<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, 1999, 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
HISPANIC 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 13, 2000, the aggregate market price of the Class A Common Stock
held by non-affiliates of the Company was approximately $2,787.8 million.
(For purposes hereof, directors, executive officers and 10% or greater
shareholders have been deemed affiliates).
On March 13, 2000, there were 40,251,462 outstanding shares of Class A Common
Stock, $.001 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2000 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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HISPANIC 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.......................................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders........................................ 17
PART II.
Item 5. Market for Registrant's Class A Common Stock and Related Stockholder Matters............... 18
Item 6. Selected Financial Data.................................................................... 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................ 20
Item 7a. Quantitative and Qualitative Disclosures About Market Risk ................................ 25
Item 8. Financial Statements and Supplementary Data ............................................... 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................................................ 45
PART III.
Item 10. Directors and Executive Officers of the Registrant......................................... 46
Item 11. Executive Compensation..................................................................... 46
Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 46
Item 13. Certain Relationships and Related Transactions............................................. 46
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................... 47
</TABLE>
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PART I.
ITEM 1. BUSINESS
GENERAL
Hispanic Broadcasting Corporation (the "Company") is the largest
Spanish-language radio broadcasting company in the United States and
currently owns and programs 45 radio stations in 13 markets. Our stations are
located in 12 of the 15 largest Hispanic markets in the United States,
including Los Angeles, New York, Miami, San Francisco/San Jose, Chicago,
Houston, San Antonio, Dallas/Fort Worth, McAllen/Brownsville/Harlingen, San
Diego, Phoenix and El Paso. In addition, we also operate the HBC Radio
Network, which is one of the largest Spanish-language radio broadcast
networks in the United States in terms of audience delivery.
Our strategy is to own and program top performing Spanish-language
radio stations, principally in the 15 largest Spanish-language radio markets
in the United States. Based on the results of the Fall Arbitron Ratings Book,
we operated the leading Spanish-language radio station in the adult 25-54 age
group, as measured by audience share, in 10 of the 13 markets where we
operated during the fall rating period. Our current strategy is to acquire or
develop additional Spanish-language radio stations in the leading Hispanic
markets.
We frequently evaluate strategic opportunities, both within and
outside our existing line of business, that closely relate to serving the
Hispanic market, including opportunities outside of the United States. We
expect to pursue additional acquisitions from time to time and may decide to
dispose of certain businesses. Such acquisitions or dispositions could be
material.
The following table sets forth certain information regarding the
radio stations that we owned and programmed as of December 31, 1999:
<TABLE>
<CAPTION>
No. of Stations
Ranking of Market by -----------------
Hispanic Population (a) Market AM FM
- ----------------------- ----------------------------- ------ ------
<S> <C> <C> <C>
1 Los Angeles 1 2(b)
2 New York 1 1
3 Miami 2 2
4 San Francisco/San Jose 0 2
5 Chicago 2 1
6 Houston 2 5(c)
7 San Antonio 2 2
8 Dallas/Fort Worth 2 5
9 McAllen/Brownsville/Harlingen 1 2
10 San Diego 0 2
11 Phoenix 0 1(c)
13 El Paso 2 1
26 Las Vegas 1 1
------ ------
Total 16 27
====== ======
</TABLE>
(a) 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 - 2000 U.S. HISPANIC MARKET STUDY.
(b) This table does not include the acquisition of radio stations KRCD(FM) and
KRCV(FM) (formerly KACE(FM) and KRTO(FM)) since they were acquired
subsequent to December 31, 1999.
(c) Does not reflect our agreement to exchange the assets of KRTX(FM), serving
Houston, for the assets of KLNZ(FM), owned by Z-Spanish Media Corporation
serving Phoenix, pursuant to our agreement with Z-Spanish, which is now in
arbitration.
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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 27.3 million
(approximately 10.4% of the total United States population) at the end of
1995 to an estimated 31.4 million (approximately 11.4% 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
69.8%, or approximately 23.7 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 27.3% in 2000. 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 52.2% 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 $952.8 million in
1994 to an estimated $1.9 billion in 1999. This represents a compound
annual growth rate of approximately 14.7%, 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.
The Company's board of directors and stockholders recently approved
an amendment to the Company's certificate of incorporation to change the name
of the Company from "Heftel Broadcasting Corporation" to "Hispanic
Broadcasting Corporation." The ticker symbol for the Company's Class A Common
Stock remained "HBCCA" following the name change. Furthermore, the change in
the Company's name did not affect the validity or transferability or its
outstanding securities or affect its capital or corporate structure and its
stockholders were not required to exchange any certificates representing any
of its securities held by them.
RECENT DEVELOPMENTS
On March 4, 2000, the Company entered into an agreement with Clear
Channel Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc., AMFM
Radio Licenses LLC, AMFM Ohio, Inc. and AMFM Houston, Inc. to purchase for
approximately $127.0 million, the assets of KXPK(FM), KKFR(FM) and KEYI(FM),
serving the Denver, Phoenix and Austin markets, respectively. The Company
plans to spend approximately $4.0 million for new studios and other costs to
operate these new radio stations. The closing of this asset acquisition is
expected to occur during the third quarter of 2000. Immediately after
closing, the programming of KXPK(FM) and KEYI(FM) will be converted to a
Spanish-language format. The present audience of KKFR(FM) includes a large
proportion of Hispanics and the programming will continue in its present
format after closing. The closing of this transaction is subject to numerous
conditions and approvals, including receipt of regulatory approvals under the
federal communication laws, review by federal antitrust authorities, and
completion of Clear Channel's merger with AMFM Inc.
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KRCD(FM) AND KRCV(FM) ACQUISITION. On October 15, 1999, the Company
entered into an asset purchase agreement with Cox Radio, Inc. to acquire for
$75.0 million the assets of KRCD(FM) and KRCV(FM) (formerly KACE(FM) and
KRTO(FM)), serving the Los Angeles market (the "Los Angeles Acquisition").
The Los Angeles Acquisition closed on January 31, 2000. The stations'
programming was converted to a single Spanish-language format in February
2000.
KLNO(FM) ACQUISITION. On July 6, 1999, the Company entered into an
agreement to acquire from SBT Communications Statutory Trust for $65.0
million, the FCC licenses and transmission equipment of a radio station
broadcasting at 94.1 MHz (KLNO(FM)), serving the Dallas/Fort Worth market
(the "Dallas Acquisition"). The Dallas Acquisition closed September 24, 1999.
With the Dallas Acquisition, the Company assumed a time brokerage agreement
whereby an unaffiliated party provided the programming to the radio station
broadcasting at 94.1 MHz until January 31, 2000. Immediately after the time
brokerage agreement terminated, the station's programming was converted to a
Spanish-language format.
KSCA(FM) ACQUISITION. On January 2, 1997, the Company acquired an
option to purchase all of the assets used in connection with the operation of
KSCA(FM), a radio station serving the Los Angeles market (the "KSCA Option").
In connection with the acquisition of the KSCA Option, the Company began
providing Spanish-language programming to KSCA(FM) under a time brokerage
agreement on February 5, 1997. The Company exercised the KSCA Option and on
September 17, 1999, the Company acquired the assets of KSCA(FM) for $118.1
million. The Company had previously paid $13.0 million to acquire and renew
the option to purchase the assets of KSCA(FM) and such payments were
subtracted from the purchase price at closing.
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 (the "Las Vegas
Acquisition") for $20.3 million. The Las Vegas Acquisition closed on April
30, 1999. Immediately after closing, the station's programming was converted
to a Spanish-language format.
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 (the "Phoenix Acquisition") for $18.3 million. The Phoenix
Acquisition closed on April 5, 1999. Immediately after closing, the station's
programming was converted to a Spanish-language format.
SALES OF CLASS A COMMON STOCK
On November 24, 1999, the Company completed the issuance and sale of
3,051,290 shares of Class A Common Stock in an underwritten public offering
for a total of $248.7 million in proceeds. The proceeds from the offering
were used to repay borrowings under the Company's credit facility and will be
used to finance future or pending acquisitions or other transactions,
advances or investments and for general corporate purposes.
On June 7, 1999, the Company completed the issuance and sale of
2,000,000 shares of Class A Common Stock in an underwritten public offering
for a total of $119.9 million in proceeds. The proceeds from the offering
were used to acquire the assets of radio stations.
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 Spanish-language
music and on-air programming at an individual station can attract a wide
audience targeted by advertisers. Programming is continuously
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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 selects 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:
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.
