<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 1998, or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ________ to
_________.
COMMISSION FILE NUMBER
0-24516
HEFTEL BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 99-0113417
(State of Incorporation) (I.R.S. Employer Identification No.)
3102 Oak Lawn Avenue, Suite 215
Dallas, Texas 75219
Telephone (214) 525-7700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
---
On March 19, 1999, the aggregate market price of the Class A Common Stock held
by non-affiliates of the Company was approximately $1,078.1 million. (For
purposes hereof, directors, executive officers and 10% or greater shareholders
have been deemed affiliates).
On March 19, 1999, there were 35,182,719 outstanding shares of Class A Common
Stock, $.001 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1999 Annual Meeting, expected to be
filed within 120 days from the Company's fiscal year-end, are incorporated by
reference into Part III.
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HEFTEL BROADCASTING CORPORATION
INDEX TO FORM 10-K
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I.
Item 1. Business....................................................................... 3
Item 2. Properties.....................................................................16
Item 3. Legal Proceedings..............................................................16
Item 4. Submission of Matters to a Vote of Security Holders............................16
PART II.
Item 5. Market for Registrant's Class A Common Stock and Related Stockholder Matters... 17
Item 6. Selected Financial Data........................................................ 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................ 19
Item 7a. Quantitative and Qualitative Disclosures About Market Risk .................... 23
Item 8. Financial Statements and Supplementary Data ................................... 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................................ 44
PART III.
Item 10. Directors and Executive Officers of the Registrant............................ 45
Item 11. Executive Compensation........................................................ 45
Item 12. Security Ownership of Certain Beneficial Owners and Management................ 45
Item 13. Certain Relationships and Related Transactions................................ 45
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............. 46
</TABLE>
2
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PART I.
ITEM 1. BUSINESS
GENERAL
Heftel Broadcasting Corporation (the "Company") is the largest Spanish
language radio broadcasting company in the United States and currently owns or
programs 39 radio stations in 12 markets. The Company's stations are located in
eleven of the top fifteen Hispanic markets in the United States, including Los
Angeles, New York, Miami, San Francisco/San Jose, Chicago, Houston, San Antonio,
McAllen/Brownsville/Harlingen, Dallas/Fort Worth, San Diego and El Paso.
The Company's strategy is to own and program top performing Spanish
language radio stations, principally in the fifteen largest Spanish language
radio markets in the United States. The top fifteen Hispanic markets account for
approximately 21,641,400 million Hispanics, representing approximately 71.0% of
the total Hispanic population in the United States. The Company currently has
the leading Spanish language radio station, as measured by audience share, in 10
of the 12 markets in which the Company operates. The Company intends to acquire
or develop additional Spanish language radio stations in the leading Hispanic
markets.
The Company frequently evaluates strategic opportunities both within
and outside its existing line of business which closely relate to serving the
Hispanic market, including opportunities outside of the United States. The
Company expects from time to time to pursue additional acquisitions and may
decide to dispose of certain businesses. Such acquisitions or dispositions could
be material.
The following table sets forth certain information regarding the
Company's radio stations owned or programmed as of December 31, 1998:
<TABLE>
<CAPTION>
Ranking of
Market by No. of
Hispanic Stations
Population (1) Market AM FM
- ------------------------------------------------------------------------ ---------- ----------
<S> <C> <C> <C>
1 Los Angeles 1 2
2 New York 1 1
3 Miami 2 2
4 San Francisco/San Jose 0 2
5 Chicago 2 1
6 Houston 2 5
7 San Antonio 2 2
8 Dallas/Fort Worth 2 3
9 McAllen/Brownsville/Harlingen 1 2
10 San Diego 0 2
11 El Paso 2 1
26 Las Vegas 1 0
---------------------
Total 16 23
</TABLE>
(1) Ranking of the principal radio market served by the Company's
station(s) among all U.S. radio markets by Hispanic population as reported
by Strategy Research Corporation - 1998 U.S. Hispanic Market Study.
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The Company believes Spanish language radio broadcasting has
significant growth potential for the following reasons:
- - THE U.S. HISPANIC POPULATION IS GROWING RAPIDLY. The U.S. Hispanic
population is expected to grow from an estimated 27.2 million
(approximately 10.4% of the total United States population) at the end of
1995 to an estimated 30.4 million (approximately 11.2% of the total United
States population) by the year 2000. These estimates imply a growth rate of
approximately three times the expected growth rate for the total United
States population during the same period.
- - THE U.S. HISPANIC POPULATION IS CONCENTRATED IN 15 MARKETS. Approximately
71.0%, or approximately 21.6 million, of all U.S. Hispanics live in these
markets. The U.S. Hispanic population in the top fifteen markets, as a
percentage of the total population in such markets, has increased from
approximately 17.0% in 1980 to approximately 26.0% in 1998. The percentage
concentration of Hispanics in the top fifteen markets is more than twice
the percentage of Hispanics in the U.S. as a whole. Since 1980, the
Hispanic population growth has represented approximately 51.1% of the total
population growth in the top fifteen Hispanic markets.
- - U.S. HISPANICS REPRESENT AN ATTRACTIVE CONSUMER MARKET. Advertisers target
Hispanics because, on average, they are younger, their households are
larger in size and they routinely spend a greater percentage of their
income on many different kinds of goods and services than do non-Hispanic
households. The Company believes that, as a result, advertisers have
substantially increased their use of Spanish media. Total Spanish language
advertising revenues have increased from approximately $721.5 million in
1993 to an estimated $1.7 billion in 1998. This represents a compound
annual growth rate of approximately 18.0%, which is substantially greater
than the estimated growth rate for total advertising for the comparable
period.
The Company was incorporated under the laws of the State of Delaware in
1992. The Company's principal executive offices are located at 3102 Oak Lawn
Avenue, Suite 215, Dallas, Texas 75219 and the telephone number is (214)
525-7700.
RECENT DEVELOPMENTS
KISF(FM) ACQUISITION. The Company entered into an asset purchase
agreement with Radio Vision, Inc. and George E. Tobin on March 1, 1999, to
acquire the assets of KISF(FM) serving the Las Vegas market for $20.3
million. The closing of this asset acquisition is expected to occur during
the second quarter of 1999. Immediately after closing, the station's
programming will be converted to a Spanish language format. Consummation of
the purchase is subject to a number of conditions, including approval by the
FCC of the transfer of the FCC licenses.
KHOT(FM) ACQUISITION. The Company entered into an asset purchase
agreement with New Century Arizona, LLC and New Century Arizona License
Partnership on January 27, 1999, to acquire the assets of KHOT(FM) serving
the Phoenix market for $18.3 million. The closing of this asset acquisition
is expected to occur during the second quarter of 1999. Immediately after
closing, the station's programming will be converted to a Spanish language
format. Consummation of the purchase is subject to a number of conditions,
including approval by the FCC of the transfer of the FCC licenses.
KSCA OPTION. On January 2, 1997, the Company acquired an option to
purchase all of the assets used in connection with the operation of KSCA(FM) in
Los Angeles, California, upon the death of Gene Autry, the indirect principal
stockholder of the seller (the "KSCA Option"). In connection with the
acquisition of the KSCA Option, the Company began providing programming to
KSCA(FM) under a time brokerage agreement. Gene Autry died on October 2, 1998,
and the Company exercised the KSCA Option. The closing of the acquisition of the
KSCA(FM) assets is expected to occur during the second quarter of 1999. The
Company made a total of $13.0 million in payments under the terms of the KSCA
Option which will be credited against the purchase price of the KSCA (FM)
assets. If the acquisition closes on June 1, 1999, the purchase price for the
KSCA(FM) assets will be approximately $116.6 million ($103.6 million would be
paid at closing after the $13.0 million in option payments are credited to the
purchase price). Consummation of the acquisition is subject to a number of
conditions, including approval by the FCC of the transfer of FCC licenses.
KLQV(FM) AND KLNV(FM) ACQUISITION. The Company entered into an asset
purchase agreement with Citicasters Co. on May 26, 1998, to acquire the assets
of KLQV(FM) and KLNV(FM) (formerly KJQY(FM) and KKLQ(FM)) serving the San Diego
market (the "San Diego Acquisition") for $65.2 million. The San Diego
Acquisition closed on August 10, 1998. Immediately after closing, the
programming of the stations was converted to two Spanish language formats.
KLTN(FM) ACQUISITION. On March 25, 1998, the Company announced that it
had entered into an agreement with Capstar Broadcasting Corporation to acquire
the assets of radio station KLTN(FM) (formerly
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KKPN(FM)), serving the Houston, Texas market, for $54.0 million in cash (the
"KLTN(FM) Acquisition"). The KLTN(FM) Acquisition closed on May 29, 1998.
Immediately after closing, the station's programming was converted to a
Spanish language format.
WCAA(FM) ACQUISITION. On December 1, 1997, the Company announced that
it entered into an agreement with Multicultural Radio Broadcasting, Inc. to
exchange WPAT(AM), the Company's AM station serving the New York City market,
and $115.5 million in cash for the assets of WCAA(FM) (formerly WNWK(FM)), an FM
station also serving the New York City market (the "WCAA(FM) Acquisition"). The
WCAA(FM) Acquisition closed on May 22, 1998. WCAA(FM) broadcasts on 105.9 MHz
from a transmitter site located on the Empire State Building. Immediately
following the consummation of the WCAA(FM) Acquisition, the Company converted
the station's programming to a Spanish language format.
SALE OF CLASS A COMMON STOCK
On January 22, 1998, the Company completed the issuance and sale of
5,175,000 shares of Class A Common Stock in an underwritten public offering for
a total of $205.1 million in proceeds. The proceeds from the offering were used
to repay borrowings under the Company's credit facility and to finance the
WCAA(FM) Acquisition, the KLTN(FM) Acquisition, and a portion of the San Diego
Acquisition.
SPANISH LANGUAGE RADIO INDUSTRY
Due to differences in origin, Hispanics are not a homogeneous group.
The music, culture, customs and Spanish dialects vary from one radio market to
another. Consequently, the Company programs its stations in a manner responsive
to the local preferences of the target demographic audience in each of the
markets it serves. A well-researched mix of music and on-air programming at an
individual station can attract a wide audience targeted by Spanish language
advertisers. Programming is continuously monitored to maintain its quality and
relevance to the target audience. Most music formats are primarily variations of
Regional Mexican, Tropical, Tejano and Contemporary music styles. The local
program director will select music from the various music styles that best
reflect the music preferences of the local Hispanic audiences. A brief
description of the Company's programming follows:
PROGRAMMING
REGIONAL MEXICAN. Regional Mexican consists of various types of music
played in different regions of Mexico. Ranchera music, originating in Jalisco,
Mexico, is a traditional folkloric music commonly referred to as Mariachi music.
Mariachi music features acoustical instruments and is considered the music
indigenous to Mexicans who have lived in the country towns. Nortena means
northern, and is representative of Northern Mexico. Featuring an accordion,
Nortena has a Polka sound with a distinct Mexican flavor. Banda is a regional
music from the state of Sinaloa, Mexico and is popular in California. Banda
resembles up-tempo marching band music with synthesizers.
Regional Mexican also includes Cumbia music, which originates in Colombia.
TROPICAL. The Tropical format primarily consists of Salsa, Merengue,
and Cumbia music. Salsa is dance music combining Latin Caribbean rhythms with
jazz. Salsa symbolizes music from Puerto Rico, Cuba, and the Dominican Republic
and is popular with Hispanics living in New York, Miami and Chicago. Merengue
music is up-tempo dance music originating in the Dominican Republic.
TEJANO. Tejano music originated in Texas and is based on Mexican themes
but is indigenous to Texas. It is a combination of contemporary rock, Ranchera,
and country music. The lyrics are primarily sung in Spanish. The on-air talent
speak in Spanish and English.
CONTEMPORARY. The Contemporary format includes pop, Latin rock, and
ballads. This format is similar to English adult contemporary and contemporary
hit radio stations.
5
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FULL SERVICE. The Full Service format includes all the traditional
radio services: music, news, sports, traffic reports, special information
programs and weather.
NEWS/TALK. News includes local, national, international reports and
weather, business, traffic and sports. Talk includes commentary, analysis,
discussion, interviews, call-ins and information shows.
COMPANY'S STATIONS
The following table sets forth information regarding the radio stations
owned or programmed by the Company as of December 31, 1998:
<TABLE>
<CAPTION>
RANKING OF
MARKET BY PRIMARY
HISPANIC DEMOGRAPHIC
POPULATION MARKET(1) STATION STATION FORMAT(2) MARKET
- ------------- ------------------------------- ------------------ ------------------- ---------------
<S> <C> <C> <C> <C>
1 Los Angeles KLVE(FM) Contemporary A 25-54
KTNQ(AM) News/Talk A 25-54
KSCA(FM)(3) Regional Mexican A 25-54
2 New York WCAA(FM) Tropical A 25-54
WADO(AM) News/Talk A 25+
3 Miami WAMR(FM) Contemporary A 25-54
WRTO(FM) Tropical A 18-34
WAQI(AM) News/Talk A 35+
WQBA(AM) News/Talk/Sports A 35+
4 San Francisco/San Jose KSOL(FM) Regional Mexican A 25-54
KZOL(FM) Regional Mexican A 25-54
5 Chicago WOJO(FM) Regional Mexican A 25-54
WIND(AM) Full Service A 35+
WLXX(AM) Tropical A 18-49
6 Houston KLTN(FM) Regional Mexican A 18-49
KOVE(FM) Contemporary A 25-54
KOVA(FM) Contemporary A 25-54
KLTO(FM) Contemporary A 25-54
KLAT(AM) News/Talk A 25-54
KRTX(FM) Tejano A 25-54
KRTX(AM) Tejano A 25-54
7 San Antonio KXTN(FM) Tejano A 25-54
KPOZ(AM)(4) Brokered n/a
KROM(FM) Regional Mexican A 25-54
KCOR(AM) Regional Mexican A 35+
8 Dallas/Fort Worth KESS(AM) Full Service A 18+
KHCK(FM) Tejano A 18-49
KDXT(FM) Contemporary A 18-49
KDXX(FM) Tejano A 18-49
KDXX(AM) Contemporary A 18-49
9 McAllen/Brownsville/Harlingen KGBT(FM) Regional Mexican A 25-54
KGBT(AM) Regional Mexican A 25-54
KIWW(FM) Tejano A 25-54
6
<PAGE>
<CAPTION>
RANKING OF
MARKET BY PRIMARY
HISPANIC DEMOGRAPHIC
POPULATION MARKET(1) STATION STATION FORMAT(2) MARKET
- ------------- ------------------------------- ------------------ ------------------- ---------------
<S> <C> <C> <C> <C>
10 San Diego KLQV(FM) Contemporary A 25-54
KLNV(FM) Regional Mexican A 18-49
11 El Paso KBNA(FM) Regional Mexican A 25-54
KBNA(AM) Regional Mexican A 25-54
KAMA(AM) Tejano A 25-54
30 Las Vegas KLSQ(AM) Regional Mexican A 18-49
</TABLE>
(1) Actual city of license may differ from the metropolitan market served.
(2) See "--Programming."
(3) The Company operates this station pursuant to the KSCA Time Brokerage
Agreement.
(4) The Company sells airtime on this station to third parties for broadcast
of specialty programming.
The following table sets forth selected information with regard to Company owned
radio stations:
<TABLE>
<CAPTION>
DATE LICENSE BROADCAST
STATION/LOCATION ACQUIRED EXPIRATION DATE FREQUENCY
- ------------------------------------------- ------------ ---------------- --------------
<S> <C> <C> <C>
KTNQ(AM), Los Angeles, CA 10/85 12/1/05 1020 kHz
KLVE(FM), Los Angeles, CA 10/85 12/1/05 107.5 MHz
WADO(AM), New York, NY 8/94 6/1/98 (1) 1280 kHz
WCAA(FM), New York, NY 5/98 6/1/98 (1) 105.9 MHz
WAQI(AM), Miami, FL 10/89 2/1/03 710 kHz
WRTO(FM), Miami, FL 10/89 2/1/03 98.3 MHz
WQBA(AM), Miami, FL 8/94 2/1/03 1140 kHz
WAMR(FM), Miami, FL 8/94 2/1/03 107.5 MHz
KSOL(FM), San Francisco/San Jose, CA 2/97 12/1/05 98.9 MHz
KZOL(FM), San Francisco/San Jose, CA 2/97 12/1/05 99.1 MHz
WOJO(FM), Chicago, IL 2/97 12/1/04 105.1 MHz
WIND(AM), Chicago, IL 2/97 12/1/04 560 kHz
WLXX(AM), Chicago, IL 7/95 12/1/04 1200 kHz
KLTN(FM), Houston, TX 5/98 8/1/05 102.9 MHz
KOVE(FM), Houston, TX 2/97 8/1/05 93.3 MHz
KOVA(FM), Houston, TX 2/97 8/1/05 104.9 MHz
KLTO(FM), Houston, TX 2/97 8/1/05 104.9 MHz
KRTX(FM), Houston, TX 2/97 8/1/05 100.7 MHz
KLAT(AM), Houston, TX 2/97 8/1/05 1010 kHz
KRTX(AM), Houston, TX 2/97 8/1/05 980 kHz
KXTN(FM), San Antonio, TX 2/97 8/1/05 107.5 MHz
KPOZ(AM), San Antonio, TX 2/97 8/1/05 1310 kHz
KROM(FM), San Antonio, TX 2/97 8/1/05 92.9 MHz
KCOR(AM), San Antonio, TX 2/97 8/1/05 1350 kHz
KGBT(FM), McAllen/Brownsville/Harlingen, TX 2/97 8/1/05 98.5 MHz
KGBT(AM), McAllen/Brownsville/Harlingen, TX 2/97 8/1/05 1530 kHz
7
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DATE LICENSE BROADCAST
STATION/LOCATION ACQUIRED EXPIRATION DATE FREQUENCY
- ------------------------------------------- ------------ ---------------- --------------
KIWW(FM), McAllen/Brownsville/Harlingen, TX 2/97 8/1/05 96.1 MHz
KESS(AM), Dallas/Ft. Worth, TX 8/94 8/1/05 1270 kHz
KDXX(AM), Dallas/Ft. Worth, TX 12/94 8/1/05 1480 kHz
KDXX(FM), Dallas/Ft. Worth, TX 4/95 8/1/05 107.9 MHz
KDXT(FM), Dallas/Ft. Worth, TX 6/95 8/1/05 106.7 MHz
KHCK(FM), Dallas/Ft. Worth, TX 7/95 8/1/05 99.1 MHz
KBNA(FM), El Paso, TX 2/97 8/1/05 97.5 MHz
KBNA(AM), El Paso, TX 2/97 8/1/05 920 kHz
KAMA(AM), El Paso, TX 2/97 8/1/05 750 kHz
KLSQ(AM), Las Vegas, NV 8/95 10/1/97 (1) 870 kHz
KLNV(FM), San Diego, CA 8/98 12/1/97 (1) 106.5 MHz
KLQV(FM), San Diego, CA 8/98 12/1/97 (1) 102.9 MHz
</TABLE>
(1) An application for license renewal is currently pending with the FCC.
Regulations permit continuing operation of the station during the period
the renewal application is pending.
Statistical information contained herein regarding the radio industry,
population, consumer spending and advertising expenditures are taken from the
Arbitron Company 1996-1998 radio metro ratings and national data base (the
Company's station rankings were based upon the Arbitron Adults 25-54 category
1998 Fall Book); 1997 U.S. Census; Strategy Research Corporation--1998 U.S.
Hispanic Market Study; Hispanic Business (December 1993-1998); The M Street
Journal; and Katz Hispanic Media.
COMPETITION
Broadcasting is a highly competitive business. The Company's radio
stations compete for audiences and advertising revenues with other radio
stations of all formats, as well as with other media, such as newspapers,
magazines, television, cable television, outdoor advertising and direct mail,
within their respective markets. Audience ratings and market shares are subject
to change and any adverse change in a particular market would have a material
adverse effect on the revenue of stations located in that market. Future
operations are further subject to many variables which could have an adverse
effect upon the Company's financial performance. These variables include
economic conditions, both general and relative to the broadcasting industry;
shifts in population and other demographics; the level of competition for
advertising dollars with other radio stations and other entertainment and
communications media; fluctuations in operating costs; technological changes and
innovations; changes in labor conditions; and changes in governmental
regulations and policies and actions of federal regulatory bodies, including the
FCC, the FTC, and the Antitrust Division. Although the Company believes that
each of its stations is or will be able to compete effectively in its respective
market, there can be no assurance that any such station will be able to maintain
or increase its current audience ratings and advertising revenues. Radio
stations can quickly change formats. Any radio station could shift its format to
duplicate the format of any of the Company's stations. If a station converted
its programming to a format similar to that of a station owned by the Company,
the ratings and broadcast cash flow of the Company's station could be adversely
affected.
REGULATION OF THE COMPANY'S BUSINESS
EXISTING REGULATION AND LEGISLATION.
Radio broadcasting is subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended (the "Communications Act"). The
Communications Act prohibits the operation of a radio broadcasting station
except under a license issued by the FCC and empowers the FCC, among other
things,
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to issue, renew, revoke and modify broadcasting licenses; assign frequency
bands; determine stations' frequencies, locations and power; regulate the
equipment used by stations; adopt other regulations to carry out the
provisions of the Communications Act; impose penalties for violation of such
regulations; and impose fees for processing applications and other
administrative functions. The Communications Act prohibits the assignment of
a license or the transfer of control of a licensee without prior approval of
the FCC.
The Telecommunications Act of 1996 (the "1996 Act") represents the most
comprehensive overhaul of the country's telecommunications laws in more than 60
years. The 1996 Act significantly changes both the broadcast ownership rules and
the process for renewal of broadcast station licenses. The 1996 Act also relaxes
local radio ownership restrictions. The FCC has already implemented some of
these changes through Commission Orders. The 1996 Act establishes a "two-step"
renewal process that limits the FCC's discretion to consider applications filed
in competition with an incumbent's renewal application. Additionally, the 1996
Act substantially liberalizes the broadcast ownership rules, eliminating the
national radio limits.
This new regulatory flexibility has engendered aggressive local,
regional, and/or national acquisition campaigns. Removal of previous station
ownership limitations on leading incumbents (i.e., existing networks and major
station groups) has increased sharply the competition for, and the prices of,
attractive stations.
MULTIPLE OWNERSHIP RESTRICTIONS.
The FCC has promulgated rules that, among other things, limit the
ability of individuals and entities to own or have an official position or
ownership interest above a certain level (an "attributable" interest, as defined
more fully below) in broadcast stations, as well as other specified mass media
entities. Prior to the passage of the 1996 Act, these rules included limits on
the number of radio stations that could be owned on both a national and local
basis.
The 1996 Act substantially relaxed the radio ownership limitations. The
FCC began its implementation of the 1996 Act with several orders issued on March
8, 1996. The 1996 Act and the FCC's subsequently issued rule changes
eliminated the national ownership restriction, allowing a single entity to
own nationally any number of AM or FM broadcast stations. The 1996 Act and
the FCC's new rules also greatly eased local radio ownership restrictions. As
with the old rules, the maximum number of radio stations in which a person or
entity is allowed to have an attributable interest varies depending on the
number of radio stations within a defined market. In markets with more than
45 stations, one company may own, operate or control eight stations, with no
more than five in either service (AM or FM). In markets of 30-44 stations,
one company may own seven stations, with no more than four in either service;
in markets with 15- 29 stations, one entity may own six stations, with no
more than four in either service. In markets with 14 commercial stations or
less, one company may own up to five stations or 50% of all of the stations,
whichever is less, with no more than three in either service. It should be
noted, however, that the Department of Justice has precluded certain entities
from acquiring the maximum number of radio stations allowed in a market under
the 1996 Act because of concerns that antitrust laws would be violated. Thus,
it is possible that the Company would, in certain instances, be unable to
acquire the maximum number of stations allowed in a market under the 1996 Act.
In 1992, the FCC placed limitations on time brokerage (local marketing)
agreements ("LMA") through which the licensee of one radio station provides the
programming for another licensee's station in the same market. Stations
operating in the same service (e.g., where both stations are AM) and in the same
market are prohibited from simulcasting more than 25% of their programming.
Moreover, in determining the number of stations that a single entity may
control, an entity programming a station pursuant to an LMA is required, under
certain circumstances, to count that station toward its maximum even though it
does not own the station.
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A number of cross-ownership rules pertain to licensees of television
and radio stations. FCC rules, the Communications Act, or both, generally
prohibit an individual or entity from having an attributable interest in both a
television station and a radio station, daily newspaper or cable television
system that is located in the same local market area served by the television
station. The FCC has employed a liberal waiver policy with respect to the
TV/radio cross-ownership restriction (the so-called "one-to-a-market" rule),
generally permitting common ownership of one AM, one FM, and one TV station in
any of the 25 largest markets, provided there are at least 30 separately owned
stations in the market. The 1996 Act directed the FCC to extend its
one-to-a-market waiver policy to the top 50 markets, consistent with the public
interest, convenience and necessity. On November 7, 1996, the FCC released a
Second Further Notice of Proposed Rulemaking seeking comment on a number of
issues relating to the local television ownership rules, including its tentative
conclusion that it should extend the presumptive waiver of the one-to-a-market
rule to the top 50 markets. The Commission also requested further comment on
whether there is a continued need for the rule and, if there is, whether the
rule should be further modified. In addition, on September 27, 1996, the FCC
released a Notice of Inquiry seeking comment on whether it should relax its
policy of granting waivers of the radio/newspaper cross-ownership restriction.
