,176 83,487(3)
(150,000)(4)
Deferred tax liabilities................ 453,134 42,858 495,992 1,198,129 319,069(3)
Other liabilities....................... 50,325 250 50,575 178 --
---------- -------- ---------- ---------- ----------
Total liabilities............... 4,836,077 353,655 5,189,732 3,367,407 252,556
Redeemable preferred stock.............. -- -- -- 262,368 26,894(3)
STOCKHOLDERS' EQUITY:
Preferred stock......................... 409,500 -- 409,500 -- --
Common stock............................ 1,428 -- 1,428 1,076 (543)(3)
Additional paid in capital.............. 2,259,583 -- 2,259,583 1,503,201 972,974(3)
Stock subscriptions receivable.......... -- -- -- (2,694) --
Unearned compensation................... -- -- -- (4,893) 4,893(3)
Accumulated deficit..................... (278,681) 9,246 (269,435) (186,928) 186,928(3)
---------- -------- ---------- ---------- ----------
Total stockholders' equity...... 2,391,830 9,246 2,401,076 1,309,762 1,164,252
---------- -------- ---------- ---------- ----------
Total liabilities and
stockholders' equity.......... $7,227,907 $362,901 $7,590,808 $4,939,537 $1,443,702
========== ======== ========== ========== ==========
<CAPTION>
COMPANY
AS ADJUSTED
FOR THE
COMPLETED PRO FORMA
TRANSACTIONS ADJUSTMENTS FOR
AND THE THE PENDING COMPANY
CAPSTAR MERGER TRANSACTION(5) PRO FORMA
-------------- --------------- -----------
<S> <C> <C> <C>
ASSETS:
Current assets.......................... $ 597,487 $ -- $ 597,487
Property and equipment, net............. 1,666,330 1,771 1,668,101
Intangible assets, net.................. 11,450,230 88,229 11,538,459
Other assets............................ 260,000 -- 260,000
----------- ------- -----------
Total assets.................... $13,974,047 $90,000 $14,064,047
=========== ======= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt....... $ 29,834 $ -- $ 29,834
Other current liabilities............... 359,293 -- 359,293
----------- ------- -----------
Total current liabilities....... 389,127 -- 389,127
Long-term debt, excluding current
portion............................... 6,356,625 90,000 6,446,625
Deferred tax liabilities................ 2,013,190 -- 2,013,190
Other liabilities....................... 50,753 -- 50,753
----------- ------- -----------
Total liabilities............... 8,809,695 90,000 8,899,695
Redeemable preferred stock.............. 289,262 -- 289,262
STOCKHOLDERS' EQUITY:
Preferred stock......................... 409,500 -- 409,500
Common stock............................ 1,961 1,961
Additional paid in capital.............. 4,735,758 -- 4,735,758
Stock subscriptions receivable.......... (2,694) -- (2,694)
Unearned compensation................... -- -- --
Accumulated deficit..................... (269,435) -- (269,435)
----------- ------- -----------
Total stockholders' equity...... 4,875,090 -- 4,875,090
----------- ------- -----------
Total liabilities and
stockholders' equity.......... $13,974,047 $90,000 $14,064,047
=========== ======= ===========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-2
<PAGE> 6
CHANCELLOR MEDIA CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS CAPSTAR AS
FOR THE COMPANY AS ADJUSTED FOR THE PRO FORMA
COMPANY COMPANY ADJUSTED COMPLETED ADJUSTMENTS
COMPLETED AND THE FOR THE CAPSTAR AND FOR THE
YEAR ENDED COMPANY TRANSACTIONS COMPLETED COMPLETED PENDING CAPSTAR CAPSTAR
DECEMBER 31, 1998 HISTORICAL HISTORICAL(6) TRANSACTIONS TRANSACTIONS TRANSACTIONS(14) MERGER
- ----------------- ---------- ------------- ------------ ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $1,440,357 $261,292 $ -- $1,701,649 $ 728,742 $ (56,261)(15)
Less: agency commissions.......... (166,501) (28,372) -- (194,873) (62,670) --
---------- -------- --------- ---------- --------- ---------
Net revenues...................... 1,273,856 232,920 -- 1,506,776 666,072 (56,261)
Operating expenses excluding
depreciation and amortization.... 682,061 118,666 -- 800,727 385,896 (4,400)(15)
Depreciation and amortization..... 446,338 51,201 22,736(7) 578,345 143,979 (49,425)(15)
58,070(8) 281,222(16)
Corporate general and
administrative................... 36,722 12,775 (570)(9) 48,927 28,963 --
Stock option compensation......... -- -- -- -- 21,401 --
Merger, nonrecurring and systems
development expense.............. 63,661 2,164 (2,164)(10) 63,661 57,892 (43,105)(17)
---------- -------- --------- ---------- --------- ---------
Operating income (loss)........... 45,074 48,114 (78,072) 15,116 27,941 (240,553)
Interest expense.................. 217,136 13,762 131,973(11) 362,871 193,056 (10,600)(15)
1,750(18)
Interest income................... (15,650) (643) -- (16,293) (3,870) 10,600(15)
Gain on disposition of assets..... (123,845) (3,158) -- (127,003) -- --
Gain on disposition of
representation contracts......... (32,198) -- -- (32,198) -- --
Loss on investment in limited
liability companies.............. -- -- -- -- 28,565 --
Other (income) expense............ (3,221) (692) -- (3,913) 1,524 --
---------- -------- --------- ---------- --------- ---------
Income (loss) before income
taxes............................ 2,852 38,845 (210,045) (168,348) (191,334) (242,303)
Income tax expense (benefit)...... 33,751 -- (72,889)(12) (39,138) (58,889) (87,301)(19)
Dividends and accretion on
preferred stock of subsidiary.... 17,601 -- (17,601)(13) -- 25,586 --
---------- -------- --------- ---------- --------- ---------
Net income (loss)................. (48,500) 38,845 (119,555) (129,210) (158,031) (155,002)
Preferred stock dividends......... 25,670 -- -- 25,670 -- --
---------- -------- --------- ---------- --------- ---------
Income (loss) attributable to
common stockholders.............. $ (74,170) $ 38,845 $(119,555) $ (154,880) $(158,031) $(155,002)
========== ======== ========= ========== ========= =========
Basic and diluted income (loss)
per common share................. $ (0.54) $ (1.12)
========== ==========
Weighted average common shares
outstanding(21).................. 137,979 137,979 53,319
========== ========== =========
<CAPTION>
COMPANY
PRO FORMA
AS ADJUSTED
FOR COMPLETED
TRANSACTIONS COMPANY
AND THE PRO FORMA
YEAR ENDED CAPSTAR PENDING COMPANY
DECEMBER 31, 1998 MERGER TRANSACTION(20) PRO FORMA
- ----------------- ------------- --------------- ----------
<S> <C> <C> <C>
Gross revenues.................... $2,374,130 $12,052 $2,386,182
Less: agency commissions.......... (257,543) (1,329) (258,872)
---------- ------- ----------
Net revenues...................... 2,116,587 10,723 2,127,310
Operating expenses excluding
depreciation and amortization.... 1,182,223 6,150 1,188,373
Depreciation and amortization..... 954,121 5,984 960,105
Corporate general and
administrative................... 77,890 -- 77,890
Stock option compensation......... 21,401 -- 21,401
Merger, nonrecurring and systems
development expense.............. 78,448 -- 78,448
---------- ------- ----------
Operating income (loss)........... (197,496) (1,411) (198,907)
Interest expense.................. 547,077 6,632 553,709
Interest income................... (9,563) -- (9,563)
Gain on disposition of assets..... (127,003) -- (127,003)
Gain on disposition of
representation contracts......... (32,198) -- (32,198)
Loss on investment in limited
liability companies.............. 28,565 -- 28,565
Other (income) expense............ (2,389) -- (2,389)
---------- ------- ----------
Income (loss) before income
taxes............................ (601,985) (8,043) (610,028)
Income tax expense (benefit)...... (185,328) (3,378) (188,706)
Dividends and accretion on
preferred stock of subsidiary.... 25,586 -- 25,586
---------- ------- ----------
Net income (loss)................. (442,243) (4,665) (446,908)
Preferred stock dividends......... 25,670 -- 25,670
---------- ------- ----------
Income (loss) attributable to
common stockholders.............. $ (467,913) $(4,665) $ (472,578)
========== ======= ==========
Basic and diluted income (loss)
per common share................. $ (2.45) $ (2.47)
========== ==========
Weighted average common shares
outstanding(21).................. 191,298 191,298
========== ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-3
<PAGE> 7
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED
TO THE COMPLETED TRANSACTIONS
(1) Reflects the Completed Transactions that were completed after December
31, 1998 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
--------------------------------------------------------------------------------------------------------
PROPERTY AND DEFERRED
COMPLETED PURCHASE CURRENT EQUIPMENT, INTANGIBLE CURRENT TAX OTHER ACCUMULATED
TRANSACTIONS PRICE ASSETS NET ASSETS, NET LIABILITIES LIABILITIES LIABILITIES DEFICIT
- ------------ -------- ------- ------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outdoor
Acquisitions(a).... $ 45,204 $ 2,346 $18,335 $ 25,110 $ (337) $ -- $(250) $ --
Cleveland
Acquisitions(b).... 283,758 10,218 2,047 309,903 (2,248) (36,162)(c) -- --
Chicago
Disposition(d)..... (21,000) -- (2,214) (2,844) -- (6,696) -- (9,246)
-------- ------- ------- -------- ------- -------- ----- -------
$307,962 $12,564 $18,168 $332,169 $(2,585) $(42,858) $(250) $(9,246)
======== ======= ======= ======== ======= ======== ===== =======
<CAPTION>
FINANCING
-----------
INCREASE IN
COMPLETED LONG-TERM
TRANSACTIONS DEBT
- ------------ -----------
<S> <C>
Outdoor
Acquisitions(a).... $ 45,204
Cleveland
Acquisitions(b).... 283,758
Chicago
Disposition(d)..... (21,000)
--------
$307,962
========
</TABLE>
- -------------------------
(a)
Subsequent to January 1, 1999, the Company acquired approximately
4,500 outdoor display faces from Triumph Outdoor Holdings and certain
affiliated companies ("Triumph") for approximately $37,006 in cash
including working capital and acquired approximately 100 additional
billboards and outdoor displays in various transactions for
approximately $8,198. The outdoor acquisitions aggregate purchase
price of $45,204 has been allocated to property and equipment and
intangible assets based upon a preliminary appraisal for Triumph and
historical information from prior outdoor acquisitions. The amounts
allocated to property and equipment consist primarily of advertising
structures with an estimated average life of 15 years. The amounts
allocated to intangible assets represent goodwill with an estimated
average life of 40 years.
(b)
On January 28, 1999, the Company acquired Wincom Broadcasting
Corporation which owns WQAL-FM in Cleveland. The Company had
previously been operating WQAL-FM under a time brokerage agreement
effective October 1, 1998. On February 2, 1999, the Company acquired
five 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 $283,758 in cash including working
capital, subject to certain adjustments. 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 and are based on information provided by management of the
respective companies acquired. The Company, on a preliminary basis,
has allocated the intangible assets to broadcast licenses with an
estimated average life of 15 years based upon historical information
from prior radio acquisitions.
(c)
Reflects a deferred tax liability related to the difference between
the financial statement carrying amount and the tax basis of assets
acquired in the stock acquisitions of Wincom Broadcasting Corporation
and Zebra Broadcasting Corporation.
(d)
On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc.
for $21,000 in cash. The Company had previously entered into a time
brokerage agreement to sell substantially all of the broadcast time
of WMVP-AM effective September 10, 1998. The amounts allocated to
accumulated deficit and deferred tax liabilities represent the
estimated gain on the disposition of WMVP-AM of $15,942 net of taxes
of $6,696.