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, 1999:
<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
KSCA(FM) Regional Mexican A 25-54
KTNQ(AM) News/Talk 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 A 35+
</TABLE>
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<TABLE>
<CAPTION>
RANKING
OF
MARKET BY PRIMARY
HISPANIC DEMOGRAPHIC
POPULATION MARKET(1) STATION STATION FORMAT(2) MARKET
- ---------- -------------------------------- -------- ----------------- -----------
<S> <C> <C> <C> <C>
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
KRTX(FM) Contemporary A 18-34
KLAT(AM) News/Talk A 25-54
KRTX(AM) Contemporary A 18-34
7 San Antonio KXTN(FM) Tejano A 25-54
KROM(FM) Regional Mexican A 25-54
KXTN(AM) Tejano A 25-54
KCOR(AM) Regional Mexican A 35+
8 Dallas/Fort Worth KLNO(FM) Contemporary A 18-49
KHCK(FM) Tejano A 18-49
KDXT(FM) Contemporary A 18-49
KDXX(FM) Contemporary A 18-49
KDOS(FM) Contemporary A 18-49
KESS(AM) Full Service A 18+
KDXX(AM) Contemporary A 18-49
9 McAllen/Brownsville/Harlingen KGBT(FM) Regional Mexican A 25-54
KIWW(FM) Tejano A 25-54
KGBT(AM) Regional Mexican A 25-54
10 San Diego KLQV(FM) Contemporary A 25-54
KLNV(FM) Regional Mexican A 18-49
11 Phoenix KHOT(FM) Regional Mexican A 25-54
13 El Paso KBNA(FM) Regional Mexican A 25-54
KBNA(AM) Regional Mexican A 25-54
KAMA(AM) Tejano A 25-54
26 Las Vegas KISF(FM) Regional Mexican A 18-49
KLSQ(AM) Regional Mexican A 18-49
</TABLE>
(1) Actual city of license may differ from the metropolitan market served.
(2) See "--Spanish-Language Radio Industry."
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The following table sets forth selected information with regard to Company
owned radio stations:
<TABLE>
<CAPTION>
DATE LICENSE BROADCAST
STATION/MARKET ACQUIRED EXPIRATION DATE FREQUENCY
- ------------------------------------------------- -------- --------------- ---------
<S> <C> <C> <C>
KLVE(FM), Los Angeles, CA 10/85 12/01/05 107.5 MHz
KSCA(FM), Los Angeles, CA 09/99 12/01/05 101.9 MHz
KTNQ(AM), Los Angeles, CA 10/85 12/01/05 1020 kHz
WCAA(FM), New York, NY 05/98 06/01/98 (1) 105.9 MHz
WADO(AM), New York, NY 08/94 06/01/06 1280 kHz
WAMR(FM), Miami, FL 08/94 02/01/03 107.5 MHz
WRTO(FM), Miami, FL 10/89 02/01/03 98.3 MHz
WAQI(AM), Miami, FL 10/89 02/01/03 710 kHz
WQBA(AM), Miami, FL 08/94 02/01/03 1140 kHz
KSOL(FM), San Francisco/San Jose, CA 02/97 12/01/05 98.9 MHz
KZOL(FM), San Francisco/San Jose, CA 02/97 12/01/05 99.1 MHz
WOJO(FM), Chicago, IL 02/97 12/01/04 105.1 MHz
WIND(AM), Chicago, IL 02/97 12/01/04 560 kHz
WLXX(AM), Chicago, IL 07/95 12/01/04 1200 kHz
KLTN(FM), Houston, TX 05/98 08/01/05 102.9 MHz
KOVE(FM), Houston, TX 02/97 08/01/05 93.3 MHz
KOVA(FM), Houston, TX 02/97 08/01/05 104.9 MHz
KLTO(FM), Houston, TX 02/97 08/01/05 104.9 MHz
KRTX(FM), Houston, TX 02/97 08/01/05 100.7 MHz
KLAT(AM), Houston, TX 02/97 08/01/05 1010 kHz
KRTX(AM), Houston, TX 02/97 08/01/05 980 kHz
KXTN(FM), San Antonio, TX 02/97 08/01/05 107.5 MHz
KROM(FM), San Antonio, TX 02/97 08/01/05 92.9 MHz
KXTN(AM), San Antonio, TX 02/97 08/01/05 1310 kHz
KCOR(AM), San Antonio, TX 02/97 08/01/05 1350 kHz
KLNO(FM), Dallas/Ft. Worth, TX 09/99 08/01/05 94.1 MHz
KHCK(FM), Dallas/Ft. Worth, TX 07/95 08/01/05 99.1 MHz
KDXT(FM), Dallas/Ft. Worth, TX 06/95 08/01/05 106.7 MHz
KDXX(FM), Dallas/Ft. Worth, TX 04/95 08/01/05 107.9 MHz
KDOS(FM), Dallas/Ft. Worth, TX 08/94 (2) 107.9 MHz
KESS(AM), Dallas/Ft. Worth, TX 08/94 08/01/05 1270 kHz
KDXX(AM), Dallas/Ft. Worth, TX 12/94 08/01/05 1480 kHz
KGBT(FM), McAllen/Brownsville/Harlingen, TX 02/97 08/01/05 98.5 MHz
KIWW(FM), McAllen/Brownsville/Harlingen, TX 02/97 08/01/05 96.1 MHz
KGBT(AM), McAllen/Brownsville/Harlingen, TX 02/97 08/01/05 1530 kHz
KLQV(FM), San Diego, CA 08/98 12/01/05 102.9 MHz
KLNV(FM), San Diego, CA 08/98 12/01/05 106.5 MHz
KHOT(FM), Phoenix, AZ 04/99 12/01/05 105.9 MHz
KBNA(FM), El Paso, TX 02/97 08/01/05 97.5 MHz
KBNA(AM), El Paso, TX 02/97 08/01/05 920 kHz
</TABLE>
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<TABLE>
<CAPTION>
DATE LICENSE BROADCAST
STATION/MARKET ACQUIRED EXPIRATION DATE FREQUENCY
- ------------------------------------------------- -------- --------------- ---------
<S> <C> <C> <C>
KAMA(AM), El Paso, TX 02/97 08/01/05 750 kHz
KISF(FM), Las Vegas, NV 04/99 10/01/05 103.5 MHz
KLSQ(AM), Las Vegas, NV 08/95 10/01/97 (1) 870 kHz
</TABLE>
(1) An application for license renewal is currently pending with the Federal
Communications Commission ("FCC"). Regulations permit continuing operation
of the station during the period the renewal application is pending.
(2) KDOS(FM) has been constructed and a license application (currently pending)
was timely filed with the FCC on April 19, 1999.
Statistical information contained herein regarding the radio
industry, population, consumer spending and advertising expenditures are
taken from the 1997 U.S. Census, Strategy Research Corporation--2000 U.S.
HISPANIC MARKET STUDY, and Hispanic Business Magazine (December 1994 and
2000). The Company's station rankings were based upon the Arbitron Adults
18-34 and 25-54 category 1999 Fall Book.
COMPETITION
Radio 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 revenues 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 Federal Trade Commission ("FTC"),
and the Antitrust Division of the Department of Justice (the "Antitrust
Division"). Although the Company believes that each of its stations does 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, 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.
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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 changed both the broadcast
ownership rules and the process for renewal of broadcast station licenses.
The 1996 Act also relaxed local radio ownership restrictions. The FCC has
already implemented some of these changes through Commission Orders. The 1996
Act established 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 liberalized 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 a LMA is
required, under certain circumstances, to count that station toward its
maximum even though it does not own the station.
A number of cross-ownership rules pertain to licensees of television
and radio stations. The federal communications laws limit the number of radio
stations a company may own or control in markets where the company also owns
or controls one or more television stations. Following recent revisions to
these rules, the FCC currently permits a company to own or control more than
one radio station in a market in which the company also owns or controls one
or more television stations, depending on the number of independent voices
existing in the market. The FCC has initiated a proceeding and sought public
comment on whether it should relax its policy of granting waivers of the
radio/newspaper cross-ownership restriction.
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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. In August 1999, the FCC announced the results of
its first biennial review of its broadcast ownership rules (see discussion
below). The Company cannot predict the impact of future announcements in the
biennial review process or any other agency or legislative initiatives upon
the FCC's broadcast rules.