Expansion of the Company's broadcast operations in particular areas and
nationwide will continue to be subject to the FCC's ownership rules and any
further changes the FCC or Congress may adopt. Significantly, the 1996 Act
requires the FCC to review its remaining ownership rules biennially -- as
part of its regulatory reform obligations -- to determine whether its various
rules are still necessary. On March 13, 1998, the FCC initiated its first
biennial review of its broadcast ownership rules and solicited comment on
matters including the effect which the relaxation of the local radio ownership
limitations pursuant to the 1996 Act has had on competition in the local
advertising markets and in programming. The Company cannot predict the impact of
the biennial review process or any other agency or legislative initiatives upon
the FCC's broadcast rules. Further, the 1996 Act's relaxation of the FCC's
ownership rules may increase the level of competition in one or more of the
markets in which the Company's stations are located, particularly to the extent
that any of the Company's competitors may have greater resources and thereby be
in a better position to capitalize on such changes.
Under the FCC's ownership rules, a direct or indirect purchaser of
certain types of securities of the Company could violate FCC regulations if that
purchaser owned or acquired an "attributable" or "meaningful" interest in other
media properties in the same areas as stations owned by the Company or in a
manner otherwise prohibited by the FCC. All officers and directors of a
licensee, as well as general partners, limited partners who are not properly
"insulated" from management activities, and stockholders who own five percent or
more of the outstanding voting stock of a licensee (either directly or
indirectly), generally will be deemed to have an attributable interest in the
license. Certain institutional investors who exert no control or influence over
a licensee may own up to ten percent of such outstanding voting stock without
being considered "attributable". Under current FCC regulations, debt
instruments, non-voting stock, properly insulated limited partnership interests
(as to which the licensee certifies that the limited partners are not
"materially involved" in the management and operation of the subject media
property) and voting stock held by minority stockholders in cases in which there
is a single majority stockholder generally are not attributable. The FCC's
"cross-interest" policy, which precludes an individual or entity from having a
"meaningful" (even though not attributable) interest in one media property and
an attributable interest in a broadcast, cable or newspaper property in the same
area, may be invoked in certain circumstances to reach interests not expressly
covered by the multiple ownership rules. See "--Control by Certain
Stockholders--Relationship Between the Company and Clear Channel."
In January 1995, the FCC initiated a rulemaking proceeding designed to
permit a "thorough review of [its] broadcast media attribution rules." Among the
issues on which comment was sought were (i) whether to change the voting stock
attribution benchmarks from five percent to ten percent and, for passive
investors, from ten percent to twenty percent; (ii) whether there are any
circumstances in which non-voting stock interests, which are currently
considered non-attributable, should be considered attributable; (iii) whether
the FCC should eliminate its single majority shareholder exception (pursuant to
which voting interests in excess
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<PAGE>
of five percent are not considered cognizable if a single shareholder owns
more than fifty percent of the voting power); (iv) whether to relax
insulation standards for business development companies and other widely-held
limited partnerships; (v) how to treat limited liability companies and other
new business forms for attribution purposes; (vi) whether to eliminate,
modify or codify the cross-interest policy; and (vii) whether to adopt a new
policy which would consider whether multiple cross interests or other
significant business relationships (such as time brokerage agreements, debt
relationships or holdings of nonattributable interests), which individually
do not raise concerns, raise issues with respect to diversity and
competition. On November 7, 1996, the FCC released a Further Notice of
Proposed Rulemaking in order to elicit further comment on several issues
concerning its review of the broadcast attribution rules. In general, the FCC
seeks comment as to whether the recent relaxation of the multiple ownership
rules resulting from passage of the 1996 Act should affect the FCC's
review of the rules, including whether a combination of debt and equity
exceeding a certain threshold should be considered to be an attributable
interest. The Company cannot predict with certainty when this proceeding will
be concluded or whether any of these standards will be changed. Should the
attribution rules be changed, the Company is unable to predict what effect,
if any, such changes would have on the Company or its activities.
LICENSE GRANT AND RENEWAL.
Prior to the passage of the 1996 Act, radio broadcasting licenses
generally were granted or renewed for a period of seven years upon a finding by
the FCC that the "public interest, convenience, and necessity" had been served
thereby. At the time an application was made for renewal of a radio license,
parties in interest could file petitions to deny the application, and such
parties, including members of the public, could comment upon the service the
station had provided during the preceding license term. In addition, prior to
passage of the 1996 Act, any person was permitted to file a competing
application for authority to operate on the station's channel and replace the
incumbent licensee. Renewal applications were granted without a hearing if there
were no competing applications or if issues raised by petitioners to deny such
applications were not serious enough to cause the FCC to order a hearing. If
competing applications were filed, a full comparative hearing was required.
Under the 1996 Act, the statutory restriction on the length of
broadcast licenses has been amended to allow the FCC to grant broadcast licenses
for terms of up to eight years and the FCC has implemented the eight year
license term provision for radio stations. The 1996 Act also requires renewal of
a broadcast license if the FCC finds that (1) the station has served the public
interest, convenience, and necessity; (2) there have been no serious violations
of either the Communications Act or the FCC's rules and regulations by the
licensee; and (3) there have been no other serious violations which taken
together constitute a pattern of abuse. In making its determination, the FCC may
still consider petitions to deny but cannot consider whether the public interest
would be better served by a person other than the renewal applicant. Instead,
under the 1996 Act, competing applications for the same frequency may be
accepted only after the FCC has denied an incumbent's application for
renewal of license.
Although in the vast majority of cases broadcast licenses are granted
by the FCC even when petitions to deny are filed against them, there can be no
assurance that any of the Company's stations' licenses will be renewed.
ALIEN OWNERSHIP RESTRICTIONS.
The Communications Act restricts the ability of foreign entities or
individuals to own or hold certain interests in broadcast licenses. Foreign
governments, representatives of foreign governments, non-U.S. citizens,
representatives of non-U.S. citizens, and corporations or partnerships organized
under the laws of a foreign nation are barred from holding broadcast licenses.
Non-U.S. citizens, collectively, may directly or indirectly own or vote up to
twenty percent of the capital stock of a licensee. In addition, a broadcast
license may not be granted to or held by any corporation that is controlled,
directly or indirectly, by any other corporation more than one-fourth of whose
capital stock is owned or voted by non-U.S. citizens or their
11
<PAGE>
representatives, by foreign governments or their representatives, or by
non-U.S. corporations, if the FCC finds that the public interest will be
served by the refusal or revocation of such license. The FCC has interpreted
this provision of the Communications Act to require an affirmative public
interest finding before a broadcast license may be granted to or held by any
such corporation, and the FCC has made such an affirmative finding only in
limited circumstances. The Company, which serves as a holding company for
subsidiaries that serve as licensees for the stations, therefore may be
restricted from having more than one-fourth of its stock owned or voted
directly or indirectly by non-U.S. citizens, foreign governments,
representatives of non-U.S. citizens or foreign governments, or foreign
corporations.
OTHER REGULATIONS AFFECTING RADIO BROADCASTING STATIONS.
The FCC has significantly reduced its past regulation of broadcast
stations, including elimination of formal ascertainment requirements and
guidelines concerning amounts of certain types of programming and commercial
matter that may be broadcast. In 1990, the U.S. Supreme Court refused to review
a lower court decision that upheld the FCC's 1987 action invalidating most
aspects of the Fairness Doctrine, which had required broadcasters to present
contrasting views on controversial issues of public importance. The FCC has,
however, continued to regulate other aspects of fairness obligations in
connection with certain types of broadcasts. In addition, there are FCC rules
and policies, and rules and policies of other federal agencies, that regulate
matters such as political advertising practices, equal employment opportunities,
application procedures and other areas affecting the business or operations of
broadcast stations.
ANTITRUST MATTERS.
An important element of the Company's growth strategy involves the
acquisition of additional radio stations, many of which are likely to require
preacquisition antitrust review by the FTC and the Antitrust Division. Following
passage of the 1996 Act, the Antitrust Division has become more aggressive in
reviewing proposed acquisitions of radio stations and radio station networks,
particularly in instances where the proposed acquirer already owns one or more
radio stations in a particular market and the acquisition involves another radio
station in the same market. The Antitrust Division has obtained consent decrees
requiring an acquirer to dispose of at least one radio station in a particular
market where the acquisition otherwise would have resulted in an undue
concentration of market share by the acquirer. There can be no assurance that
the Antitrust Division or the FTC will not seek to bar the Company from
acquiring additional radio stations in a market where the Company's existing
stations already have a significant market share of the overall radio market or
the Spanish language market segment.
ENVIRONMENTAL MATTERS.
As the owner, lessee or operator of various real properties and
facilities, the Company is subject to various federal, state and local
environmental laws and regulations. Historically, compliance with such laws and
regulations has not had a material adverse effect on the Company's business.
There can be no assurance, however, that compliance with existing or new
environmental laws or regulations will not require the Company to make
significant expenditures in the future.
RECENT DEVELOPMENTS, PROPOSED LEGISLATION AND REGULATION.
The FCC is considering ways to introduce new technologies to the radio
broadcasting industry, including terrestrial delivery of digital audio
broadcasting on both the AM and FM bands. In 1997, the FCC granted two licenses
for national, satellite-delivered digital audio broadcasting services. These
services will be capable of delivering multiple, high-quality channels of audio.
The Company is unable to predict the effect any such new technology will have on
the Company's financial condition or results of operations. In addition, cable
television operators and direct satellite broadcast television companies market
service commonly referred to as "cable radio" which provides their subscribers
with several high-quality channels of
12
<PAGE>
music, news and other information. Technical considerations currently limit
this technology to fixed locations.
The FCC presently is seeking comment on its policies designed to
increase minority ownership of mass media facilities. Congress, however, has
enacted legislation that eliminated the minority tax certificate program of the
FCC, which gave favorable tax treatment to entities selling broadcast stations
to entities controlled by an ethnic minority. In addition, a Supreme Court
decision has cast into doubt the continued validity of other FCC programs
designed to increase minority ownership of mass media facilities.
Congress and the FCC currently have under consideration, and may in the
future adopt, new laws, regulations and policies regarding a wide variety of
matters that could affect, directly or indirectly, the operation and ownership
of the Company's broadcast properties. For example, the FCC has recently adopted
new rules which, with limited exceptions, requires the holder of an FCC
construction permit to complete construction of new or modified facilities
within three (3) years of grant. In addition to the changes and proposed changes
noted above, such matters include, for example, the license renewal process,
spectrum use fees, political advertising rates, potential restrictions on the
advertising of certain products (liquor, beer and wine, for example) and the
rules and policies to be applied in enforcing the FCC's equal employment
opportunity regulations. Other matters that could affect the Company's broadcast
properties include technological innovations and developments generally
affecting competition in the mass communications industry. The foregoing does
not purport to be a complete summary of all the provisions of the Communications
Act, or the 1996 Act, nor of the regulations and policies of the FCC thereunder.
The 1996 Act also covers satellite and terrestrial delivery of digital audio
radio service, and direct broadcast satellite systems. Proposals for additional
or revised regulations and requirements are pending before and are being
considered by Congress and federal regulatory agencies from time to time. Also,
various of the foregoing matters are now, or may become, the subject of court
litigation, and the Company cannot predict the outcome of any such litigation or
the impact on its broadcast business.
CONCENTRATION OF CASH FLOW FROM LOS ANGELES STATIONS.
Broadcast cash flow generated by the Company's Los Angeles stations
accounted for approximately 47% of the Company's broadcast cash flow for the
year ended December 31, 1998. Increased competition for advertising dollars with
other radio stations and communications media in the Los Angeles metropolitan
area, both generally and relative to the broadcasting industry, increased
competition from a new format competitor and other competitive and economic
factors could cause a decline in revenue generated by the Company's Los Angeles
stations. A significant decline in the revenue of the Los Angeles stations could
have a material adverse effect on the Company's overall results of operations
and broadcast cash flow.
CONTROL BY CERTAIN STOCKHOLDERS
CONTROL BY THE TICHENOR FAMILY.
McHenry T. Tichenor, Jr., the Company's Chairman, President and Chief
Executive Officer, McHenry T. Tichenor, Sr., the David T. Tichenor Trust, Warren
W. Tichenor, William E. Tichenor and Jean T. Russell (collectively, the
"Tichenor Family") are parties to a Voting Agreement with one another, dated as
of July 1, 1996 (the "Voting Agreement"). As of March 11, 1999, the Tichenor
Family had voting control over approximately 20.6% of the shares of Class A
Common Stock. This enables the Tichenor Family to exert significant influence
over all matters submitted to the stockholders. Such ownership and control by
the Tichenor Family could have the effect of delaying or preventing a change in
control of the Company, thereby possibly having the effect of depriving
stockholders of the opportunity to receive a premium for their shares. Such
ownership and control could also have the effect of making the Company less
attractive to a potential acquirer and could result in holders of Class A Common
Stock receiving less consideration upon a sale of their shares than might
otherwise be available in the event of a takeover attempt.
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<PAGE>
RELATIONSHIP BETWEEN THE COMPANY AND CLEAR CHANNEL.
As of March 19, 1999, Clear Channel owned no shares of Class A Common
Stock and thus was not entitled to vote in the election of the Company's
directors. However, Clear Channel owned all of the outstanding shares of the
Company's Class B Common Stock, which accounted for approximately a 28.7%
interest in the Common Stock of the Company. As long as Clear Channel owns at
least 20.0% of the Company's Common Stock, Clear Channel will have a class vote
on certain matters, including the sale of all or substantially all of the assets
of the Company, any merger or consolidation involving the Company where the
stockholders of the Company immediately prior to the transaction would not own
at least 50.0% of the capital stock of the surviving entity, any
reclassification, capitalization, dissolution, liquidation or winding up of the
Company, the issuance of any shares of Preferred Stock by the Company, the
amendment of the Company's Restated Certificate of Incorporation in a manner
that adversely affects the rights of the holders of Class B Common Stock, the
declaration or payment of any non-cash dividends on the Company's Common Stock,
or any amendment to the Company's Certificate of Incorporation concerning the
Company's capital stock. Furthermore, shares of Class B Common Stock are
convertible into shares of Class A Common Stock, at the holder's option, subject
to any necessary governmental consents, including the consent of the FCC.
Because of the FCC's cross interest policy, which bars a party that holds an
attributable relationship in one or more radio stations in a market from having
a "meaningful relationship" with another radio station in that market, Clear
Channel may not presently convert its shares of Class B Common Stock into shares
of Class A Common Stock. The provisions of the Class B Common Stock could have
the effect of delaying or preventing a change in control of the Company, thereby
possibly having the effect of depriving stockholders of the opportunity to
receive a premium for their shares. Such provisions could also have the effect
of making the Company less attractive to a potential acquirer and could result
in holders of Class A Common Stock receiving less consideration upon a sale of
their shares than might otherwise be available in the event of a takeover
attempt.
The nature of the respective businesses of the Company and Clear
Channel gives rise to potential conflicts of interest between the two companies.
The Company and Clear Channel are each engaged in the radio broadcasting
business in certain markets, and as a result, they are competing with each other
for advertising revenues. As of December 31, 1998, Clear Channel owned,
programmed or sold airtime for 206 radio stations in 48 domestic markets, as
well as radio stations in a number of foreign countries. Clear Channel also
owned or programmed 20 television stations and was one of the largest domestic
outdoor advertising companies based on its total inventory of advertising
display faces. Clear Channel's television and outdoor advertising operations may
also be deemed to compete with the Company's business. In addition, conflicts
could arise with respect to transactions involving the purchase or sale of radio
broadcasting companies, particularly Spanish language radio broadcasting
companies, the issuance of shares of Common Stock or Preferred Stock, or the
payment of dividends by the Company.
Although Clear Channel does not currently engage in the domestic
Spanish language radio broadcasting business, other than through its ownership
of shares in the Company, circumstances could arise that would cause Clear
Channel to engage in the domestic Spanish language radio broadcasting business.
There can be no assurance that Clear Channel will not engage in the domestic
Spanish language radio broadcasting business. In addition, as part of Clear
Channel's overall acquisition strategy, Clear Channel may from time to time
acquire Spanish language radio broadcasting companies individually or as part of
a larger group and thereafter engage in the Spanish language radio broadcasting
business. Such activities could directly or indirectly compete with the
Company's business. In addition, Clear Channel may from time to time make
international acquisitions of or investments in companies engaged in the Spanish
language radio broadcasting business outside the United States and the Company
and Clear Channel may compete for such acquisition or investment opportunities.
To the extent the Company enters new lines of business, it may be deemed to
compete directly or indirectly with Clear Channel, and the Company and Clear
Channel may compete in the future with respect to acquisitions and investment
opportunities in these areas.
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<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements contained herein are not based upon historical
facts, but are forward-looking statements based upon numerous assumptions made
as of the date hereof. When used in the preceding and following discussions, the
words "believes," "intends," "expects," "anticipates" and similar expressions
are intended to identify such forward-looking statements, which are subject to
various risks and uncertainties that could cause actual results to differ
materially from those expressed in such forward-looking statements. Such risks
and uncertainties include, but are not limited to, industrywide market factors
and regulatory developments affecting the Company's operations, acquisitions and
dispositions of broadcast properties, the financial performance of start-up
stations, and efforts by the Company's management to integrate its operating
philosophies and practices at the station level. The Company disclaims any
obligation to update the forward-looking statements contained herein.
INDUSTRY SEGMENTS
The Company considers radio broadcasting to be its only operating
segment.
EMPLOYEES
As of March 23, 1999, the Company employed 652 persons on a full-time
basis, including corporate employees and 16 employees (at WCAA(FM) and WADO(AM),
New York) who are subject to two collective bargaining agreements. The Company
considers its employee relations to be good.
15
<PAGE>
ITEM 2. PROPERTIES
The Company's corporate headquarters is in Dallas, Texas. The Company
has leased approximately 11,000 square feet at 3102 Oak Lawn Avenue in Dallas,
Texas. The initial term of this lease expires in 2013, and the Company has one
option to extend the lease for one additional five-year term.
The types of properties required to support each of the Company's radio
stations listed in Item 1 above includes offices, studios, transmitter sites and
antenna sites. A radio station's studios are generally housed with its offices
in downtown or business districts. A radio station's transmitter sites and
antenna sites generally are located in a manner that provides maximum market
coverage subject to the station's FCC license and FCC rules and regulations.
The studios and offices of the Company's radio stations are located in
leased or owned facilities. These leases generally have expiration dates that
range from three to sixteen years. The Company either owns or leases its
transmitter and antenna sites. These leases generally have expiration dates that
range from five to thirty years. The Company does not anticipate any
difficulties in renewing those leases that expire within the next several years
or in leasing other space, if required.
A substantial amount of the Company's broadcast cash flow was generated
by the Company's Los Angeles stations during 1998. Accordingly, the offices,
studios, transmitter sites and antenna sites used in the operation of the
Company's Los Angeles stations may be material to the Company's overall
operations.
As noted in Item 1 above, as of December 31, 1998, the Company owns or
programs 39 radio stations in 12 markets throughout the United States.
Therefore, except as set forth above, no one property is material to the
Company's overall operations. The Company believes that its properties are in
good condition and suitable for its operations. The Company owns substantially
all of the equipment used in its radio broadcasting business.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company becomes involved in
certain legal claims and litigation. In the opinion of management, based upon
consultations with legal counsel, the disposition of such litigation pending
against the Company will not have a materially adverse effect on its
consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF CLASS A COMMON STOCK
The Class A Common Stock is traded on the Nasdaq National Market under
the symbol "HBCCA." The following table sets forth for each of the periods
presented below, the high and low closing sale prices per share as reported by
the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
----------- -----------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter........................... $ 23.31 $ 15.88
Second Quarter.......................... 27.75 22.13
Third Quarter........................... 38.06 27.00
Fourth Quarter.......................... 46.75 32.50
YEAR ENDED DECEMBER 31, 1998
First Quarter........................... $ 50.88 $ 40.38
Second Quarter.......................... 45.50 34.88
Third Quarter........................... 42.81 30.00
Fourth Quarter.......................... 49.25 31.25
</TABLE>
As of December 31, 1998, there were approximately 79 holders of the
Class A Common Stock. This figure does not include an estimate of the
indeterminate number of beneficial holders whose shares may be held of record by
brokerage firms and clearing agencies.
DIVIDEND POLICY
The Company has never paid a cash dividend on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. The Company
intends to retain any earnings for use in the growth of its business. The
Company currently is restricted from paying any cash dividends on its capital
stock under the Credit Agreement.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data for
Heftel Broadcasting Corporation and its subsidiaries for the years ended
December 31, 1998 and 1997, the three months ended December 31, 1996, and the
years ended September 30, 1996, 1995 and 1994 (in thousands, except per share
data):
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended September 30,
------------------------- December 31, -----------------------------------
1998 1997 1996 1996 1995 1994
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues $ 164,122 $ 136,584 $ 18,309 $ 71,732 $ 64,160 $ 27,433
Operating expenses 95,784 82,065 11,207 48,896 43,643 15,345
Depreciation and amortization 21,149 14,928 1,747 5,140 3,344 1,906
----------- ----------- ----------- ---------- ---------- ----------
Operating income before corporate 47,189 39,591 5,355 17,696 17,173 10,182
expenses
Corporate expenses 5,451 4,579 368 5,072 4,720 3,454
----------- ----------- ----------- ---------- ---------- ----------
Operating income 41,738 35,012 4,987 12,624 12,453 6,728
----------- ----------- ----------- ---------- ---------- ----------
Other income (expense):
Interest income (expense), net 2,634 (3,541) (2,841) (11,034) (6,389) (2,997)
Income (loss) in equity of joint venture(a) - - - - - 616
Restructuring charges(b) - - - (29,011) - -
Other, net 252 (82) 18 (1,671) (428) (1,407)
----------- ----------- ----------- ---------- ---------- ----------
2,886 (3,623) (2,823) (41,716) (6,817) (3,788)
----------- ----------- ----------- ---------- ---------- ----------
Income (loss) before minority interest
and income tax 44,624 31,389 2,164 (29,092) 5,636 2,940
Minority interest(a) - - - - 1,167 351
Income tax 17,740 12,617 100 65 150 100
----------- ----------- ----------- ---------- ---------- ----------
Income (loss) from continuing operations 26,884 18,772 2,064 (29,157) 4,319 2,489
Loss on discontinued operations of CRC(b) - - - 9,988 626 285
----------- ----------- ----------- ---------- ---------- ----------
Income (loss) before extraordinary item 26,884 18,772 2,064 (39,145) 3,693 2,204
Extraordinary item - loss on retirement
of debt - - - 7,461 - 1,738
----------- ----------- ----------- ---------- ---------- ----------
Net income (loss) $ 26,884 $ 18,772 $ 2,064 $ (46,606) $ 3,693 $ 466
----------- ----------- ----------- ---------- ---------- ----------
----------- ----------- ----------- ---------- ---------- ----------
Net income (loss) per common share(c):
Basic:
Continuing operations $ 0.55 $ 0.45 $ 0.09 $ (1.41) $ 0.21 $ 0.25
Discontinued operations - - - (0.49) (0.03) (0.03)
Extraordinary loss - - - (0.36) - (0.19)
----------- ----------- ----------- --------- ---------- ----------
Net income (loss) $ 0.55 $ 0.45 $ 0.09 $ (2.26) $ 0.18 $ 0.03
----------- ----------- ----------- --------- ---------- ----------
----------- ----------- ----------- --------- ---------- ----------
Diluted:
Continuing operations $ 0.54 $ 0.45 $ 0.09 $ (1.41) $ 0.20 $ 0.22
Discontinued operations - - - (0.49) (0.03) (0.03)
Extraordinary loss - - - (0.36) - (0.16)
----------- ----------- ----------- --------- ---------- ----------
Net income (loss) $ 0.54 $ 0.45 $ 0.09 $ (2.26) $ 0.17 $ 0.03
----------- ----------- ----------- --------- ---------- ----------
----------- ----------- ----------- --------- ---------- ----------
Weighted average common shares outstanding:
Basic 49,021 41,671 23,095 20,590 20,021 9,137
Diluted 49,348 41,792 23,095 20,590 21,611 10,769
OTHER OPERATING DATA:
Broadcast cash flow $ 68,338 $ 54,519 $ 7,102 $ 22,836 $ 20,517 $ 12,088
EBITDA 62,887 49,940 6,734 17,764 15,797 8,634
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital $ 17,168 $ 10,970 $ 8,429 $ 7,168 $ 14,967 $ 18,366
Net intangible assets 643,955 423,530 120,592 121,742 109,253 70,528
Total assets 744,444 512,249 163,725 165,751 151,637 113,353
Long-term debt, less current portion 1,547 14,122 135,504 137,659 97,516 59,898
Stockholders' equity 622,621 389,960 14,166 12,101 43,581 44,436
</TABLE>
(a) Effective August 20, 1994, the Company began accounting for its 49.0%
interest in Viva Media on a consolidated basis. Accordingly, Viva Media's
result of operations are included in the consolidated financial statements
commencing August 20, 1994. The Company acquired the remaining 51.0% of
Viva Media on September 7, 1995. Prior to August 20, 1994, the results of
operations of Viva Media were accounted for using the equity method of
accounting.
(b) See Note 4 to Consolidated Financial Statements.
(c) All common share and per-common-share amounts have been adjusted
retroactively for a two-for-one common stock split effective December 1,
1997.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the consolidated results of operations
and cash flows of the Company for the years ended December 31, 1998 and 1997,
the three months ended December 31, 1996 and the year ended September 30,
1996 and consolidated financial condition as of December 31, 1998 and 1997
should be read in conjunction with the consolidated financial statements of
the Company and the related notes included elsewhere in this report.