P-4
<PAGE> 8
ADJUSTMENTS TO THE UNAUDITED PRO FORMA BALANCE SHEET RELATED TO CAPSTAR AS
ADJUSTED FOR THE COMPLETED CAPSTAR AND PENDING CAPSTAR TRANSACTIONS
(2) The historical balance sheet of Capstar at December 31, 1998 and the
pro forma adjustments related to the Completed Capstar and Pending
Capstar Transactions are summarized below:
<TABLE>
<CAPTION>
CAPSTAR AS
CAPSTAR PRO FORMA CAPSTAR AS PRO FORMA ADJUSTED FOR THE
HISTORICAL ADJUSTMENTS FOR ADJUSTED FOR ADJUSTMENTS FOR COMPLETED
AT THE COMPLETED COMPLETED THE PENDING CAPSTAR AND
DECEMBER 31, CAPSTAR CAPSTAR CAPSTAR PENDING CAPSTAR
1998 TRANSACTIONS(A) TRANSACTIONS TRANSACTIONS TRANSACTIONS
------------ --------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets.................... $ 150,084 $ -- $ 150,084 $ 10,028(b) $ 160,112
Property and equipment, net....... 248,920 (1,758) 247,162 12,844(b) 260,006
Intangible assets, net............ 4,240,378 (3,172) 4,237,206 231,106(b) 4,468,312
Other assets...................... 23,620 19,924 43,544 7,563(b) 51,107
---------- -------- ---------- -------- -----------
Total assets............. $4,663,002 $ 14,994 $4,677,996 $261,541 $ 4,939,537
========== ======== ========== ======== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities:
Current portion of long-term
debt............................ $ 29,834 $ -- $ 29,834 $ -- $ 29,834
Other current liabilities......... 114,127 (616) 113,511 6,579(b) 120,090
---------- -------- ---------- -------- -----------
Total current
liabilities............ 143,961 (616) 143,345 6,579 149,924
Long-term debt, excluding current
portion......................... 1,748,755 15,610 1,764,365 219,811(b) 2,019,176
35,000(c)
Deferred tax liabilities.......... 1,163,156 -- 1,163,156 34,973(b) 1,198,129
Other liabilities................. -- -- -- 178(b) 178
---------- -------- ---------- -------- -----------
Total liabilities........ 3,055,872 14,994 3,070,866 296,541 3,367,407
Redeemable preferred stock........ 262,368 -- 262,368 -- 262,368
STOCKHOLDERS' EQUITY:
Common stock...................... 1,076 -- 1,076 -- 1,076
Additional paid-in capital........ 1,503,201 -- 1,503,201 -- 1,503,201
Stock subscriptions receivable.... (2,694) -- (2,694) -- (2,694)
Unearned compensation............. (4,893) -- (4,893) -- (4,893)
Accumulated deficit............... (151,928) -- (151,928) (35,000)(c) (186,928)
---------- -------- ---------- -------- -----------
Total stockholders'
equity................. 1,344,762 -- 1,344,762 (35,000) 1,309,762
---------- -------- ---------- -------- -----------
Total liabilities and
stockholders' equity... $4,663,002 $ 14,994 $4,677,996 $261,541 $ 4,939,537
========== ======== ========== ======== ===========
</TABLE>
- -------------------------
(a) Reflects the Completed Capstar Transactions as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
---------------------------------------------------------- -----------
PROPERTY
AND INTANGIBLE INCREASE IN
COMPLETED CAPSTAR PURCHASE EQUIPMENT, ASSETS, OTHER CURRENT LONG-TERM
TRANSACTIONS PRICE NET NET ASSETS LIABILITIES DEBT
- ----------------- -------- ---------- ---------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Radio Acquisitions(i)................... $15,610 $ 5,057 $ 10,553 $ -- $ -- $15,610
Muzak Transaction(ii)................... -- (6,815) (13,725) 19,924 616 --
------- ------- -------- ------- ---- -------
Total.......................... $15,610 $(1,758) $ (3,172) $19,924 $616 $15,610
======= ======= ======== ======= ==== =======
</TABLE>
(i) Subsequent to January 1, 1999, Capstar acquired 14 radio stations (11
FM and 3 AM) in three separate transactions for an aggregate purchase
price of $15,610. The purchase price has been
P-5
<PAGE> 9
allocated to property and equipment and intangible assets based upon
preliminary appraisals provided by the management of Capstar. Capstar
previously operated all 14 of these stations under either time
brokerage agreements or joint sales agreements.
(ii) On March 18, 1999, Capstar contributed Muzak affiliate territories in
Atlanta, Albany and Macon, Georgia and Ft. Myers, Florida to Muzak
Holdings LLC in exchange for a 20.13% voting interest in Muzak
Holdings LLC. The investment in Muzak Holdings LLC of $19,924
represents the book value of the net assets contributed, which
approximates fair market value.
(b) Reflects the Pending Capstar Transactions as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
-------------------------------------------------------------------
PROPERTY
AND INTANGIBLE
PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT
PENDING CAPSTAR TRANSACTIONS PRICE ASSETS NET(I) NET(II) ASSETS LIABILITIES
- ---------------------------- -------- ------- ---------- ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Triathlon Acquisition(iii).............. $199,923 $10,231 $16,204 $215,365 $ 36 $(6,609)
Other Triathlon Transactions(v)......... (10,000) (203) (4,350) (13,157) 7,527 30
Other Pending Capstar
Transactions(vi)....................... 29,888 -- 990 28,898 -- --
-------- ------- ------- -------- ------ -------
Total................................... $219,811 $10,028 $12,844 $231,106 $7,563 $(6,579)
======== ======= ======= ======== ====== =======
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
--------------------------- -------------
INCREASE
DEFERRED (DECREASE) IN
TAX OTHER LONG-TERM
PENDING CAPSTAR TRANSACTIONS LIABILITIES LIABILITIES DEBT
- ---------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Triathlon Acquisition(iii).............. $(34,973)(iv) $(331) $199,923
Other Triathlon Transactions(v)......... -- 153 (10,000)
Other Pending Capstar
Transactions(vi)....................... -- -- 29,888
-------- ----- --------
Total................................... $(34,973) $(178) $219,811
======== ===== ========
</TABLE>
- -------------------------
(i) The amounts allocated to net property and equipment are based on
preliminary appraisals provided by the management of Capstar.
(ii) Capstar, on a preliminary basis, has allocated the intangible assets to
broadcast licenses and goodwill resulting from the recognition of deferred
tax liabilities in connection with the Triathlon acquisition and are
amortized on a straight-line basis over estimated average lives of 40
years. The amounts allocated to net intangible assets are preliminary and
are based upon historical information from prior radio acquisitions.
(iii)On July 23, 1998, Capstar entered into an agreement to acquire Triathlon
Broadcasting Company for an aggregate purchase price of approximately
$199,923 which includes (a) the conversion of each outstanding share of
each class of Triathlon common stock into the right to receive $13.00 in
cash, resulting in cash payments of approximately $63,647; (b) the
conversion of each outstanding depositary share of Triathlon, representing
one-tenth interest in a share of Triathlon's 9% mandatory convertible
preferred stock, into the right to receive $10.83 in cash, resulting in
cash payments of approximately $63,182; (c) additional consideration
ranging from $0.11 per depositary share to $0.37 per depositary share based
upon the average closing price for Triathlon's common stock for the twenty
days prior to the closing related to the settlement of a depositary
shareholder lawsuit on February 12, 1999, resulting in cash payments of
$642 (assuming $0.11 per share); (d) the conversion of each outstanding
share of Triathlon's Series B convertible preferred stock into the right to
receive $.01 in cash, resulting in cash payments of approximately $6; (e)
the assumption of warrants, stock options, and stock appreciation rights
with an estimated fair value of $2,712; (f) the assumption of long term
debt of $62,496 and (g) estimated acquisition costs of $7,238. If the
merger is not completed by April 30, 1999, subject to certain exceptions,
the merger consideration to be paid to the Triathlon stockholders will
increase by $0.125 per common share and $0.104 per depositary share every
two weeks that lapse after April 30, 1999 until the merger is completed.
Although there can be no assurances, the Company believes that the merger
will be consummated on or before April 30, 1999. 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.
(iv) Reflects a deferred tax liability related to the difference between the
financial statement carrying amount and the tax basis of assets acquired in
the stock acquisition of Triathlon.
(v) In order to consummate the acquisition of Triathlon, Capstar is required to
dispose of KSPZ-FM (owned by Triathlon) in the Colorado Spring market;
KNSS-AM (owned by Capstar Broadcasting) and KFH-AM, KEYN-FM, KQAM-AM and
KWSJ-FM (owned by Triathlon) in the Wichita,
P-6
<PAGE> 10
Kansas market. Capstar has entered into an exchange agreement and an asset
purchase agreement with Citadel Broadcasting Company wherein, upon
consummation of the Triathlon acquisition, Capstar will exchange KSPZ-FM
for KKLI-FM in Colorado Springs, Colorado and sell stations KTWK-AM and
KVOR-AM in Colorado Springs, Colorado and KEYF-FM and KEYF-AM in Spokane,
Washington (all of which are owned by Triathlon) for approximately $10,000
in cash. Capstar is actively seeking a purchaser of the Wichita, Kansas
stations, but has not yet entered into a contract to sell the Wichita,
Kansas stations. Upon consummation of the Triathlon Acquisition, the
Wichita, Kansas stations will be placed in a trust pending the sale of the
stations. Other assets includes $7,300 for the stations held in trust.
Capstar will also contribute the Muzak affiliate territory in Omaha,
Nebraska to be acquired as part of the Triathlon Acquisition to Muzak
Holdings LLC in exchange for an additional 2.74% voting interest in Muzak
Holdings LLC.
(vi) Other Pending Capstar Transactions include the acquisition of three FM
stations, the disposition of 2 FM stations and the acquisition of LAN
International, a software development company.
(c) Reflects additional bank borrowings of $35,000 required to finance estimated
financial advisory and other fees to be incurred by Capstar in connection
with the Merger.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE CAPSTAR MERGER
(3) 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 0.4955 shares of the combined
entity. For 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 Chancellor Media common stock on 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.................. 107,606,231
Exchange ratio.............................................. 0.4955
-----------
Shares of Chancellor Media common stock issued in connection
with the Capstar merger................................... 53,318,887
===========
AGGREGATE PURCHASE PRICE:
Estimated fair value of common stock to be issued in
connection with the Capstar merger (53,318,887 shares @
$44.75 per share)......................................... $2,386,020
Capstar debt and equity assumed at fair values:
Long-term debt outstanding:
Capstar Credit Facility................................ 1,179,421
12 3/4% Senior Discount Notes due 2009................. 228,774
9 1/4% Senior Subordinated Notes due 2007.............. 208,000
10 3/4% Senior Subordinated Notes due 2006............. 333,519
11 3/8% Senior Subordinated Notes due 2000............. 566
Note payable to affiliate.............................. 150,000
Capital lease obligation and other notes payable....... 7,217
-----------
Total long-term debt outstanding.......................... 2,107,497
12% senior exchangeable preferred stock................... 136,371
Series E 12 5/8% cumulative preferred stock............... 152,891
Stock options and warrants issued by Capstar.............. 90,688
Financial advisors, legal, accounting and other transaction
costs..................................................... 25,000
----------
Aggregate purchase price.................................... $4,898,467
==========
</TABLE>
P-7
<PAGE> 11
To record the aggregate purchase price of the Capstar merger and eliminate
certain Capstar historical balances as follows:
<TABLE>
<CAPTION>
ELIMINATION
OF CAPSTAR
HISTORICAL
BALANCES
AS ADJUSTED
FOR THE
COMPLETED
CAPSTAR AND
PURCHASE PENDING CAPSTAR
PRICE CAPSTAR MERGER NET
ALLOCATION TRANSACTIONS FINANCING ADJUSTMENT
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Current assets......................... $ 160,112 $ (160,112) $ -- $ --
Property and equipment, net(a)......... 260,006 (260,006) -- --
Intangible assets(a)................... 6,062,014 (4,468,312) -- 1,593,702
Other assets........................... 51,107 (51,107) -- --
Current liabilities.................... (120,090) 120,090 -- --
Long-term debt(b)...................... -- 2,049,010 (2,132,497) (83,487)
Deferred tax liability(c).............. (1,517,198) 1,198,129 -- (319,069)
Other liabilities...................... (178) 178 -- --
Redeemable preferred stock(d).......... -- 262,368 (289,262) (26,894)
Common stock(e)........................ -- 1,076 (533) 543
Additional paid-in capital(f).......... -- 1,503,201 (2,476,175) (972,974)
Stock subscription receivable.......... 2,694 (2,694) -- --
Unearned compensation.................. -- (4,893) -- (4,893)
Accumulated deficit.................... -- (186,928) -- (186,928)
----------- ----------- ----------- ----------
Aggregate purchase price............... $ 4,898,467 $ -- $(4,898,467) $ --
=========== =========== =========== ==========
</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 $4,544,816 of intangible assets to broadcast licenses with an
estimated average life of 15 years and $1,517,198 to goodwill resulting
from the recognition of deferred tax liabilities with an estimated
average life of 15 years. This preliminary allocation is based upon
historical information from prior radio acquisitions.