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), are generally 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 twenty percent of such outstanding
voting stock without the interest being considered "attributable". In
addition to the foregoing limitations, under the FCC's new "equity/debt plus"
standard, if an investor's interest in a licensee corporation exceeds
thirty-three percent of the aggregated debt and equity of the company (i.e.,
the "total asset value" of the company), the investor's interest is
considered attributable if the investor is also either a major program
supplier to the licensee or a same-market media entity. 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 where
there is a single majority stockholder, are generally not considered
attributable interests. The FCC has eliminated its "cross-interest" policy
which formerly precluded an individual or entity from having a "meaningful"
(even though not attributable) interest in one media property and an
attributable interest in certain other media properties in the same area.
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.
11
<PAGE>
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 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 acquiror
already owns one or more radio station properties in a particular market and
seeks to acquire another radio station in the same market. The Antitrust
Division has, in some cases, obtained consent decrees requiring radio station
divestitures in a particular market based on allegations that acquisitions
would lead to unacceptable concentration levels. 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 already has
a significant position.
The FCC has been more aggressive in independently examining issues
of market concentration when considering radio station acquisitions. The FCC
has delayed its approval of several pending radio station purchases by
various parties because of market concentration concerns. Moreover, in recent
months the FCC has followed an informal policy of giving specific public
notice of its intention to conduct additional ownership concentration
analysis and soliciting public comment on the issue of concentration and its
effect on competition and diversity with respect to certain applications for
consent to radio station acquisitions.
12
<PAGE>
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
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, require 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 43.4% of the Company's broadcast cash flow for
the year ended December 31, 1999. In addition, in January 2000 the Company
acquired two additional radio stations in Los Angeles. 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
13
<PAGE>
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.
As of March 13, 2000, McHenry T. Tichenor, Jr., the Company's
Chairman, President and Chief Executive Officer, and certain members of his
family held voting control over approximately 17.1% of the shares of the
Company's Class A Common Stock. Since these shares are subject to a voting
agreement, the Tichenor family can exert significant influence over the
election of the Company's board of directors and other management decisions.
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 acquiror 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.
RELATIONSHIP BETWEEN THE COMPANY AND CLEAR CHANNEL.
As of March 13, 2000, Clear Channel owned no shares of Class A
Common Stock and thus is not entitled to vote in the election of the
Company's directors. However, Clear Channel does own all of the outstanding
shares of the Company's Class B Common Stock, which accounts for
approximately a 26.0% 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 multiple ownership rules, which limit the number of radio stations
that a company may own or have an attributable interest in, in a single
market, Clear Channel may not presently convert its shares of Class B Common
Stock into shares of Class A Common Stock if such conversion would create an
attributable interest without first obtaining the consent of the FCC. 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.
Clear Channel owns a significant percentage of the Company's Common
Stock. Any direct or indirect sales of the Company's stock by Clear Channel
could have a material adverse effect on the Company's stock price and could
impair the Company's ability to raise money in the equity markets.
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, 1999, Clear
Channel owned, programmed or sold airtime for 507 radio stations in 123
domestic markets, as well as radio stations in a number of foreign countries.
Clear
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<PAGE>
Channel also owned or programmed 24 television stations and was one of the
world's largest 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 additional
equity securities, or the payment of dividends by the Company. For instance,
Clear Channel currently owns a 40% equity interest in Grupo Acir
Communicaciones, S.A. de C.V., one of the largest radio broadcasters in
Mexico. In addition, following its pending merger with AMFM Inc., as
described below, Clear Channel will own a non-voting equity interest in
Z-Spanish Media Corporation, the fourth largest Spanish-language radio
operator in the United States.
Except as discussed below in connection with Clear Channel's pending
merger with AMFM, Clear Channel has advised the Company that it does not
currently intend to directly engage in the Spanish-language radio
broadcasting business in the United States, other than through its ownership
of shares in the Company. However, circumstances could arise that would cause
Clear Channel to directly or indirectly engage in the domestic
Spanish-language radio broadcasting business. For example, opportunities
could arise which require greater financial resources than those available to
the Company or which are located in areas in which the Company does not
intend to operate. Thus, although Clear Channel has indicated that it has no
current intention to directly engage in the domestic Spanish-language
broadcasting business, the Company cannot guarantee that Clear Channel will
not do so in the future. In addition, Clear Channel may from time to time
acquire domestic Spanish-language radio broadcasting companies or an interest
in such companies, individually or as part of a larger group, and thereafter
directly or indirectly engage in the domestic Spanish-language radio
broadcasting business. For instance, Clear Channel has entered into an
agreement to engage in a merger with AMFM, after which AMFM would be a
wholly-owned subsidiary of Clear Channel. AMFM currently owns a non-voting
equity position in Z-Spanish, and, thus, Clear Channel will indirectly own
such equity interest in Z-Spanish following the AMFM merger. Also, AMFM owns
and operates stations which broadcast in a Spanish-language format. Such
acquisitions and equity positions could cause Clear Channel to directly or
indirectly compete with the Company's business in the future, which could
adversely affect the Company. 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.
RISK POSED BY ACQUISITION STRATEGY
The Company intends to grow through the acquisition of radio
stations and other assets it believes will complement its existing portfolio.
The Company's acquisition strategy involves numerous risks, including the
risk that certain acquisitions may prove unprofitable and fail to generate
anticipated cash flows; the risk that successful management of a portfolio of
radio broadcasting properties may require the Company to recruit additional
senior management and expand corporate infrastructure; the risk that the
Company may encounter difficulties in the integration of operations and
systems; the risk that management's attention may be diverted from other
business concerns; and the risk that the Company may lose key employees of
acquired companies or stations.
The Company continues to explore international opportunities. If the
Company makes one or more international acquisitions, it will face new risks
that it does not face in the United States, such as foreign currency risks,
foreign ownership restrictions, foreign taxation, restrictions on withdrawal
of foreign investments and earnings, possible expropriation and other risks.
The Company will face stiff competition from other companies for
acquisition opportunities. If the prices sought by sellers of existing radio
stations continue to rise, the Company may find fewer acceptable
15
<PAGE>
acquisition opportunities. In addition, the purchase price of possible
acquisitions could require additional debt or equity financing. The Company
can give no assurance that either it will obtain the needed financing or that
it will obtain such financing on attractive terms. Additional indebtedness
could increase the Company's leverage and make it more vulnerable to economic
downturns and may limit the Company's ability to withstand competitive
pressures. Additional equity financing or the issuance of the Company's
shares in connection with an acquisition would dilute the ownership interest
of the Company's stockholders. The Company may not have sufficient capital
resources to complete acquisitions.
Part of the Company's strategy is to acquire radio stations with an
English-language format and convert these stations to a Spanish-language
format. This conversion process is currently under way in Los Angeles, New
York, San Diego, Dallas, Phoenix and Las Vegas. In addition, the Company plans
to convert two of the stations acquired from Clear Channel and AMFM in Austin
and Denver into Spanish-language formats. This conversion strategy requires a
heavy initial investment of both financial and management resources. Start-up
stations typically incur losses for a period of time after a format change
because of the time required to build up ratings and station loyalty. The
Company can give no assurance that this strategy will be successful in any
given market, notwithstanding that the Company may incur substantial costs and
losses in implementing this part of its strategy.
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 February 25, 2000, the Company employed 828 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.
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.
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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 fifteen years. The Company either owns or leases its
transmitter and antenna sites. These leases generally have expiration dates
that range from one to seventeen 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 1999. 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, 1999, the Company owns
or programs 43 radio stations in 13 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, 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
YEAR ENDED DECEMBER 31, 1999
First Quarter ............................... $ 48.88 $ 41.25
Second Quarter .............................. 75.88 43.25
Third Quarter ............................... 87.47 66.50
Fourth Quarter .............................. 97.50 76.94
</TABLE>
As of December 31, 1999, there were approximately 140 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 its credit agreement.