GENERAL
The performance of a radio station group is customarily measured by
its ability to generate broadcast cash flow. The two components of broadcast
cash flow are net revenues (gross revenues net of agency commissions) and
operating expenses (excluding depreciation and amortization and corporate
general and administrative expense). The primary source of revenues is the
sale of broadcasting time for advertising. The Company's most significant
operating expenses for purposes of the computation of broadcast cash flow are
employee salaries and commissions, programming expenses, and advertising and
promotion expenses. The Company strives to control these expenses by working
closely with local station management. The Company's revenues vary throughout
the year. As is typical in the radio broadcasting industry, the Company's
first calendar quarter generally produces the lowest revenues. The second and
third quarters generally produce the highest revenues.
Another measure of operating performance is EBITDA. EBITDA consists
of operating income or loss excluding depreciation and amortization and other
non-cash and non-recurring charges.
Broadcast cash flow and EBITDA are not calculated in accordance with
generally accepted accounting principles. These measures should not be
considered in isolation or as substitutes for operating income, cash flows
from operating activities or any other measure for determining the Company's
operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles. Broadcast cash flow and EBITDA do
not take into account the Company's debt service requirements and other
commitments and, accordingly, broadcast cash flow and EBITDA are not necessarily
indicative of amounts that may be available for dividends, reinvestment in
the Company's business or other discretionary uses.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE
YEAR ENDED DECEMBER 31, 1997.
The results of operations for the year ended December 31, 1998 are
not comparable to results of operations for the same period in 1997 primarily
due to (a) the Tichenor Merger which closed February 14, 1997, and (b) the
start-up of radio stations KSCA(FM) in Los Angeles on February 5, 1997,
WCAA(FM) in New York on May 22, 1998 (WPAT(AM) was exchanged for WCAA(FM)),
KRTX(AM/FM) in Houston on May 29, 1998, and KLQV(FM) and KLNV(FM) in San
Diego on August 10, 1998.
Net revenues for the year ended December 31, 1998 increased by $27.5
million, or 20.1% to $164.1 million compared to $136.6 million for the year
ended December 31, 1997. Operating expenses increased by $13.7 million, or
16.7%, to $95.8 million for the year ended December 31, 1998 compared to $82.1
million for the year ended December 31, 1997. Broadcast cash flow increased
$13.8 million, or 25.3% to $68.3 million for the year ended December 31, 1998
compared to $54.5 million for the year ended December 31, 1997. The improved
operating performance was due to same station revenue growth.
Corporate expenses for the year ended December 31, 1998 increased by
$0.9 million, or 19.6%, to $5.5 million compared to $4.6 million for the year
ended December 31, 1997. The increase was primarily due to higher staffing
costs of the Company after the Tichenor Merger. As a result, EBITDA increased
$12.9 million, or 25.9% to $62.9 million.
Depreciation and amortization for the year ended December 31, 1998
increased 41.6% to $21.1 million compared to $14.9 million for the year ended
December 31, 1997. The increase is due to radio
19
<PAGE>
station acquisitions, capital expenditures, and the additional depreciation
and amortization associated with the Tichenor Merger included in all of the
year ended December 31, 1998 compared to a portion of the same period in 1997.
Interest expense, net of interest income decreased from $3.5 million
for the year ended December 31, 1997 to $2.6 million of interest income, net
of interest expense for the year ended December 31, 1998. The reduction in
interest expense was the result of the repayment of debt funded from the
January 1998 Offering. Interest income increased due to an increase in
invested cash from the January 1998 Offering.
Other, net decreased from $0.1 million of other expense for the year
ended December 31, 1997 to $0.3 million of the other income for the year
ended December 31, 1998. In 1998, the Company reversed the remaining balance
of an accrual of costs relating to unconsummated acquisitions of $0.3 million
which was made in a prior reporting period.
Income tax expense increased from $12.6 million for the year ended
December 31, 1997 to $17.7 million for the year ended December 31, 1998. The
increase was primarily due to income before income tax increasing from $31.4
million for the year ended December 31, 1997 to $44.6 million for the year
ended December 31, 1998. The effective tax rates for the years ended December
31, 1997 and 1998 are 40.2% and 39.8%, respectively.
Net income of $18.8 million was generated by the Company for the
year ended December 31, 1997 compared to net income of $26.9 million for the
year ended December 31, 1998.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE
YEAR ENDED SEPTEMBER 30, 1996.
During 1997, the Company completed the Tichenor Merger and entered
into the KSCA Option. The results of operations for 1997 do not reflect a
full year of operations of Tichenor or KSCA and 1996 results of operations
exclude the financial results of these transactions. Consequently, the
results of operations for 1997 and 1996 are not entirely comparable.
For the year ended December 31, 1997, net revenues increased by
$64.9 million, or 90.5% to $136.6 million compared to $71.7 million for the
year ended September 30, 1996. Operating expenses increased by $33.2 million,
or 67.9%, to $82.1 million for the year ended December 31, 1997 compared to
$48.9 million for the year ended September 30, 1996. Broadcast cash flow
increased $31.7 million, or 139.0% to $54.5 million for the year ended
December 31, 1997 compared to $22.8 million for the year ended September 30,
1996. The improved operating performance was due to contributions from the
radio stations acquired in the Tichenor Merger, improved performance from
start-up stations, and same station revenue growth.
Corporate expenses for the year ended December 31, 1997 were $4.6
million compared to $5.1 million for the year ended September 30, 1996.
Following the Tichenor Merger, the Company shut down duplicative corporate
headquarters in Las Vegas, Nevada, and consolidated the corporate
headquarters in Dallas, Texas. As a result, EBITDA increased $32.2 million,
or 181.1% to $49.9 million.
Depreciation and amortization increased $9.8 million, or 192.2% to
$14.9 million for the year ended December 31, 1997 compared to $5.1 million
for the year ended September 30, 1996. The increase is primarily attributable
to depreciation and amortization arising from the Tichenor Merger.
Interest expense, net of interest income, decreased by $7.5 million,
or 67.9% for the year ended December 31, 1997 compared to $11.0 million for
the year ended September 30, 1996. The decrease in interest expense was due
to a $97.0 million reduction in outstanding debt through the February 1997
Offering and through repayments in debt from the Company's cash flow.
20
<PAGE>
Other expenses declined from $41.7 million for the year ended
September 30, 1996 to $3.6 million for the year ended December 31, 1997.
During fiscal 1996, the Company incurred $29.0 million of restructuring
charges and $1.4 million of costs relating to unconsummated acquisitions. The
Company did not incur these expenses in 1997.
Income tax expense increased from $65,000 for the year ended
September 30, 1996 to $12.7 million for the year ended December 31, 1997. The
increase was primarily due to an improvement in earnings before taxes from a
loss of $29.1 million for the year ended September 30, 1996 to income of
$31.4 million for the year ended December 31, 1997.
The results of operations for the year ended December 31, 1997 did
not include any loss on discontinued operations or any extraordinary loss on
the retirement of debt. In 1996, the loss on discontinued operations due to
the shut down of CRC was $10.0 million and the extraordinary loss on the
retirement of debt was $7.5 million.
The Company generated net income of $18.8 million for the year ended
December 31, 1997 compared to a net loss of $46.6 million for the year ended
September 30, 1996.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 1996 COMPARED TO THE
QUARTER ENDED DECEMBER 31, 1995.
On February 14, 1997, the Board of Directors of the Company voted to
change the Company's fiscal year from September 30 to December 31. The
quarter ended December 31, 1996 represents the transition period.
For the quarter ended December 31, 1996, net revenues increased by
$0.8 million, or 4.6% to $18.3 million compared to $17.5 million for the
quarter ended December 31, 1995. Income from continuing operations increased
by $0.8 million, or 58.5%, to $2.1 million for the quarter ended December 31,
1996 compared to $1.3 million for the quarter ended December 31, 1995. A loss
on discontinued operations of $0.4 million was recognized in the quarter
ended December 31, 1995. The Company generated net income of $2.1 and $0.9
million for the quarters ended December 31, 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the years ended
December 31, 1998 and 1997 was $57.0 and $43.8 million, respectively.
Generally, capital expenditures are financed with cash provided by operations
and long-term borrowings. For the years ended December 31, 1998 and 1997, the
Company's capital expenditures were $4.7 and $4.0 million, respectively. The
increase in capital expenditures was due primarily to the office space
improvement costs for New York and the corporate office in Dallas. During
1998 and 1997, the Company spent $236.6 and $1.1 million ($3.2 million to
acquire KOVA(FM) net of approximately $2.1 million of cash and cash
equivalents acquired in the Tichenor Merger), respectively, to acquire radio
stations.
STOCKHOLDERS' EQUITY
On January 22, 1998, the Company completed the 1998 Offering,
selling 5,175,000 shares of Class A Common Stock for $39.75 per share, after
underwriters' discounts and commissions. The net proceeds of the offering
were approximately $205.1 million.
On February 10, 1997, the Company completed the February 1997
Offering selling 4,830,000 (pre-split) shares of its Class A Common Stock for
$36.80 (pre-split) per share, after underwriters' discounts and commissions.
The net proceeds of the offering were approximately $176.4 million.
21
<PAGE>
LONG-TERM DEBT
On February 12, 1997, the Company repaid borrowings of $143.0
million outstanding under an existing $155 million credit facility with a
portion of the proceeds from the February 1997 Offering.
On February 14, 1997, the Company entered into a new $300 million
credit facility (the "Credit Facility"), replacing the existing credit
facility and initially borrowed $46.0 million. The Company used advances
under the Credit Facility and a portion of the proceeds from the February
1997 Offering to retire the outstanding debt and senior preferred stock of
Tichenor assumed on the date of the Tichenor Merger. At December 31, 1997,
the Company had outstanding borrowings of $12.0 million under the Credit
Facility. On January 29, 1998, the Company repaid the entire amount
outstanding under the Credit Facility. In August 1998, the Company borrowed
$18.0 million which was subsequently repaid in December 1998. The Company's
ability to make additional borrowings under the Credit Facility is subject
to compliance with certain financial ratios and other conditions set forth
in the Credit Facility. The Company may elect under the terms of the Credit
Facility to increase the facility by $150.0 million. The Credit Facility is
secured by the stock of the Company's subsidiaries.
Borrowings under the Credit Facility bear interest at a rate based
on LIBOR plus an applicable margin as determined by the Company's leverage
ratio. Availability under the Credit Facility reduces quarterly commencing
September 30, 1999 and ending December 31, 2004.
Available cash on hand plus cash provided by operations were
sufficient to pay interest due under the Credit Facility and fund capital
expenditures during the year ended December 31, 1998. The Company's
management believes that it will have sufficient cash flow to finance its
operations and satisfy its debt service requirements. The Company regularly
reviews potential acquisitions. Future acquisitions are expected to be made
from additional borrowings under the Credit Facility and available cash
balances.
ACCOUNTING PRONOUNCEMENTS
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, REPORTING COMPREHENSIVE INCOME, and Statement of Financial
Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION. The adoption of these new accounting standards did not
have a material impact on the Company.
YEAR 2000
The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable year.
Programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failures
or miscalculations.
The Company has been replacing its software and hardware as part of
its long-term technological plans. The new software being implemented
functions properly with respect to dates in the year 2000 and thereafter.
All software used in the accounting system is in the process of
being replaced. The key software components used in the accounting system are
the general ledger and traffic system. The general ledger is used to record
all transactional activity whereas the traffic system is used to record the
airing of commercials, perform billing and maintain the accounts receivable
detail. The new general ledger software has been implemented in twelve of the
thirteen locations in which the Company operates. The one remaining location
will implement the new general ledger software by May 1, 1999. Ten of the
twelve radio station markets in which the Company operates have implemented
the new traffic software. The two remaining radio station markets will
implement the new traffic software at or around June 1999. The Company is in
the
22
<PAGE>
process of reviewing the hardware used in its operations that might be
affected by the Year 2000 problem. Hardware testing for Year 2000 compliance
is anticipated to be completed by June 30, 1999.
Inquiries of the Company's top ten customers, vendors and service
providers regarding Year 2000 compliance will be made during 1999.
The Company decided, after the merger with Tichenor Media System,
Inc. in February 1997, to change its general ledger and traffic system
software so all locations would be on the same system. The replacement of the
general ledger and traffic system software was not accelerated due to Year
2000 issues.
The Company does not believe the costs related to the Year 2000
compliance project will be material to its financial position or results of
operations. Unanticipated failures by critical customers, vendors and service
providers, as well as the failure by the Company to execute its own
remediation efforts, could have a material adverse effect on the cost of the
Year 2000 project, its completion date, and the Company's financial position
or results of operations. The Company has not yet established contingency
plans in the event of the failure of its system with regard to Year 2000
compliance or those of its significant customers, vendors and service
providers. Based on its assessment of the Year 2000 issue, the Company will
establish contingency plans, however there is no assurance that such plans
will be adequate to meet the Company's needs in the event of any disruption
in the Company's operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have significant market risk exposure since it
does not have any outstanding variable rate debt or derivative financial and
commodity instruments as of December 31, 1998.
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
-------
<S> <C>
Reports of Independent Auditors......................................................................... 25 - 26
Consolidated Balance Sheets as of December 31, 1998 and 1997................................................. 27
Consolidated Statements of Operations for the Years Ended December 31, 1998 and 1997,
the Three Months Ended December 31, 1996, and the Year Ended September 30, 1996......................... 28
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998 and 1997,
the Three Months Ended December 31, 1996, and the Year Ended September 30, 1996......................... 29
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998 and 1997,
the Three Months Ended December 31, 1996, and the Year Ended September 30, 1996......................... 30
Notes to Consolidated Financial Statements................................................................... 31
</TABLE>
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Heftel Broadcasting Corporation:
We have audited the accompanying consolidated balance sheets of Heftel
Broadcasting Corporation and subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for the years then ended. In connection with our audits of the
consolidated financial statements, we also have audited the financial
statement schedule for these periods included at Item 14(a)(2). These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Heftel
Broadcasting Corporation and subsidiaries as of December 31, 1998 and 1997,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Dallas, Texas
February 15, 1999
25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Heftel Broadcasting Corporation
We have audited the accompanying consolidated statements of
operations, stockholders' equity and cash flows of Heftel Broadcasting
Corporation for the three months ended December 31, 1996 and the year ended
September 30, 1996. Our audits also included the financial statement schedule
included in Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated results of
operations and cash flows of Heftel Broadcasting Corporation for the three
months ended December 31, 1996 and the year ended September 30, 1996, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Los Angeles, California
July 2, 1997
26
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1997
--------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,293,241 $ 6,553,271
Accounts receivable, net of allowance of $2,301,286 in 1998 and $2,612,847 in 34,309,106 29,324,324
1997
Prepaid expenses and other current assets 456,843 817,456
------------ ------------
Total current assets 45,059,190 36,695,051
------------ ------------
Property and equipment, at cost:
Land 7,965,865 11,046,486
Buildings and improvements 7,366,617 7,034,799
Broadcast and other equipment 25,948,994 20,663,573
Furniture and fixtures 8,356,121 5,705,226
------------ ------------
49,637,597 44,450,084
Less accumulated depreciation 15,830,226 11,150,167
------------ ------------
33,807,371 33,299,917
------------ ------------
Intangible assets:
Broadcast licenses 569,914,391 334,821,684
Cost in excess of fair value of net assets acquired 97,553,319 95,308,112
Other intangible assets 14,861,481 14,351,232
------------ ------------
682,329,191 444,481,028
Less accumulated amortization 36,128,832 20,951,102
------------ ------------
646,200,359 423,529,926
------------ ------------
Deferred charges and other assets 21,622,079 18,723,785
------------ ------------
Total assets $746,688,999 $512,248,679
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,063,294 $ 2,103,419
Accrued expenses 22,200,882 19,832,802
Income taxes payable 3,505,640 3,349,161
Current portion of long-term obligations 121,052 440,097
------------ ------------
Total current liabilities 27,890,868 25,725,479
------------ ------------
Long-term obligations, less current portion 1,547,130 14,122,019
------------ ------------
Deferred income taxes 94,630,353 82,441,601
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, cumulative, $.001 par value; authorized 5,000,000 shares;
no shares issued or outstanding - -
Class A Common Stock, $.001 par value; authorized 100,000,000 shares in 1998
and 50,000,000 shares in 1997; issued and outstanding 35,171,980 shares in
1998 and 29,978,748 shares in 1997 35,172 29,979
Class B Common Stock, convertible, $.001 par value; authorized 50,000,000
shares; issued and outstanding 14,156,470 shares 14,156 14,156
Additional paid-in capital 665,339,306 459,567,282
Accumulated deficit (42,767,986) (69,651,837)
------------ ------------
Total stockholders' equity 622,620,648 389,959,580
------------ ------------
Total liabilities and stockholders' equity $746,688,999 $512,248,679
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
27
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months
YEAR ENDED DECEMBER 31, Ended Year Ended
----------------------------------- December 31, September 30,
1998 1997 1996 1996
------------------ ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Revenues $ 186,778,637 $ 154,869,079 $ 20,850,616 $ 81,242,695
Agency commissions 22,657,029 18,285,224 2,541,648 9,510,663
--------------- --------------- ------------- --------------
Net revenues 164,121,608 136,583,855 18,308,968 71,732,032
Operating expenses 95,783,645 82,064,446 11,207,309 48,896,256
Depreciation and amortization 21,149,369 14,928,326 1,746,732 5,140,131
--------------- --------------- ------------- --------------
Operating income before corporate expenses 47,188,594 39,591,083 5,354,927 17,695,645
Corporate expenses 5,451,010 4,579,270 368,074 5,071,859
--------------- --------------- ------------- --------------
Operating income 41,737,584 35,011,813 4,986,853 12,623,786
--------------- --------------- ------------- --------------
Other income (expense):
Interest income 4,680,652 406,241 26,290 206,605
Interest expense (2,046,185) (3,947,092) (2,866,872) (11,240,835)
Costs relating to unconsummated
acquisitions - - - (1,383,187)
Restructuring charges - - - (29,011,237)
Other, net 251,780 (81,973) 18,044 (287,140)
--------------- --------------- ------------- --------------
2,886,247 (3,622,824) (2,822,538) (41,715,794)
--------------- --------------- ------------- --------------
Income (loss) before income tax 44,623,831 31,388,989 2,164,315 (29,092,008)
Income tax 17,739,980 12,616,833 100,000 65,000
--------------- --------------- ------------- --------------
Income (loss) from continuing operations 26,883,851 18,772,156 2,064,315 (29,157,008)
--------------- --------------- ------------- --------------
Discontinued operations:
Loss from operations of CRC - - - 1,844,939
Loss on disposal of CRC - - - 8,142,598
--------------- --------------- ------------- --------------
Total loss on discontinued operations - - - 9,987,537
--------------- --------------- ------------- --------------
Income (loss) before extraordinary item 26,883,851 18,772,156 2,064,315 (39,144,545)
Extraordinary item - loss on retirement of
debt - - - 7,461,267
--------------- --------------- ------------- --------------
Net income (loss) $ 26,883,851 $ 18,772,156 $ 2,064,315 $ (46,605,812)
--------------- --------------- ------------- --------------
--------------- --------------- ------------- --------------
Net income (loss) per common share:
Basic:
Continuing operations $ 0.55 $ 0.45 $ 0.09 $ (1.41)
Discontinued operations - - - (0.49)
Extraordinary loss - - - (0.36)
--------------- --------------- ------------- --------------
Net income (loss) $ 0.55 $ 0.45 $ 0.09 $ (2.26)
--------------- --------------- ------------- --------------
--------------- --------------- ------------- --------------
Diluted:
Continuing operations $ 0.54 $ 0.45 $ 0.09 $ (1.41)
Discontinued operations - - - (0.49)
Extraordinary loss - - - (0.36)
--------------- --------------- ------------- --------------
Net income (loss) $ 0.54 $ 0.45 $ 0.09 $ (2.26)
--------------- --------------- ------------- --------------
--------------- --------------- ------------- --------------
Weighted average common shares outstanding:
Basic 49,020,759 41,671,026 23,095,462 20,589,934
Diluted 49,347,646 41,792,191 23,095,462 20,589,934
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Receivables
Preferred ------------------------ paid-in Accumulated Treasury for stock
Stock Class A Class B Capital Deficit Stock Purchases
--------- ---------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 $ 336 $ 6,192 $ 4,680 $ 95,693,269 $(43,839,535) $(4,019,735) $(4,264,052)
Repurchase of preferred stock (336) - - (335,298) - - -
Preferred stock dividends - - - - (42,961) - -
Retirement of treasury stock - - (811) (4,018,924) - 4,019,735 -
Payment on stockholder notes - - - - - - 4,264,052
Common stock issued in
connection with:
Conversion of Class B to
Class A Common Stock - 3,869 (3,869) - - - -
Exercise of warrants and
options - 1,442 - 10,546,817 - - -
Business acquisition - 45 - 692,285 - - -
Net loss - - - - (46,605,812) - -
--------- ---------- ---------- ------------ ------------ ----------- -----------
Balance at September 30, 1996 - 11,548 - 102,578,149 (90,488,308) - -
Net income - - - - 2,064,315 - -
--------- ---------- ---------- ------------ ------------ ----------- -----------
Balance at December 31, 1996 - 11,548 - 102,578,149 (88,423,993) - -
Net proceeds from issuance
of 4,830,000 (pre-split)
shares of Class A Common
Stock - 4,830 - 176,363,259 - - -
Common Stock issued for
Tichenor acquisition - 5,560 130 180,647,941 - - -
Conversion of Class A
Common Stock into
Class B Common Stock - (6,948) 6,948 - - - -
Two-for-one stock split - 14,989 7,078 (22,067) - - -
Net income - - - - 18,772,156 - -
--------- ---------- ---------- ------------ ------------ ----------- -----------
Balance at December 31, 1997 - 29,979 14,156 459,567,282 (69,651,837) - -
Net proceeds from issuance
of 5,193,232 shares of
Class A Common Stock - 5,193 - 205,772,024 - - -
Net income - - - - 26,883,851 - -
--------- ---------- ---------- ------------ ------------ ----------- -----------
Balance at December 31, 1998 $ - $ 35,172 $ 14,156 $665,339,306 $(42,767,986) $ - $ -
--------- ---------- ---------- ------------ ------------ ----------- -----------
--------- ---------- ---------- ------------ ------------ ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended
------------------------------- December 31, September 30,
1998 1997 1996 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 26,883,851 $ 18,772,156 $ 2,064,315 $ (46,605,812)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Loss on discontinued operations - - - 9,987,537
Extraordinary loss on debt retirement - - - 7,461,267
Provision for bad debts 1,417,505 2,756,605 722,691 2,871,700
Depreciation and amortization 21,149,369 14,928,326 1,746,732 5,140,131
Amortization of debt facility fee included
in interest expense 160,152 133,200 360,000 993,674
Deferred income taxes 9,943,545 8,106,930 - -
Non-cash restructuring charges - - - 1,219,048
Changes in operating assets and liabilities:
Accounts receivable, net (6,327,755) (4,996,984) (702,939) (4,711,197)
Prepaid expenses and other current assets 360,613 360,381 380,441 1,175,118
Accounts payable (26,250) (4,770,977) (341,698) (421,251)
Accrued expenses 3,519,021 2,788,673 (1,595,238) 4,087,219
Income taxes payable 156,479 5,506,696 - -
Other, net (251,943) 206,987 (27,122) 297,960
-------------- -------------- -------------- --------------
Net cash provided by (used in) operating
activities of continuing operations 56,984,587 43,791,993 2,607,182 (18,504,606)
Net cash used in discontinued operations - - - (1,594,006)
-------------- -------------- -------------- --------------
Net cash provided by (used in) operating
activities 56,984,587 43,791,993 2,607,182 (20,098,612)
-------------- -------------- -------------- --------------
Cash flows from investing activities:
Acquisitions of radio stations (236,648,434) (1,096,424) - (20,150,000)
Property and equipment acquisitions (4,745,912) (4,010,775) (400,396) (3,687,780)
Additions to intangible assets (56,003) (2,777,245) - (7,000,000)
Collection of loans to related parties - - - 2,357,932
Increase in other noncurrent assets (4,875,701) (15,134,257) (397,684) -
-------------- -------------- -------------- --------------
Net cash used in investing activities (246,326,050) (23,018,701) (798,080) (28,479,848)
-------------- -------------- -------------- --------------
Cash flows from financing activities:
Borrowings on long-term obligations 18,000,000 56,000,000 - 163,459,267
Payments on long-term obligations (30,893,934) (250,826,404) (2,153,410) (123,752,057)
Payment of deferred financing costs - (1,232,061) - (5,799,878)
Proceeds from stock issuances 205,975,367 177,050,792 - 10,548,259
Repurchase of preferred and common stock - - - (335,634)
Dividends on preferred stock - - - (42,961)
Note payments from stockholders - - - 4,229,114
-------------- -------------- -------------- --------------
Net cash provided by (used in)
financing activities 193,081,433 (19,007,673) (2,153,410) 48,306,110
-------------- -------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents 3,739,970 1,765,619 (344,308) (272,350)
Cash and cash equivalents at beginning of period 6,553,271 4,787,652 5,131,960 5,404,310
-------------- -------------- -------------- --------------
Cash and cash equivalents at end of period $ 10,293,241 $ 6,553,271 $ 4,787,652 $ 5,131,960
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Heftel Broadcasting Corporation (the "Company"), through its
subsidiaries, owns and/or operates 39 Spanish language broadcast radio
stations serving 12 markets throughout the United States (Los Angeles, New
York City, Miami, San Francisco/San Jose, Chicago, Houston, San Antonio,
McAllen/Brownsville/Harlingen, Dallas/Fort Worth, San Diego, El Paso and Las
Vegas).