(b) Reflects the adjustment to record debt assumed or incurred by the
Company including (i) the fair value of Capstar's long-term debt of
$2,107,497 and (ii) additional bank borrowings of $25,000 required to
finance estimated financial advisors, legal, accounting and other
transaction costs.
(c) Reflects the adjustment to record a $1,517,198 deferred tax liability
related to the difference between the financial statement carrying
amount and the tax basis of Capstar acquired assets.
(d) Reflects the adjustment to record the estimated fair value of redeemable
preferred stock to be assumed by the Company including (i) Capstar's 12%
senior exchangeable preferred stock of $136,371 and (ii) Capstar's
Series E cumulative exchangeable preferred stock of $152,891.
(e) Reflects 53,318,887 shares of Chancellor Media common stock at a par
value of $0.01 to be issued in connection with the Capstar merger.
(f) Reflects additional paid-in capital of $2,385,487 related to 53,318,887
shares of Chancellor Media common stock issued in connection with the
Capstar merger and the fair value of stock options and warrants assumed
by Chancellor Media of $90,688. The fair value of the Capstar stock
options and warrants was estimated using the Black-Scholes option
pricing model and the Capstar merger exchange ratio of 0.4955 applied to
Capstar's outstanding options and warrants and exercise prices.
P-8
<PAGE> 12
At December 31, 1998, Capstar had 3,998,144 options outstanding with an
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.
(4) Reflects the elimination of the $150,000 Capstar loan (as described on
page P-11) in connection with the Capstar merger.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING TRANSACTION
(5) Reflects the Pending Transaction as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
------------------------------------------------------------------ ----------
INCREASE
PROPERTY (DECREASE)
PURCHASE/ AND INTANGIBLE DEFERRED IN
(SALES) EQUIPMENT, ASSETS, TAX ACCUMULATED LONG-TERM
PENDING TRANSACTION PRICE NET(A) NET(B) LIABILITIES DEFICIT DEBT
------------------- --------- ---------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Phoenix Acquisition(c).......................... $90,000 $1,771 $88,229 $ -- $ -- $90,000
</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 Transaction.
(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) 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.
P-9
<PAGE> 13
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE COMPLETED TRANSACTIONS HISTORICAL
(6) The Completed Transactions historical condensed combined statement of
operations for the year ended December 31, 1998 are summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------------------------------------------------------------------
MARTIN AS
ADJUSTED FOR OTHER
CAPSTAR/SFX COMPLETED PRIMEDIA WHITECO OUTDOOR
TRANSACTIONS WWDC-FM/AM MARTIN ACQUISITION ACQUISITION ACQUISITIONS
YEAR ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL
DECEMBER 31, 1998 1/1-12/31 (A) 1/1-6/1 (B) 1/1-7/31 (C) 1/1-10/23 (D) 1/1-12/1 (E) 1/1-12/31 (F)
----------------- ------------- ----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........... $34,324 $4,273 $54,472 $12,797 $128,565 $ 7,022
Less: agency
commissions............. (4,302) (528) (5,768) (3,358) (8,973) (2,319)
------- ------ ------- ------- -------- -------
Net revenues............. 30,022 3,745 48,704 9,439 119,592 4,703
Operating expenses
excluding depreciation
and amortization........ 18,464 2,158 23,751 5,363 60,587 3,983
Depreciation and
amortization............ 21,435 45 16,068 2,350 10,342 692
Corporate general and
administrative.......... -- -- 924 2,794 6,759 1,817
Profit participation
fee..................... -- -- -- -- 2,164 --
------- ------ ------- ------- -------- -------
Operating income
(loss).................. (9,877) 1,542 7,961 (1,068) 39,740 (1,789)
Interest expense......... -- 62 11,189 1,972 35 197
Interest income.......... -- (18) (381) -- (58) (4)
Gain on disposition of
assets.................. -- -- -- -- -- (3,158)
Other (income) expense... -- (49) (557) 24 (1,082) 105
------- ------ ------- ------- -------- -------
Income (loss) before
income taxes............ (9,877) 1,547 (2,290) (3,064) 40,845 1,071
Income tax expense....... -- -- -- -- -- --
------- ------ ------- ------- -------- -------
Net income (loss)........ (9,877) 1,547 (2,290) (3,064) 40,845 1,071
Preferred stock
dividends............... -- -- -- -- -- --
------- ------ ------- ------- -------- -------
Income (loss)
attributable to common
stockholders............ $(9,877) $1,547 $(2,290) $(3,064) $ 40,845 $ 1,071
======= ====== ======= ======= ======== =======
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------- ----------------------------
WBAB-FM
WBLI-FM
CLEVELAND WGBB-AM CHICAGO COMPANY
ACQUISITIONS WHFM-FM DISPOSITION COMPLETED
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
DECEMBER 31, 1998 1/1-12/31 (G) 1/1-5/29 (H) 1/1-12/31 (I) HISTORICAL
----------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Gross revenues........... $36,432 $(5,063) $(11,530) $261,292
Less: agency
commissions............. (4,859) 514 1,221 (28,372)
------- ------- -------- --------
Net revenues............. 31,573 (4,549) (10,309) 232,920
Operating expenses
excluding depreciation
and amortization........ 20,962 (3,331) (13,271) 118,666
Depreciation and
amortization............ 861 -- (592) 51,201
Corporate general and
administrative.......... 481 -- -- 12,775
Profit participation
fee..................... -- -- -- 2,164
------- ------- -------- --------
Operating income
(loss).................. 9,269 (1,218) 3,554 48,114
Interest expense......... 307 -- -- 13,762
Interest income.......... (182) -- -- (643)
Gain on disposition of
assets.................. -- -- (3,158)
Other (income) expense... 867 -- -- (692)
------- ------- -------- --------
Income (loss) before
income taxes............ 8,277 (1,218) 3,554 38,845
Income tax expense....... -- -- -- --
------- ------- -------- --------
Net income (loss)........ 8,277 (1,218) 3,554 38,845
Preferred stock
dividends............... -- -- -- --
------- ------- -------- --------
Income (loss)
attributable to common
stockholders............ $ 8,277 $(1,218) $ 3,554 $ 38,845
======= ======= ======== ========
</TABLE>
P-10
<PAGE> 14
- ---------------
(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-AM 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 Company also provided a loan to Capstar in
the principal amount of $150,000 as part of the Capstar/SFX Transaction.
The Capstar/SFX Stations were acquired by Capstar as part of Capstar's
acquisition of SFX on May 29, 1998. This adjustment reflects the following
aspects of the Capstar/SFX Transaction:
(i) On May 29, 1998, the Company exchanged WAPE-FM and WFYV-FM in
Jacksonville (valued at $53,000) for Capstar station KODA-FM in
Houston. As part of the KODA-FM transaction, the Company also paid
cash of $90,250 to the owners of KVET-AM, KVET-FM and KASE-FM, who
simultaneously transferred such stations to Capstar. Thus, this
adjustment records the results of operations of KODA-FM for the period
January 1, 1998 to May 29, 1998. 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. Therefore, the results of
operations of WAPE-FM and WFYV-FM are not included in the Company's
historical condensed statement of operations for the year ended
December 31, 1998.
(ii)The Company began operating the remaining ten Capstar/SFX stations
under time brokerage agreements effective May 29, 1998 pending the
consummation of the Capstar merger. Thus, this adjustment records the
results of operations of the ten Capstar/SFX stations and the related
LMA fee payment to Capstar of $20,594 for the period January 1, 1998
to May 29, 1998.
(iii)
On February 1, 1999, the Company began operating WKNR-FM in Cleveland
under a time brokerage agreement with Capstar, pending the
consummation of the Capstar merger. WKNR-FM was acquired by Capstar as
part of Capstar's acquisition of SFX on May 29, 1998. Therefore, in
addition to the above items, this adjustment records the results of
operations of WKNR-FM for the year ended December 31, 1998.
(b) 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.
(c) On July 31, 1998, the Company acquired Martin Media and certain affiliated
companies for a total purchase price of $615,117 which consisted of
$612,848 in cash including various other direct acquisition costs and the
assumption of notes payable of $2,270. Martin is an outdoor advertising
company with over 13,700 billboards and outdoor displays in 12 states
serving 23 markets. As part of the Martin transaction, the Company acquired
an asset purchase agreement with Kunz & Company and paid an additional
$6,000 in cash for a purchase option deposit previously paid by Martin.
Martin's historical condensed combined statements of operations for the
year ended December 31, 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.
P-11
<PAGE> 15
<TABLE>
<CAPTION>
OTHER PRO FORMA MARTIN AS
COMPLETED ADJUSTMENTS ADJUSTED
MARTIN MARTIN FOR THE FOR
ACQUISITION ACQUISITIONS COMPLETED COMPLETED
HISTORICAL HISTORICAL MARTIN MARTIN
YEAR ENDED DECEMBER 31, 1998 1/1-7/31 1/1-7/31(I) TRANSACTIONS TRANSACTIONS
---------------------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues.................................. $52,345 $2,127 $ -- $54,472
Less: agency commissions........................ (5,612) (156) -- (5,768)
------- ------ ------ -------
Net revenues.................................... 46,733 1,971 -- 48,704
Operating expenses excluding depreciation and
amortization.................................. 22,845 906 -- 23,751
Depreciation and amortization................... 14,694 88 1,286(ii) 16,068
Corporate general and administrative............ 2,919 -- (1,995)(iii) 924
------- ------ ------ -------
Operating income................................ 6,275 977 709 7,961
Interest expense................................ 10,781 -- 408(iv) 11,189
Interest income................................. (381) -- -- (381)
Other (income) expense.......................... (571) 14 -- (557)
------- ------ ------ -------
Net income (loss)............................... $(3,554) $ 963 $ 301 $(2,290)
======= ====== ====== =======
</TABLE>
- -------------------------
(i) Prior to July 31, 1998, Martin acquired approximately 1,636 billboards
and outdoor displays in various transactions for approximately $12,246.
(ii) Reflects the adjustment to record incremental amortization of $1,286 for
the period January 1, 1998 to July 31, 1998 related to the Completed
Martin Transactions based upon an estimated average life of 5 years used
by Martin for intangible assets. 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.
(iii)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 $1,995 for the
period January 1, 1998 through July 31, 1998.
(iv) Reflects the adjustment to increase interest expense by $408 in
connection with the consummation of the Completed Martin Transactions
based upon additional bank borrowings of $12,246 at 8.5%.
(d) 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 a purchase price of $75,619 including various other direct
acquisition costs.