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ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data
for Hispanic Broadcasting Corporation and its subsidiaries for the years
ended December 31, 1999, 1998 and 1997, the three months ended December 31,
1996, and the years ended September 30, 1996 and 1995 (in thousands, except
per share data):
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, December 31, Year Ended September 30,
-------------------------------------- ------------ ------------------------
1999 1998 1997 1996 1996 1995
---------- --------- --------- ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues $ 197,920 $ 164,122 $ 136,584 $ 18,309 $ 71,732 $ 64,160
Operating expenses 106,288 95,784 82,065 11,207 48,896 43,643
Depreciation and amortization 28,492 21,149 14,928 1,747 5,140 3,344
--------- --------- --------- --------- --------- ---------
Operating income before corporate expenses 63,140 47,189 39,591 5,355 17,696 17,173
Corporate expenses 6,982 5,451 4,579 368 5,072 4,720
--------- --------- --------- --------- --------- ---------
Operating income 56,158 41,738 35,012 4,987 12,624 12,453
--------- --------- --------- --------- --------- ---------
Other income (expense):
Interest income (expense), net 1,831 2,634 (3,541) (2,841) (11,034) (6,389)
Restructuring charges(b) - - - - (29,011) -
Other, net - 252 (82) 18 (1,671) (428)
--------- --------- --------- --------- --------- ---------
1,831 2,886 (3,623) (2,823) (41,716) (6,817)
--------- --------- --------- --------- --------- ---------
Income (loss) before minority interest and
income tax 57,989 44,624 31,389 2,164 (29,092) 5,636
Minority interest(a) - - - - - 1,167
Income tax 23,813 17,740 12,617 100 65 150
--------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations 34,176 26,884 18,772 2,064 (29,157) 4,319
Loss on discontinued operations of CRC(b) - - - - 9,988 626
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item 34,176 26,884 18,772 2,064 (39,145) 3,693
Extraordinary item - loss on
retirement of debt - - - - 7,461 -
--------- --------- --------- --------- --------- ---------
Net income (loss) $ 34,176 $ 26,884 $ 18,772 $ 2,064 $ (46,606) $ 3,693
========= ========= ========= ========= ========= =========
Net income (loss) per common share(c):
Basic:
Continuing operations $ 0.67 $ 0.55 $ 0.45 $ 0.09 $ (1.41) $ 0.21
Discontinued operations - - - - (0.49) (0.03)
Extraordinary loss - - - - (0.36) -
--------- --------- --------- --------- --------- ---------
Net income (loss) $ 0.67 $ 0.55 $ 0.45 $ 0.09 $ (2.26) $ 0.18
========= ========= ========= ========= ========= =========
Diluted:
Continuing operations $ 0.66 $ 0.54 $ 0.45 $ 0.09 $ (1.41) $ 0.20
Discontinued operations - - - - (0.49) (0.03)
Extraordinary loss - - - - (0.36) -
--------- --------- --------- --------- --------- ---------
Net income (loss) $ 0.66 $ 0.54 $ 0.45 $ 0.09 $ (2.26) $ 0.17
========= ========= ========= ========= ========= =========
Weighted average common shares outstanding:
Basic 50,783 49,021 41,671 23,095 20,590 20,021
Diluted 51,464 49,348 41,792 23,095 20,590 21,611
STATEMENT OF CASH FLOW DATA:
Net cash provided by (used in) operating
activities $ 61,641 $ 56,985 $ 43,792 $ 2,607 $ (20,099) $ 6,280
Net cash used in investing activities (226,133) (246,326) (23,019) (798) (28,480) (42,013)
Net cash provided by (used in) financing
activities 369,335 193,081 (19,008) (2,153) 48,306 30,918
OTHER OPERATING DATA(d):
Broadcast cash flow $ 91,632 $ 68,338 $ 54,519 $ 7,102 $ 22,836 $ 20,517
EBITDA 84,650 62,887 49,940 6,734 17,764 15,797
</TABLE>
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<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, December 31, Year Ended September 30,
-------------------------------------- ------------ ------------------------
1999 1998 1997 1996 1996 1995
---------- --------- --------- ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital $ 231,137 $ 17,168 $ 10,970 $ 8,429 $ 7,168 $ 14,967
Net intangible assets 848,351 646,201 423,530 120,592 121,742 109,253
Total assets 1,157,138 746,689 512,249 163,725 165,751 151,637
Long-term debt, less current portion 1,448 1,547 14,122 135,504 137,659 97,516
Stockholders' equity 1,026,253 622,621 389,960 14,166 12,101 43,581
</TABLE>
(a) Effective August 20, 1994, we began accounting for our 49.0% interest in
Viva Media on a consolidated basis. Accordingly, Viva Media's results of
operations are included in the consolidated financial statements commencing
August 20, 1994. We 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) On August 5, 1996, Clear Channel Communications, Inc. acquired control of
the Company. In connection with the change in control, the Company incurred
certain restructuring charges. Also, effective August 5, 1996, the Company's
Board of Directors approved a plan to discontinue the operations of the
radio network Cadena Radio Centro ("CRC").
(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.
(d) Operating income excluding corporate expenses, depreciation and
amortization, commonly referred to as "broadcast cash flow," is widely
used in the broadcast industry as a measure of a broadcasting company's
operating performance. Another measure of operating performance is EBITDA.
EBITDA consists of operating income excluding depreciation and amortization.
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 our operating
performance or liquidity that is calculated in accordance with generally
accepted accounting principles. Further, such amounts may not be consistent
with similarly titled measures presented by other companies.
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, 1999, 1998 and
1997 and consolidated financial condition as of December 31, 1999 and 1998
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, amortization and corporate
general and administrative expense). The primary source of revenues is the
sale of broadcasting time for advertising. The 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. Management of 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
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.
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 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.
20
<PAGE>
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE
YEAR ENDED DECEMBER 31, 1998
The results of operations for the year ended December 31, 1999 are
not comparable to results of operations for the same period in 1998 primarily
due to the start-up of radio stations 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, KLQV(FM) and KLNV(FM) in San Diego on August 10, 1998, KHOT(FM) in
Phoenix on April 5, 1999, the radio station broadcasting at 94.1 MHz
(KLNO(FM)) in Dallas on September 24, 1999, and the start-up of HBC Radio
Network (a radio network sales and programming division) on January 1, 1999.
Net revenues increased by $33.8 million or 20.6% to $197.9 million
for the year ended December 31, 1999 from $164.1 million for the same period
in 1998. Net revenues increased for the year ended December 31, 1999, compared
to the same period in 1998 primarily because of (a) revenue growth of same
stations, (b) revenues from start-up stations which were not operating for all
or part of the year ended December 31, 1998, and (c) time brokerage agreement
fees associated with the radio station broadcasting at 94.1 MHz (KLNO(FM)) in
Dallas of $1.4 million for the year ended December 31, 1999. Had the WCAA(FM)
acquisition occurred on January 1, 1998, net revenues, on a pro forma basis,
for the year ended December 31, 1999 would have increased 19.6% compared to
the same period in 1998.
Operating expenses increased by $10.5 million or 11.0% to $106.3
million for the year ended December 31, 1999 from $95.8 million for the same
period in 1998. Operating expenses increased primarily due to operating
expenses of start-up stations. As a percentage of net revenues, operating
expenses decreased to 53.7% from 58.4% for the years ended December 31, 1999
and 1998, respectively. Had the WCAA(FM) acquisition occurred on January 1,
1998, operating expenses, on a pro forma basis, for the year ended December
31, 1999 would have increased 10.2% compared to the same period in 1998.
Operating income before corporate expenses, depreciation and
amortization ("broadcast cash flow") for the year ended December 31, 1999
increased 34.1% to $91.6 million, compared to $68.3 million for the year
ended December 31, 1998. As a percentage of net revenues, broadcast cash flow
increased to 46.3% from 41.6% for the years ended December 31, 1999 and 1998,
respectively. Had the WCAA(FM) acquisition occurred on January 1, 1998,
broadcast cash flow, on a pro forma basis, for the year ended December 31,
1999 would have increased 32.9% compared to the same period in 1998.
Corporate expenses increased by $1.4 million or 25.5% to $6.9
million for the year ended December 31, 1999 from $5.5 million for the same
period in 1998. The increase was primarily due to higher staffing costs and
the one-time expenses related to the resignation of an executive officer in
the first quarter of 1999. As a percentage of net revenues, corporate
expenses increased to 3.5% from 3.4% for the years ended December 31, 1999
and 1998, respectively.
EBITDA for the year ended December 31, 1999 increased 34.9% to $84.7
million compared to $62.8 million for the same period in 1998. As a
percentage of net revenues, EBITDA increased to 42.8% from 38.3% for the
years ended December 31, 1999 and 1998, respectively.
Depreciation and amortization for the year ended December 31, 1999
increased 35.1% to $28.5 million compared to $21.1 million for the same
period in 1998. The increase is due to radio station acquisitions and capital
expenditures.