CHANGE IN YEAR-END
On February 14 1997, the Board of Directors of the Company voted to
change the Company's fiscal year-end from September 30 to December 31,
beginning with the fiscal year ended December 31, 1997.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Heftel Broadcasting Corporation and its wholly-owned
subsidiaries. The Company consolidates the accounts of subsidiaries when it
has a controlling financial interest (over 50%) in the outstanding voting
shares of the subsidiary.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the amounts reported in the consolidated
financial statements and related notes to financial statements. Actual
results could differ from those estimates.
CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with
an original maturity of three months or less.
INVESTMENTS
The Company uses the equity method to account for investments when
it does not have a controlling interest but has the ability to exercise
significant influence over the operating and/or financial decisions of the
investee. Investments where the Company does not exert significant influence
are accounted for using the cost method. Investments at December 31, 1998 are
comprised primarily of 50% interests in entities which own transmission
towers that are leased to the Company.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for
significant renewals and betterments are capitalized. Repairs and maintenance
are charged to expense as incurred.
Depreciation is provided in amounts sufficient to relate the asset
cost to operations over the estimated useful lives (three to forty years) on
a straight-line basis. Leasehold improvements are depreciated over the life
of the lease or the estimated service life of the asset, whichever is
shorter. Gains or losses from disposition of property and equipment are
recognized in the statement of operations.
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<PAGE>
INTANGIBLE ASSETS
Intangible assets are recorded at cost. Amortization of intangible
assets is provided in amounts sufficient to relate the asset cost to operations
over the estimated useful lives on a straight-line basis. Intangible assets
consist primarily of broadcast licenses and other identifiable intangible
assets. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Broadcast licenses 40 years
Cost in excess of fair value of net assets acquired 40 years
Other intangibles 3 - 40 years
</TABLE>
The Company evaluates periodically the propriety of the carrying
amount of intangible assets, including goodwill, as well as the amortization
period to determine whether current events or circumstances warrant
adjustments to the carrying value and/or revised estimates of useful lives.
This evaluation consists of the projection of undiscounted income before
depreciation, amortization, nonrecurring charges and interest for each of the
Company's radio stations over the remaining amortization periods of the
related intangible assets. If such projections indicate that undiscounted
cash flows are not expected to be adequate to recover the carrying amounts of
the related intangible assets, a loss is recognized to the extent the
carrying amount of the asset exceeds its fair value. At this time, the
Company believes that no significant impairment of goodwill and other
intangible assets has occurred and that no reduction of the estimated useful
lives is warranted.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial
announcements to local and national advertisers. Revenue is recognized as
commercials are broadcast.
ADVERTISING COSTS
The Company incurs various marketing and promotional costs to add
and maintain listenership. These costs are charged to expense in the year
incurred and totaled approximately $6.4, $4.0, $0.3, and $2.4 million for the
years ended December 31, 1998 and 1997, the three months ended December 31,
1996, and the year ended September 30, 1996, respectively.
BARTER TRANSACTIONS
Barter transactions represent advertising time exchanged for
promotional items, advertising, supplies, equipment and services. Barter
transactions are recorded at the estimated fair value of the goods or
services received. Revenues from barter transactions are recognized as income
when advertisements are broadcast. Expenses are recognized when goods or
services are received or used. Barter amounts are not significant to the
Company's consolidated financial statements.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the period that includes the
enactment date.
32
<PAGE>
EARNINGS PER SHARE
Basic earnings per common share is based on net earnings after
preferred stock dividend requirements, if any, and the weighted average
number of common shares outstanding during each year. Diluted earnings per
common share reflects the incremental increase in the weighted average number
of common shares due to the dilutive effect of stock options.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used, from
time to time, to manage well-defined interest rate risks related to interest
on the Company's outstanding debt. There were no outstanding swap agreements
at December 31, 1998 and 1997.
As interest rates change under interest rate swap and cap
agreements, the differential to be paid or received is recognized as an
adjustment to interest expense.
FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments, including cash and
cash equivalents, trade receivables and accounts payable, approximate fair
value due to the relatively short maturity of these instruments. The carrying
amount of long-term obligations, including the current portion, approximates
fair value based upon quoted interest rates for the same or similar debt
issues.
CREDIT RISK
In the opinion of management, credit risk with respect to trade
receivables is limited due to the large number of diversified customers and
the geographic diversification of the Company's customer base. The Company
performs ongoing credit evaluations of its customers and believes that
adequate allowances for uncollectible trade receivables are maintained.
STOCK BASED COMPENSATION
The Company accounts for stock options using the intrinsic-value
method as outlined under Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
interpretations. In accordance with Statement of Financial Accounting
Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company has
disclosed pro forma net earnings and net earnings per share as if the
fair-value method had been applied.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), REPORTING
COMPREHENSIVE INCOME. SFAS 130 requires the reporting of comprehensive income
in financial statements by all entities that provide a full set of financial
statements. The Company's net income is the same as its comprehensive income
and no additional disclosures are necessary.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with
the current year presentation.
33
<PAGE>
2. ACQUISITIONS AND DISPOSITIONS
1998 ACQUISITIONS
On December 1, 1997, the Company entered into an asset exchange
agreement to exchange WPAT(AM), serving the New York City market, and $115.5
million in cash for the assets of WCAA(FM) (formerly WNWK(FM)), serving the
New York City market (the "WCAA(FM) Acquisition"). The asset exchange was
financed with a portion of the proceeds from the January 1998 secondary
public stock offering (the "January 1998 Offering"). The WCAA(FM) Acquisition
closed on May 22, 1998. Immediately after closing, the station's programming
was converted to a Spanish language format.
On March 25, 1998, the Company entered into an asset purchase
agreement to acquire the assets of KLTN(FM) (formerly KKPN(FM)), serving the
Houston market, for $54.0 million (the "KLTN(FM) Acquisition"). The asset
acquisition was financed with a portion of the proceeds from the January 1998
Offering. The KLTN(FM) Acquisition closed on May 29, 1998. Immediately after
closing, the station's programming was converted to a Spanish language format.
The Company entered into an asset purchase agreement on May 26,
1998, to acquire the assets of KLQV(FM) and KLNV(FM) (formerly KJQY(FM) and
KKLQ(FM)) serving the San Diego market (the "San Diego Acquisition") for
$65.2 million. The asset acquisition was financed with a portion of the
proceeds from the January 1998 Offering, an additional $18.0 million
borrowing under the Company's credit agreement and cash generated from
operations. The San Diego Acquisition closed on August 10, 1998. Immediately
after closing, the programming of the stations was converted to two Spanish
language formats.
1997 ACQUISITIONS AND DISPOSITIONS
On February 14, 1997, the Company completed its acquisition of
Tichenor Media System, Inc. ("Tichenor"), a national radio broadcasting
company engaged in the business of acquiring, developing and programming
Spanish language radio stations (the "Tichenor Merger"). At the time of the
Tichenor Merger, Tichenor owned or programmed 20 radio stations in six of the
ten largest Hispanic markets in the United States. The merger was effected
through the merger of a wholly-owned subsidiary of the Company with and into
Tichenor. In connection with the merger, management of Tichenor assumed
management responsibilities of the Company. Pursuant to the Tichenor Merger,
the former Tichenor shareholders and warrant holders received an aggregate of
11,379,756 shares of Common Stock. At the time of the Tichenor Merger,
Tichenor had outstanding approximately $72.0 million of long-term debt, which
was subsequently refinanced by the Company. In addition, all of Tichenor's
outstanding shares of 14% Senior Redeemable Cumulative Preferred Stock were
redeemed for approximately $3.4 million. The total purchase price, including
closing costs, allocated to net assets acquired was approximately $181.2
million.
On August 13, 1997, the Company sold the assets of KINF(AM) which is
licensed in Denton, Texas. The sales price net of selling expenses was $0.6
million, which approximated the book value of the assets.
The Company closed on the purchase of the assets of KLTO(FM) in
Rosenberg-Richmond (Houston), Texas on September 22, 1997. The purchase price
was $3.2 million and was funded from operations. The final purchase price is
contingent on an upgrade of the station's broadcast authorization from the
FCC prior to April 1, 2004. Depending on whether the signal is fully or
partially upgraded, the purchase price could increase to $14.0 million.
34
<PAGE>
1996 ACQUISITION
On March 25, 1996, the Company acquired the assets of radio station
WPAT(AM) which serves the New York City market for approximately $19.5
million. The asset acquisition was financed through additional borrowings
under the Company's credit agreement.
Unaudited consolidated condensed pro forma results of operations as
if all completed acquisitions occurred as of January 1, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1998 1997
--------------------- --------------------
<S> <C> <C>
Net revenues $ 165,401,849 $ 144,277,581
Operating income 39,425,539 27,447,932
Net income 21,532,287 11,804,576
Net income per common share:
Basic 0.44 0.24
Diluted 0.43 0.24
</TABLE>
All of the business acquisitions discussed above were accounted for
using the purchase method of accounting. Accordingly, the accompanying
financial statements include the accounts of the acquired businesses since
the respective dates of acquisition.
PENDING TRANSACTIONS
On January 2, 1997, the Company acquired an option to purchase all
of the assets used in connection with the operation of KSCA(FM), Glendale,
California (the "KSCA Option"). In connection with the acquisition of the
KSCA Option, the Company began providing programming to KSCA(FM) under a time
brokerage agreement on February 5, 1997. The KSCA Option, which is
exercisable only upon the death of Gene Autry, the indirect principal
stockholder of the seller, had an initial term which expired on December 31,
1997. The KSCA Option was renewable for additional one-year terms during the
lifetime of Mr. Autry upon payment by the Company of $3.0 million on or
before the then scheduled expiration date of the KSCA Option. On February 4,
1997, the Company made an initial payment of $10.0 million, as required under
the option agreement. On December 29, 1997, the Company renewed the KSCA
Option through December 31, 1998. All such payments will be credited against
the purchase price for the KSCA(FM) assets. The purchase price for the
KSCA(FM) assets is the greater of (a) $112.5 million, or (b) the sum of (i)
$105.0 million, plus (ii) an amount equal to $13,699 per day during the term
of the time brokerage agreement.
Gene Autry died on October 2, 1998, and the Company exercised the
KSCA Option. The closing is expected to occur during the second quarter of
1999. If the acquisition of KSCA(FM) closes on June 1, 1999, the purchase
price for the KSCA(FM) assets will be approximately $116.6 million, and
approximately $103.6 million ($116.6 million less $13.0 million in option
payments credited against the purchase price) will be paid at closing.
Consummation of the purchase is subject to a number of conditions, including
approval by the FCC of the transfer of the FCC licenses.
On January 27, 1999, the Company entered into an agreement to
purchase the assets of KHOT(FM), serving the Phoenix market, for $18.3
million. The closing of this asset acquisition is expected to occur during
the second quarter of 1999. Immediately after closing, the station's
programming will be converted to a Spanish language format. Consummation
of the purchase is subject to a number of conditions, including approval by
the FCC of the transfer of the FCC license.
35
<PAGE>
All of the pending transactions will be financed with borrowings
under the Company's credit agreement and cash generated from operations.
3. CHANGE IN CONTROL OF COMPANY
On August 5, 1996, Clear Channel Communications, Inc. ("Clear
Channel") completed the purchase of 9,345,092 shares (pre-split) of the
Company's Class A and Class B common stock for $23 (pre-split) per share
pursuant to a Stockholder Purchase Agreement dated June 1, 1996 between Clear
Channel and two executive officers and other related parties. On the same
date, Clear Channel also purchased a total of 936,952 (pre-split) shares of
the Company's Class A common stock from certain public shareholders and from
employees of the Company upon the exercise of their stock purchase options.
As a result of these transactions, Clear Channel's ownership of the Company
was increased from 21% to 63%.
In connection with the change in control of the Company, the
employment of two executive officers was terminated pursuant to employment
contract settlement agreements which provided for a lump sum payment upon
their termination. Also, the two executive officers entered into five-year
noncompete agreements with the Company in exchange for the aggregate payment
of $7.0 million.
As a result of the Tichenor acquisition and the January 1998
Offering, Clear Channel's ownership in the Company was reduced to
approximately 29%.
4. DISCONTINUED OPERATIONS AND RESTRUCTURING CHARGES
The Company's Board of Directors approved a plan to discontinue the
operations of the radio network owned by the Company's wholly owned
subsidiary Spanish Coast-to-Coast, Ltd., dba Cadena Radio Centro ("CRC")
effective August 5, 1996. The charge to operations during the year ended
September 30, 1996 was approximately $8.1 million, of which $6.2 million
relates to non-cash charges resulting from the write-off of goodwill. No
income tax benefit was recognized due to the Company's net operating loss
carryforwards. During 1998 and 1997, approximately $0.2 and $0.4 million,
respectively was charged against the accrual primarily for operating losses
and severance payments. The majority of the remaining accrued balance of
approximately $0.4 million at December 31, 1998 is for severance payments to
be paid to a former employee through 2000.
In connection with the change in control, the Company incurred
certain restructuring charges totaling approximately $29.0 million during the
year ended September 30, 1996. The material components of the restructuring
charges were $18.8 million in payments to two executive officers relating to
employment contract settlement agreements, $4.7 million in broker commissions
and transaction costs, $2.6 million in costs relating to the planned closing
of duplicate facilities, and $1.8 million in severance relating to employee
terminations resulting from the restructuring. During 1998 and 1997,
approximately $1.4 and $2.5 million, respectively, was charged against the
accrual primarily for severance payments. The majority of the remaining
accrued balance of approximately $0.5 million at December 31, 1998 consists
of accruals for severance payments and expenditures to be incurred relating
to the closing of duplicate facilities. The majority of such costs are
expected to be incurred and charged against the accrual in 1999.
36
<PAGE>
5. LONG-TERM OBLIGATIONS
The following is a summary of long-term obligations outstanding as
of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------- --------------------
<S> <C> <C>
Revolving credit facility payable to banks; aggregate commitment of $300.0
million; interest rate based on LIBOR plus an applicable margin as
determined by the Company's leverage ratio; interest rate of 5.69% at
December 31, 1998; interest rates ranged from 5.69% to 6.38% during 1998;
payable through December 2004; secured by 100% of the common stock of the
Company's wholly-owned subsidiaries; the Company is required to comply with
certain financial and nonfinancial covenants
$ - $ 12,000,000
Various loans, interest ranging from 8.1% to 9.38%, payable in
varying installments through 2001 198,267 1,055,820
Prize awards net of imputed interest (10% to 12%), payable in
varying annual installments through 2044 1,469,915 1,506,296
--------------- ---------------
1,668,182 14,562,116
Less current portion (121,052) (440,097)
--------------- ---------------
$ 1,547,130 $ 14,122,019
--------------- ---------------
--------------- ---------------
</TABLE>
NEW CREDIT AGREEMENT
On February 14, 1997, the Company entered into a new $300 million
credit facility (the "Credit Facility"), replacing the existing credit
facility. The Company used a $46 million advance under the Credit Facility
and a portion of the proceeds from the 1997 secondary public stock offering
to retire the outstanding debt and senior preferred stock of Tichenor assumed
on the date of the Tichenor Merger. The Company's ability to make additional
borrowings under the Credit Facility is subject to compliance with certain
financial ratios and other conditions set forth in the Credit Facility. The
Credit Facility principal balance begins reducing on September 30, 1999 and
continues quarterly through December 31, 2004, when the principal must be
paid in full.
OLD CREDIT AGREEMENT
On August 5, 1996, the Company borrowed $135.0 million under a
credit agreement with new lenders which provided a total credit facility of
$155.0 million. The proceeds were used to retire all of the outstanding debt
under the Company's August 1994 credit agreement and to pay certain
noncompete and employment contract settlements plus certain transaction and
other costs relating to the Clear Channel transaction previously discussed.
37
<PAGE>
Maturities of long-term obligations for the five years subsequent to
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1999 $ 121,052
2000 99,703
2001 23,019
2002 6,042
2003 6,714
Thereafter 1,411,652
</TABLE>
Interest paid for the years ended December 31, 1998 and 1997, the
three months ended December 31, 1996 and the year ended September 30, 1996
amounted to $1.2, $3.9, $2.9, and $11.2 million, respectively.
6. COMMITMENTS AND CONTINGENCIES
The Company leases office space and other property under
noncancellable operating leases. Terms of the leases vary from two to thirty
years. Certain leases have contingent rent clauses whereby rent is increased
based on a change in the Consumer Price Index. Various leases have renewal
options of five to ten years. Future minimum rental payments under
noncancellable operating leases in effect at December 31, 1998 are summarized
as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1999 $ 3,684,385
2000 3,192,339
2001 3,029,793
2002 2,747,614
2003 2,429,795
Thereafter 11,057,669
</TABLE>
Rent expense for the years ended December 31, 1998 and 1997, the
three months ended December 31, 1996, and the year ended September 30, 1996
was $3.4, $2.6, $0.3, and $1.7 million, respectively.
The Company is subject to legal proceedings and other claims which
have arisen in the ordinary course of its business and have not been fully
adjudicated. These actions, when ultimately concluded, will not, in the
opinion of management, have a material adverse effect upon the financial
position or results of operations of the Company.
7. STOCKHOLDERS' EQUITY
COMMON STOCK
On January 22, 1998, the Company completed a secondary stock
offering of 5,175,000 shares of Class A Common Stock at $39.75 per share, net
of underwriters' discounts and commissions. The net proceeds of the offering
were approximately $205.1 million.
On October 6, 1998, the Company filed a Second Amended and Restated
Certificate of Incorporation to increase the authorized shares of the Class A
Common Stock to 100,000,000 shares.
On February 10, 1997, the Company completed a secondary public stock
offering selling 4,830,000 (pre-split) shares of its Class A Common Stock for
$36.80 (pre-split) per share, net of
38
<PAGE>
underwriters' discounts and commissions. The net proceeds of the offering
were approximately $176.4 million.
On February 14, 1997, all of the outstanding shares of Heftel Common
Stock owned by Clear Channel (14,156,470 shares) were converted to Class B
Common Stock. The rights of the Class A and Class B Common Stock are
identical except that the Class B Common Stock has no voting rights, except
in certain matters. Shares of Class B Common Stock are convertible into
shares of Class A Common Stock, at Clear Channel's option, subject to any
necessary governmental consents, including the consent of the FCC.
On November 6, 1997, the Board of Directors of the Company
authorized a two-for-one stock split payable in the form of a stock dividend
of one share of common stock for each issued and outstanding share of common
stock. The dividend was paid on December 1, 1997 to all holders of common
stock at the close of business on November 18, 1997. In connection with the
stock split, $22,067 was transferred to common stock from additional paid-in
capital. All financial information related to number of shares, per share
amounts, stock option data and market prices of the Company's common stock
have been restated to give effect to the split, unless otherwise noted.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of $.001 par
value Preferred Stock. The Preferred Stock may be issued in series, with the
rights and preferences of each series established by the Company's Board of
Directors.
8. INCOME TAXES
The provision for income tax on income (loss) from continuing
operations consists of the following:
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended
---------------------------------- December 31, September 30,
1998 1997 1996 1996
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Current:
Federal $ 6,103,464 $ 3,144,449 $ - $ -
State 1,692,971 1,365,454 100,000 65,000
-------------- -------------- -------------- --------------
Total current tax 7,796,435 4,509,903 100,000 65,000
-------------- -------------- -------------- --------------
Deferred:
Federal 9,514,876 7,782,653 - -
State 428,669 324,277 - -
-------------- -------------- -------------- --------------
Total deferred tax 9,943,545 8,106,930 - -
-------------- -------------- -------------- --------------
Total income tax $ 17,739,980 $ 12,616,833 $ 100,000 $ 65,000
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
39
<PAGE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at December
31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Deferred tax assets:
Net operating losses $ 4,161,265 $12,987,833
Other intangible assets 1,668,659 1,668,659
Long-term obligations - prize awards 574,722 587,455
Allowance for doubtful accounts receivable 909,964 1,019,010
Other 919,167 869,649
-------------- --------------
Total deferred tax assets 8,233,777 17,132,606
-------------- --------------
Deferred tax liabilities:
Broadcast licenses 93,117,633 91,668,629
Property and equipment 2,095,041 1,139,937
Restructuring charges 7,395,033 6,585,218
Other 256,423 180,423
-------------- --------------
Total deferred tax liabilities 102,864,130 99,574,207
-------------- --------------
Net deferred tax liabilities $ 94,630,353 $ 82,441,601
-------------- --------------
-------------- --------------
</TABLE>
The valuation allowance decreased $13.7 million for the year ended
December 31, 1997 due in part to a reassessment of the Company's ability to
realize its deferred tax asset primarily as a result of the Tichenor Merger.
Future reversals of taxable temporary differences created by the Tichenor
Merger are sufficient to absorb the benefits of the deferred tax assets.
The reduction in the valuation allowance reduced the carrying value of
intangibles recognized in the Tichenor Merger.
The reconciliation of income tax expense (benefit) computed at the
federal statutory tax rate to the Company's actual income tax expense
attributable to continuing operations is as follows:
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended
-------------------------------- December 31, September 30,
1998 1997 1996 1996
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal income tax (benefit) at statutory rate $ 15,618,341 $ 10,986,146 $ 735,867 $ (9,891,283)
State income taxes, net of federal benefit 1,115,009 941,674 66,000 42,900
Nondeductible and non-taxable items, net 1,006,630 689,013 (46,629) 8,490,286
Net operating loss carryforward not
recognized - - - 1,423,097
Use of net operating loss carryforwards - - (655,238) -
------------- ------------- ------------ -------------
$ 17,739,980 $ 12,616,833 $ 100,000 $ 65,000
============= ============= ============ =============
</TABLE>
As of December 31, 1998, the Company had tax net operating loss
carryforwards for federal and state tax purposes of approximately $10.7 and
$14.2 million, respectively. The net operating losses expire in the year 2010
if not used.
Income taxes paid for the years ended December 31, 1998 and 1997,
the three months ended December 31, 1996, and the year ended September 30,
1996 amounted to $6.0, $2.2 million, $0, and $65,000, respectively.
40
<PAGE>
9. EARNINGS (LOSS) PER SHARE
The following is a reconciliation of the numerators and denominators
of the basic and diluted earnings per share computations for income (loss)
from continuing operations:
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended
------------------------------------- December 31, September 30,
1998 1997 1996 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Income (loss) from continuing
operations $ 26,883,851 $ 18,772,156 $ 2,064,315 $ (29,157,008)
Preferred stock dividends - - - 22,823
-------------- -------------- -------------- --------------
Numerator for basic and
diluted earnings per share $ 26,883,851 $ 18,772,156 $ 2,064,315 $ (29,179,831)
============== ============== ============== ==============
Denominator:
Weighted average common
shares 49,020,759 41,671,026 23,095,462 20,589,934
Effect of dilutive securities:
Stock options 318,094 121,165 - -
Employee Stock Purchase
Plan 8,793 - - -
-------------- -------------- -------------- --------------
Denominator for diluted
earnings per share 49,347,646 41,792,191 23,095,462 20,589,934
============== ============== ============== ==============
</TABLE>
10. RETIREMENT PLAN
The Company has a defined contribution retirement savings plan (the
"Plan"). The Plan covers all employees who have reached the age of 18 years
and have been employed by the Company for at least one year. The Company
matches participants' contributions to the Plan in an amount not to exceed
$1,600. The Company, at the sole discretion of the Board of Directors, may
make additional supplemental contributions to the Plan. The Company's
expenses related to the Plan for the years ended December 31, 1998 and 1997,
the three months ended December 31, 1996, and the year ended September 30,
1996 amounted to $334,050, $237,671, $56,655 and $226,355, respectively.
11. STOCK OPTIONS
In December 1995, the Company issued 1,048,678 stock options to
various employees of the Company under its (1994 adopted) Stock Option Plan.
The exercise price ranged from $7.63 to $9.31 per share, the market price at
the date of issuance. The options vest over a period ranging from two to
three years.
On August 5, 1996, all unexercised and outstanding employee stock
options were tendered in connection with the Clear Channel tender offer, as
previously described. Other fully vested options and warrants were exercised
during the months of June and July 1996.
In December 1996, the Company issued to a key employee 6,084 options
at $16.44 per share. The options vest ratably over a three year period.
In May 1997, the stockholders of the Company approved a stock
incentive plan ("Long-Term Incentive Plan"), to be administered by the Board
of Directors or by a sub-committee of the Board of Directors. The maximum
number of shares of Class A Common Stock that may be the subject of awards
41
<PAGE>
at any one time shall be five percent of the total number of shares of Class
A Common Stock outstanding. Options granted under the Long-Term Incentive
Plan have a ten-year term and vest one third at the end of years three, four
and five.
The stockholders of the Company also approved an Employee Stock
Purchase Plan in May 1997. Under the plan, shares of the Company's common
stock may be purchased at six-month intervals at 85% of the lower of the fair
market value on the first or the last day of each six-month period. Employees
may purchase shares having a value not exceeding 15% of their gross
compensation during an offering period. During 1998 and 1997, employees
purchased 22,222 and 6,753 common shares at average prices of $37.22 and
$28.26, respectively. At December 31, 1998, 371,025 shares were reserved for
future issuance.
In 1997, the Company issued 753,000 stock options to various
employees of the Company under its Long-Term Incentive Plan. The exercise
prices ranged from $23.50 to $36.19 per share, the market prices at dates of
issuance.
In 1998, the Company issued 369,650 stock options to various
employees of the Company under its Long-Term Incentive Plan. The exercise
prices ranged from $31.00 to $43.94 per share, the market prices at dates of
issuance.