(e) On December 1, 1998, the Company acquired the assets and working capital of
the outdoor advertising division of Whiteco Industries, Inc., including
approximately 22,500 billboards and outdoor displays in 34 states, for
$981,698 in cash including various other direct acquisition costs.
(f) Other outdoor acquisitions consist of (i) approximately 670 billboards and
outdoor displays acquired in 1998 for approximately $23,582; (ii)
approximately 4,500 outdoor display faces acquired from Triumph for
approximately $37,006 in cash including working capital in January and
February 1999 and (iii) approximately 100 additional billboards and outdoor
displays acquired for approximately $8,198 subsequent to January 1, 1999.
(g) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company had previously been operating
WQAL-FM under a time brokerage agreement effective October 1, 1998. On
February 2, 1999, the Company acquired five
P-12
<PAGE> 16
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 $283,758 in cash including working capital, subject to
certain adjustments.
(h) Chancellor began programming WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long
Island under a time brokerage agreement effective July 1, 1996. 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
Company's historical condensed statement of operations for the year ended
December 31, 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.
(i) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for
$21,000 in cash. The Company entered into a time brokerage agreement to
sell substantially all of the broadcast time of WMVP-AM effective September
10, 1998.
(7) 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, 1998 PERIOD(A) ASSETS, NET EXPENSE EXPENSE (DECREASE)
---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Denver Acquisition(b)............................ 1/1-1/30 $ 24,589 $ 137 $ -- $ 137
Bonneville Option(b)............................. 1/1-4/3 186,349 3,209 -- 3,209
KODA-FM(b)....................................... 1/1-5/29 93,294 2,574 656 1,918
WWDC-FM/AM(b).................................... 1/1-6/1 64,338 1,799 -- 1,799
Martin Acquisitions(c)........................... 1/1-7/31 264,803 6,618 12,994 (6,376)
Other 1998 Outdoor Acquisitions(c)............... 1/1-8/31 8,782 146 -- 146
Primedia Acquisition(b).......................... 1/1-10/23 69,361 3,763 1,765 1,998
Kunz Option(c)................................... 1/1-11/13 13,414 292 -- 292
Whiteco Acquisition(c)........................... 1/1-12/1 212,044 4,874 5,826 (952)
Other 1999 Outdoor Acquisitions(c)............... 1/1-12/31 25,110 628 162 466
Cleveland Acquisitions(b)........................ 1/1-12/31 309,903 20,660 561 20,099
---------- ------- ------- -------
Total.................................... $1,271,987 $44,700 $21,964 $22,736
========== ======= ======= =======
</TABLE>
- -------------------------
(a) 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.
(b) Intangible assets for the radio acquisitions consist primarily of FCC
licenses which are amortized on a straight-line basis over an estimated
average life of 15 years.
(c) Intangible assets for the outdoor acquisitions consist primarily of
goodwill which is amortized on a straight-line basis over an estimated
average life of 40 years, except for the acquisition of Martin which
includes non-compete agreements of $27,000 which are amortized on a
straight-line basis over 5 years. The Martin goodwill of $237,803
includes $98,042 resulting from the recognition of deferred tax
liabilities.
(8) Historical depreciation expense of the completed radio acquisitions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation may differ based upon final purchase price allocations. The
following adjustments reflect incremental depreciation related to the
completed outdoor acquisitions and are based on the following allocation to
property and equipment:
P-13
<PAGE> 17
<TABLE>
<CAPTION>
INCREMENTAL PROPERTY AND HISTORICAL ADJUSTMENT
DEPRECIATION EQUIPMENT, DEPRECIATION DEPRECIATION FOR NET
YEAR ENDED DECEMBER 31, 1998 PERIOD(A) NET(A) EXPENSE(A) EXPENSE INCREASE
---------------------------- ------------ -------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Martin Acquisition............................ 1/1-7/31 $ 431,253 $16,771 $3,074 $13,697
Kunz Option................................... 1/1-11/13 26,849 1,556 -- 1,556
Other 1998 Outdoor Acquisitions............... 1/1-11/17 14,815 734 -- 734
Whiteco Acquisition........................... 1/1-12/1 748,940 45,907 4,516 41,391
Other 1999 Outdoor Acquisitions............... 1/1-12/31 18,335 1,222 530 692
---------- ------- ------ -------
Total................................. $1,240,192 $66,190 $8,120 $58,070
========== ======= ====== =======
</TABLE>
--------------------
(a) Property and equipment consists primarily of advertising structures and
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.
(9) 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.
(10) Reflects the elimination of the profit participation fee paid by Whiteco to
Metro Management Associates of $2,164 for the year ended December 31, 1998.
(11) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Transactions, 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>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Additional bank borrowings related to completed
acquisitions.............................................. $2,292,899
==========
Interest expense at 7.0%.................................... $ 123,693
Less: historical interest expense related to completed
acquisitions.............................................. (13,762)
----------
Net increase in interest expense............................ 109,931
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7.0%:
Proceeds from the March 13, 1998 equity offering used to
reduce bank borrowings by $673,000..................... (9,553)
CMCLA 9% Senior Subordinated Notes issuance on September
30, 1998 for net proceeds of $730,000.................. (38,325)
CMCLA 8% Senior Notes issuance on November 17, 1998 for
net proceeds of $730,000............................... (44,996)
Interest expense on borrowings of $262,495 to finance the
repurchase of CMCLA's 12% exchange debentures on June 10,
1998...................................................... 8,167
Interest expense on borrowings of $143,836 to finance the
repurchase of CMCLA's 12 1/4% exchange debentures on
August 19, 1998........................................... 6,405
Interest expense on CMCLA's $750,000 9% Senior Subordinated
Notes issued September 30, 1998........................... 50,625
Interest expense on CMCLA's $750,000 8% Senior Notes issued
November 17, 1998......................................... 52,833
Elimination of historical interest expense on the CMCLA 12%
Subordinated Exchange Debentures from May 13, 1998 through
June 10, 1998............................................. (1,976)
Elimination of historical interest expense on the CMCLA
12 1/4% Subordinated Exchange Debentures from July 23,
1998 through August 19, 1998.............................. (1,138)
----------
Total adjustment for net increase in interest expense....... $ 131,973
==========
</TABLE>
(12) Reflects the tax effect of the pro forma adjustments.
P-14
<PAGE> 18
(13) Reflects the elimination of preferred stock dividends on the 12% Preferred
Stock and the 12 1/4% Preferred Stock of $17,601 for the year ended
December 31, 1998, 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.
P-15
<PAGE> 19
ADJUSTMENTS TO CAPSTAR'S HISTORICAL CONDENSED STATEMENT OF OPERATIONS RELATED TO
THE COMPLETED CAPSTAR TRANSACTIONS
(14) Capstar's historical condensed statement of operations for the year ended
December 31, 1998 and pro forma adjustments related to the Completed and
Pending Capstar Transactions is summarized below:
<TABLE>
<CAPTION>
PRO FORMA CAPSTAR PRO FORMA
ADJUSTMENTS AS ADJUSTED ADJUSTMENTS
COMPLETED FOR THE FOR THE PENDING FOR THE
CAPSTAR COMPLETED COMPLETED CAPSTAR PENDING
YEAR ENDED CAPSTAR TRANSACTIONS CAPSTAR CAPSTAR TRANSACTIONS CAPSTAR
DECEMBER 31, 1998 HISTORICAL HISTORICAL(A) TRANSACTIONS TRANSACTIONS HISTORICAL(L) TRANSACTIONS
- ----------------- ---------- ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $568,050 $ 120,176 $ -- $ 688,226 $ 40,516 $ --
Less: agency commissions.............. (50,583) (8,026) -- (58,609) (4,061) --
-------- --------- -------- --------- -------- --------
Net revenues.......................... 517,467 112,150 -- 629,617 36,455 --
Operating expenses excluding
depreciation and amortization....... 304,565 57,874 -- 362,439 23,457 --
Depreciation and amortization......... 96,207 10,953 27,033(B) 134,193 5,307 4,479(M)
Corporate general and administrative.. 23,678 3,208 -- 26,886 2,077 --
Stock option compensation............. 21,260 74,199 (74,199)(C) 21,260 141 --
LMA fees.............................. 4,103 697 (4,800)(D) -- -- --
Other nonrecurring costs.............. 12,970 35,318 (11,255)(E) 20,433 2,459 35,000(N)
(16,600)(F)
-------- --------- -------- --------- -------- --------
Operating income (loss)............... 54,684 (70,099) 79,821 64,406 3,014 (39,479)
Interest expense...................... 121,145 31,569 19,957(G) 172,671 6,433 13,952(O)
Interest income....................... (3,423) (380) -- (3,803) (67) --
Loss on investments in limited
liability companies................. 28,565 -- -- 28,565 -- --
Other (income) expense................ 183 3,311 (3,163)(H) 331 1,193 --
-------- --------- -------- --------- -------- --------
Income (loss) before income taxes..... (91,786) (104,599) 63,027 (133,358) (4,545) (53,431)
Income tax expense (benefit).......... (24,317) 210 (14,760)(I) (38,867) -- (20,022)(P)
Dividends and accretion on preferred
stock of subsidiary................. 17,264(J)
21,987 -- (13,665)(K) 25,586 -- --
-------- --------- -------- --------- -------- --------
Net income (loss)..................... (89,456) (104,809) 74,188 (120,077) (4,545) (33,409)
Preferred stock dividends............. -- 17,264 (17,264)(J) -- 5,507 (5,507)(Q)
-------- --------- -------- --------- -------- --------
Income (loss) attributable to common
stockholders........................ $(89,456) $(122,073) $ 91,452 $(120,077) $(10,052) $(27,902)
======== ========= ======== ========= ======== ========
<CAPTION>
CAPSTAR
AS ADJUSTED
FOR THE
COMPLETED
CAPSTAR
AND PENDING
YEAR ENDED CAPSTAR
DECEMBER 31, 1998 TRANSACTIONS
- ----------------- ------------
<S> <C>
Gross revenues........................ $ 728,742
Less: agency commissions.............. (62,670)
---------
Net revenues.......................... 666,072
Operating expenses excluding
depreciation and amortization....... 385,896
Depreciation and amortization......... 143,979
Corporate general and administrative.. 28,963
Stock option compensation............. 21,401
LMA fees.............................. --
Other nonrecurring costs.............. 57,892
---------
Operating income (loss)............... 27,941
Interest expense...................... 193,056
Interest income....................... (3,870)
Loss on investments in limited
liability companies................. 28,565
Other (income) expense................ 1,524
---------
Income (loss) before income taxes..... (191,334)
Income tax expense (benefit).......... (58,889)
Dividends and accretion on preferred
stock of subsidiary.................