Interest income, net decreased to $1.8 million from $2.6 million for
the years ended December 31, 1999 and 1998, respectively. The decrease for
the year ended December 31, 1999 compared to the same period in 1998 was
because the proceeds from the June 1999 and November 1999 secondary public
stock offerings ("June 1999 Offering" and "November 1999 Offering") were
received later in the year in comparison to the proceeds of the January 1998
secondary public stock offering ("January 1998 Offering").
21
<PAGE>
Income tax expense increased from $17.7 million for the year ended
December 31, 1998 to $23.8 million for the same period in 1999. The increase
was primarily due to income before income tax increasing from $44.6 million
for the year ended December 31, 1998 to $58.0 million for the same period in
1999. The effective tax rates for the years ended December 31, 1998 and 1999
are 39.8% and 41.1%, respectively. The increase in the effective tax rate in
1999 is due to an increase in the effective state tax rate.
For the year ended December 31, 1999, net income totaled $34.2
million ($0.66 per common share - diluted) compared to $26.9 million ($0.54
per common share - diluted) in the same period in 1998.
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 merger with Tichenor Media System, Inc. ("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. Net revenues increased for the year ended December
31, 1998, compared to the same period in 1997 primarily because of (a)
revenue growth of same stations, and (b) revenues from start-up stations
which operated for part of the year ended December 31, 1998 and none in 1997
since it was prior to their acquisition. Had the WCAA(FM) acquisition and the
Tichenor Merger occurred on January 1, 1997, net revenues, on a pro forma
basis, for the year ended December 31, 1998 would have increased 13.2%
compared to the same period in 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 same period in 1997. Operating expenses increased primarily due to
operating expenses of start-up stations. As a percentage of net revenues,
operating expenses decreased to 58.4% from 60.1% for the years ended December
31, 1998 and 1997, respectively. Had the WCAA(FM) acquisition and the
Tichenor Merger occurred on January 1, 1997, operating expenses, on a pro
forma basis, for the year ended December 31, 1998 would have increased 8.3%
compared to the same period in 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. As a percentage of net revenues, broadcast
cash flow increased to 41.6% from 39.9% for the years ended December 31, 1998
and 1997, respectively. Had the WCAA(FM) acquisition and the Tichenor Merger
occurred on January 1, 1997, broadcast cash flow, on a pro forma basis, for
the year ended December 31, 1998 would have increased 20.9% compared to the
same period in 1997.
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 after the Tichenor Merger.
EBITDA for the year ended December 31, 1998 increased 25.9% to $62.8
million compared to $49.9 million for the same period in 1997. As a
percentage of net revenues, EBITDA increased to 38.3% from 36.5% for the
years ended December 31, 1998 and 1997, respectively.
22
<PAGE>
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 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 remaining balance of an accrual of
costs relating to unconsummated acquisitions of $0.3 million which was made
in a prior reporting period was reversed.
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 ($0.45 per share - basic and diluted)
was generated for the year ended December 31, 1997 compared to net income of
$26.9 million ($0.54 per share - diluted) in the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the year ended
December 31, 1999 was $61.6 million as compared to $57.0 million for the same
period in 1998. Net cash used in investing activities was $226.1 and $246.3
million for the years ended December 31, 1999 and 1998, respectively. The
$20.2 million decrease from 1998 to 1999 is mostly due to $27.7 million more
spent during the 1998 year on radio station acquisitions than the comparable
period of 1999 offset somewhat by a $6.5 million increase in 1999 in property
and equipment acquisitions. Net cash provided by financing activities was
$369.3 and $193.1 million for the years ended December 31, 1999 and 1998,
respectively. The $176.2 million increase from 1998 to 1999 is due to the
proceeds of the June 1999 Offering and the November 1999 Offering being
larger than those of the January 1998 Offering.
Generally, capital expenditures are made with cash provided by
operations. Capital expenditures totaled $11.6 and $5.1 million for the years
ended December 31, 1999 and 1998, respectively. Approximately $7.2 million of
the capital expenditures incurred during the year ended December 31, 1999
related to radio signal upgrade projects for four different radio stations
and the build-out of studios related to acquisitions made in New York,
Phoenix and Los Angeles.
On October 15, 1999, the Company entered into an asset purchase
agreement to acquire for $75.0 million the assets of KRCD(FM) and KRCV(FM)
(formerly KACE(FM) and KRTO(FM)), serving the Los Angeles market. The
transaction closed on January 31, 2000. The asset acquisition was funded with
a portion of the proceeds from the November 1999 Offering.
Available cash on hand plus cash flow provided by operations was
sufficient to fund the Company's operations, meet its debt obligations, and
to fund capital expenditures. Management believes the Company will have
sufficient cash on hand and cash provided by operations to finance its
operations, satisfy its debt
23
<PAGE>
service requirements, and to fund capital expenditures. Management regularly
reviews potential acquisitions. Future acquisitions will be financed
primarily through proceeds from borrowings under the $294.0 million revolving
credit facility ( "Credit Facility"), proceeds from securities offerings,
and/or from cash provided by operations.
STOCKHOLDERS' EQUITY
On November 24, 1999, we completed the November 1999 Offering,
selling 3,051,290 shares of Class A Common Stock at $81.70 per share, net of
underwriters' discounts and commissions. The net proceeds of the offering
were approximately $248.7 million.
On June 7, 1999, we completed the June 1999 Offering, selling
2,000,000 shares of Class A Common Stock at $60.03 per share, net of
underwriters' discounts and commissions. The net proceeds of the offering
were approximately $119.9 million.
On January 22, 1998, we completed the January 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.
LONG-TERM DEBT
On April 30, 1999, we borrowed $20.0 million on the Credit Facility
and repaid the entire amount by June 30, 1999 from the proceeds of the June
1999 Offering. In September 1999, we borrowed $51.0 million on the Credit
Facility and repaid the entire amount by December 31, 1999 with cash
generated from operating activities and proceeds of the November 1999
Offering.
At December 31, 1997, we had outstanding borrowings of $12.0 million
under the Credit Facility. On January 29, 1998, we repaid the entire amount
outstanding under the Credit Facility with proceeds of the January 1998
Offering. In August 1998, we borrowed $18.0 million which was subsequently
repaid in December 1998 with cash generated from operating activities.
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. The Credit Facility is secured by the stock of the Company's
subsidiaries. Availability under the Credit Facility reduces quarterly
commencing September 30, 1999 and ending December 31, 2004.
Our 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. We may elect under the terms of the Credit
Facility to increase the facility by $150.0 million.
INFLATION
Inflation has affected financial performance due to higher operating
expenses. Although the exact impact of inflation is indeterminable, we have
offset these higher costs by increasing the effective advertising rates of
most of our radio stations.
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The ratios of earnings to fixed charges for the Company are computed
by dividing pretax income from continuing operations after certain
adjustments, by fixed charges. Fixed charges consist of interest expense on
all long and short-term borrowings and the estimated interest portion of
rental expense. Set forth
24
<PAGE>
below are the ratios of earnings to fixed charges and earnings to combined
fixed charges and preferred stock dividends (in thousands except ratios):
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, December 31, Year Ended September 30,
-------------------------------------- ------------ ------------------------
1999 1998 1997 1996 1996 1995
---------- --------- --------- ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges 20.0 14.6 7.5 1.7 - 1.6
Deficiency of Earnings to Cover Fixed
Charges - - - - $29,092 -
Earnings to Combined Fixed Charges and
Preferred Stock Dividends 20.0 14.6 7.5 1.7 - 1.6
Deficiency of Earnings to Cover Fixed
Charges and Preferred Stock Dividends - - - - $29,112 -
</TABLE>
YEAR 2000
In 1999, we completed our remediation and testing of systems for
Year 2000 compliance. As a result of these efforts, we experienced no
significant disruptions in mission critical information and non-information
technology systems and we believe those systems successfully responded to the
Year 2000 date changes. We are not aware of any material problems resulting
from Year 2000 issues, either with our services, our internal systems, or the
products and services of third parties. We will continue to monitor our
mission critical computer applications and those of our suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly. However, the Company considers the possibility
that latent matters could arise to be remote and does not anticipate any
significant problems due to Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk on both the interest
earned on cash and cash equivalents and interest paid on borrowings under the
Credit Facility. A change of 10% in the interest rate earned on short-term
investments and interest paid under the Credit Facility would not have had a
significant impact on our historical financial statements.