The following is a summary of management incentive stock options
granted, exercised and outstanding for the year ended September 30, 1996, the
three months ended December 31, 1996, and the years ended December 31, 1997
and 1998:
<TABLE>
<CAPTION>
Number Weighted Average
of Shares Exercise Price
--------- ----------------
<S> <C> <C>
Options outstanding at September 30, 1995 1,845,212 $ 1.90
Granted 1,048,678 7.65
Exercised (2,883,890) 3.39
Canceled (10,000) 5.00
--------------
Options outstanding at September 30, 1996 - -
Granted 6,084 16.44
--------------
Options outstanding at December 31, 1996 6,084 16.44
Granted 753,000 23.88
Canceled (36,000) 23.50
--------------
Options outstanding at December 31, 1997 723,084 23.84
Granted 369,650 36.26
Canceled (52,000) 25.71
--------------
Options outstanding at December 31, 1998 1,040,734 28.16
===============
</TABLE>
At December 31, 1998, 19,056 options were exercisable at the
weighted average exercise price of $22.31 per share.
No compensation expense related to stock option grants was
recognized during any of the periods presented because all such options were
granted at market value.
Pro forma information regarding net earnings and earnings per share
is required by Statement of Financial Accounting Standards No. 123, and has
been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The weighted average
fair values for these options were estimated at the dates of grant using a
Black-Scholes option pricing model
42
<PAGE>
with the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 5.22% 6.55% 5.73%
Dividend yield 0.00% 0.00% 0.00%
Volatility factor 50.67% 50.00% 51.00%
Weighted average expected life 6 years 6 years 3 years
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period. The
Company's historical and pro forma net earnings and earnings per share were
as follows:
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended
--------------------------------- December 31, September 30,
1998 1997 1996 1996
--------------- -------------- ------------- ------------------
<S> <C> <C> <C> <C>
Net earnings - as reported $ 26,883,851 $ 18,772,156 $ 2,064,315 $ (46,605,812)
Net earnings - pro forma 25,448,980 18,147,081 2,063,644 (48,509,974)
Net earnings per common
share - as reported
Basic 0.55 0.45 0.09 (2.26)
Diluted 0.54 0.45 0.09 (2.26)
Net earnings per common
share - pro forma
Basic 0.52 0.44 0.09 (2.36)
Diluted 0.52 0.44 0.09 (2.36)
Weighted average fair value of
options granted during the
year 19.49 13.17 6.51 6.51
</TABLE>
The following table summarizes stock options outstanding at December
31, 1998:
<TABLE>
<CAPTION>
Weighted Average
Exercise Price Number Weighted Average Remaining
Range of Shares Exercise Price Contractual Life
-------------- --------- ---------------- ----------------
<S> <C> <C> <C>
$16.44 - $23.50 638,084 $ 23.43 8.4
24.69 - 36.25 369,150 35.23 9.3
37.50 - 43.94 33,500 40.24 9.6
---------
1,040,734
=========
</TABLE>
Because the Statement provides for pro forma amounts for options
granted beginning in 1995, the pro forma expense will likely increase in
future years as the new option grants become subject to the pricing model.
43
<PAGE>
12. OTHER FINANCIAL INFORMATION
ACCRUED EXPENSES
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1998 1997
-------------------- ---------------------
<S> <C> <C>
Wages, salaries and benefits payable $ 3,569,451 $ 3,145,530
Commissions payable 7,160,344 5,969,278
Accrued restructuring and discontinued
operation charges 918,732 2,467,200
Advertising payable 2,393,566 1,176,578
Deferred income 1,151,829 816,257
Other accrued expenses 7,006,961 6,257,959
------------------ ------------------
$ 22,200,882 $ 19,832,802
================== ==================
</TABLE>
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Year ended December 31, 1998:
3/31/98 6/30/98 9/30/98 12/31/98
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 31,347,088 $ 44,392,528 $ 44,205,828 $ 44,176,164
Net income 4,344,418 7,803,470 7,104,146 7,631,817
Net income per common share - basic
and diluted 0.09 0.16 0.14 0.15
Year ended December 31, 1997:
<CAPTION>
3/31/97 6/30/97 9/30/97 12/31/97
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 23,029,373 $ 37,980,889 $ 37,196,813 $ 38,376,780
Net income 565,983 5,373,047 5,948,853 6,884,273
Net income per common share - basic
and diluted 0.02 0.12 0.13 0.16
</TABLE>
14. SUBSEQUENT EVENT (UNAUDITED)
The Company entered into an agreement on March 1, 1999 to
purchase the assets of KISF(FM), serving the Las Vegas market, for $20.3
million. The closing of this asset acquisition is expected to occur during the
second quarter of 1999. Immediately after closing, the station's programming
will be converted to a Spanish language format. Consummation of the purchase
is subject to a number of conditions, including approval by the FCC of the
transfer of the FCC licenses.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
44
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 with respect to the directors,
nominees and executive officers of the Company is incorporated by reference
to the information set forth under the caption "Election of Directors,"
"Executive Compensation and Other Matters" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Definitive Schedule 14A
Proxy Statement to be filed with the Securities and Exchange Commission not
later than 120 days after the Company's fiscal year-end.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to
the information set forth under the caption "Executive Compensation and Other
Matters" in the Company's Definitive Schedule 14A Proxy Statement to be filed
with the Securities and Exchange Commission not later than 120 days after the
Company's fiscal year-end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by Item 12 is incorporated by reference to
the information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Definitive Schedule 14A
Proxy Statement to be filed with the Securities and Exchange Commission not
later than 120 days after the Company's fiscal year-end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference to
the information set forth under the caption "Certain Transactions" in the
Company's Definitive Schedule 14A Proxy Statement to be filed with the
Securities and Exchange Commission not later than 120 days after the
Company's fiscal year-end.
45
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)
1. FINANCIAL STATEMENTS
The following financial statements have been filed under Item 8 of this
report:
Reports of Independent Auditors
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the Years Ended December 31,
1998 and 1997, the Three Months Ended December 31, 1996, and the Year
Ended September 30, 1996
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998 and 1997, the Three Months Ended December 31, 1996,
and the Year Ended September 30, 1996
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998 and 1997, the Three Months Ended December 31, 1996, and the Year
Ended September 30, 1996
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1997, THE THREE MONTHS ENDED DECEMBER 31,
1996, AND THE YEAR ENDED SEPTEMBER 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at Charged to Charged Balance
Beginning Costs and to other at end
Description of period expenses accounts Deductions of period
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998:
Allowance for Doubtful Accounts $ 2,613 $ 1,417 $ - $ 1,729 $ 2,301
FOR THE YEAR ENDED DECEMBER 31, 1997:
Allowance for Doubtful Accounts 1,128 2,757 - 1,272 2,613
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996:
Allowance for Doubtful Accounts 1,658 723 - 1,253 1,128
FOR THE YEAR ENDED SEPTEMBER 30, 1996:
Allowance for Doubtful Accounts 1,492 2,872 - 2,706 1,658
</TABLE>
46
<PAGE>
3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 Second Amended and Restated Certificate of Incorporation of the Registrant dated
February 14, 1997 (incorporated by reference to Exhibit 3.1 to the Registrant's
Form 8-K filed March 3, 1997).
3.2 Amended and Restated Bylaws of the Registrant. (1)
4 Specimen certificate for the Class A Common Stock. (1)
10.1 Lease dated May 15, 1987, between the Registrant and Hollywood and Vine Development Co.
(incorporated by reference to Exhibit 10.15 of Registrant's Registration Statement on Form S-1
(Registration No. 33-78370) filed on April 29, 1994, as amended ("Registrant's S-1")).
10.2 Tower Lease Agreement, dated April 13, 1990, between the Registrant and KTNQ/KLVE, Inc.
(formerly Heftel Broadcasting of California, Inc.), together with the Assignment and
Assumption Agreement dated April 13, 1990 between the Registrant and The Tower Company
(incorporated by referenceto Exhibit 10.16 of Registrant's S-1).
10.3 Lease Agreement dated June 18, 1991 between Newcrow XI and KTNQ/KLVE, Inc. (incorporated by
reference to Exhibit 10.17 of Registrant's S-1).
10.4 Reciprocal Easement Agreement, dated June 18 1991, between Newcrow XI and KTNQ/KLVE, Inc.
(incorporated by reference to Exhibit 10.18 of Registrant's S-1).
10.5 Lease dated April 26, 1994, between the Registrant and Tropicana Trail Limited Partnership
(incorporated by reference to Exhibit 10.14 of Registrant's S-1).
10.6 Stock Option Plan (incorporated by reference to Exhibit 10.4 of Registrant's S-1).
10.7 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.22 of Registrant's
S-1).
10.8 Employment Agreement between KTNQ/KLVE, Inc. and Richard Heftel (incorporated by reference to
Exhibit 10.23 of Registrant's S-1).
10.9 Amendment No. 1 to Employment Agreement dated May 31, 1996, between KTNQ/KLVE, Inc. and Richard
Heftel (incorporated by reference to Exhibit 10.5 of Registrant's Form 10-Q/A filed on November
6, 1996).
10.10 Lease Agreement, dated July 17, 1995, between the Registrant and 485 Madison Associates, a
New York Limited Partnership (incorporated by reference to Exhibit 10.20 of Registrant's
Form 10-K filed on December 29, 1995).
47
<PAGE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.11 Option Agreement, dated as of December 23, 1996, among Clear Channel, Golden West Broadcasters
("GWB"), and Gene Autry and Stanley B. Schneider, as co-trustees of the Autry Survivor's
Trust, with Exhibits (Schedules omitted) (incorporated by reference to Exhibit 2.5.14 to the
Registrant's Registration Statement on Form S-3, as amended (Reg. No. 333-14207)).
10.12 Time Brokerage Agreement, dated as of December 23, 1996, between GWB and Clear Channel (Exhibits
omitted) (incorporated by reference to Exhibit 2.5.15 to the Registrant's Registration Statement
on Form S-3, as amended (Reg. No. 333-14207)).
10.13 Option Agreement, dated February 3, 1997, by and between Tichenor Media System, Inc. and Heart
Unlimited Company (incorporated by reference to Exhibit 10.2 to Registrant's Form 8-K filed on
May 14, 1997).
10.14 Time Brokerage Agreement, dated as of February 3, 1997, by and between Tichenor Media System,
Inc. and Heart Unlimited Company (incorporated by reference to Exhibit 10.1 to Registrant's Form
8-K filed on May 14, 1997).
10.15 Registration Rights Agreement, dated February 14, 1997, by and among the Registrant,
McHenry T. Tichenor, Sr., McHenry T. Tichenor, Jr., Warren W. Tichenor, William E. Tichenor,
Jean T. Russell, McHenry T. Tichenor, Jr., as Custodian for David T. Tichenor, Alta Subordinated
Debt Partners III, L.P., Prime II Management, LP, PrimeComm, LP, Ricardo A. del
Castillo, Jeffrey Hinson and David D. Lykes (incorporated by reference to Exhibit 10.1 to the
Registrant's Form 8-K filed March 3, 1997).
10.16 Employment Agreement, dated February 14, 1997, by and between the Registrant and McHenry T.
Tichenor, Jr. (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed March
3, 1997).
10.17 Stockholders Agreement, dated February 14, 1997, by and among the Registrant and each of the
stockholders listed on the signature pages thereto (incorporated by reference to Exhibit 10.4 to
Schedule 13D of McHenry T. Tichenor, Jr. filed February 14, 1997).
10.18 Registration Rights Agreement, dated February 14, 1997, by and among the Registrant and Clear
Channel Communications, Inc. (incorporated by reference to Exhibit 10.4 to the Registrant's Form
8-K filed March 3, 1997).
10.19 Credit Agreement among the Registrant and its subsidiaries, The Chase Manhattan Bank, as
administrative agent, and certain other lenders, dated February 14, 1997 without Exhibits
(Schedules omitted) (incorporated by reference to Exhibit 10.5 to the Registrant's Form 8-K filed
on May 14, 1997).
10.20 Heftel Broadcasting Corporation Long-Term Incentive Plan (incorporated by reference to Appendix A
to the Company's Definitive Proxy Statement filed on April 24, 1997 (Commission File No.
000-24516)).
48
<PAGE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.21 Heftel Broadcasting Corporation Amended and Restated 1997 Employee Stock Purchase Plan (incorporated
by reference to the Registrant's Form S-8 filed on December 31, 1997).
10.22 Asset Purchase Agreement, dated March 25, 1998, by and between HBC Houston, Inc., HBC Houston
License Corporation and SBI Holding Corporation (incorporated by reference to Exhibit 10.1 to
Registrant's Form 10-Q filed May 13, 1998).
10.23 Assets Purchase Agreement, dated May 26, 1998, by and between Citicasters Co. and Heftel
Broadcasting Corporation, HBC San Diego, Inc. and HBC San Diego License Corporation (incorporated
by reference to Exhibit 10.1 to Registrant's Form 10-Q filed August 6, 1998).
10.24 Asset Purchase Agreement, dated January 27, 1999, by and between New Century Arizona LLC, New
Century Arizona License Partnership and Heftel Broadcasting Corporation.
10.25 Asset Purchase Agreement, dated March 1, 1999, by and between Radio Vision, Inc., George E. Tobin
and Heftel Broadcasting Corporation.
11 Statement Regarding Computations of Per Share Earnings.
21 Subsidiaries of the Registrant
23.1 Consent of KPMG LLP
23.2 Consent of Ernst & Young LLP
24 Power of Attorney (included on Signature Page)
27 Financial Data Schedule
</TABLE>
Registrant agrees to furnish supplementally a copy of any omitted
schedules to the Commission upon request.
(1) Incorporated by reference to the identically numbered Exhibit to the
Company's Registration Statement on Form S-1, as amended (Reg. No.
33-78370).
(b)
REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Registrant during the
fourth quarter of 1998.
49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, on
March 31, 1999.
HEFTEL BROADCASTING CORPORATION
By: /s/ McHENRY T. TICHENOR, JR.
-------------------------------------
McHenry T. Tichenor, Jr.
President and Chief Executive Officer
Each person whose signature appears below authorizes McHenry T.
Tichenor, Jr. and Jeffrey T. Hinson, or either of them, each of whom may act
without joinder of the other, to execute in the name of each such person who
is then an officer or director of the Registrant and to file any amendments
to this annual report on Form 10-K necessary or advisable to enable the
Registrant to comply with the Securities Exchange Act of 1934, as amended,
and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in such
report as such attorney-in-fact may deem appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ MCHENRY T. TICHENOR, JR. President, Chief Executive Officer and Chairman March 31, 1999
- ------------------------------------ of the Board of Directors
McHenry T. Tichenor, Jr.
/s/ JEFFREY T. HINSON Senior Vice President, Chief Financial Officer March 31, 1999
- ------------------------------------ and Treasurer
Jeffrey T. Hinson (Principal Financial Officer)
/s/ DAVID P. GEROW Vice President and Controller March 31, 1999
- ------------------------------------ (Principal Accounting Officer)
David P. Gerow
/s/ MCHENRY T. TICHENOR Director March 31, 1999
- ------------------------------------
McHenry T. Tichenor
/s/ ROBERT W. HUGHES Director March 31, 1999
- ------------------------------------
Robert W. Hughes
/s/ JAMES M. RAINES Director March 31, 1999
- ------------------------------------
James M. Raines
/s/ ERNESTO CRUZ Director March 31, 1999
- ------------------------------------
Ernesto Cruz
</TABLE>
50
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made the 27th day of January, 1999, by
and between New Century Arizona, LLC ("NCA"), New Century Arizona License
Partnership ("NCALP"; and together with NCA, "Seller") and Heftel
Broadcasting Corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, NCALP is the licensee of Radio Station KHOT-FM (the
"Station"), licensed to Paradise Valley, Arizona and authorized by the
Federal Communications Commission (the "FCC"), and Seller owns, or is the
lessee of, the assets which are used in the operation of the Station; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, certain properties and assets relating to the Station
as described herein under the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 PURCHASE AND SALE OF STATION ASSETS. Subject to the conditions
set forth in this Agreement, at the Closing (as defined hereinafter), Seller
shall, or if necessary shall cause its affiliated companies to, assign,
transfer, convey and deliver to Purchaser, and Purchaser shall purchase from
Seller and such affiliates of Seller, the fee, licensee or lessee interest
in and to the following assets used in the operation of the Station (the
"Station Assets"), free and clear of all liens, security interests, charges,
encumbrances and rights of others, except as provided below:
(a) The licenses, construction permits or authorizations issued by or
pending before the FCC or any other governmental authority for use in the
operation of the Station that are set forth on Schedule I attached hereto,
together with any and all renewals, extensions and modifications thereof (the
"Governmental Licenses");
(b) The real and personal property, tangible or intangible, owned or
leased by Seller and used in the operation of the Station set forth on Schedule
II hereto, together with replacements thereof and additions thereto made between
the date hereof and the Closing;
(c) The KHOT-FM call letters;
(d) Advertising credits (not less than $150,000 in amount and in form
and type acceptable to Purchaser) in favor of the Seller and/or the Station
from the Univision television broadcasting station affiliate in the Phoenix
market; and
<PAGE>
(e) Copies of the Station's FCC logs, all materials maintained in the
Station's FCC public file, technical data and records relating to the Station
Assets.
All other assets of any nature whatsoever shall be retained by Seller and
no rights therein shall be transferred to Purchaser.
1.2 ASSUMED LIABILITIES. At the Closing, Purchaser shall assume the
specified contractual obligations of the Station listed on Schedule III hereto,
as such contracts may be amended through the Closing Date with the mutual
consent of Seller and Purchaser (collectively, the "Assumed Liabilities"), and
Purchaser agrees to pay and perform the Assumed Liabilities after the Closing
Date, when and as such payment and performance obligations come due. Except
as specifically set forth on such Schedule III, Purchaser does not assume and
shall in no event be liable for any debt, obligation, responsibility or
liability of the Station or Seller. Purchaser is and shall remain liable for
any obligation and/or liability incurred by Purchaser at any time.
2. CONSIDERATION; CLOSING.
2.1 PURCHASE PRICE. The consideration to be received by Seller in
exchange for the Station Assets shall be $18,300,000 in cash, payable in
immediately available funds at Closing. Purchaser and Seller agree to allocate
the foregoing purchase price for federal income tax purposes among the Station
Assets in the manner set forth on Schedule IV. Purchaser shall bear the costs
of any appraisals of the Station Assets made for such purposes. Such appraisals
shall be made by Bond & Pecaro, or such other qualified appraisers selected by
Purchaser.
2.2 TIME OF CLOSING.
(a) A closing (the "Closing") for the sale and purchase of the Station
Assets shall be held at the offices of Seller's counsel in Phoenix, Arizona (or
such other place as may be agreed upon by the parties in writing) on the date
which is the latest of (i) the 10th day after the FCC Order (as defined
hereinafter) or (ii) the second business day after the satisfaction of all of
the conditions precedent to the obligations of Purchaser and Seller hereunder,
or (iii) such other date as may be mutually agreed upon by the parties in
writing (the "Closing Date"). Notwithstanding the foregoing, in no event shall
the Closing occur prior to January 15, 1999. The Closing shall be deemed to be
effective as of 12:01 a.m. on the Closing Date.
(b) In order to consummate the transfer of the Station Assets, Seller
and Purchaser agree to use their best efforts and cooperation to file, within
ten business days after the date hereof, an assignment of license application
(the "FCC Application") requesting FCC consent to the assignment from Seller
to Purchaser of all Governmental Licenses used in the operation of the
Station. The parties agree that the FCC Application will be prosecuted with
mutual cooperation, reasonable best efforts, in good faith and with due
diligence. The parties agree to use their reasonable best efforts to file
additional information or amendments requested by the FCC orally or in
writing as rapidly as possible after such request and, in any
<PAGE>
event, to commence preparation of such additional information or amendments
immediately upon request and to complete and file the same with the FCC as
rapidly as practical. Each party will be solely responsible for the expenses
incurred by it in the preparation, filing and prosecution of the FCC
Application (it being understood that the parties will bear equally the FCC
filing fee). As used herein, the term "FCC Order" shall mean that the FCC
has granted or given its consent, without any condition materially adverse to
Purchaser or Seller, to the assignment of the Governmental Licenses; and the
term "Final Order" shall mean that the FCC Order shall have become final,
that the normally applicable time period for filing any protests, requests
for stay, reconsideration by the FCC, petitions for rehearing or appeal of
such order shall have expired, and that no protest, request for stay,
reconsideration by the FCC, petition for rehearing or appeal of such order
shall be pending.
(c) To the extent required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), the parties further agree to use their best efforts
to make any necessary filings under the HSR Act, within ten days after the date
hereof. The fees associated with any filings made pursuant to the HSR Act shall
be split equally between the parties (it being understood that the Purchaser
shall advance Seller's portion of such fee at the time of filing and be
reimbursed in the form of a deduction from the purchase price).
2.3 CLOSING PROCEDURE. At the Closing, Seller shall deliver to
Purchaser such bills of sale, instruments of assignment, transfer and conveyance
and similar documents as Purchaser shall reasonably request. Against such
delivery, Purchaser shall (i) issue and deliver to Seller the purchase price in
accordance with Section 2.1 above and (ii) execute and deliver the assumption
agreements with respect to the Assumed Liabilities as are contemplated by
Section 1.2 hereof. Each party will cause to be prepared, executed and
delivered all other documents required to be delivered by such party pursuant to
this Agreement and all other appropriate and customary documents as another
party or its counsel may reasonably request for the purpose of consummating the
transactions contemplated by this Agreement. All actions taken at the Closing
shall be deemed to have been taken simultaneously at the time the last of any
such actions is taken or completed.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Purchaser, as follows:
3.1 ORGANIZATION; GOOD STANDING. NCA is a limited liability company
duly organized, validly existing and in good standing under the laws of the
state of Delaware, and has all requisite power and authority to own and lease
its properties and carry on its business as currently conducted. NCALP is a
general partnership duly organized, validly existing and in good standing under
the laws of the state of Delaware, and has all requisite power and authority to
own and lease its properties and carry on its business as currently conducted.
3.2 DUE AUTHORIZATION. Subject to the FCC Order and the Final Order,
Seller has full power and authority to enter into and perform this Agreement and
to carry out the transactions contemplated hereby. Seller has taken all
necessary action to approve the
<PAGE>
execution and delivery of this Agreement and the transactions contemplated
hereby. This Agreement constitutes the legal, valid and binding obligation
of Seller, enforceable against it in accordance with its terms, except as
may be limited by the availability of equitable remedies or by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally.
3.3 EXECUTION AND DELIVERY. Neither the execution and delivery by
Seller of this Agreement nor the consummation by it of the transactions
contemplated hereby will: (i) conflict with or result in a breach of the
Certificate of Formation, Operating Agreement or Partnership Agreement, as
applicable, of Seller (ii) subject to the FCC Order and Final Order, violate any
statute, law, rule or regulation or any order, writ, injunction or decree of any
court or governmental authority, which violation, either individually or in the
aggregate, might reasonably be expected to have a material adverse effect on the
business or operations of Seller or Purchaser's ownership of the Station
Assets; or (iii) except as disclosed on Schedule V, violate or conflict with or
constitute a default under (or give rise to any right of termination,
cancellation or acceleration under), or result in the creation of any lien on
any of the Station Assets pursuant to, any material agreement, indenture,
mortgage or other instrument to which Seller is a party or by which it is
bound or affected. Notwithstanding the foregoing, Seller believes that upon the
filing of the FCC Application or shortly thereafter, the Station will lose a
substantial number of employees and a substantial amount of its revenues.
3.4 GOVERNMENTAL CONSENTS. No approval, authorization, consent, order
or other action of, or filing with, any governmental authority or administrative
agency is required in connection with the execution and delivery by Seller of
this Agreement or the consummation of the transactions contemplated hereby or
thereby, other than those of the FCC or under the HSR Act.
3.5 TITLE TO PERSONAL PROPERTY ASSETS. Except for leased or licensed
property, Seller is the sole and exclusive legal owner of all right, title and
interest in, and when delivered to Purchaser, the Station Assets constituting
personal property shall be free and clear of liens, claims and encumbrances
except liens for taxes not yet payable, and liens permitted or incurred by
Purchaser.
3.6 REAL ESTATE.
(a) Subject to the following sentence, Seller has a valid, binding and
enforceable leasehold interest at its transmitter site located at 11138 North
148th Street, Mountain Hills, Arizona (the "Real Estate"). A true, complete and
correct copy of the lease with respect to the Real Estate has been furnished to
Purchaser.
(b) Seller has not received any notice of, and has no knowledge of,
any material violation of any zoning, building, health, fire, water use or
similar statute, ordinance, law, regulation or code in connection with any of
the Real Estate. To the knowledge of Seller, no fact or condition exists
which would result in the termination or impairment of access of the
<PAGE>
Station to the Real Estate or discontinuation of necessary sewer, water,
electrical, gas, telephone or other utilities or services.
(c) To Seller's knowledge, no hazardous or toxic material (as
hereinafter defined) exists in any structure located on, or exists on or
under the surface of, any of the Real Estate which is, in any case, in
material violation by Seller of applicable environmental law. For purposes
of this Section, "hazardous or toxic material" shall mean waste, substance,
materials, smoke, gas or particulate matter designated as hazardous, toxic or
dangerous under any environmental law. For purposes of this Section,
"environmental law" shall include the Comprehensive Environmental Response
Compensation and Liability Act, the Clean Air Act, the Clean Water Act and
any other applicable federal, state or local environmental, health or safety
law, rule or regulation relating to or imposing liability or standards
concerning or in connection with hazardous, toxic or dangerous waste,
substance, materials, smoke, gas or particulate matter.
3.7 GOVERNMENTAL LICENSES AND REPORTS.
(a) Schedule I lists and accurately describes all of the Governmental
Licenses. Seller has furnished to Purchaser true and accurate copies of all
such Governmental Licenses. Each Governmental License is in full force and
effect and is valid under applicable federal, state and local laws; and Seller
has not done anything which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) is reasonably likely to result
in the revocation or termination of any Governmental License or the imposition
of any restriction of such a nature as might reasonably be expected to adversely
affect the operation of the Station as now conducted, except for proceedings of
a legislative or rule-making nature intended to affect the broadcasting industry
generally.