25,586
---------
Net income (loss)..................... (158,031)
Preferred stock dividends............. --
---------
Income (loss) attributable to common
stockholders........................ $(158,031)
=========
</TABLE>
P-16
<PAGE> 20
(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, 1998 has been obtained from the historical financial statements
of the respective stations and is summarized below:
<TABLE>
<CAPTION>
OTHER OTHER
PATTERSON SFX SFX COMPLETED COMPLETED
ACQUISITION ACQUISITION TRANSACTIONS CAPSTAR CAPSTAR
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS TRANSACTIONS
DECEMBER 31, 1998 1/1-1/29(I) 1/1-5/29(II) 1/1-5/29(III) HISTORICAL(IV) HISTORICAL
----------------- ----------- ------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues................ $ 3,853 $ 141,369 $(24,457) $ (589) $ 120,176
Less: agency commissions...... (350) (16,692) 5,430 3,586 (8,026)
------- --------- -------- ------- ---------
Net revenues.................. 3,503 124,677 (19,027) 2,997 112,150
Operating expenses excluding
depreciation and
amortization................ 2,523 78,235 (26,309) 3,425 57,874
Depreciation and
amortization................ 497 17,668 (4,875) (2,337) 10,953
Corporate general and
administrative.............. 171 3,069 -- (32) 3,208
Stock option compensation..... -- 74,199 -- -- 74,199
LMA fees...................... -- 697 -- -- 697
Other nonrecurring costs...... -- 35,318 -- -- 35,318
------- --------- -------- ------- ---------
Operating income (loss)....... 312 (84,509) 12,157 1,941 (70,099)
Interest expense.............. 645 30,867 (4) 61 31,569
Interest income............... -- (352) -- (28) (380)
Other expense................. 3,163 -- 145 3 3,311
------- --------- -------- ------- ---------
Income (loss) before income
taxes....................... (3,496) (115,024) 12,016 1,905 (104,599)
Income tax expense............ -- 210 -- -- 210
------- --------- -------- ------- ---------
Net income (loss)............. (3,496) (115,234) 12,016 1,905 (104,809)
Preferred stock dividends..... -- 17,264 -- -- 17,264
------- --------- -------- ------- ---------
Income (loss) attributable to
common stockholders......... $(3,496) $(132,498) $ 12,016 $ 1,905 $(122,073)
======= ========= ======== ======= =========
</TABLE>
- ---------------
(i) In January 1998, Capstar acquired 39 radio stations (25 FM and 14 AM) from
Patterson Broadcasting, Inc. for approximately $227,186 in cash.
(ii) On May 29, 1998, Capstar acquired SFX, a radio broadcasting company which
owned 81 radio stations (60 FM and 21 AM) and operated two additional
radio stations (1 FM and 1 AM) under time brokerage or joint sales
agreements (the "SFX Acquisition"). The acquisition was effected through
the merger of a wholly owned subsidiary of Capstar with and into SFX, with
SFX surviving the merger as a wholly owned subsidiary of Capstar. The
total consideration paid for all of the outstanding common equity interest
of SFX was approximately $1,279,656, including direct costs of the
acquisition. In connection with the SFX Acquisition, Capstar assumed (a)
long-term debt with a fair value of $812,436 which included $313,000 of
borrowings outstanding under the SFX senior credit facility, $450,000 of
10 3/4% Senior subordinated notes at a fair value of $497,458, $566 of
11 3/8% Senior subordinated notes and other notes payable of $1,412 and
(b) 2,392,022 shares of Series E Cumulative Exchangeable Preferred Stock
with a fair value of $283,605, including accrued and unpaid interest of
$13,754.
(iii) Other SFX transactions include the following transactions related to
stations acquired by Capstar from SFX on May 29, 1998:
(a)In connection with the Capstar/SFX Transaction (as defined at 6(a)),
Capstar entered into a time brokerage agreement with the Company to sell
substantially all of the broadcasting time of ten of the SFX stations (9
FM and 1 AM) acquired by Capstar effective May 29, 1998 pending
consummation of the Capstar Merger. Reflects the adjustment to eliminate
the results of operations of the SFX stations operated by the Company
under time brokerage agreements and to record the related LMA fee
revenue of $20,594 for the period January 1, 1998 to May 29, 1998.
(b)In connection with the SFX Merger, Capstar was required to dispose of
certain stations acquired from SFX due to governmental restrictions on
multiple station ownership. On May 29, 1998,
P-17
<PAGE> 21
Capstar completed the following disposition and exchange transactions to
comply with the multiple ownership rules:
-the sale of one FM station in Houston, Texas to HBC Houston, Inc. for
approximately $54,000;
-the sale of four radio stations (3 FM and 1 AM) in Long Island, New
York to Cox Radio, Inc for approximately $46,000;
-the sale of four radio stations (3 FM and 1 AM) in Greenville, South
Carolina to Clear Channel Radio, Inc. for approximately $35,000;
-the sale of one FM station in Daytona Beach, Florida to Clear Channel
Metroplex, Inc. for approximately $11,500;
-the assignment of four radio stations (2 FM and 2 AM) in Fairfield,
Connecticut with an aggregate fair market value of $15,000 to a trust
pending the sale to a third party; and
-the exchange of KODA-FM in Houston, Texas to the Company for two FM
stations in Jacksonville, Florida (valued at $53,000) and $90,250 in
cash, which was used by Capstar to acquire three stations (2 FM and 1
AM) in Austin, Texas through a qualified intermediary.
Reflects the adjustment to eliminate the results of operations of the SFX
stations disposed by Capstar and to record the results of operations for
the stations received in the exchange transaction for the period January
1, 1998 to May 29, 1998.
(c)On February 1, 1999, Capstar entered into a time brokerage agreement
with the Company to sell substantially all of the broadcast time of
WKNR-FM in Cleveland, which was acquired by Capstar as part of the SFX
Merger on May 29, 1998. Reflects the adjustment to eliminate the results
of operations of WKNR-FM for the year ended December 31, 1998.
(iv) Reflects the historical results of operations for various other completed
Capstar Transactions which include the acquisition of 56 radio stations
(39 FM and 17 AM) for approximately $203,470 in cash; the disposition of
15 radio stations (10 FM and 5 AM) for approximately $99,620 in cash; the
exchange of 2 radio stations (1 FM and 1 AM) for 2 radio stations (1 FM
and 1 AM) and the contribution of Muzak affiliate territories in Atlanta,
Albany and Macon, Georgia and Ft. Myers, Florida in exchange for a 20.13%
voting interest in Muzak Holdings LLC.
(B) Reflects incremental amortization related to the Completed Transactions
and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1998 PERIOD(I) ASSETS, NET EXPENSE EXPENSE INCREASE
---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Patterson Acquisition............ 1/1-1/29 $ 268,219 $ 540 $ 356 $ 184
SFX Acquisition.................. 1/1-5/29 3,194,742 33,057 9,515 23,542
Other Completed Capstar
Transactions................... Various 219,936 3,314 7 3,307
---------- ------- ------- -------
$3,682,897 $36,911 $ 9,878 $27,033
========== ======= ======= =======
</TABLE>
- ---------------
(i) The incremental amortization period represents the period of the year
that the acquisition was not completed. Intangible assets are
amortized on a straight-line basis over estimated average lives of 40
years. Actual amortization may differ based upon final purchase price
allocations.
(C) Reflects the elimination of non-recurring transaction-related compensation
expense of $74,199 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 $4,800 of time brokerage (LMA) fees of which
$4,103 were paid by Capstar and $697 by SFX related to acquired radio
stations that were previously operated under time brokerage agreements.
P-18
<PAGE> 22
(E) Reflects the elimination of non-recurring transaction-related charges of
$11,255 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.
(F) 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. The spin-off of SFX Entertainment was
consummated in April 1998.
(G) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Capstar Transactions:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Additional bank borrowings related to completed
acquisitions.............................................. $1,721,380
Reduction of bank borrowings related to completed
dispositions.............................................. (239,958)
----------
$1,481,422
==========
Interest expense at 8.00%................................... $ 43,293
Less: historical interest expense related to completed
transactions.............................................. 31,569
----------
Net increase in interest expense............................ 11,724
Reduction in interest expense related to the following:
Purchase of $76,808 principal amount of 13 1/4% Capstar
Radio Notes on March 30, 1998.......................... (2,544)
Proceeds from issuance of common stock to affiliates used
to reduce bank borrowings by $634,102 at 8.0%.......... (8,473)
Proceeds from the May 29, 1998 equity offering used to
reduce bank borrowings by $551,308 at 8.0%............. (18,254)
Redemption of $154,000 principal amount of 10 3/4% CCI
Notes at fair value on July 3, 1998.................... (7,866)
Redemption of $1,866 principal amount of 10 3/4% CCI Notes
at fair value on July 10, 1998......................... (99)
Interest expense on borrowings of $90,200 to finance the
repurchase of $76,808 principal amount of 13 1/4% Capstar
Radio Notes on March 30, 1998............................. 1,804
Interest expense on borrowings of $313,000 made on May 29,
1998 to finance the payoff of the credit facility assumed
as part of the SFX transaction............................ 10,364
Interest expense, including amortization of premiums, on
assumption of $450,000 principal amount of 10 3/4% SFX
Notes on May 29, 1998..................................... 18,716
Interest expense on assumption of $566 principal amount of
11 3/8% SFX Notes on May 29, 1998......................... 27
Interest expense on $150,000 12% note payable to the Company
issued on May 29, 1998.................................... 7,450
Interest expense on borrowings of $172,800 to finance the
redemption of $154,000 principal amount of 10 3/4% CCI
Notes on July 3, 1998..................................... 7,027
Interest expense on borrowings of $1,915 to finance the
redemption of $1,866 principal amount of 10 3/4% CCI Notes
on July 10, 1998.......................................... 81
----------
Total adjustment for net increase in interest expense....... $ 19,957
==========
</TABLE>
(H) Adjustment represents the elimination of $3,163 of transaction expenses
recorded by Patterson in connection with Capstar's acquisition of
Patterson.
(I) Reflects the tax effect of the pro forma adjustments.
P-19
<PAGE> 23
(J) Reclassification of SFX's historical preferred stock dividends of $17,264
to Capstar's dividends on preferred stock of subsidiaries.
(K) Reflects the elimination of a portion of the redeemable preferred stock
dividends related to the SFX Merger and the subsequent 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>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Dividends on Series C 6% redeemable preferred stock
redeemed as part of the SFX Merger on May 29,
1998................................................ $ (112)
Dividends on Series D 6 1/2% cumulative convertible
exchangeable preferred stock redeemed as part of the
SFX Merger on May 29, 1998.......................... (5,841)
Dividends on Series E 12 5/8% cumulative preferred
stock of $119,500 and $500 for the period January 1,
1998 to the redemption dates of July 3, 1998 and
July 10, 1998, respectively......................... (7,712)
--------
Total adjustment for net decrease in dividends and
accretion........................................... $(13,665)
========
</TABLE>
ADJUSTMENTS TO CAPSTAR'S HISTORICAL CONDENSED STATEMENT OF OPERATIONS RELATED TO
THE PENDING CAPSTAR TRANSACTIONS
(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, 1998 has been obtained from the historical financial
statements of the respective stations and is summarized below:
<TABLE>
<CAPTION>
OTHER
OTHER PENDING PENDING
TRIATHLON TRIATHLON CAPSTAR CAPSTAR
HISTORICAL TRANSACTIONS TRANSACTIONS TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998 1/1-12/31(A) 1/1-12/31(B) HISTORICAL(C) HISTORICAL
- ---------------------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Gross revenues............................. $45,025 $(6,098) $ 1,589 $ 40,516
Less: agency commissions................... (4,442) 456 (75) (4,061)
------- ------- ------- --------
Net revenues............................... 40,583 (5,642) 1,514 36,455
Operating expenses excluding depreciation
and amortization......................... 26,727 (3,996) 726 23,457
Depreciation and amortization.............. 4,794 -- 513 5,307
Corporate general and administrative....... 2,077 -- -- 2,077
Non-cash compensation...................... 141 -- -- 141
Other nonrecurring costs................... -- -- 2,459 2,459
------- ------- ------- --------
Operating income (loss).................... 6,844 (1,646) (2,184) 3,014
Interest expense........................... 5,994 -- 439 6,433
Interest income............................ (67) -- -- (67)
Other (income) expense..................... 1,193 -- -- 1,193
------- ------- ------- --------
Net income (loss).......................... (276) (1,646) (2,623) (4,545)
Preferred stock dividends.................. 5,507 -- -- 5,507
------- ------- ------- --------
Income (loss) attributable to common
stockholders............................. $(5,783) $(1,646) $(2,623) $(10,052)
======= ======= ======= ========
</TABLE>
- ---------------
(a) On July 23, 1998, Capstar entered into an agreement to acquire Triathlon
Broadcasting Company for an aggregate purchase price of approximately
$199,923 which includes (a) the conversion of each outstanding share of
each class of Triathlon common stock into the right to receive $13.00 in
cash,
P-20
<PAGE> 24
resulting in cash payments of approximately $63,647; (b) the conversion of
each outstanding depositary share of Triathlon, representing one-tenth
interest in a share of Triathlon's 9% mandatory convertible preferred
stock, into the right to receive $10.83 in cash, resulting in cash payments
of approximately $63,182; (c) additional consideration ranging from $0.11
per depositary share to $0.37 per depositary share based upon the average
closing price for Triathlon's common stock for the twenty days prior to the
closing related to the settlement of a depositary shareholder lawsuit on
February 12, 1999, resulting in cash payments of $642 (assuming $0.11 per
share); (d) the conversion of each outstanding share of Triathlon's Series
B convertible preferred stock into the right to receive $.01 in cash,
resulting in cash payments of approximately $6; (e) the assumption of
warrants, stock options, and stock appreciation rights with an estimated
fair value of $2,712; (f) the assumption of long term debt of $62,496 and
(g) estimated acquisition costs of $7,238. If the merger is not completed
by April 30, 1999, subject to certain exceptions, the merger consideration
to be paid to the Triathlon stockholders will increase by $0.125 per common
share and $0.104 per depositary share every two weeks that lapse after
April 30, 1999 until the merger is completed. Although there can be no
assurances, the Company believes that the merger will be consummated on or
before April 30, 1999. 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.