25
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Independent Auditors' Report ............................................................................27
Consolidated Balance Sheets as of December 31, 1999 and 1998 .............................................28
Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997 ...............29
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998
and 1997..................................................................................................30
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997................31
Notes to Consolidated Financial Statements ...............................................................32
</TABLE>
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Hispanic Broadcasting Corporation:
We have audited the accompanying consolidated balance sheets of Hispanic
Broadcasting Corporation (formerly Heftel Broadcasting Corporation) and
subsidiaries (the "Company") as of December 31, 1999 and 1998 and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1999. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule 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 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 financial position of Hispanic
Broadcasting Corporation and subsidiaries as of December 31, 1999 and 1998 and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999, 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.
KPMG LLP
Dallas, Texas
February 10, 2000
27
<PAGE>
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 215,136 $ 10,293
Accounts receivable, net of allowance of $1,855 in 1999 and $2,301 in 1998 40,621 34,309
Prepaid expenses and other current assets 825 457
----------- -----------
Total current assets 256,582 45,059
----------- -----------
Property and equipment, at cost:
Land 7,163 7,966
Buildings and improvements 7,731 7,366
Broadcast and other equipment 38,895 28,147
Furniture and fixtures 10,351 8,356
----------- -----------
64,140 51,835
Less accumulated depreciation 23,217 15,830
----------- -----------
40,923 36,005
----------- -----------
Intangible assets:
Broadcast licenses 789,641 569,915
Cost in excess of fair value of net assets acquired 99,711 97,553
Other intangible assets 15,833 14,862
----------- -----------
905,185 682,330
Less accumulated amortization 56,834 36,129
----------- -----------
848,351 646,201
----------- -----------
Deferred charges and other assets 11,282 19,424
----------- -----------
Total assets $ 1,157,138 $ 746,689
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,210 $ 2,063
Accrued expenses 18,028 22,201
Income taxes payable 6,107 3,506
Current portion of long-term obligations 100 121
----------- -----------
Total current liabilities 25,445 27,891
----------- -----------
Long-term obligations, less current portion 1,448 1,547
----------- -----------
Deferred income taxes 103,992 94,630
----------- -----------
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 1999 and 1998;
issued and outstanding 40,244,778 shares in 1999 and 35,171,980 shares in 1998 40 35
Class B Common Stock, convertible, $.001 par value; authorized 50,000,000 shares; issued
and outstanding 14,156,470 shares 14 14
Additional paid-in capital 1,034,791 665,340
Accumulated deficit (8,592) (42,768)
----------- -----------
Total stockholders' equity 1,026,253 622,621
----------- -----------
Total liabilities and stockholders' equity $ 1,157,138 $ 746,689
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues $ 225,301 $ 186,779 $ 154,869
Agency commissions 27,381 22,657 18,285
--------- --------- ---------
Net revenues 197,920 164,122 136,584
Operating expenses 106,288 95,784 82,065
Depreciation and amortization 28,492 21,149 14,928
--------- --------- ---------
Operating income before corporate expenses 63,140 47,189 39,591
Corporate expenses 6,982 5,451 4,579
--------- --------- ---------
Operating income 56,158 41,738 35,012
--------- --------- ---------
Other income (expense):
Interest income 3,438 4,680 406
Interest expense (1,607) (2,046) (3,947)
Other, net - 252 (82)
--------- --------- ---------
1,831 2,886 (3,623)
--------- --------- ---------
Income before income tax 57,989 44,624 31,389
Income tax 23,813 17,740 12,617
--------- --------- ---------
Net income $ 34,176 $ 26,884 $ 18,772
========= ========= =========
Net income per common share:
Basic $ 0.67 $ 0.55 $ 0.45
Diluted $ 0.66 $ 0.54 $ 0.45
Weighted average common shares outstanding:
Basic 50,783 49,021 41,671
Diluted 51,464 49,348 41,792
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
Common Stock Additional
Preferred ------------------- paid-in Accumulated
Stock Class A Class B capital deficit Total
--------- ------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ - $ 11 $ - $ 102,578 $ (88,424) $ 14,165
Net proceeds from issuance
of 9,660,000 shares
of Class A Common Stock - 5 - 176,363 - 176,368
Class A Common Stock issued for
Tichenor acquisition - 6 - 180,648 - 180,654
Conversion of Class A
Common Stock into
Class B Common Stock - (7) 7 - - -
Two-for-one stock split - 15 7 (22) - -
Net income - - - - 18,772 18,772
------- ------ ------ ---------- ---------- -----------
Balance at December 31, 1997 - 30 14 459,567 (69,652) 389,959
Net proceeds from issuance
of 5,193,232 shares of
Class A Common Stock - 5 - 205,773 - 205,778
Net income - - - - 26,884 26,884
------- ------ ------ ---------- ---------- -----------
Balance at December 31, 1998 - 35 14 665,340 (42,768) 622,621
Net proceeds from issuance
of 5,072,798 shares
of Class A Common Stock - 5 - 369,451 - 369,456
Net income - - - - 34,176 34,176
------- ------ ------ ---------- ---------- -----------
Balance at December 31, 1999 $ - $ 40 $ 14 $1,034,791 $ (8,592) $ 1,026,253
======= ====== ====== ========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1999 1998 1997
----------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 34,176 $ 26,884 $ 18,772
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for bad debts 1,869 1,418 2,757
Depreciation and amortization 28,492 21,149 14,928
Amortization of debt facility fee included
in interest expense 156 160 133
Deferred income taxes 8,006 9,944 8,107
Changes in operating assets and liabilities:
Accounts receivable, net (8,338) (6,328) (4,997)
Prepaid expenses and other current assets (377) 361 360
Accounts payable (775) (26) (4,771)
Accrued expenses (4,173) 3,519 2,789
Income taxes payable 2,601 156 5,507
Other, net 4 (252) 207
--------- --------- ---------
Net cash provided by operating
activities 61,641 56,985 43,792
--------- --------- ---------
Cash flows from investing activities:
Acquisitions of radio stations (208,921) (236,648) (1,097)
Property and equipment acquisitions (11,578) (5,086) (4,305)
Dispositions of property and equipment 951 340 294
Additions to intangible assets (144) (56) (2,777)
Increase in other noncurrent assets (6,441) (4,876) (15,134)
--------- --------- ---------
Net cash used in investing activities (226,133) (246,326) (23,019)
--------- --------- ---------
Cash flows from financing activities:
Borrowings on long-term obligations 71,000 18,000 56,000
Payments on long-term obligations (71,121) (30,894) (250,827)
Payment of deferred financing costs - - (1,232)
Proceeds from stock issuances 369,456 205,975 177,051
--------- --------- ---------
Net cash provided by (used in)
financing activities 369,335 193,081 (19,008)
--------- --------- ---------
Net increase in cash and cash equivalents 204,843 3,740 1,765
Cash and cash equivalents at beginning of period 10,293 6,553 4,788
--------- --------- ---------
Cash and cash equivalents at end of period $ 215,136 $ 10,293 $ 6,553
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Hispanic Broadcasting Corporation (the "Company", formerly Heftel
Broadcasting Corporation), through its subsidiaries, owns and operates 45
Spanish-language broadcast radio stations serving 13 markets throughout the
United States (Los Angeles, New York City, Miami, San Francisco/San Jose,
Chicago, Houston, San Antonio, Dallas/Fort Worth,
McAllen/Brownsville/Harlingen, San Diego, Phoenix, El Paso and Las Vegas).
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Hispanic 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, 1999
(included in deferred charges and other assets) consist primarily of 50%
interests in entities which own transmission towers that are leased to the
Company and an interest in a company which is developing the technology for a
digital radio broadcasting system.
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 (two 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.
32
<PAGE>
INTANGIBLE ASSETS
Intangible assets are recorded at cost. Amortization of intangible
assets is provided in amounts sufficient to charge the asset cost to operations
over the estimated useful lives on a straight-line basis. The estimated useful
lives are as follows:
<TABLE>
<S> <C>
Broadcast licenses 40 years
Cost in excess of fair value of net assets acquired principally 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 estimated useful life of the
broadcast licenses. 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 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 advertising time 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 $4.2, $6.4 and $4.0 million for the years
ended December 31, 1999, 1998 and 1997, 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 commercials are broadcast. Expenses are recognized when goods or
services are received or used. Barter transactions 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.
33
<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 and the Employee
Stock Purchase Plan.
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
or other derivative financial instruments at December 31, 1999 or 1998.
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, accounts receivable and 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 accounts
receivable 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 accounts receivable 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 ("APB
25"), ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES and related interpretations.