(b) With respect to the Station, Seller has duly filed all material
reports required to be filed by law or applicable rule, regulation, order, writ
or decree of any court, governmental commission, body or instrumentality and has
made payment of all charges and other payments, if any, shown by such reports to
be due and payable, except where the failure to so file or make payment would
not have a material adverse effect upon the operations of the Station or where
such payments are being contested in good faith. All reports required to be
filed by Seller with the FCC with respect to the Station have been filed, except
where the failure to so file would not have a material adverse effect upon the
Station.
3.8 TAXES. All tax reports and returns required to be filed by or
relating to the Station Assets or operations of the Station (including sales,
use, property and employment taxes) have been filed with the appropriate
federal, state and local governmental agencies, and there have been paid all
taxes, penalties, interest, deficiencies, assessments or other charges due as
reflected on the filed returns or claimed to be due by such federal, state or
local taxing authorities (other than taxes, deficiencies, assessments or claims
which are being contested in good faith and which in the aggregate are not
material); (ii) there are no examinations or audits pending or unresolved
examinations or audit issues with respect to Seller's federal, state or local
tax returns; (iii) all additional taxes, if any, assessed as a result of such
examinations or audits have been paid; and (iv) there are no pending claims or
proceedings relating to, or
<PAGE>
asserted for, taxes, penalties, interest, deficiencies or assessments against
the Station Assets.
3.9 LITIGATION. There is no order of any court, governmental agency
or authority and no action, suit, proceeding or publicly disclosed
investigation, judicial, administrative or otherwise that is pending or, to
Seller's knowledge, threatened against the Station which, if adversely
determined, might materially and adversely affect the business, operations,
properties, assets or conditions (financial or otherwise) of the Station or
which challenges the validity or propriety of any of the transactions
contemplated by this Agreement.
3.10 CALL LETTERS. Other than as set forth on Schedule 3.10 hereto,
there are no agreements in effect relating to the use of the KHOT-FM call
letters by the Station or by Seller.
3.11 FINDERS AND BROKERS. Other than Star Media Group (the fees and
expenses of which shall be borne by Seller), no person has as a result of any
agreement entered into by Seller any valid claim against any of the parties
hereto for a brokerage commission, finder's fee or other like payment.
3.12 NO OTHER REPRESENTATIONS. Except for the express representations
and warranties contained in this Section 3, Seller makes no other
representations or warranties of any nature whatsoever, and Seller hereby
disclaims any other representations and warranties of any nature whatsoever.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has all requisite power and authority to own and lease its properties and carry
on its business as currently conducted.
4.2 DUE AUTHORIZATION. Subject to the FCC Order and Final Order,
Purchaser has full power and authority to enter into and perform this Agreement
and to carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly executed and delivered by Purchaser and constitutes
the legal, valid and binding obligation of Purchaser, enforceable against it in
accordance with its respective terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally or general equitable principles.
4.3 EXECUTION AND DELIVERY. Neither the execution and delivery by
Purchaser of this Agreement nor the consummation by it of the transactions
contemplated hereby will: (i) conflict with or result in a breach of the
Articles of Incorporation or Bylaws of Purchaser; (ii) subject to the FCC Order
and Final Order, violate any law, statute, rule or regulation or any
<PAGE>
order, writ, injunction or decree of any court or governmental authority; or
(iii) violate or conflict with or constitute a default under (or give rise to
any right of termination, cancellation or acceleration under) any indenture,
mortgage, lease, contract or other instrument to which Purchaser is a party
or by which it is bound or affected.
4.4 CONSENTS. No consent, approval, authorization, license, exemption
of, filing or registration with any court, governmental authority, commission,
board, bureau, agency or instrumentality, domestic or foreign, is required by
Purchaser in connection with the execution and delivery of this Agreement or the
consummation by it of any transaction contemplated hereby, other than the
consent of the FCC or under the HSR Act. No approval, authorization or consent
of any other third party is required in connection with the execution and
delivery by Purchaser of this Agreement and the consummation of the transactions
contemplated hereby, except as may have been previously obtained by Purchaser.
Purchaser warrants that it is legally qualified to become a licensee of the
Station and is aware of no impediment to the approval by the FCC of the
assignment of the Governmental Licenses to Purchaser. To Purchaser's knowledge,
Purchaser's acquisition of the Station Assets will not require a waiver of any
FCC rule, regulation or policy, and Purchaser knows of no fact that would cause
the FCC to materially delay the processing or grant of the FCC Order (including
approval of the FCC Application), including facts relating to Purchaser's market
share in any locality within the Station's primary service contour.
4.5 FINDERS AND BROKERS. No person has as a result of any agreement
entered into by Purchaser any valid claim against any of the parties hereto for
a brokerage commission, finder's fee or other like payment.
4.6 PURCHASER'S QUALIFICATION. Purchaser is in all material respects
qualified legally, financially and otherwise to be the licensee of the Station,
and has or shall have sufficient resources to pay in full all amounts due to
Seller under this Agreement when such amounts are due. In furtherance of the
foregoing, during the last 12 months, Purchaser has had no applications in front
of the FCC rejected, reconsidered or withdrawn.
4.7 LITIGATION. There are no suits, legal proceedings, or known
investigations of any nature pending or, to Purchaser's knowledge, threatened
against or affecting Purchaser that would affect Purchaser's ability to carry
out the transactions contemplated hereby, or would affect Purchaser's
qualifications to own and operate the Station under the Communications Act and
the rules, regulations and policies of the FCC.
4.8 MISCELLANEOUS MATTERS. Purchaser acknowledges that no other
representations or warranties have been made by Seller, and Purchaser has not
and will not rely on any statements made by Seller or its representatives or
agents other than those expressly set forth herein.
5. CERTAIN COVENANTS AND AGREEMENTS.
5.1 REASONABLE EFFORTS. Each of Seller and Purchaser shall take all
reasonable
<PAGE>
action necessary and cooperate in good faith to consummate the transactions
contemplated by this Agreement and will use all necessary and reasonable
means at its disposal to obtain all necessary consents and approvals of other
persons and governmental authorities required to enable it to consummate the
transactions contemplated by this Agreement. Except as otherwise provided
herein, each of Seller and Purchaser acknowledges and agrees that it shall
pay all costs, fees and expenses incurred by it in obtaining such necessary
consents and approvals. Each party shall make all filings, applications,
statements and reports to all governmental agencies or entities which are
required to be made prior to the Closing Date by or on its behalf pursuant to
any statute, rule or regulation in connection with the transactions
contemplated by this Agreement, and copies of all such filings, applications,
statements and reports shall be provided to the other. If the FCC determines
that the transactions contemplated hereby or a portion thereof are
inconsistent or violative of FCC rules or regulations, the parties agree that
they will negotiate in good faith to amend, modify or restructure the
transactions contemplated hereby so as to be consistent with FCC rules and
regulations; provided, that the amount or timing of payment of the purchase
price shall not be amended or modified.
5.2 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, all notices to
third parties and other publicity relating to the transaction contemplated by
this Agreement shall be jointly planned and agreed to by Seller and Purchaser.
5.3 PARTIES ACTION PENDING THE CLOSING. During the period from the
date hereof to the Closing Date, unless the prior consent of the other party
is first obtained, neither party shall knowingly take any action which would
cause any representation and warranty made by such party hereunder to be
untrue as of the Closing Date.
5.4 TRANSITION CONSULTING FEE. In the event that, subsequent to the
Closing, the Purchaser elects to occupy the Seller's studio location, as set
forth in the Sublease (as described in Section 6.5), the Purchaser will pay to
Seller a consulting fee for the months in which the Sublease is in effect as
follows: (i) $4,000 per month during the months prior to April 1999, (ii) $9,000
per month for April 1999 through June 1999 and (iii) $49,000 per month for July
1999 and each subsequent month.
6. CONDITIONS TO PURCHASER'S CLOSING.
All obligations of Purchaser under this Agreement shall be subject to the
fulfillment at or prior to the Closing of the following conditions, it being
understood that Purchaser may, in its sole discretion, waive any or all of such
conditions in whole or in part:
6.1 REPRESENTATIONS, ETC. Seller shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by it as of the Closing, and the representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects as of the Closing Date with the same effect as though
made at such time (except as contemplated or permitted by this Agreement).
<PAGE>
6.2 CONSENTS. All consents and approvals from the FCC (other than
the Final Order) and under the HSR Act required to consummate the
transactions contemplated by this Agreement shall have been obtained without
material cost (except for regularly scheduled filing fees, and attorneys' and
other experts fees incurred in connection therewith) or other materially
adverse consequence to Purchaser and shall be in full force and effect. All
consents and approvals required from third parties under the Assumed
Liabilities shall have been obtained without material cost to Purchaser.
6.3 NO ADVERSE LITIGATION. No order or temporary, preliminary or
permanent injunction or restraining order shall have been entered and no action,
suit or other legal or administrative proceeding by any court or governmental
authority, agency or other person shall be pending or threatened on the Closing
Date which may have the effect of (i) making any of the transactions
contemplated hereby illegal, (ii) materially adversely affecting the value of
the Station Assets or (iii) making Purchaser liable for the payment of damages
to any person in respect of the Station or the Station's Assets.
6.4 STATION UPGRADE. The FCC shall have approved Seller's application
for a "one-step" upgrade of the Station's broadcast authorization to Class C2
status, and such approval shall have become final, that the normally applicable
time period for filing any protests, requests for stay, reconsideration by the
FCC, petitions for rehearing or appeal of such order shall have expired, and
that no protest, request for stay, reconsideration by the FCC, petition for
rehearing or appeal of such order shall be pending.
6.5 SUBLEASE. Seller and Purchaser shall have entered into the
Sublease in the form of Exhibit A attached hereto (the "Sublease").
6.6 UNWIND AGREEMENT. Seller and Purchaser shall have entered into
the Unwind Agreement in the form of Exhibit B attached hereto (the "Unwind
Agreement").
6.7 CLOSING DELIVERIES. Purchaser shall have received each of the
documents or items required to be delivered to it pursuant to Section 8.1
hereof.
7. CONDITIONS TO SELLER'S CLOSING.
All obligations of Seller under this Agreement shall be subject to the
fulfillment at or prior to the Closing of the following conditions, it being
understood that Seller may, in its sole discretion, waive any or all of such
conditions in whole or in part:
7.1 REPRESENTATIONS, ETC. Purchaser shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by Purchaser as of the Closing, and the
representations and warranties of Purchaser contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same effect as though made at such time (except as contemplated or permitted
by this Agreement).
7.2 NO ADVERSE LITIGATION. No order or temporary, preliminary or
permanent
<PAGE>
injunction or restraining order shall have been entered and no action, suit
or other legal or administrative proceeding by any court or governmental
authority, agency or other person shall be pending or threatened on the
Closing Date which may have the effect of making any of the transactions
contemplated hereby illegal, or (ii) making Seller liable for the payment of
damages to any person in respect of the Station or the Station's Assets.
7.3 CONSENTS. All consents and approvals from the FCC (other than the
Final Order) and under the HSR Act required to consummate the transactions
contemplated by this Agreement shall have been obtained without material cost
(except for regularly scheduled filing fees, and attorneys' and other experts
fees incurred in connection therewith) or other materially adverse consequence
to Seller and shall be in full force and effect. All consents and approvals
required from third parties under the Assumed Liabilities shall have been
obtained without material cost to Seller.
7.4 SUBLEASE. Seller and Purchaser shall have entered into the
Sublease.
7.5 UNWIND AGREEMENT. Seller and Purchaser shall have entered into
the Unwind Agreement.
7.6 CLOSING DELIVERIES. Seller shall have received each of the
documents or items required to be delivered to it pursuant to Section 8.2.
8. DOCUMENTS TO BE DELIVERED AT CLOSING.
8.1 TO PURCHASER. At the Closing, there shall be delivered to
Purchaser:
(a) The warranty deeds, bills of sale, agreements of assignment and
similar instruments of transfer to the Station Assets contemplated by Section
2.3 hereof.
(b) A certificate, signed by an executive officer of Seller, as to the
fulfillment of the conditions set forth in Sections 6.1 through 6.3 hereof.
(c) All other items reasonably requested by Purchaser.
8.2 TO SELLER. At the Closing, there shall be delivered to Seller:
(a) The balance of the purchase price contemplated by Section 2.1
hereof, in the form of wire transfer or cashier's or certified check as Seller
may direct.
(b) A certificate, signed by an executive officer of Purchaser, as to
the fulfillment of the conditions set forth in Sections 7.1 through 7.3.
(c) An assumption agreement pursuant to which Purchaser shall assume
the Assumed Liabilities.
<PAGE>
(d) All other items reasonably requested by Seller.
9. SURVIVAL.
All representations, warranties, covenants and agreements made by any party
to this Agreement or pursuant hereto shall be deemed to have been relied upon
by the parties hereto and shall survive the Closing for a period of one year
(except for the provisions of Section 5.4 which shall survive until such
provision expires in accordance with its terms), and notice of any claim of any
nature hereunder seeking indemnification or any other remedy must be given
within one year from the Closing Date, and if not, shall be deemed waived and
forfeited. The representations and warranties hereunder shall not be affected
or diminished by any investigation at any time by or on behalf of the party for
whose benefit such representations and warranties were made. No representation
or warranty contained herein shall be deemed to be made at any time after the
date of this Agreement or, if made in a certificate, the date of such
certificate.
10. INDEMNIFICATION OF PURCHASER.
Subject to the limitations set forth in Sections 9 and 12, Seller shall
indemnify and hold Purchaser harmless from, against, for and in respect of:
(a) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by Purchaser because of the breach of
any written representation, warranty, agreement or covenant of Seller contained
in this Agreement or any document, certificate or agreement executed in
connection with this Agreement;
(b) any and all liabilities, obligations, claims and demands arising
out of the ownership and operation of the Station at all times prior to the
Closing Date (other than the Assumed Liabilities); and
(c) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) incurred by Purchaser in connection
with any action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against in this Section 10.
11. INDEMNIFICATION OF SELLER.
Subject to the limitations set forth in Sections 9 and 12, Purchaser shall
indemnify and hold Seller harmless from, against, for and in respect of:
(a) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by Seller because of the breach of
any written representation, warranty, agreement or covenant of Purchaser
contained in this Agreement or any document, certificate or agreement executed
in connection with this Agreement;
<PAGE>
(b) any and all liabilities, obligations, claims and demands arising
out of the ownership and operation of the Station on and after the Closing
Date, except to the extent the same arises from a breach of any written
representation, warranty, agreement or covenant of Seller contained in this
Agreement or any document, certificate or agreement executed in connection
with this Agreement;
(c) any of the Assumed Liabilities; and
(d) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) incurred by Seller in connection with
any action, suit, proceeding, demand, assessment or judgment incident to any of
the matters indemnified against in this Section 11.
12. GENERAL RULES REGARDING INDEMNIFICATION.
The obligations and liabilities of each indemnifying party hereunder with
respect to claims resulting from the assertion of liability by the other party
or indemnified third parties shall be subject to the following terms and
conditions:
(a) The indemnified party shall give prompt written notice (which in
no event shall exceed 20 days from the date on which the indemnified party
first became aware of such claim or assertion) to the indemnifying party of
any claim which might give rise to a claim by the indemnified party against
the indemnifying party based on the indemnity agreements contained in Section
10 or 11 hereof, stating the nature and basis of said claims and the amounts
thereof, to the extent known;
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Section 10 or 11
hereof, the action, suit or proceeding shall, upon the written acknowledgment
by the indemnifying party that it is obligated to indemnify under such
indemnity agreement, be defended (including all proceedings on appeal or for
review which counsel for the indemnified party shall deem appropriate) by the
indemnifying party. The indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall
be at the indemnified party's own expense unless (A) the employment of such
counsel and the payment of such fees and expenses both shall have been
specifically authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding, or (B) counsel to such
indemnified party shall have reasonably concluded and specifically notified
the indemnifying party that there may be specific defenses available to it
which are different from those available to the indemnifying party, in any
of which events the indemnifying party, to the extent made necessary by such
defenses, shall not have the right to direct the defense of such action, suit
or proceeding on behalf of the indemnified party. In the latter such case
only that portion of such fees and expenses of the indemnified party's
separate counsel reasonably related to matters covered by the indemnity
agreements contained in Section 10 or 11 hereof shall be borne by the
indemnifying party. The indemnified party shall be kept fully informed of
such action, suit or proceeding at all
<PAGE>
stages thereof whether or not it is represented by separate counsel.
(c) The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the
indemnified party relating to such proceedings or litigation and the parties
hereto agree to render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and adequate defense of
any such action, suit or proceeding.
(d) The indemnified party shall not make any settlement of any claims
without the written consent of the indemnifying party, which consent shall not
be unreasonably withheld or delayed.
(e) If any claims are made by an indemnified party for which an
indemnifying party would be liable, and it appears likely that such claims might
also be covered by the indemnified party's insurance policies, the indemnified
party shall make a timely claim under such policies and to the extent that such
party obtains any recovery from such insurance, such recovery shall be offset
against any sums due from an indemnifying party (or shall be repaid to the
indemnifying party by the indemnified party to the extent that an indemnifying
party has already paid any such amounts). In addition, any claim for indemnity
hereunder shall reduced by any tax-related benefit reasonably expected by
Purchaser to be received or actually received by Purchaser.
(f) The indemnified party shall not make any claim unless and until it
has incurred indemnified losses, damages and expenses in the cumulative
aggregate amount of $25,000, and then only in respect of the excess over such
$25,000 minimum. All claims for indemnification shall not, in any event, exceed
$3.6 million.
(g) Purchaser and Seller acknowledge and agree that the foregoing
indemnification provisions in Sections 10, 11 and 12 hereof shall be the sole
and exclusive remedies for breaches or defaults of any representation, warranty,
covenant or agreement contained herein or in any other document or instrument
delivered in connection herewith.
13. TERMINATION. This Agreement may be terminated by the mutual consent of
Purchaser and Seller, or by either Purchaser or Seller, if the terminating party
is not then in material breach of its obligations hereunder, upon written notice
to the other upon the occurrence of any of the following:
(a) By the terminating party, if the other party is in material breach
of its obligations hereunder and such breach has not been cured by the other
party within 30 days of written notice of such breach;
(b) If the FCC designates the FCC Application contemplated by Section
2.2(b) hereof for hearing at any time; or
(c) If the Closing has not occurred on or before December 31, 1999.
<PAGE>
In the event that this Agreement is terminated as a result of either party's
material breach of this Agreement, the non-breaching party will incur
substantial damages that are difficult to quantify. In such event, the sum of
$4,000,000 (the "Break-up Fee") is deemed by the parties to be an amount which
is a fair and reasonable estimate of the damage the non-breaching party may
incur. Accordingly, in the event of such termination, the breaching party will
pay the Break-up Fee to the non-breaching party within 10 days of such
termination, with interest thereon (if not paid during such 10 day period) at an
annual rate of 15%. In the event that the non-breaching party's actual damages
exceed the amount of the Break-up Fee, the non-breaching party may seek, and
shall be entitled to recover from the breaching party, any such excess damages.
14. RISK OF LOSS.
If any material portion of the Station Assets shall suffer any "material
physical damage or destruction" (as defined below) prior to the Closing Date,
the parties shall promptly notify one another in writing of such physical damage
or destruction, and the party at fault (or if no fault, Seller) shall promptly
take all necessary steps to restore, repair or replace such assets at its sole
expense, and shall advise the other in writing of the estimated cost to complete
such restoration, repair or replacement and all amounts actually paid as of the
date of the estimate. If such restoration, repair or replacement is not
accomplished prior to the Closing Date, and only if it is Seller's obligation to
restore, repair or replace (i.e., Purchaser is not at fault), Buyer shall
receive all insurance proceeds paid or payable to Seller in respect of such
damage or destruction, close this Agreement and thereafter complete such
restoration, repair or replacement at its sole expense; provided, however,
Seller shall have no further liabilities with respect to such damage or
destruction after payment to Purchaser of such insurance proceeds. For purposes
hereof, "material physical damage or destruction" shall mean any damage or
destruction to a material portion of the Station Assets, which damage or
destruction exceeds $250,000, in the aggregate and which is not covered by
insurance (other than a reasonable deductible).
15. MISCELLANEOUS PROVISIONS.
15.1 EXPENSES. Except as otherwise expressly provided herein, each
party shall pay the fees and expenses incurred by it in connection with the
transactions contemplated by this Agreement. If any action is brought for
breach of this Agreement or to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover court costs, arbitration
expenses and reasonable attorneys' fees.
15.2 PRORATIONS. All items of income and expense arising from the
operation of the Station with respect to the Station Assets and the Assumed
Liabilities on or before the close of business on the Closing Date shall be for
the account of Seller and thereafter shall be for the account of Purchaser.
Proration of the items described below between Seller and Purchaser shall be
effective as of 11:59 p.m., local time, on such date and shall occur as follows
with respect to those rights, liabilities and obligations of Seller transferred
to and assumed by Purchaser hereunder:
<PAGE>
(a) Liability for state and local taxes assessed on the Station Assets
payable with respect to the tax year in which the Closing Date falls shall be
prorated as between Seller and Purchaser on the basis of the number of days of
the tax year elapsed to and including such date, appropriately adjusted with
respect to improvements to the Station Assets effected by Purchaser after the
Closing Date.
(b) Prepaid items and accruals such as water, electricity, telephone,
other utility and service charges, lease expenses, license fees (if any) and
payments under any contracts to be assumed by Purchaser shall be prorated
between Seller and Purchaser on the basis of the period of time to which such
liabilities, prepaid items and accruals apply.
All prorations shall be made and paid insofar as feasible on the Closing
Date with a final settlement to be made on the Closing Date. Seller and
Purchaser agree to assume, pay and perform all costs, liabilities and expenses
allocated to each of them pursuant to this Section 15.2.
15.3 AMENDMENT. This Agreement may be amended at any time but only
by an instrument in writing signed by the parties hereto.
15.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if mailed by certified mail, return receipt
requested, or by nationally recognized "next-day" delivery service, to the
parties at the addresses set forth below (or at such other address for a party
as shall be specified by like notice), or sent by facsimile to the number set
forth below (or such other number for a party as shall be specified by proper
notice hereunder):
If to Purchaser:
3102 Oak Lawn, Suite 215
Dallas, Texas 75219
Attn: McHenry T. Tichenor, Jr., President
Fax: (214) 525-7750
If to Seller:
190 Queen Anne Avenue North, Suite 100
Seattle, Washington 98109
Attn: Lance Anderson
Fax: (206) 286-2376
With a copy to :
Tom D. Wippman, Esq .
650 Dundee Road, Suite 370
Northbrook, Illinois 60062
<PAGE>
Fax: (847)480-1251
15.5 ASSIGNMENT. This Agreement may not be assigned by either party
without the prior consent of the other party; provided, however, that Purchaser
may assign its rights to one or more of its subsidiaries so long as Heftel
Broadcasting Corporation remains liable for all obligations of the Purchaser
hereunder. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, heirs and permitted assigns.
15.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.7 HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
15.8 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein contain the entire understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
warranties, conveyances or undertakings other than those expressly set forth
herein. This Agreement supersedes any prior agreements and understandings
between the parties with respect to the subject matter.
15.9 WAIVER. No attempted waiver of compliance with any provision or
condition hereof, or consent pursuant to this Agreement, will be effective
unless evidenced by an instrument in writing by the party against whom the
enforcement of any such waiver or consent is sought.
15.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona.
15.11 CERTAIN DEFINITIONS. As used in this Agreement, "affiliates" of a
party shall mean persons or entities that directly, or indirectly through one or
more intermediaries, control or are controlled by, or are under common control
with, such party.
15.12 INTENDED BENEFICIARIES. The rights and obligations contained in
this Agreement are hereby declared by the parties hereto to have been
provided expressly for the exclusive benefit of such entities as set forth
herein and shall not benefit, and do not benefit, any unrelated third parties.
15.13 MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no
provision of this Agreement shall be construed against any party on the
ground that such party drafted the provision or caused it to be drafted or
the provision contains a covenant of such party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
NEW CENTURY ARIZONA LICENSE
PARTNERSHIP
By /s/ George Kristi
-------------------------------
General Partner
NEW CENTURY ARIZONA LLC
By /s/ George Kristi
-------------------------------
Managing Member
HEFTEL BROADCASTING CORPORATION
By /s/ Jeffrey T. Hinson
-------------------------------
Senior Vice President
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of the 1st day of March, 1999,
by and among Radio Vision, Inc. ("Seller"), George E. Tobin ("Shareholder")
and Heftel Broadcasting Corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the licensee of Radio Station KISF-FM (the
"Station"), licensed to Las Vegas, Nevada and authorized by the Federal
Communications Commission (the "Commission" or "FCC"), and the Seller owns
the assets which are used in the operation of the Station; and
WHEREAS, Shareholder is the controlling shareholder of the Seller; and
WHEREAS, the Seller desires to sell to Purchaser, and Purchaser desires
to purchase from the Seller, certain of the radio station properties and
assets relating to the Station as described herein under the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 PURCHASE AND SALE OF STATION ASSETS. Subject to the conditions
set forth in this Agreement, at the Closing (as defined hereinafter), the
Seller shall, or if necessary shall cause its affiliated companies to,
assign, transfer, convey and deliver to Purchaser, and Purchaser shall
purchase from the Seller, all right, title and interest in and to the
following assets relating to the Station (the "Station Assets"), free and
clear of all liens, security interests, charges, encumbrances and rights of
others (other than liens and charges for which a proration adjustment is made
pursuant to Section 15.2 hereof):
(a) All licenses, construction permits or authorizations issued by or
pending before the FCC or any other governmental authority for use in the
operation of the Station that are set forth on Schedule I attached hereto,
together with any and all renewals, extensions and modifications thereof (the
"Governmental Licenses");
(b) All real and personal property, tangible or intangible, owned by
Seller which is used or useful in the operation of the Station, including,
but not limited to, broadcast towers and antennas, transmitters, the
transmitter and studio equipment listed on Schedule II hereto, tapes and
record libraries, together with replacements thereof and additions thereto
made between the date hereof and the Closing;
<PAGE>
(c) Programming materials, market data, research and similar items
relating to the Station's intellectual property (to the extent that Seller
has any transferable interest therein);
(d) The KISF call letters;
(e) All deposits made by the Seller to third parties in connection
with the transmitter site and the Assumed Contracts (defined below), for
which proration shall be made in accordance with Section 15.2; and
(f) Copies of the Station's FCC logs, all materials maintained in the
Station's FCC public file, technical data and records relating to the Station
Assets.