(b) In order to consummate the acquisition of Triathlon, Capstar is required to
dispose of KSPZ-FM (owned by Triathlon) in the Colorado Spring market;
KNSS-AM (owned by Capstar Broadcasting) and KFH-AM, KEYN-FM, KQAM-AM and
KWSJ-FM (owned by Triathlon) in the Wichita, Kansas market. Capstar has
entered into an exchange agreement and an asset purchase agreement with
Citadel Broadcasting Company wherein, upon consummation of the Triathlon
acquisition, Capstar will exchange KSPZ-FM for KKLI-FM in Colorado Springs,
Colorado and sell stations KTWK-AM and KVOR-AM in Colorado Springs,
Colorado and KEYF-FM and KEYF-AM in Spokane, Washington (all of which are
owned by Triathlon) for approximately $10,000 in cash. Capstar is actively
seeking a purchaser of the Wichita, Kansas stations, but has not yet
entered into a contract to sell the Wichita, Kansas stations. Upon
consummation of the Triathlon Acquisition, the Wichita, Kansas stations
will be placed in a trust pending the sale of the stations. Other assets
includes $7,300 for the stations held in trust. Capstar will also
contribute the Muzak affiliate territory in Omaha, Nebraska to be acquired
as part of the Triathlon Acquisition to Muzak Holdings LLC in exchange for
an additional 2.74% voting interest in Muzak Holdings LLC.
(c) Other Pending Capstar Transactions includes the acquisition of three FM
stations, the disposition of 2 AM stations and the acquisition of LAN
International, a software development company.
(M) Reflects incremental amortization related to the Pending Capstar
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
PENDING CAPSTAR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1998 PERIOD(I) ASSETS, NET EXPENSE(I) EXPENSE INCREASE
---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Triathlon Acquisition........ 1/1-12/31 $215,365 $5,384 $3,408 $1,976
Other Triathlon
Transactions............... Various (13,157) (329) -- (329)
Other Pending Capstar
Transactions............... Various 29,352 3,298 466 2,832
-------- ------ ------ ------
$231,560 $8,353 $3,874 $4,479
======== ====== ====== ======
</TABLE>
---------------------
(i) The incremental amortization period represents the period of the year
that the acquisition was not completed. Intangible assets of $231,560
consist of broadcast licenses of $196,587 and goodwill of $34,973
resulting from the recognition of deferred tax liabilities in
connection with the Triathlon Acquisition and are amortized on a
straight-line basis over estimated average lives of 40 years.
P-21
<PAGE> 25
(N) Reflects the adjustment to record estimated expenses of $35,000 for
financial advisory and other fees to be incurred by Capstar in connection
with the Merger.
(O) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Capstar Transactions:
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1998
------------
<S> <C>
Interest expense on additional bank borrowings related to
pending acquisitions of $219,811 at 8.0%.................. $17,585
Interest expense on additional bank borrowings related to
estimated financial advisors, legal, accounting and other
professional fees of $35,000 at 8.0%...................... 2,800
Less: historical interest expense of the stations to be
acquired in the Pending Capstar Transactions.............. (6,433)
-------
Total adjustment for net increase in interest expense....... $13,952
=======
</TABLE>
(P) Reflects the tax effect of the pro forma adjustments.
(Q) Reflects the elimination of Triathlon's preferred stock dividends of $5,507
for the year ended December 31, 1998. The Triathlon preferred stock will be
redeemed in connection with Capstar's acquisition of Triathlon in 1999.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE CAPSTAR MERGER
(15) Reflects the elimination of intercompany transactions between the Company
and Capstar for the Company's media representation services provided to
Capstar, Capstar's participation in the Company's AMFM Radio Networks, fees
paid by the Company to Capstar under time brokerage agreements and interest
on Capstar's note payable to the Company of $150,000 for the year ended
December 31, 1998.
(16) Reflects incremental amortization related to the Capstar merger and is
based on the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Amortization expense on $6,062,014 additional intangible
assets, which includes $4,544,816 of intangible assets and
$1,517,198 resulting from the recognition of deferred tax
liabilities amortized on a straight-line basis over a
period of 15 years........................................ $ 404,134
Less: Historical amortization expense....................... (122,912)
---------
Adjustment for net increase in amortization expense......... $ 281,222
=========
</TABLE>
Historical depreciation expense of Capstar 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 elimination of $43,105 of financial advisory and other
expenses of Capstar in connection with the Merger, including $8,105
recorded by Capstar in 1998 and additional estimated expenses of $35,000 to
be incurred by Capstar in 1999.
(18) Reflects the adjustment to record interest expense of $1,750 on additional
bank borrowings related to estimated financial advisors, legal, accounting
and other professional fees of $25,000 at 7.0%.
(19) Reflects the tax effect of the pro forma adjustments.
P-22
<PAGE> 26
ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO
THE PENDING TRANSACTION
(20) The detail of the historical financial data of the company to be acquired
in the Pending Transaction for the year ended December 31, 1998 has been
obtained from the historical financial statements of the respective
companies and is summarized below:
<TABLE>
<CAPTION>
PRO FORMA
PHOENIX ADJUSTMENTS COMPANY
ACQUISITION FOR THE PRO FORMA
YEAR ENDED HISTORICAL PENDING PENDING
DECEMBER 31, 1998 1/1 - 12/31(A) TRANSACTION TRANSACTION
----------------- -------------- ------------ ------------
<S> <C> <C> <C>
Gross revenues.......................................... $12,052 $ -- $12,052
Less: agency commissions................................ (1,329) -- (1,329)
------- -------- -------
Net revenues............................................ 10,723 -- 10,723
Operating expenses excluding depreciation and
amortization.......................................... 6,150 -- 6,150
Depreciation and amortization........................... 188 5,796(b) 5,984
Corporate general and administrative.................... -- -- --
------- -------- -------
Operating income (loss)................................. 4,385 (5,796) (1,411)
Interest expense........................................ 332 6,300(c) 6,632
Interest income......................................... -- -- --
Other (income) expense.................................. -- -- --
------- -------- -------
Income (loss) before income taxes....................... 4,053 (12,096) (8,043)
Income tax expense (benefit)............................ -- (3,378)(d) (3,378)
------- -------- -------
Net income (loss)....................................... $ 4,053 $ (8,718) $(4,665)
======= ======== =======
</TABLE>
- -------------------------
(a) 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. The Company began operating KKFR-FM and KFYI-AM under a time
brokerage agreement effective November 5, 1998.
(b) Reflects incremental amortization related to the assets acquired in the
Pending Transaction and is based on the allocation of the total
consideration as follows:
<TABLE>
<CAPTION>
PENDING TRANSACTION INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
YEAR ENDED AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
DECEMBER 31, 1998 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
- ------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Phoenix Acquisition........... 1/1-12/31 $88,229 $5,882 $ 86 $5,796
------- ------ ---- ------
</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.
Historical depreciation expense of the Pending Transaction is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
P-23
<PAGE> 27
(c) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Transaction:
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1998
------------
<S> <C>
Additional bank borrowings related to:
Pending Acquisition....................................... $ 90,000
--------
Interest expense at 7.0%.................................. $ 6,300
========
</TABLE>
(d) Reflects the tax effect of the pro forma adjustments.
(21) 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
DECEMBER 31, 1998
-----------------
<S> <C>
Historical weighted average shares outstanding.............. 137,979
Incremental weighted average shares relating to:
53,318,887 shares of Common Stock to be issued in
connection with the Capstar merger..................... 53,319
-------
Shares used in the pro forma combined earnings per share
calculation............................................... 191,298
=======
</TABLE>
P-24
<PAGE> 28
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 and each of the companies acquired in
the transactions completed by the Company during 1998 and 1999 and the
elimination of the consolidated historical data of the stations disposed in the
transactions completed by the Company during 1998 and 1999. The unaudited pro
forma condensed combined balance sheet data at December 31, 1998 presents
adjustments for the transactions completed in 1999 and the Pending Transactions,
as if each such transaction had occurred at December 31, 1998. The unaudited pro
forma condensed combined statement of operations data for the twelve months
ended December 31, 1998 presents adjustments for the transactions completed by
the Company in 1998 and 1999, the 1998 Financing Transactions and the Pending
Transactions (excluding the acquisition of Petry Media Corporation), as if each
such transaction occurred on January 1, 1998. The acquisition of Petry is
excluded from the pro forma information included in this prospectus due to
uncertainty regarding DOJ approval of the transaction. In the opinion of
management of the Company, such information is not material to such pro forma
presentations.
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 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 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.