Under APB 25, the Company does not recognize compensation expense
related to employee stock options since options are not granted at a price
below the market value of the underlying common stock on the date of grant.
In accordance with Statement of Financial Accounting Standards No. 123 ("SFAS
123"), ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company has disclosed pro
forma net income and net income per share using the fair-value method in
calculating compensation expense.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with
the current year presentation.
34
<PAGE>
2. ACQUISITIONS AND DISPOSITIONS
1999 ACQUISITIONS
On January 27, 1999, the Company entered into an asset purchase
agreement to acquire for $18.3 million the assets of KHOT(FM), serving the
Phoenix market (the "Phoenix Acquisition"). The Phoenix Acquisition closed on
April 5, 1999. The asset acquisition was funded with cash generated from
operations. Immediately after closing, the station's programming was
converted to a Spanish-language format.
On March 1, 1999, the Company entered into an asset purchase
agreement to acquire for $20.3 million the assets of KISF(FM), serving the
Las Vegas market (the "Las Vegas Acquisition"). The Las Vegas Acquisition
closed on April 30, 1999. The asset acquisition was funded with a $20.0
million borrowing from the Company's $294.0 million revolving credit facility
(the "Credit Facility") and $0.3 million cash generated from operations.
Immediately after closing, the station's programming was converted to a
Spanish-language format.
On January 2, 1997, the Company acquired an option to purchase all
of the assets used in connection with the operation of KSCA(FM), a radio
station serving the Los Angeles market (the "KSCA Option"). In connection
with the acquisition of the KSCA Option, the Company began providing
Spanish-language programming to KSCA(FM) under a time brokerage agreement on
February 5, 1997. The Company exercised the KSCA Option and on September 17,
1999, the Company acquired the assets of KSCA(FM) for $118.1 million. The
Company had previously paid $13.0 million to acquire and renew the option to
purchase the assets of KSCA(FM) and such payments were subtracted from the
purchase price at closing. To fund the acquisition, the Company borrowed
$38.0 million from the Credit Facility and used $67.1 million of cash. The
cash was generated from operating activities and proceeds of the June 1999
secondary public stock offering (the "June 1999 Offering").
On July 6, 1999, the Company entered into an agreement to acquire
from a nonaffiliated trust for $65.0 million, the FCC licenses and
transmission equipment of a radio station broadcasting at 94.1 MHz
(KLNO(FM)), serving the Dallas/Fort Worth market (the "Dallas Acquisition").
The Dallas Acquisition closed on September 24, 1999. To fund the acquisition,
the Company borrowed $8.0 million from the Credit Facility and used $57.0
million of cash. The cash was generated from operating activities and
proceeds of the June 1999 Offering.
With the Dallas Acquisition, the Company assumed a time brokerage
agreement whereby an unaffiliated party provided the programming to the radio
station broadcasting at 94.1 MHz until January 31, 2000. The time brokerage
payments ranged from $12,947 to $15,618 per day. Immediately after the time
brokerage agreement terminated, the station's programming was converted to a
Spanish-language format.
35
<PAGE>
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 "New York Acquisition"). The New York Acquisition
closed on May 22, 1998. The asset exchange was funded with a portion of the
proceeds from the January 1998 secondary public stock offering (the "January
1998 Offering"). 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 "Houston Acquisition"). The Houston
Acquisition closed on May 29, 1998. The asset acquisition was funded with a
portion of the proceeds from the January 1998 Offering. 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 San Diego Acquisition closed on August 10, 1998. The asset
acquisition was funded with a portion of the proceeds from the January 1998
Offering, an additional $18.0 million borrowing from the Company's Credit
Facility and cash generated from operations. Immediately after closing, the
programming of the stations was converted to two Spanish-language formats.
1997 ACQUISITIONS AND DISPOSITION
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
Federal Communications Commission ("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.
36
<PAGE>
All of the acquisitions discussed above were accounted for using the
purchase method of accounting. Accordingly, the accompanying financial
statements include the accounts of the acquired businesses from the
respective dates of acquisition.
Unaudited pro forma results of operations for the year ended
December 31, 1998, calculated as though the New York Acquisition had occurred
at the beginning of 1998, is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
Historical Pro forma
1999 1998
---------- ---------
<S> <C> <C>
Net revenues $197,920 $165,402
Operating income 56,158 41,195
Net income 34,176 23,963
Net income per common share:
Basic 0.67 0.49
Diluted 0.66 0.48
</TABLE>
PENDING TRANSACTIONS
On April 14, 1999, the Company entered into an agreement with
Z-Spanish Media Corporation ("Z"), to exchange the assets of KRTX(FM), a
radio station serving the Houston market, for the assets of KLNZ(FM), a radio
station owned by Z serving the Phoenix market. Although the asset exchange
has received all necessary governmental consents, the transaction has not
closed. Pursuant to the terms of the asset exchange agreement, the Company
has instituted arbitration proceedings seeking, among other relief, specific
performance to compel the closing of the transaction.
On October 15, 1999, the Company entered into an asset purchase
agreement to acquire for $75.0 million the assets of KRCD(FM) and KRCV(FM)
(formerly KACE(FM) and KRTO(FM)), serving the Los Angeles market (the "Los
Angeles Acquisition"). The Los Angeles Acquisition closed on January 31,
2000. The asset acquisition was funded with a portion of the proceeds from
the November 1999 secondary public stock offering (the "November 1999
Offering"). The stations' programming was converted to a single
Spanish-language format in February 2000.
37
<PAGE>
3. LONG-TERM OBLIGATIONS
The following is a summary of long-term obligations outstanding as
of December 31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revolving credit facility payable to banks; aggregate
commitment of $294.0 million; interest rate based on
LIBOR plus an applicable margin as determined by the
Company's leverage ratio; interest rates ranged from
5.29%to 5.81%during 1999; 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 $ - $ -
Various loans net of imputed interest of 8.1%, payable
in monthly installments through 2001 108 198
Prize awards net of imputed interest (10%to 12%),
payable in varying annual installments through 2044 1,440 1,470
------ ------
1,548 1,668
Less current portion 100 121
------ ------
$1,448 $1,547
====== ======
</TABLE>
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. As of December 31, 1999, the
Company had $294.0 million of credit available, and may elect under the terms
of the Credit Facility to increase the facility by $150.0 million. The Credit
Facility commitment began reducing on September 30, 1999 and continues
quarterly through December 31, 2004.
Maturities of long-term obligations for the five years subsequent to
December 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
2000 $ 100
2001 23
2002 6
2003 7
2004 8
Thereafter 1,404
</TABLE>
Interest paid for the years ended December 31, 1999, 1998 and 1997
amounted to $1.7, $1.2, and $3.9 million, respectively.
38
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
The Company leases office space and other property under
noncancellable operating leases. Terms of the leases vary from three 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, 1999 are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
2000 $ 4,754
2001 4,631
2002 4,382
2003 4,023
2004 3,669
Thereafter 19,995
</TABLE>
Rent expense for the years ended December 31, 1999, 1998 and 1997
was $4.3, $3.4, and $2.6 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, results of operations or liquidity of the Company.
5. STOCKHOLDERS' EQUITY
COMMON STOCK
On June 7, 1999, the Company completed the June 1999 Offering,
selling 2,000,000 shares of Class A Common Stock at $60.03 per share, net of
underwriters' discounts and commissions. The net proceeds of the offering
were approximately $119.9 million.
On November 24, 1999, the Company completed the November 1999
Offering, selling 3,051,290 shares of Class A Common Stock at $81.70 per
share, net of underwriters' discounts and commissions. The net proceeds of
the offering were approximately $248.7 million.
On January 22, 1998, the Company completed the January 1998 Offering,
selling 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 February 10, 1997, the Company completed a secondary public stock
offering selling 9,660,000 shares of its Class A Common Stock for $18.40 per
share, net of 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 Class A
Common Stock owned by Clear Channel Communications, Inc. ("Clear Channel")
were converted to Class B Common Stock. Clear Channel owns all of the issued
and outstanding 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. All financial
information related to
39
<PAGE>
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.
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.