The foregoing notwithstanding, in no event shall the Station Assets be deemed
to include (i) the cash and cash equivalents of the Seller, (ii) any accounts
receivable, notes receivable or other receivables of the Seller (including
tax refunds), (iii) the Station's "Supervan" or other vehicles, (iv) the
Seller's corporate seal, minute books, charter documents, corporate stock
record books and other books and records that pertain to the organization of
Seller, (v) securities of any kind owned by Seller, (vi) insurance contracts
or proceeds thereof or (vii) claims arising out of acts occurring before the
Closing Date.
1.2 ASSUMED CONTRACTS. At the Closing, the Purchaser shall assume
the specified contractual obligations of the Station listed on Schedule III
hereto (the "Assumed Contracts"), and the Purchaser agrees to pay and perform
the Assumed Contracts after the Closing Date. Except as specifically set
forth on such Schedule III, Purchaser does not assume and shall in no event
be liable for any debt, obligation, responsibility or liability of the
Station or Seller, including without limitation, employee obligations, taxes,
accounts payable and barter obligations of the Station.
2. CONSIDERATION; CLOSING.
2.1 PURCHASE PRICE; RESERVE.
(a) The consideration to be received by the Seller in exchange for
the Station Assets shall be $20,290,000 in cash. The Purchaser and Seller
agree to allocate the foregoing purchase price for federal income tax
purposes among the Station Assets in a manner not inconsistent with Section
1060 of the Internal Revenue Code of 1986, as amended, and the related
Treasury Regulations issued thereunder. The Purchaser shall bear the costs
of obtaining appraisals, if any such appraisals are required to be obtained
by the Purchaser, of the Station Assets. Such appraisals shall be made by
Bond & Pecaro, or such other qualified appraisers selected by the Purchaser.
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(b) At the Closing, the Seller shall set aside and pay to Purchaser a
portion of the purchase price in the amount of $50,000, which the Purchaser
shall use in its sole discretion as a reserve (the "Reserve") in order to
satisfy certain obligations in connection with the Assumed Contracts.
2.2 TIME OF CLOSING.
(a) A closing (the "Closing") for the sale and purchase of the
Station Assets shall be held at the offices of the Station in Las Vegas,
Nevada (or such other place as may be agreed upon by the parties in writing)
on the date which is the later of (i) the 5th day after the FCC Order (as
defined hereinafter) or (ii) the satisfaction of all of the conditions
precedent to the obligations of Purchaser and Seller hereunder, or on such
other date as may be agreed upon by the parties in writing (the "Closing
Date"). The Closing shall be deemed to be effective as of 12:01 a.m. on the
Closing Date.
(b) In order to consummate the transfer of the Station Assets, Seller
and Purchaser agree to use their best efforts to file, within five days after
the date hereof, an assignment of license application (the "Application")
requesting FCC consent to the assignment from the Seller to Purchaser of all
Governmental Licenses relating to the operation of the Station. The parties
agree that the Application will be prosecuted with best reasonable efforts,
in good faith and with due diligence. The parties agree to use their
reasonable best efforts to file additional information or amendments
requested by the FCC orally or in writing within five business days after
such request and, in any event, to commence preparation of such additional
information or amendments immediately upon request and to complete and file
the same with the FCC as rapidly as practical. Each party will be solely
responsible for the expenses incurred by it in the preparation, filing and
prosecution of the Application (it being understood that the parties will
bear equally the FCC filing fee). As used herein, the term "FCC Order" shall
mean that the FCC staff has granted or given its consent, without any
condition materially adverse to Purchaser or Seller, to the assignment of the
Governmental Licenses; and the term "Final Order" shall mean that the FCC
Order shall have become final, that the time period for filing any protests,
requests for stay, reconsideration by the FCC, petitions for rehearing or
appeal of such order shall have expired, and that no protest, request for
stay, reconsideration by the FCC, petition for rehearing or appeal of such
order shall be pending.
(c) To the extent required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), the parties further agree to use
their best efforts to make any necessary filings under the HSR Act. The fees
associated with any filings made pursuant to the HSR Act shall be paid by the
Purchaser.
2.3 CLOSING PROCEDURE. At the Closing, the Seller shall deliver to
Purchaser such bills of sale, instruments of assignment, transfer and
conveyance and similar
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<PAGE>
documents as Purchaser shall reasonably request. Against such delivery,
Purchaser shall (i) issue and deliver to Seller the purchase price in
accordance with Section 2.1 above and (ii) execute and deliver the assumption
agreements with respect to the Assumed Contracts as are contemplated by
Section 1.2 hereof. Each party will cause to be prepared, executed and
delivered all other documents required to be delivered by such party pursuant
to this Agreement and all other appropriate and customary documents as
another party or its counsel may reasonably request for the purpose of
consummating the transactions contemplated by this Agreement. All actions
taken at the Closing shall be deemed to have been taken simultaneously at the
time the last of any such actions is taken or completed.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND SHAREHOLDER.
Each of the Shareholder and the Seller, jointly and severally, hereby
represents and warrants to the Purchaser, as follows:
3.1 ORGANIZATION; GOOD STANDING. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Nevada, and has all requisite corporate power and authority to own and
lease its properties and carry on its business as currently conducted.
3.2 DUE AUTHORIZATION. Subject to the FCC Order and the Final Order,
the Seller has full power and authority, and the Shareholder has the
capacity, to enter into and perform this Agreement and to carry out the
transactions contemplated hereby. The Seller has taken all necessary
corporate action to approve the execution and delivery of this Agreement and
the transactions contemplated hereby. This Agreement constitutes the legal,
valid and binding obligation of the Seller and Shareholder, enforceable
against each of them in accordance with its terms, except as may be limited
by the availability of equitable remedies or by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally.
3.3 EXECUTION AND DELIVERY. Neither the execution and delivery by
the Seller and Shareholder of this Agreement nor the consummation by them of
the transactions contemplated hereby will: (i) conflict with or result in a
breach of the Articles of Incorporation or bylaws of Seller (ii) subject to
the FCC Order and Final Order, violate any statute, law, rule or regulation
or any order, writ, injunction or decree of any court or governmental
authority, which violation, either individually or in the aggregate, might
reasonably be expected to have a material adverse effect on the business or
operations of the Seller or Purchaser's ownership of the Station Assets; or
(iii) violate or conflict with or constitute a default under (or give rise to
any right of termination, cancellation or acceleration under), or result in
the creation of any lien on any of the Station Assets pursuant to, any
material agreement, indenture, mortgage or other
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instrument to which the Seller is a party or by which it or its assets may be
bound or affected.
3.4 GOVERNMENTAL CONSENTS. No approval, authorization, consent,
order or other action of, or filing with, any governmental authority or
administrative agency is required in connection with the execution and
delivery by the Seller of this Agreement or the consummation of the
transactions contemplated hereby or thereby, other than those of the FCC or
under the HSR Act.
3.5 TITLE TO PERSONAL PROPERTY ASSETS. Except for leased property,
the Seller is the sole and exclusive legal owner of all right, title and
interest in, and has good and marketable title to, all of the Station Assets
constituting personal property, free and clear of liens, claims and
encumbrances except (i) liens for taxes not yet payable and (ii) the Assumed
Contracts.
3.6 TRANSMITTER SITE.
(a) Seller has a valid, binding and enforceable leasehold interest,
which is (except as disclosed in the Transmitter Site Lease relating thereto)
free and clear of liens, claims, encumbrances, subleases or other
restrictions, in and to the transmitter site from which the Station's signal
is broadcast, and the buildings, structures and improvements situated thereon
(the "Transmitter Site"). A true, complete and correct copy of the lease
evidencing such interest (the "Transmitter Site Lease") has been furnished to
Purchaser. Neither Seller nor, to Seller's knowledge, any other party is in
default under the Transmitter Site Lease and no notice of termination or
default has been given.
(b) Except as set forth in Schedule V, Seller has not received any
notice of, and has no knowledge of, any material violation of any zoning,
building, health, fire, water use or similar statute, ordinance, law,
regulation or code in connection with the Transmitter Site. To the knowledge
of Seller and Shareholder, except as set forth on Schedule V, no fact or
condition exists which would result in the termination or impairment of
access of the Station to the Transmitter Site or discontinuation of necessary
sewer, water, electrical, gas, telephone or other utilities or services.
(c) To Seller's and Shareholder's knowledge, no hazardous or toxic
material (as hereinafter defined) exists in any structure located on, or
exists on or under the surface of, the Transmitter Site which is, in any
case, in material violation by Seller of applicable environmental law. For
purposes of this Section, "hazardous or toxic material" shall mean waste,
substance, materials, smoke, gas or particulate matter designated as
hazardous, toxic or dangerous under any environmental law. For purposes of
this Section, "environmental law" shall include the Comprehensive
Environmental Response Compensation and Liability Act, the Clean Air Act, the
Clean Water Act and any other applicable federal, state or local
environmental, health or
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safety law, rule or regulation relating to or imposing liability or standards
concerning or in connection with hazardous, toxic or dangerous waste,
substance, materials, smoke, gas or particulate matter.
3.7 GOVERNMENTAL LICENSES AND REPORTS.
(a) Schedule I lists and accurately describes all material
Governmental Licenses. The Seller has furnished to Purchaser true and
accurate copies of all such Governmental Licenses. Each Governmental License
is in full force and effect and is valid under applicable federal, state and
local laws; and, to the knowledge of Seller and Shareholder, no event has
occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) is reasonably likely to result in
the revocation or termination of any Governmental License or the imposition
of any restriction of such a nature as might adversely affect the ownership
or operation of the Station as now conducted, except for proceedings of a
legislative or rule-making nature intended to affect the broadcasting
industry generally.
(b) The Seller has duly filed all material reports required to be
filed by law or applicable rule, regulation, order, writ or decree of any
court, governmental commission, body or instrumentality and has made payment
of all charges and other payments, if any, shown by such reports to be due
and payable, except where the failure to so file or make payment would not
have a material adverse effect upon the operations of the Station. All
reports required to be filed by the Seller with the FCC with respect to the
Station have been filed, except where the failure to so file would not have a
material adverse effect upon the Station.
3.8 TAXES. All tax reports and returns required to be filed by or
relating to the Station Assets or operations of the Station (including sales,
use, property and employment taxes) have been filed with the appropriate
federal, state and local governmental agencies, and there have been paid all
taxes, penalties, interest, deficiencies, assessments or other charges due as
reflected on the filed returns or claimed to be due by such federal, state or
local taxing authorities (other than taxes, deficiencies, assessments or
claims which are being contested in good faith and which in the aggregate are
not material); (ii) Seller has not received any written notice of any
examinations or audits pending or unresolved examinations or audit issues
with respect to the Seller's federal, state or local tax returns; (iii) all
additional taxes, if any, assessed as a result of such examinations or audits
have been paid; and (iv) to Seller's knowledge, there are no pending claims
or proceedings relating to, or asserted for, taxes, penalties, interest,
deficiencies or assessments against the Station Assets.
3.9 LITIGATION. There is no order of any court, governmental agency
or authority and no action, suit, proceeding or investigation, judicial,
administrative or otherwise that is pending or, to Seller's and Shareholder's
knowledge, threatened against or affecting the Station which, if adversely
determined, might materially and
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adversely affect the business, operations, properties, assets or conditions
(financial or otherwise) of the Station or which challenges the validity or
propriety of any of the transactions contemplated by this Agreement.
3.10 THIRD PARTY CONSENTS. By the Closing Date, the Seller will have
used all reasonable efforts to obtain all consents from any person or entity
which are required in connection with the execution and delivery by Purchaser
of this Agreement and the consummation of the transactions contemplated
hereby, which consents are described on Schedule IV.
3.11 SHAREHOLDER'S NET ASSETS. The value of the Shareholder's assets
(using the net book value of all business assets, such as the Station, and
the most recent market value of personal investments, but excluding the value
of personal assets such as home and automobile) as of the most recent date
available does not exceed $10 million.
3.12 FINDERS AND BROKERS. No person has as a result of any agreement
entered into by the Seller any valid claim against any of the parties hereto
for a brokerage commission, finder's fee or other like payment.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Seller and Shareholder
as follows:
4.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Delaware
and has all requisite power and authority to own and lease its properties and
carry on its business as currently conducted.
4.2 DUE AUTHORIZATION. Subject to the FCC Order and Final Order,
Purchaser has full power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Purchaser. This Agreement has been duly executed and delivered by Purchaser
and constitutes the legal, valid and binding obligation of Purchaser,
enforceable against it in accordance with its respective terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally or general equitable
principles.
4.3 EXECUTION AND DELIVERY. Neither the execution and delivery by
Purchaser of this Agreement nor the consummation of the transactions
contemplated hereby will: (i) conflict with or result in a breach of the
Articles of Incorporation or Bylaws of
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Purchaser; (ii) subject to the FCC Order and Final Order, violate any law,
statute, rule or regulation or any order, writ, injunction or decree of any
court or governmental authority; or (iii) violate or conflict with or
constitute a default under (or give rise to any right of termination,
cancellation or acceleration under) any indenture, mortgage, lease, contract
or other instrument to which Purchaser is a party or by which it is bound or
affected.
4.4 CONSENTS. No consent, approval, authorization, license,
exemption of, filing or registration with any court, governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign, is
required by Purchaser in connection with the execution and delivery of this
Agreement or the consummation by it of any transaction contemplated hereby,
other than the consent of the FCC or under the HSR Act. No approval,
authorization or consent of any other third party is required in connection
with the execution and delivery by Purchaser of this Agreement and the
consummation of the transactions contemplated hereby, except as may have been
previously obtained by Purchaser. Purchaser warrants that it is legally
qualified to become a licensee of the Station and is aware of no impediment
to the approval by the FCC of the assignment of the Governmental Licenses to
Purchaser.
4.5 FINDERS AND BROKERS. No person has as a result of any agreement
entered into by the Purchaser any valid claim against any of the parties
hereto for a brokerage commission, finder's fee or other like payment.
4.6 PURCHASER'S QUALIFICATION. The Purchaser is in all material
respects qualified legally, financially and otherwise to be the licensee of
the Station, and has or shall have sufficient resources to pay in full all
amounts due to the Seller under this Agreement when such amounts are due.
5. CERTAIN COVENANTS AND AGREEMENTS.
5.1 REASONABLE EFFORTS. Each of the Seller and Purchaser shall take
all reasonable action necessary to consummate the transactions contemplated
by this Agreement and will use all necessary and reasonable means at its
disposal to obtain all necessary consents and approvals of other persons and
governmental authorities required to enable it to consummate the transactions
contemplated by this Agreement. Except as otherwise provided herein, each of
the Seller and Purchaser acknowledges and agrees that it shall pay all costs,
fees and expenses incurred by it in obtaining such necessary consents and
approvals. Each party shall make all filings, applications, statements and
reports to all governmental agencies or entities which are required to be
made prior to the Closing Date by or on its behalf pursuant to any statute,
rule or regulation in connection with the transactions contemplated by this
Agreement, and copies of all such filings, applications, statements and
reports shall be provided to the other. If the FCC determines that the
transactions contemplated hereby or a portion thereof are inconsistent or
violative of FCC rules or regulations, the parties agree that
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they will negotiate in good faith to amend, modify or restructure the
transactions contemplated hereby so as to be consistent with FCC rules and
regulations.
5.2 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, all notices to
third parties and other publicity relating to the transaction contemplated by
this Agreement shall be jointly planned and agreed to by the Seller and
Purchaser.
5.3 ORDINARY COURSE OF BUSINESS. During the period from the date
hereof to the Closing Date, unless the prior consent of Purchaser is first
obtained, the Seller shall cause the Station to (i) conduct its operations in
the ordinary course of business consistent with past and current practices
(it being understood that a material decline in advertising revenues or a
significant departure of Station employees will not be deemed to be a
deviation from conduct in the ordinary course of business) and (ii) not
knowingly take any action which would cause any representation contained in
Article 3 to be untrue as of the Closing Date.
6. CONDITIONS TO PURCHASER'S CLOSING.
All obligations of Purchaser under this Agreement shall be subject to
the fulfillment at or prior to the Closing of the following conditions, it
being understood that Purchaser may, in its sole discretion, waive any or all
of such conditions in whole or in part:
6.1 REPRESENTATIONS, ETC. The Seller shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by it at or prior to the Closing, and the
representations and warranties of the Seller contained in this Agreement
shall be true and correct in all material respects as of the Closing Date
with the same effect as though made at such time (except as contemplated or
permitted by this Agreement).
6.2 CONSENTS. All consents and approvals from the FCC and
governmental agencies required to consummate the transactions contemplated by
this Agreement shall have been obtained without material cost or other
materially adverse consequence to Purchaser and shall be in full force and
effect, and the FCC Order shall, at the Closing, be in full force and effect.
6.3 NO ADVERSE LITIGATION. No order or temporary, preliminary or
permanent injunction or restraining order shall have been entered and no
action, suit or other legal or administrative proceeding by any court or
governmental authority, agency or other person shall be pending or threatened
on the Closing Date which may have the effect of (i) making any of the
transactions contemplated hereby illegal or (ii) materially adversely
affecting the value of the Station Assets.
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6.4 TRANSMITTER SITE. The lessor of the Transmitter Site shall have
consented to the assignment of the Transmitter Site Lease to Purchaser.
6.5 STUDIO LEASE. The lessor of the Seller's studio lease shall have
provided to the Purchaser a consent to remove from the premises the studio
assets included in the Purchased Assets.
6.6 CLOSING DELIVERIES. Purchaser shall have received each of the
documents or items required to be delivered to it pursuant to Section 8.1
hereof.
7. CONDITIONS TO SELLER'S CLOSING.
All obligations of the Seller under this Agreement shall be subject to
the fulfillment at or prior to the Closing of the following conditions, it
being understood that the Seller may, in its sole discretion, waive any or
all of such conditions in whole or in part:
7.1 REPRESENTATIONS, ETC. Purchaser shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by Purchaser as of the Closing, and the
representations and warranties of Purchaser contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same effect as though made at such time (except as contemplated or permitted
by this Agreement).
7.2 NO ADVERSE LITIGATION. No order or temporary, preliminary or
permanent injunction or restraining order shall have been entered and no
action, suit or other legal or administrative proceeding by any court or
governmental authority, agency or other person shall be pending or threatened
on the Closing Date which may have the effect of (i) making any of the
transactions contemplated hereby illegal or (ii) materially adversely
affecting the value of the Station Assets.
7.3 CLOSING DELIVERIES. The Seller shall have received each of the
documents or items required to be delivered to it pursuant to Section 8.2.
7.4 CONSENTS. All consents and approvals from the FCC and
governmental agencies required to consummate the transactions contemplated by
this Agreement shall have been obtained without material cost or other
materially adverse consequence to Seller and shall be in full force and
effect, and the FCC Order shall, at the Closing, be in full force and effect.
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8. DOCUMENTS TO BE DELIVERED AT CLOSING.
8.1 TO PURCHASER. At the Closing, there shall be delivered to
Purchaser:
(a) The warranty deeds, bills of sale, agreements of assignment and
similar instruments of transfer to the Station Assets contemplated by Section
2.3 hereof.
(b) A certificate, signed by an executive officer of Seller, as to
the fulfillment of the conditions set forth in Sections 6.1 through 6.3
hereof.
(c) An Unwind Agreement in the form of Exhibit A hereto (the "Unwind
Agreement").
8.2 TO SELLER. At the Closing, there shall be delivered to the
Seller:
(a) The purchase price contemplated by Section 2.1 hereof, in the
form of wire transfer or cashier's or certified check as the Seller may
direct.
(b) A certificate, signed by an executive officer of Purchaser, as to
the fulfillment of the conditions set forth in Sections 7.1 and 7.2 hereof.
(c) An assumption agreement pursuant to which Purchaser shall assume
the Assumed Contracts.
(d) The Unwind Agreement.
9. SURVIVAL.
All representations, warranties, covenants and agreements made by any
party to this Agreement or pursuant hereto shall be deemed to be material and
to have been relied upon by the parties hereto and shall survive the Closing;
provided, however, that notice of any claim against the Purchaser or Seller,
whether made under the indemnification provisions hereof or otherwise, based
on a breach of a representation, warranty, covenant or agreement must be
given within one year from the Closing Date; and provided, further, that
notice of any claim made against the Shareholder, whether made under the
indemnification provisions hereof or otherwise, based on a breach of a
representation, warranty, covenant or agreement must be given within six
months from the Closing Date. The representations and warranties hereunder
shall not be affected or diminished by any investigation at any time by or on
behalf of the party for whose benefit such representations and warranties
were made. No representation or warranty contained herein shall be deemed to
be made at any time after the date of this Agreement.
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<PAGE>
10. INDEMNIFICATION OF PURCHASER.
Subject to the limitations set forth in Sections 9 and 12, the Seller
and Shareholder, jointly and severally, shall indemnify and hold Purchaser
harmless from, against, for and in respect of:
(a) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by Purchaser because of the breach
of any written representation, warranty, agreement or covenant of the Seller
or Shareholder contained in this Agreement;
(b) any and all liabilities, obligations, claims and demands arising
out of the ownership and operation of the Station at all times prior to the
Closing Date (other than the contractual liabilities specifically assumed as
set forth in Section 1.2 hereto); and
(c) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) incurred by Purchaser in connection
with any action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against in this Section 10.
11. INDEMNIFICATION OF SELLER AND SHAREHOLDER.
Subject to the limitations set forth in Sections 9 and 12, Purchaser
shall indemnify and hold the Seller and Shareholder harmless from, against,
for and in respect of:
(a) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by the Seller or Shareholder
because of the breach of any written representation, warranty, agreement or
covenant of Purchaser contained in this Agreement;
(b) any and all liabilities, obligations, claims and demands arising
out of the ownership and operation of the Station on and after the Closing
Date, except to the extent the same arises from a breach of any written
representation, warranty, agreement or covenant of the Seller or Shareholder
contained in this Agreement or any document, certificate or agreement
executed in connection with this Agreement;
(c) any of the Assumed Contracts specifically assumed as set forth in
Section 1.2; and
12
<PAGE>
(d) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) incurred by the Seller or
Shareholder in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified against in
this Section 11.
12. GENERAL RULES REGARDING INDEMNIFICATION.
The obligations and liabilities of each indemnifying party hereunder
with respect to claims resulting from the assertion of liability by the other
party or indemnified third parties shall be subject to the following terms
and conditions:
(a) The indemnified party shall give prompt written notice (which in
no event shall exceed 30 days from the date on which the indemnified party
first became aware of such claim or assertion) to the indemnifying party of
any claim which might give rise to a claim by the indemnified party against
the indemnifying party based on the indemnity agreements contained in Section
10 or 11 hereof, stating the nature and basis of said claims and the amounts
thereof, to the extent known;
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Section 10 or 11
hereof, the action, suit or proceeding shall, upon the written acknowledgment
by the indemnifying party that it is obligated to indemnify under such
indemnity agreement, be defended (including all proceedings on appeal or for
review which counsel for the indemnified party shall deem appropriate) by the
indemnifying party. The indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall
be at the indemnified party's own expense unless (A) the employment of such
counsel and the payment of such fees and expenses both shall have been
specifically authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding, or (B) counsel to such
indemnified party shall have reasonably concluded and specifically notified
the indemnifying party that there may be specific defenses available to it
which are different from or additional to those available to the indemnifying
party or that such action, suit or proceeding involves or could have an
effect upon matters beyond the scope of the indemnity agreements contained in
Sections 10 and 11 hereof, in any of which events the indemnifying party, to
the extent made necessary by such defenses, shall not have the right to
direct the defense of such action, suit or proceeding on behalf of the
indemnified party. In the latter such case only that portion of such fees
and expenses of the indemnified party's separate counsel reasonably related
to matters covered by the indemnity agreements contained in Section 10 or 11
hereof shall be borne by the indemnifying party. The indemnified party shall
be kept fully informed of such action, suit or proceeding at all stages
thereof whether or not it is represented by separate counsel.
13
<PAGE>
(c) The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the
indemnified party relating to such proceedings or litigation and the parties
hereto agree to render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and adequate defense of
any such action, suit or proceeding.
(d) The indemnified party shall not make any settlement of any claims
without the written consent of the indemnifying party, which consent shall
not be unreasonably withheld or delayed.