P-25
<PAGE> 29
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA BALANCE SHEET
AT DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMPANY
ADJUSTMENTS AS ADJUSTED PRO FORMA
COMPANY FOR THE FOR THE ADJUSTMENTS FOR
HISTORICAL COMPLETED COMPLETED THE PENDING COMPANY
AT 12/31/98 TRANSACTIONS(1) TRANSACTIONS TRANSACTION(2) PRO FORMA
----------- --------------- ------------ --------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets........................... $ 424,811 $ 12,564 $ 437,375 $ -- $ 437,375
Property and equipment, net.............. 1,388,156 18,168 1,406,324 1,771 1,408,095
Intangible assets, net................... 5,056,047 332,169 5,388,216 88,229 5,476,445
Other assets............................. 358,893 -- 358,893 -- 358,893
---------- -------- ---------- ------- ----------
Total assets................... $7,227,907 $362,901 $7,590,808 $90,000 $7,680,808
========== ======== ========== ======= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current liabilities...................... $ 236,618 $ 2,585 $ 239,203 $ -- $ 239,203
Long-term debt, excluding current
portion................................ 4,096,000 307,962 4,403,962 90,000 4,493,962
Deferred tax liabilities................. 453,134 42,858 495,992 -- 495,992
Other liabilities........................ 50,325 250 50,575 -- 50,575
---------- -------- ---------- ------- ----------
Total liabilities.............. 4,836,077 353,655 5,189,732 90,000 5,279,732
STOCKHOLDER'S EQUITY:
Common stock............................. 1 -- 1 1
Additional paid in capital............... 2,670,510 -- 2,670,510 -- 2,670,510
Accumulated deficit...................... (278,681) 9,246 (269,435) -- (269,435)
---------- -------- ---------- ------- ----------
Total stockholder's equity..... 2,391,830 9,246 2,401,076 -- 2,401,076
---------- -------- ---------- ------- ----------
Total liabilities and
stockholder's equity......... $7,227,907 $362,901 $7,590,808 $90,000 $7,680,808
========== ======== ========== ======= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-26
<PAGE> 30
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE COMPANY AS
COMPANY COMPANY ADJUSTED COMPANY
COMPLETED AND THE FOR THE PRO FORMA
YEAR ENDED COMPANY TRANSACTIONS COMPLETED COMPLETED PENDING COMPANY
DECEMBER 31, 1998 HISTORICAL HISTORICAL(3) TRANSACTIONS TRANSACTIONS TRANSACTION(11) PRO FORMA
- ----------------- ---------- ------------- ------------ ------------ --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues....................... $1,440,357 $261,292 $ -- $1,701,649 $12,052 $1,713,701
Less: agency commissions............. (166,501) (28,372) -- (194,873) (1,329) (196,202)
---------- -------- --------- ---------- ------- ----------
Net revenues......................... 1,273,856 232,920 -- 1,506,776 10,723 1,517,499
Operating expenses excluding
depreciation and amortization...... 682,061 118,666 -- 800,727 6,150 806,877
Depreciation and amortization........ 446,338 51,201 22,736(4) 578,345 5,984 584,329
58,070(5)
Corporate general and
administrative..................... 36,722 12,775 (570)(6) 48,927 -- 48,927
Non-cash and non-recurring charges... 63,661 2,164 (2,164)(7) 63,661 -- 63,661
---------- -------- --------- ---------- ------- ----------
Operating income (loss).............. 45,074 48,114 (78,072) 15,116 (1,411) 13,705
Interest expense..................... 217,136 13,762 131,973(8) 362,871 6,632 369,503
Interest income...................... (15,650) (643) -- (16,293) -- (16,293)
Gain on disposition of assets........ (123,845) (3,158) -- (127,003) -- (127,003)
Gain on disposition of representation
contracts.......................... (32,198) -- -- (32,198) -- (32,198)
Other (income) expense............... (3,221) (692) -- (3,913) -- (3,913)
---------- -------- --------- ---------- ------- ----------
Income (loss) before income taxes.... 2,852 38,845 (210,045) (168,348) (8,043) (176,391)
Income tax expense (benefit)......... 33,751 -- (79,433)(9) (45,682) (3,378) (49,060)
---------- -------- --------- ---------- ------- ----------
Net income (loss).................... (30,899) 38,845 (130,612) (122,666) (4,665) (127,331)
Preferred stock dividends............ 17,601 -- (17,601)(10) -- -- --
---------- -------- --------- ---------- ------- ----------
Income (loss) attributable to common
stock.............................. $ (48,500) $ 38,845 $(113,011) $ (122,666) $(4,665) $ (127,331)
========== ======== ========= ========== ======= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-27
<PAGE> 31
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED
TO THE COMPLETED TRANSACTIONS
(1) Reflects the Completed Transactions that were completed after December
31, 1998 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
--------------------------------------------------------------------------------------------------------
PROPERTY AND DEFERRED
COMPLETED PURCHASE CURRENT EQUIPMENT, INTANGIBLE CURRENT TAX OTHER ACCUMULATED
TRANSACTIONS PRICE ASSETS NET ASSETS, NET LIABILITIES LIABILITIES LIABILITIES DEFICIT
- ------------ -------- ------- ------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outdoor
Acquisitions(a).... $ 45,204 $ 2,346 $18,335 $ 25,110 $ (337) $ -- $(250) $ --
Cleveland
Acquisitions(b).... 283,758 10,218 2,047 309,903 (2,248) (36,162)(c) -- --
Chicago
Disposition(d)..... (21,000) -- (2,214) (2,844) -- (6,696) -- (9,246)
-------- ------- ------- -------- ------- -------- ----- -------
$307,962 $12,564 $18,168 $332,169 $(2,585) $(42,858) $(250) $(9,246)
======== ======= ======= ======== ======= ======== ===== =======
<CAPTION>
FINANCING
-----------
INCREASE IN
COMPLETED LONG-TERM
TRANSACTIONS DEBT
- ------------ -----------
<S> <C>
Outdoor
Acquisitions(a).... $ 45,204
Cleveland
Acquisitions(b).... 283,758
Chicago
Disposition(d)..... (21,000)
--------
$307,962
========
</TABLE>
- -------------------------
(a) Subsequent to January 1, 1999, the Company acquired approximately
4,500 outdoor display faces from Triumph Outdoor Holdings and certain
affiliated companies ("Triumph") for approximately $37,006 in cash
including working capital and acquired approximately 100 additional
billboards and outdoor displays in various transactions for
approximately $8,198. The outdoor acquisitions aggregate purchase
price of $45,204 has been allocated to property and equipment and
intangible assets based upon a preliminary appraisal for Triumph and
historical information from prior outdoor acquisitions. The amounts
allocated to property and equipment consist primarily of advertising
structures with an estimated average life of 15 years. The amounts
allocated to intangible assets represent goodwill with an estimated
average life of 40 years.
(b) On January 28, 1999, the Company acquired Wincom Broadcasting
Corporation which owns WQAL-FM in Cleveland. The Company had
previously been operating WQAL-FM under a time brokerage agreement
effective October 1, 1998. On February 2, 1999, the Company acquired
five 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 $283,758 in cash including working
capital, subject to certain adjustments. 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 and are based on information provided by management of the
respective companies acquired. The Company, on a preliminary basis,
has allocated the intangible assets to broadcast licenses with an
estimated average life of 15 years based upon historical information
from prior radio acquisitions.
(c) Reflects a deferred tax liability related to the difference between
the financial statement carrying amount and the tax basis of assets
acquired in the stock acquisitions of Wincom Broadcasting Corporation
and Zebra Broadcasting Corporation.
(d) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc.
for $21,000 in cash. The Company had previously entered into a time
brokerage agreement to sell substantially all of the broadcast time
of WMVP-AM effective September 10, 1998. The amounts allocated to
accumulated deficit and deferred tax liabilities represent the gain
on the disposition of WMVP-AM of $15,942 net of taxes of $6,696.
P-28
<PAGE> 32
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING TRANSACTION
(2) Reflects the Pending Transaction as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
----------------------------------- ---------
PROPERTY INCREASE
AND INTANGIBLE IN
PURCHASE EQUIPMENT, ASSETS, LONG-TERM
PENDING TRANSACTION PRICE NET(A) NET(B) DEBT
------------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Phoenix Acquisition(c)...................................... $90,000 $1,771 $88,229 $90,000
</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 Transaction.
(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) 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.
P-29
<PAGE> 33
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE COMPLETED TRANSACTIONS HISTORICAL
(3) The Completed Transactions historical condensed combined statement of
operations for the year ended December 31, 1998 are summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------------------------------------------------------------------
MARTIN AS
ADJUSTED FOR OTHER
CAPSTAR/SFX COMPLETED PRIMEDIA WHITECO OUTDOOR
TRANSACTIONS WWDC-FM/AM MARTIN ACQUISITION ACQUISITION ACQUISITIONS
YEAR ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL
DECEMBER 31, 1998 1/1-12/31 (a) 1/1-6/1 (b) 1/1-7/31 (c) 1/1-10/23 (d) 1/1-12/1 (e) 1/1-12/31 (f)
----------------- ------------- ----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........... $34,324 $4,273 $54,472 $12,797 $128,565 $ 7,022
Less: agency
commissions............. (4,302) (528) (5,768) (3,358) (8,973) (2,319)
------- ------ ------- ------- -------- -------
Net revenues............. 30,022 3,745 48,704 9,439 119,592 4,703
Operating expenses
excluding depreciation
and amortization........ 18,464 2,158 23,751 5,363 60,587 3,983
Depreciation and
amortization............ 21,435 45 16,068 2,350 10,342 692
Corporate general and
administrative.......... -- -- 924 2,794 6,759 1,817
Profit participation
fee..................... -- -- -- -- 2,164 --
------- ------ ------- ------- -------- -------
Operating income
(loss).................. (9,877) 1,542 7,961 (1,068) 39,740 (1,789)
Interest expense......... -- 62 11,189 1,972 35 197
Interest income.......... -- (18) (381) -- (58) (4)
Gain on disposition of
assets.................. -- -- -- -- -- (3,158)
Other (income) expense... -- (49) (557) 24 (1,082) 105
------- ------ ------- ------- -------- -------
Income (loss) before
income taxes............ (9,877) 1,547 (2,290) (3,064) 40,845 1,071
Income tax expense....... -- -- -- -- -- --
------- ------ ------- ------- -------- -------
Net income (loss)........ (9,877) 1,547 (2,290) (3,064) 40,845 1,071
Preferred stock
dividends............... -- -- -- -- -- --
------- ------ ------- ------- -------- -------
Income (loss)
attributable to common
stock................... $(9,877) $1,547 $(2,290) $(3,064) $ 40,845 $ 1,071
======= ====== ======= ======= ======== =======
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------- ----------------------------
WBAB-FM
WBLI-FM
CLEVELAND WGBB-AM CHICAGO COMPANY
ACQUISITIONS WHFM-FM DISPOSITION COMPLETED
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
DECEMBER 31, 1998 1/1-12/31 (g) 1/1-5/29 (h) 1/1-12/31 (i) HISTORICAL
----------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Gross revenues........... $36,432 $(5,063) $(11,530) $261,292
Less: agency
commissions............. (4,859) 514 1,221 (28,372)
------- ------- -------- --------
Net revenues............. 31,573 (4,549) (10,309) 232,920
Operating expenses
excluding depreciation
and amortization........ 20,962 (3,331) (13,271) 118,666
Depreciation and
amortization............ 861 -- (592) 51,201
Corporate general and
administrative.......... 481 -- -- 12,775
Profit participation
fee..................... -- -- -- 2,164
------- ------- -------- --------
Operating income
(loss).................. 9,269 (1,218) 3,554 48,114
Interest expense......... 307 -- -- 13,762
Interest income.......... (182) -- -- (643)
Gain on disposition of
assets.................. -- -- (3,158)
Other (income) expense... 867 -- -- (692)
------- ------- -------- --------
Income (loss) before
income taxes............ 8,277 (1,218) 3,554 38,845
Income tax expense....... -- -- -- --
------- ------- -------- --------
Net income (loss)........ 8,277 (1,218) 3,554 38,845
Preferred stock
dividends............... -- -- -- --
------- ------- -------- --------
Income (loss)
attributable to common
stock................... $ 8,277 $(1,218) $ 3,554 $ 38,845
======= ======= ======== ========
</TABLE>
P-30
<PAGE> 34
- ---------------
(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-AM 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 Company also provided a loan to Capstar in
the principal amount of $150,000 as part of the Capstar/SFX Transaction.
The Capstar/SFX Stations were acquired by Capstar as part of Capstar's
acquisition of SFX on May 29, 1998. This adjustment reflects the following
aspects of the Capstar/SFX Transaction:
(i) On May 29, 1998, the Company exchanged WAPE-FM and WFYV-FM in
Jacksonville (valued at $53,000) for Capstar station KODA-FM in
Houston. As part of the KODA-FM transaction, the Company also paid
cash of $90,250 to the owners of KVET-AM, KVET-FM and KASE-FM, who
simultaneously transferred such stations to Capstar. Thus, this
adjustment records the results of operations of KODA-FM for the
period January 1, 1998 to May 29, 1998. 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. Therefore, the
results of operations of WAPE-FM and WFYV-FM are not included in the
Company's historical condensed statement of operations for the year
ended December 31, 1998.
(ii) The Company began operating the remaining ten Capstar/SFX stations
under time brokerage agreements effective May 29, 1998 pending the
consummation of the Capstar merger. Thus, this adjustment records the
results of operations of the ten Capstar/SFX stations and the related
LMA fee payment to Capstar of $20,594 for the period January 1, 1998
to May 29, 1998.
(iii) On February 1, 1999, the Company began operating WKNR-FM in Cleveland
under a time brokerage agreement with Capstar, pending the
consummation of the Capstar merger. WKNR-FM was acquired by Capstar
as part of Capstar's acquisition of SFX on May 29, 1998. Therefore,
in addition to the above items, this adjustment records the results
of operations of WKNR-FM for the year ended December 31, 1998.