(e) If any claims are made by third parties against an indemnified
party for which an indemnifying party would be liable, and it appears likely
that such claims might also be covered by the indemnified party's insurance
policies, the indemnified party shall make a timely claim under such policies
and to the extent that such party obtains any recovery from such insurance,
such recovery shall be offset against any sums due from an indemnifying party
(or shall be repaid by the indemnified party to the extent that an
indemnifying party has already paid any such amounts). The parties
acknowledge, however, that if an indemnified party is self-insured as to any
matters, either directly or through an insurer which assesses retroactive
premiums based on loss experience, then to the extent that the indemnified
party bears the economic burden of any claims through self-insurance or
retroactive premiums or insurance ratings, the indemnifying party's
obligation shall only be reduced by any insurance recovery in excess of the
amount paid or to be paid by the indemnified party in insurance premiums.
(f) The indemnified party shall not make any claim unless and until
it has incurred indemnified losses, damages and expenses in the cumulative
aggregate amount of $25,000, and then only in respect of the excess over such
$25,000 minimum.
(g) Except as herein expressly provided, the remedies provided in
Sections 10 through 12 hereof shall be cumulative and shall not preclude
assertion by any party of any other rights or the seeking of any other rights
or remedies against any other party hereto.
13. TERMINATION. This Agreement may be terminated by the mutual consent of
Purchaser and Seller, or by either Purchaser or Seller, if the terminating
party is not then in material breach of its obligations hereunder, upon
written notice to the other upon the occurrence of any of the following:
(a) By the terminating party, if the other party is in material
breach of its obligations hereunder, and such breach has not been cured by
the other party within 30 days of written notice of such breach (or such
longer period of time if the breach
14
<PAGE>
cannot be reasonably cured within 30 days and the breaching party is
diligently attempting to cure such breach);
(b) If the FCC designates the FCC Application contemplated by Section
2.2(b) hereof for hearing at any time; or
(c) If the Closing has not occurred on or before August 31, 1999.
In the event that this Agreement is terminated as a result of either party's
material breach of this Agreement, the non-breaching party will incur
substantial damages that are difficult to quantify. In such event, the sum
of $2,000,000 (the "Break-up Fee") is deemed by the parties to be an amount
which is a fair and reasonable estimate of the damage the non-breaching party
may incur. Accordingly, in the event of such termination, the breaching
party will pay the Break-up Fee to the non-breaching party within 10 days of
such termination; provided, however, that the Shareholder shall not have any
personal liability for such payment (it being understood that the Company
will be solely liable in the event that the Company and/or the Shareholder
are the breaching party).
14. RISK OF LOSS. The Seller shall bear the risk of all damage to, loss of
or destruction of any of the Station Assets between the date of this
Agreement and the Closing Date. If any material portion of the Station
Assets shall suffer any material damage or destruction prior to the Closing
Date, the Seller shall promptly notify the Purchaser in writing of such
damage or destruction, shall promptly take all necessary steps to restore,
repair or replace such assets at its sole expense, and shall advise the
Purchaser in writing of the estimated cost to complete such restoration,
repair or replacement and all amounts actually paid as of the date of the
estimate. The Purchaser or Seller may extend the Closing Date for a period
not exceeding 45 days to accomplish such restoration, repair or replacement,
but is not required to do so. If such restoration, repair or replacement is
not accomplished prior to the Closing Date, as the same may be extended as
provided herein, the Purchaser may, at its option:
(a) terminate this Agreement upon written notice to Seller; or
(b) receive all insurance proceeds paid or payable to Seller close
this Agreement and thereafter complete such restoration, repair or
replacement at its sole expense; provided, however, Seller shall have no
further liabilities with respect to such damage or destruction after payment
to Purchaser of such insurance proceeds.
15. MISCELLANEOUS PROVISIONS.
15.1 EXPENSES. Except as otherwise expressly provided herein, each
party shall pay the fees and expenses incurred by it in connection with the
transactions contemplated by this Agreement. If any action is brought for
breach of this
15
<PAGE>
Agreement or to enforce any provision of this Agreement, the prevailing party
shall be entitled to recover court costs and reasonable attorneys' fees.
15.2 PRORATIONS. All items of income and expense arising from the
operation of the Station with respect to the Station Assets and the Assumed
Contracts on or before the close of business on the Closing Date shall be for
the account of the Seller and thereafter shall be for the account of the
Purchaser. Proration of the items described below between the Seller and the
Purchaser shall be effective as of 11:59 p.m., local time, on such date and
shall occur as follows with respect to those rights, liabilities and
obligations of the Seller transferred to and assumed by the Purchaser
hereunder.
(a) Liability for state and local taxes assessed on the Station
Assets payable with respect to the tax year in which the Closing Date falls
and the annual FCC regulatory fee for the Station payable with respect to the
year in which the Closing Date falls shall each be prorated as between the
Seller and the Purchaser on the basis of the number of days of the tax year
elapsed to and including such date.
(b) Prepaid items, deposits, credits and accruals such as water,
electricity, telephone, other utility and service charges, lease expenses,
license fees (if any) and payments under any contracts to be assumed by the
Purchaser shall be prorated between the Seller and the Purchaser on the basis
of the period of time to which such liabilities, prepaid items and accruals
apply.
All prorations shall be made and paid insofar as feasible on the Closing
Date; any prorations not made on such date shall be made as soon as
practicable (not to exceed 90 days) thereafter. The Seller and the
Purchaser agree to assume, pay and perform all costs, liabilities and
expenses allocated to each of them pursuant to this Section 15.2.
15.3 AMENDMENT. This Agreement may be amended at any time but only by
an instrument in writing signed by the parties hereto (it being understood
that email does not constitute a signed writing).
15.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if mailed by certified mail, return
receipt requested, or by nationally recognized "next-day" delivery service,
to the parties at the addresses set forth below (or at such other address for
a party as shall be specified by like notice), or sent by facsimile to the
number set forth below (or such other number for a party as shall be
specified by proper notice hereunder):
16
<PAGE>
If to the Purchaser:
3102 Oak Lawn, Suite 215
Dallas, Texas 75219
Attn: McHenry T. Tichenor, Jr., President
Fax: (214) 525-7750
If to the Seller or Shareholder:
1455 East Tropicana Avenue, Suite 720
Las Vegas, Nevada 89119
Attn: George E. Tobin, President
Fax:
15.5 ASSIGNMENT. This Agreement may not be assigned by either party
without the prior consent of the other party, which shall not be unreasonably
withheld; provided, however, that Purchaser may assign its rights to one or
more subsidiaries so long as Heftel Broadcasting Corporation remains liable
for the payment of the Break-up Fee and the purchase price hereunder. This
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, heirs and permitted assigns.
15.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.7 HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
15.8 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein contain the entire understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties, conveyances or undertakings other than those expressly set forth
herein. This Agreement supersedes any prior agreements and understandings
between the parties with respect to the subject matter.
15.9 WAIVER. No attempted waiver of compliance with any provision or
condition hereof, or consent pursuant to this Agreement, will be effective
unless evidenced by an instrument in writing by the party against whom the
enforcement of any such waiver or consent is sought.
17
<PAGE>
15.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada. Venue with respect to
any dispute or controversy shall be proper only in Las Vegas, Nevada.
15.11 CERTAIN DEFINITIONS. As used in this Agreement, "affiliates" of
a party shall mean persons or entities that directly, or indirectly through
one or more intermediaries, control or are controlled by, or are under common
control with, such party.
15.12 INTENDED BENEFICIARIES. The rights and obligations contained in
this Agreement are hereby declared by the parties hereto to have been
provided expressly for the exclusive benefit of such entities as set forth
herein and shall not benefit, and do not benefit, any unrelated third parties.
15.13 MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no
provision of this Agreement shall be construed against any party on the
ground that such party drafted the provision or caused it to be drafted or
the provision contains a covenant of such party.
[signatures on following page]
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RADIO VISION, INC.
By: /s/ George E. Tobin
------------------------------------
George E. Tobin
President
/s/ George E. Tobin
---------------------------------------
George E. Tobin, individually
HEFTEL BROADCASTING CORPORATION
By: /s/ McHenry T. Tichenor, Jr.
------------------------------------
McHenry T. Tichenor, Jr.
President
19
<PAGE>
Schedule I
Governmental Licenses
<TABLE>
<S> <C>
1. Main Station License BRH970602E7
2. Auxiliary remote pick-up KP5727
3. Auxiliary STL WLI603
4. KISF-FM call letters
</TABLE>
<PAGE>
Schedule II
Detailed Equipment Listing
KISF (FM) Transmitter Site
Black Mountain
Henderson, Nevada
<TABLE>
<S> <C>
1. Broadcast Electronics FM-30 (model A early driver) #125a shipped 12-88
2. Broadcast Electronics FX-30 FM exciter
3. 2 Marti Electronics R-10 Studio Receivers
4. Moseley MRC-1600 remote control unit
5. 2 Wacom bandpass cavities
6. Marti MTS-1 splitter
7. Coaxial cable to STL dish on roof
8. STL dish on roof
9. Custom bracket for STL dish
10. Moseley Associates TSK-2 temperature sensor
11. RE: America Radio Broadcast Data Service Encoder
12. Orban Associates Optimod 8100-A-XT2 audio processor
13. Modulation Sciences CP803
14. Extra Andrews connector for 3 1/8 inch line
15. Empty boxes for tubes
16. Trak systems 8821 gps clock
17. IBM rackmount PC
18. Skydata 8465 multirate receiver
19. Best Uninteruptible power supply
20. Small rack (has Seiko subcarrier equipment and related items)
Note: Items 16 through 20, included for informational purposes only, are used to
generate the FM subcarrier and are probably not owned by station or seller
21. Extra used tube 4CX300
22. RG-8 type Line out to GPS receiver antenna
23. Shiveley Labs 10 bay antenna (half wave spaced)
24. 2 nitrogen tanks
25. Nitrogen regulator
Note: Items 21 through 25, included for informational purposes only, are
probably not owned by station or seller
<PAGE>
26. 360 feet four inch flexible feedline and 40 feet four inch rigid line to
antenna
27. hangers and hardware for attaching line to tower and cable ladders
28. Chain to hold tanks upright
29. Wall mounted electrical disconnect panel
30. Extra power line fuses
31. Station owned electrical meter
32. Eagle Hill power line protection
KISF(FM) Studios
East Tropicana
Las Vegas, NV
Control Studio
1. Pacific Research and Engineering Airwave console
2. Arrakis Systems cabinets
3. 360 systems instant Replay recorder/playbak device
4. 3 mike (Announcer microphone and two guest mikes)
5. mike stands
6. PC for recording, editing, and playing back phone calls
7. PC for playing commercials & music
8. cassette deck
9. CD players
Commercial Production Studio
11. Pacific Research and Engineering Airwave console
12. Arrakis Systems cabinets
13. 360 systems Instant Replay recorder/playback device
14. 3 mike (Announcer microphone and two guest mikes)
15. mike stands
16. Arrakis furniture
Creative Production Studio
16. small console
17. PC with soundcard and SAW+ software
18. Arrakis furniture
Central Wiring
21. Sage Alerting Emergency Alert Unit
22. 2 Marti Electronics STL-10 studio/transmitter link units
23. Marti Electronics HRC-1 combiner for sti transmitters
24. Flexible, coaxial line to dish on roof
25. STL dish
26. Orban Associates Optimod 810-ST studio chassis
<PAGE>
Equipment associated with Vehicles
1. Transmission equipment located in Station van
a. Marti Electronics RPT- transmitter for remotes
b. Cable for antenna
c. Yagi type antenna
d. Stand-up mast and custom base
e. Miscellaneous microphones, amplifiers, speakers and stands
</TABLE>
<PAGE>
Schedule III
Assumed Contracts
<TABLE>
<S> <C>
1. Lease Agreement dated September 7, 1988, as amended by Extension
and Modification of Lease Agreement, by and between the Seller and
TeleCom Towers, LLC.
2. Agreements dated November 14, 1995 and October 29, 1998 between the
Seller and The Arbitron Company for reports for use by Station (in
each case expiring September 30, 2000).
3. Agreement dated June 3, 1996, by and between the Seller and
Marketron, Inc. (expiring September 1, 1999, subject to automatic
extension)
4. Subcarrier agreement with Seiko Digital Paging (month to month
until December 31, 1999)
</TABLE>
<PAGE>
Schedule IV
Third Party Consents
<TABLE>
<S> <C>
1. Telecom Towers, LLC, as lessor under the Station's transmitter site
lease.
</TABLE>
<PAGE>
Schedule V
During the last license period, questions had been raised by the FCC
concerning electromagnetic fields and radio frequency radiation (RFR) at the
transmitter and the site's compliance with the ANSI standards ("Safety Levels
with respect to Human Exposure to Radio Frequency Electromagnetic Fields, 3
kHz to 300GHz"). As a result, there was a joint study and a joint effort by
the affected licensees at the transmitter site to resolve the issue to the
FCC's satisfaction.
It is Seller's belief that the matter was resolved to the FCC's
satisfaction by the relocation of one transmitter to a different site and the
placing of warning signs concerning certain restricted areas.
<PAGE>
EXHIBIT A
UNWIND AGREEMENT
The Unwind Agreement ("Agreement") is entered as of [closing date], by and
among Radio Vision, Inc., a Nevada corporation ("Seller"), HBC Las Vegas,
Inc., a Delaware corporation ("Asset Buyer") and HBC License Corp., a
Delaware corporation ("License Buyer"), which hereby agree as follows:
1. RECITALS.
(a) Heftel Broadcasting Corporation ("Heftel") and Seller entered into
an Asset Purchase Agreement ("Purchase Agreement") dated as of March 1, 1999,
providing for the sale and assignment to Asset Buyer, subject to approval by
the Federal Communications Commission (the "Commission"), of assets (the
"Station Assets") relating to Seller's radio station KISF-FM (the "Station"),
including the licenses issued by the Commission (the "Licenses")for the
operation of the Station. Heftel has assigned its rights under the Purchase
Agreement (i) to purchase the Licenses to License Buyer and (ii) to purchase
the remaining Station Assets to Asset Buyer. All capitalized terms not
otherwise defined herein shall have the meaning given to them in the Purchase
Agreement.
(b) The Commission has issued an order consenting (the "FCC Order") to
the assignment of the Licenses to License Buyer, but the FCC Order has not
yet become final and is still subject to Commission reconsideration and
judicial review; and
(c) Seller, Asset Buyer and License Buyer believe to to be desirable and
in the public interest that the transactions provided for in the Purchase
Agreement be consummated promptly; provided, however, that subject to
Commission approval, Seller, Asset Buyer and License Buyer desire to make
provision for the retransfer to Seller (or its assignees or designees) of the
Licenses and other Station Assets.
(d) In order to protect the interests of Seller, Asset Buyer and License
Buyer in the event a retransfer is necessary, the parties to this Agreement
have agreed upon the terms under which each shall act until the FCC Order
becomes a Final Order or in the event that a retransfer of the Licenses or
the other Station Assets is necessary.
2. CLOSING OF PURCHASE AGREEMENT. Seller, Asset Buyer and License Buyer
agree that:
(a) The Closing under the Purchase Agreement shall occur and be
effective as of the date hereof ("Closing Date"), and the purchase by Asset
Buyer and License Buyer of the Station Assets (the "Purchase") for the
Station shall be subject to revocation or rescission (a "Rescission Event")
if the FCC Order is set aside and there is a final and unappealable order of
the Commission returning, or requiring the
<PAGE>
reassignment of, the Licenses to Seller or otherwise materially and adversely
affecting Asset Buyer's and License Buyer's right to broadcast on the Station,
or own the Licenses.
(b) To the extent any of the actions contained herein are inconsistent
with any statute, law or any Commission rule or regulation, the parties agree
to conform this Agreement to the Commission's requirements.
3. FCC DENIAL AND RESCISSION OF TRANSACTION.
(a) If a Rescission Event occurs, it is the intent of Seller, Asset
Buyer and License Buyer that the sale of the Station Assets consummated at
Closing pursuant to the Purchase Agreement shall be rescinded in a manner
that shall, as nearly as practicable in the circumstances, restore to the
respective parties the respective rights, titles and interests enjoyed by
each of them immediately prior to Closing in and to the cash, properties,
rights and interests which were transferred at Closing. Accordingly, upon the
occurrence of Rescission Event, the Seller, Asset Buyer and License Buyer
agree promptly and in good faith to extend such cooperation, execute such
instruments, and generally take such action as may be needed to formulate and
implement a rescission of the transaction and reassignment of rights and
obligations which effectively carries out the intent of Seller, Asset Buyer
and License Buyer as hereinabove expressed, including without limitation,
submitting to the Commission the requisite applications for consent to the
assignment of the Station Assets from Asset Buyer and License Buyer to Seller
(the "Unwind Application") within seven business days after the event or
deadline requiring the unwinding of the transactions contemplated by the
Purchase Agreement. The unwind closing shall occur within 15 days after the
Commission public notice is issued that the Commission (whether by delegated
authority or at the Commission level) has given its initial consent to the
Unwind Application.
(b) In the event a rescission is necessary, it is agreed that Asset
Buyer and License Buyer shall retain for their own account any profit (and
shall be fully responsible for any loss) relating to the operations of the
Station during the period from the Closing Date to 12:01 AM on the effective
date of rescission. It is further agreed that Asset Buyer and License Buyer
shall be responsible for all accounts payable, expenses and other obligations
through 12:01 AM on the effective date of rescission attributable to the
operation of the Station during the period from the Closing Date to 12:01 AM
on the effective date of rescission.
4. REPAYMENT OF PURCHASE PRICE. In connection with any rescission of
the Purchase after a Rescission Event, Seller agrees to pay to Asset Buyer
and License Buyer at the unwind closing the purchase price delivered to
Seller for the Station (the "Reimbursement"). Asset Buyer and License Buyer
agree that upon receipt of the
2
<PAGE>
Reimbursement to return the Station Assets to the Seller in substantially the
same condition as such Station Assets exist on the date hereof, ordinary wear
and tear excepted.
5. INDEMNIFICATION. Seller agrees to indemnify, defend and hold
harmless Asset Buyer and License Buyer and its officers, directors,
successors, assigns and representatives from and against any and all
demands, losses, damages (excluding any and all special, consequential or
incidental damages), fines, penalties, causes of action, claims, liabilities,
obligations, judgments, costs or expenses (including, without limitation,
attorneys' fees and court costs) (hereinafter all of the foregoing being
referred to collectively or individually as "Claim"), claimed against,
incurred, suffered or sustained by it, him or them, or any of them, arising
out of, caused by, incident to or in any manner connected with the rescission
of the Purchase, unless such Claim is caused in whole or in part by the gross
negligence or willful misconduct of Asset Buyer and License Buyer. Asset
Buyer and License Buyer agree to indemnify the Seller for any Claim arising
out of a breach by Asset Buyer and License Buyer of this Agreement and for
any Claim arising out of the operations of the Station Assets by Asset Buyer
and License Buyer after the Closing Date through the date of the unwind
closing, unless such Claim is caused in whole or in part by the gross
negligence or willful misconduct of Seller.
6. COVENANTS OF ASSET BUYER AND LICENSE BUYER. From and after the date
hereof and up to the date the FCC Order becomes a Final Order or such later
date for retransfer of the Licenses and other Station Assets as contemplated
in Section 3 and 4 hereof, and except as specifically agreed to in writing by
Seller, Asset Buyer and License Buyer covenant and agree that, with respect
to the Station and the Station Assets, License Buyer shall not, by any act or
omission within its control, surrender, modify, forfeit or fail to maintain
or renew under regular terms the Licenses, cause the Commission to institute
any proceeding for the revocation, suspension or modification of any such
License, or fail to prosecute with due diligence any pending applications
with respect to the Licenses.
7. NOTICES. All notices, demands and requests required or permitted to
be given under the provisions of this Unwind Agreement shall be in the manner
set forth in the Purchase Agreement.
8. EFFECT OF AGREEMENT. This Agreement shall be binding on, inure to
the benefit of and be enforceable by Asset Buyer, License Buyer and Seller
and their respective heirs, successors and assigns.
9. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
3
<PAGE>
10. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada.
11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12. ENTIRE AGREEMENT. Except as expressly set forth herein, the terms
of the Asset Purchase Agreement shall not be amended or modified in any
respect. Except for the Asset Purchase Agreement and the agreements referenced
therein, this Agreement contains all the terms and conditions agreed upon by
the parties hereto with respect to the transaction contemplated hereby, and
shall not be amended or modified except by written instrument signed by all
of the parties.
13. ASSIGNMENT. Any assignment of the rights and duties under this
Agreement by Asset Buyer and License Buyer, on the one hand, or Seller, on
the other, may be made only with the prior written approval of the other
party.
14. ATTORNEYS' FEES. If any action is brought for breach of this
Agreement or to enforce any provision of this Agreement, the prevailing
party shall be entitled to recover court costs, arbitration expenses and
reasonable attorneys' fees.
[signatures on following page]
4
<PAGE>
IN WITNESS WHEREOF, this Unwind Agreement is executed on the day and year
first written above.
RADIO VISION, INC.
By:
---------------------------------
HBC LAS VEGAS, INC.
By:
---------------------------------
HBC LICENSE CORP.
By:
---------------------------------
5
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
(In Thousands, Except Per-Share Data)
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended September 30,
-------------------------- December 31 -----------------------------------
1998 1997 1996 1996 1995 1994
------------ ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) from continuing
operations $ 26,884 $ 18,772 $ 2,064 $ (29,157) $ 4,319 $ 2,489
Preferred stock dividends - - - 23 27 184
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to
common stockholders $ 26,884 18,772 $ 2,064 $ (29,180) $ 4,292 $ 2,305
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
BASIC EARNINGS PER SHARE:
Continuing operations $ 0.55 $ 0.45 $ 0.09 $ (1.41) $ 0.21 $ 0.25
Discontinued operations - - - (0.49) (0.03) (0.03)
Extraordinary loss - - - (0.36) - (0.19)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) per share $ 0.55 $ 0.45 $ 0.09 $ (2.26) $ 0.18 $ 0.03
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
DILUTED EARNINGS PER SHARE:
Continuing operations $ 0.54 0.45 $ 0.09 $ (1.41) $ 0.20 $ 0.22
Discontinued operations - - - (0.49) (0.03) (0.03)
Extraordinary loss - - - (0.36) - (0.16)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) per share $ 0.54 0.45 $ 0.09 $ (2.26) $ 0.17 $ 0.03
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
NUMBER OF SHARES ON WHICH NET INCOME
(LOSS) PER SHARE IS BASED:
Weighted average common shares
before dilutive effect of
common stock equivalents 49,021 41,671 23,095 20,590 20,021 9,137
Common stock equivalents:
Stock options 318 120 - - 1,590 1,632
Employee Stock Purchase Plan 9 - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Weighted average common shares 49,348 41,791 23,095 20,590 21,611 10,769
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
HBC Broadcasting Texas, Inc.
HBC Chicago, Inc.
HBC Florida, Inc.
HBC Houston License Corporation
HBC Houston, Inc.
HBC Las Vegas, Inc.
HBC License Corporation
HBC Network, Inc.
HBC New York, Inc.
HBC Phoenix, Inc.
HBC San Diego, Inc.
HBC Texas, Inc.
Heftel GP Texas, Inc.
Heftel Broadcasting Texas, L.P.
KCYT-FM License Corp.
KECS-FM License Corp.
KESS-AM License Corp.
KESS-TV License Corp.
KHCK-FM License Corp.
KICI-AM License Corp.
KICI-FM License Corp.
KLSQ-AM License Corp.
KLVE-FM License Corp.
KMRT-AM License Corp.
KTNQ/KLVE, Inc.
KTNQ-AM License Corp.
La Oferta, Inc.
License Corp. No. 1
License Corp. No. 2
MiCasa Publications, Inc.
Momentum Research, Inc.
Spanish Coast to Coast, Ltd.
T C Television, Inc.
The Tower Company, Inc.
Tichenor License Corp.
Tichenor Media System, Inc.
TMS Assets California, Inc.
TMS License California, Inc.
WADO Radio, Inc.
WADO-AM License Corp.
WGLI-AM License Corp.
WLXX-AM License Corp.
WPAT-AM License Corp.
WQBA-AM License Corp.
WQBA-FM License Corp.
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Heftel Broadcasting Corporation
We consent to incorporation by reference in the Registration Statements on
Form S-3 (No. 333-42171) and Form S-8 (Nos. 333-43483 and 333-43495) of
Heftel Broadcasting Corporation of our report dated February 15, 1999,
relating to the consolidated balance sheets of Heftel Broadcasting
Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended, and the related financial statement schedule,
which report appears in the December 31, 1998 Annual Report on Form 10-K of
Heftel Broadcasting Corporation.
/s/ KPMG LLP
Dallas, Texas
March 30, 1999
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-43483) pertaining to the Amended and Restated 1997 Employee
Stock Purchase Plan of Heftel Broadcasting Corporation and the Registration
Statement (Form S-8 No. 333-43495) pertaining to the Heftel Broadcasting
Corporation Long-Term Incentive Plan, of our report dated July 2, 1997, with
respect to the consolidated financial statements and schedule of Heftel
Broadcasting Corporation included in this Annual Report (Form 10-K) for the
year ended December 31, 1998.
/s/ Ernst & Young LLP
Los Angeles, California
March 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,293
<SECURITIES> 0
<RECEIVABLES> 36,610
<ALLOWANCES> 2,301
<INVENTORY> 0
<CURRENT-ASSETS> 45,059
<PP&E> 49,638
<DEPRECIATION> 15,830
<TOTAL-ASSETS> 746,689
<CURRENT-LIABILITIES> 27,891
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 622,571
<TOTAL-LIABILITY-AND-EQUITY> 746,689
<SALES> 0
<TOTAL-REVENUES> 164,122
<CGS> 0
<TOTAL-COSTS> 122,384
<OTHER-EXPENSES> (4,932)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,046
<INCOME-PRETAX> 44,624
<INCOME-TAX> 17,740
<INCOME-CONTINUING> 26,884
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,884
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.54
</TABLE>