The Capstar stations currently operated under time brokerage agreements
will be acquired by Chancellor Media as part of its pending merger with
Capstar. The Company intends to continue operating these stations under
time brokerage agreements and paying LMA fees to Capstar subsequent to
consummation of Chancellor Media's merger with Capstar.
(b) 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.
(c) On July 31, 1998, the Company acquired Martin Media and certain affiliated
companies for a total purchase price of $615,117 which consisted of
$612,848 in cash including various other direct acquisition costs and the
assumption of notes payable of $2,270. Martin is an outdoor advertising
company with over 13,700 billboards and outdoor displays in 12 states
serving 23 markets. As part of the Martin transaction, the Company acquired
an asset purchase agreement with Kunz & Company and paid an additional
$6,000 in cash for a purchase option deposit previously paid by Martin.
Martin's historical condensed combined statements of operations for the
year ended December 31, 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.
P-31
<PAGE> 35
<TABLE>
<CAPTION>
OTHER PRO FORMA MARTIN AS
COMPLETED ADJUSTMENTS ADJUSTED
MARTIN MARTIN FOR THE FOR
ACQUISITION ACQUISITIONS COMPLETED COMPLETED
HISTORICAL HISTORICAL MARTIN MARTIN
YEAR ENDED DECEMBER 31, 1998 1/1-7/31 1/1-7/31(i) TRANSACTIONS TRANSACTIONS
---------------------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues.................................. $52,345 $2,127 $ -- $54,472
Less: agency commissions........................ (5,612) (156) -- (5,768)
------- ------ ------ -------
Net revenues.................................... 46,733 1,971 -- 48,704
Operating expenses excluding depreciation and
amortization.................................. 22,845 906 -- 23,751
Depreciation and amortization................... 14,694 88 1,286(ii) 16,068
Corporate general and administrative............ 2,919 -- (1,995)(iii) 924
------- ------ ------ -------
Operating income................................ 6,275 977 709 7,961
Interest expense................................ 10,781 -- 408(iv) 11,189
Interest income................................. (381) -- -- (381)
Other (income) expense.......................... (571) 14 -- (557)
------- ------ ------ -------
Net income (loss)............................... $(3,554) $ 963 $ 301 $(2,290)
======= ====== ====== =======
</TABLE>
- -------------------------
(i) Prior to July 31, 1998, Martin acquired approximately 1,636 billboards
and outdoor displays in various transactions for approximately $12,246.
(ii) Reflects the adjustment to record incremental amortization of $1,286 for
the period January 1, 1998 to July 31, 1998 related to the Completed
Martin Transactions based upon an estimated average life of 5 years used
by Martin for intangible assets. 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.
(iii)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 $1,995 for the
period January 1, 1998 through July 31, 1998.
(iv) Reflects the adjustment to increase interest expense by $408 in
connection with the consummation of the Completed Martin Transactions
based upon additional bank borrowings of $12,246 at 8.5%.
(d) 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 a purchase price of $75,619 including various other direct
acquisition costs.
(e) On December 1, 1998, the Company acquired the assets and working capital of
the outdoor advertising division of Whiteco Industries, Inc., including
approximately 22,500 billboards and outdoor displays in 34 states, for
$981,698 in cash including various other direct acquisition costs.
(f) Other outdoor acquisitions consist of (i) approximately 670 billboards and
outdoor displays acquired in 1998 for approximately $23,582; (ii)
approximately 4,500 outdoor display faces acquired from Triumph for
approximately $37,006 in cash including working capital in January and
February 1999 and (iii) approximately 100 additional billboards and outdoor
displays acquired for approximately $8,198 subsequent to January 1, 1999.
(g) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company had previously been operating
WQAL-FM under a time brokerage agreement effective October 1, 1998. On
February 2, 1999, the Company acquired five
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<PAGE> 36
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 $283,758 in cash including working capital, subject to
certain adjustments.
(h) Chancellor began programming WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long
Island under a time brokerage agreement effective July 1, 1996. 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
Company's historical condensed statement of operations for the year ended
December 31, 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.
(i) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for
$21,000 in cash. The Company entered into a time brokerage agreement to
sell substantially all of the broadcast time of WMVP-AM effective September
10, 1998.
(4) 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, 1998 PERIOD(A) ASSETS, NET EXPENSE EXPENSE (DECREASE)
---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Denver Acquisition(b)............................ 1/1-1/30 $ 24,589 $ 137 $ -- $ 137
Bonneville Option(b)............................. 1/1-4/3 186,349 3,209 -- 3,209
KODA-FM(b)....................................... 1/1-5/29 93,294 2,574 656 1,918
WWDC-FM/AM(b).................................... 1/1-6/1 64,338 1,799 -- 1,799
Martin Acquisitions(c)........................... 1/1-7/31 264,803 6,618 12,994 (6,376)
Other 1998 Outdoor Acquisitions(c)............... 1/1-8/31 8,782 146 -- 146
Primedia Acquisition(b).......................... 1/1-10/23 69,361 3,763 1,765 1,998
Kunz Option(c)................................... 1/1-11/13 13,414 292 -- 292
Whiteco Acquisition(c)........................... 1/1-12/1 212,044 4,874 5,826 (952)
Other 1999 Outdoor Acquisitions(c)............... 1/1-12/31 25,110 628 162 466
Cleveland Acquisitions(b)........................ 1/1-12/31 309,903 20,660 561 20,099
---------- ------- ------- -------
Total.................................... $1,271,987 $44,700 $21,964 $22,736
========== ======= ======= =======
</TABLE>
- -------------------------
(a) 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.
(b) Intangible assets for the radio acquisitions consist primarily of FCC
licenses which are amortized on a straight-line basis over an estimated
average life of 15 years.
(c) Intangible assets for the outdoor acquisitions consist primarily of
goodwill which is amortized on a straight-line basis over an estimated
average life of 40 years, except for the acquisition of Martin which
includes non-compete agreements of $27,000 which are amortized on a
straight-line basis over 5 years. The Martin goodwill of $237,803
includes $98,042 resulting from the recognition of deferred tax
liabilities.
(5) Historical depreciation expense of the completed radio acquisitions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation may differ based upon final purchase price allocations. The
following adjustments reflect incremental depreciation related to the
completed outdoor acquisitions and are based on the following allocation to
property and equipment:
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<PAGE> 37
<TABLE>
<CAPTION>
INCREMENTAL PROPERTY AND HISTORICAL ADJUSTMENT
DEPRECIATION EQUIPMENT, DEPRECIATION DEPRECIATION FOR NET
YEAR ENDED DECEMBER 31, 1998 PERIOD(A) NET(A) EXPENSE(A) EXPENSE INCREASE
---------------------------- ------------ -------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Martin Acquisition............................ 1/1-7/31 $ 431,253 $16,771 $3,074 $13,697
Kunz Option................................... 1/1-11/13 26,849 1,556 -- 1,556
Other 1998 Outdoor Acquisitions............... 1/1-11/17 14,815 734 -- 734
Whiteco Acquisition........................... 1/1-12/1 748,940 45,907 4,516 41,391
Other 1999 Outdoor Acquisitions............... 1/1-12/31 18,335 1,222 530 692
---------- ------- ------ -------
Total................................. $1,240,192 $66,190 $8,120 $58,070
========== ======= ====== =======
</TABLE>
--------------------
(a) Property and equipment consists primarily of advertising structures and
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.
(6) 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.
(7) Reflects the elimination of the profit participation fee paid by Whiteco to
Metro Management Associates of $2,164 for the year ended December 31, 1998.
(8) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Transactions, 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>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Additional bank borrowings related to completed
acquisitions.............................................. $2,292,899
==========
Interest expense at 7.0%.................................... $ 123,693
Less: historical interest expense related to completed
acquisitions.............................................. (13,762)
----------
Net increase in interest expense............................ 109,931
Reduction in interest expense on bank debt related to the
application of net proceeds of the following at 7.0%:
Proceeds from the March 13, 1998 equity offering used to
reduce bank borrowings by $673,000..................... (9,553)
CMCLA 9% Senior Subordinated Notes issuance on September
30, 1998 for net proceeds of $730,000.................. (38,325)
CMCLA 8% Senior Notes issuance on November 17, 1998 for
net proceeds of $730,000............................... (44,996)
Interest expense on borrowings of $262,495 to finance the
repurchase of CMCLA's 12% exchange debentures on June 10,
1998...................................................... 8,167
Interest expense on borrowings of $143,836 to finance the
repurchase of CMCLA's 12 1/4% exchange debentures on
August 19, 1998........................................... 6,405
Interest expense on CMCLA's $750,000 9% Senior Subordinated
Notes issued September 30, 1998........................... 50,625
Interest expense on CMCLA's $750,000 8% Senior Notes issued
November 17, 1998......................................... 52,833
Elimination of historical interest expense on the CMCLA 12%
Subordinated Exchange Debentures from May 13, 1998 through
June 10, 1998............................................. (1,976)
Elimination of historical interest expense on the CMCLA
12 1/4% Subordinated Exchange Debentures from July 23,
1998 through August 19, 1998.............................. (1,138)
----------
Total adjustment for net increase in interest expense....... $ 131,973
==========
</TABLE>
(9) Reflects the tax effect of the pro forma adjustments.
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<PAGE> 38
(10) Reflects the elimination of preferred stock dividends on the 12% Preferred
Stock and the 12 1/4% Preferred Stock of $17,601 for the year ended
December 31, 1998, 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 TRANSACTION
(11) The detail of the historical financial data of the company to be acquired
in the Pending Transaction for the year ended December 31, 1998 has been
obtained from the historical financial statements of the respective
companies and is summarized below:
<TABLE>
<CAPTION>
PRO FORMA
PHOENIX ADJUSTMENTS COMPANY
ACQUISITION FOR THE PRO FORMA
YEAR ENDED HISTORICAL PENDING PENDING
DECEMBER 31, 1998 1/1 - 12/31(a) TRANSACTION TRANSACTION
----------------- -------------- ------------ ------------
<S> <C> <C> <C>
Gross revenues.......................................... $12,052 $ -- $12,052
Less: agency commissions................................ (1,329) -- (1,329)
------- -------- -------
Net revenues............................................ 10,723 -- 10,723
Operating expenses excluding depreciation and
amortization.......................................... 6,150 -- 6,150
Depreciation and amortization........................... 188 5,796(b) 5,984
------- -------- -------
Operating income (loss)................................. 4,385 (5,796) (1,411)
Interest expense........................................ 332 6,300(c) 6,632
------- -------- -------
Income (loss) before income taxes....................... 4,053 (12,096) (8,043)
Income tax expense (benefit)............................ -- (3,378)(d) (3,378)
------- -------- -------
Net income (loss)....................................... $ 4,053 $ (8,718) $(4,665)
======= ======== =======
</TABLE>
- -------------------------
(a) 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. The Company began operating KKFR-FM and KFYI-AM under a time
brokerage agreement effective November 5, 1998.
(b) Reflects incremental amortization related to the assets acquired in the
Pending Transaction and is based on the allocation of the total
consideration as follows:
<TABLE>
<CAPTION>
PENDING TRANSACTION INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
YEAR ENDED AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
DECEMBER 31, 1998 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
- ------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Phoenix Acquisition........... 1/1-12/31 $88,229 $5,882 $ 86 $5,796
------- ------ ---- ------
</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.
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<PAGE> 39
Historical depreciation expense of the Pending Transaction 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 Pending Transaction:
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1998
------------
<S> <C>
Additional bank borrowings related to:
Pending Acquisition....................................... $ 90,000
--------
Interest expense at 7.0%.................................. $ 6,300
========
</TABLE>
(d) Reflects the tax effect of the pro forma adjustments.
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