6. INCOME TAXES
The provision for income tax consists of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 12,618 $ 6,103 $ 3,144
State 3,189 1,693 1,366
--------- --------- ---------
Total current tax 15,807 7,796 4,510
--------- --------- ---------
Deferred:
Federal 7,146 9,515 7,783
State 860 429 324
--------- --------- ---------
Total deferred tax 8,006 9,944 8,107
--------- --------- ---------
Total income tax $ 23,813 $ 17,740 $ 12,617
========= ========= =========
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at December
31, 1999 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating losses $ 970 $ 4,161
Other intangible assets 1,999 1,669
Long-term obligations - prize awards 561 575
Allowance for doubtful accounts receivable 724 910
Other 187 919
-------- --------
Total deferred tax assets 4,441 8,234
-------- --------
Deferred tax liabilities:
Broadcast licenses 99,616 93,118
Property and equipment 1,477 2,095
Restructuring charges 7,333 7,395
Other 7 256
-------- --------
Total deferred tax liabilities 108,433 102,864
-------- --------
Net deferred tax liabilities $103,992 $ 94,630
======== ========
</TABLE>
40
<PAGE>
The reconciliation of income tax expense computed at the federal
statutory tax rate to the Company's actual income tax expense is as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Federal income tax at statutory rate $ 20,296 $ 15,618 $ 10,986
State income taxes, net of federal benefit 2,632 1,115 942
Nondeductible and non-taxable items, net 885 1,007 689
--------- --------- ---------
$ 23,813 $ 17,740 $ 12,617
========= ========= =========
</TABLE>
As of December 31, 1999, the Company had tax net operating loss
carryforwards for state tax purposes of approximately $28.0 million which
expire in 2018 if not used.
Income taxes paid for the years ended December 31, 1999, 1998 and 1997
amounted to $13.3, $6.0 and $2.2 million, respectively.
7. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income $ 34,176 $ 26,884 $ 18,772
========= ========= =========
Denominator:
Denominator for basic earnings
per share 50,783 49,021 41,671
Effect of dilutive securities:
Stock options 674 318 121
Employee Stock Purchase
Plan 7 9 -
--------- --------- ---------
Denominator for diluted
earnings per share 51,464 49,348 41,792
========= ========= =========
</TABLE>
8. 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, 1999, 1998 and
1997 amounted to $0.3, $0.3, and $0.2 million, respectively.
41
<PAGE>
9. STOCK OPTIONS
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 at
any one time shall be ten 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 1999, 1998 and 1997, employees
purchased 17,453, 22,222 and 6,753 common shares at average prices of $51.43,
$37.22 and $28.26, respectively.
The Company issued 487,750, 369,650 and 753,000 stock options in
1999, 1998 and 1997, respectively, to various employees of the Company under
its Long-Term Incentive Plan. The exercise prices ranged from $16.44 to
$83.69 per share, the market prices at dates of issuance.
The following is a summary of stock options outstanding and
exercisable for the years ended December 31, 1997, 1998 and 1999 (in
thousands, except per share data):
<TABLE>
<CAPTION>
Number Weighted Average
Of Shares Exercise Price Per Share
-------------- ------------------------
<S> <C> <C><C>
Stock Options Outstanding:
Options outstanding at December 31, 1996 6 $ 16.44
Granted 753 23.88
Forfeited (36) 23.50
--------
Options outstanding at December 31, 1997 723 23.84
Granted 370 36.26
Forfeited (52) 25.71
--------
Options outstanding at December 31, 1998 1,041 28.16
Granted 487 48.41
Forfeited (52) 34.55
--------
Options outstanding at December 31, 1999 1,476 34.62
========
Exercisable Stock Options:
Options exercisable at December 31, 1996 - -
Vested 17 23.70
--------
Options exercisable at December 31, 1997 17 23.70
Vested 2 16.44
--------
Options exercisable at December 31, 1998 19 22.93
Vested 2 16.44
--------
Options exercisable at December 31, 1999 21 22.31
========
</TABLE>
42
<PAGE>
Pro forma information regarding net income and net income per share
is required by SFAS 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 value at date of grant for options
granted in the years ended December 31, 1999, 1998 and 1997 was $26.64,
$19.49 and $13.17 per share, respectively. The fair value of these options
was estimated on the date of the grant using the Black-Scholes option pricing
model with the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 6.11% 5.22% 6.55%
Dividend yield 0.00% 0.00% 0.00%
Volatility factor 50.39% 50.67% 50.00%
Weighted average expected life 6 years 6 years 6 years
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of
the options is expensed over the options' vesting period. Pro forma results
of operations calculated as though the Company had adopted the provisions of
SFAS 123 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 31,389 $ 25,449 $ 18,147
Net income per common
share:
Basic 0.62 0.52 0.44
Diluted 0.61 0.52 0.44
</TABLE>
The following is a summary of stock options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Weighted Average
Range of Shares Remaining
Exercise Prices Under Option Weighted Average Contractual Life
Per Share (in thousands) Exercise Price Per Share (in years)
- -------------------- -------------- ------------------------- ----------------
<S> <C> <C> <C>
Stock Options Outstanding:
$ 16.44 - $ 23.50 621 $ 23.43 7.4
24.69 - 36.25 348 35.17 8.3
37.50 - 48.88 424 42.11 9.2
68.00 - 83.69 83 77.75 9.8
-----
1,476
=====
Exercisable Stock Options:
$ 16.44 - $ 24.69 21 $ 22.31 7.3
</TABLE>
43
<PAGE>
10. OTHER FINANCIAL INFORMATION
ACCRUED EXPENSES (IN THOUSANDS):
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
--------- ---------
<S> <C> <C>
Wages, salaries and benefits payable $ 4,136 $ 3,569
Commissions payable 5,559 7,366
Advertising payable 1,636 2,394
Other accrued expenses 6,697 8,872
--------- ---------
$ 18,028 $ 22,201
========= =========
</TABLE>
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations
for the years ended December 31, 1999 and 1998 (in thousands, except per
share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Net revenues $ 37,709 $ 51,905 $ 52,370 $ 55,936
Net income 3,319 9,976 9,845 11,036
Net income per common share - basic
and diluted 0.07 0.20 0.19 0.21
Year ended December 31, 1998:
Net revenues $ 31,347 $ 44,393 $ 44,206 $ 44,176
Net income 4,344 7,803 7,104 7,633
Net income per common share - basic
and diluted 0.09 0.16 0.14 0.15
</TABLE>
12. SUBSEQUENT EVENT (UNAUDITED)
On March 4, 2000, the Company entered into an agreement with
subsidiaries of Clear Channel and AMFM Inc. to purchase for approximately
$127.0 million the assets of KXPK(FM), KKFR(FM) and KEYI(FM), serving the
Denver, Phoenix and Austin markets, respectively. The Company plans to spend
approximately $4.0 million for new studios and other costs to operate these
new radio stations. The closing of this asset acquisition is expected to
occur during the third quarter of 2000. Immediately after closing, the
programming of KXPK(FM) and KEYI(FM) will be converted to a Spanish-language
format. The present audience of KKFR(FM) includes a large proportion of
Hispanics and the programming will continue in its present format after
closing. The closing of this transaction is subject to numerous conditions
and approvals, including receipt of regulatory approvals under the federal
communication laws, review by federal antitrust authorities, and completion
of Clear Channel's merger with AMFM Inc.
44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
45
<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.
46
<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:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)
<TABLE>
<CAPTION>
Additions
------------------------
Balance at Charged to Charged Balance
Beginning Costs and to other Accounts at end
Description of period expenses accounts Written off of period
- -------------------------------------- ----------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1999:
Allowance for Doubtful Accounts $2,301 $1,869 $283 $2,598 $1,855
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
</TABLE>
47
<PAGE>
3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ------------------------------------------------------------------
<S> <C>
3.1 Second Amended and Restated Certificate of Incorporation of
the Company dated February 14, 1997 (incorporated by
reference to Exhibit 3.1 to the Company's Form 8-K filed
March 3, 1997).
3.2 Certificate of Amendment to the Second Amended and Restated
Certificate of Incorporation of the Company dated June 4,
1998 (incorporated by reference to Exhibit 3.1 to the
Company's Form 10-Q filed on November 11, 1998).
3.3 Certificate of Amendment to the Second Amended and Restated
Certificate of Incorporation of the Company dated June 8,
1999 (incorporated by reference to Exhibit 3.3 to the
Company's Form 10-Q filed on August 12, 1999).
3.4 Amended and Restated Bylaws of the Company (incorporated by
reference to the Company's Registration Statement on Form
S-1 (Registration No. 33-78370) filed on April 29, 1994, as
amended ("Company's S-1")).
10.1 Lease dated May 15, 1987, between the Company and Hollywood
and Vine Development Co. (incorporated by reference to
Exhibit 10.15 of Company's S-1).
10.2 Tower Lease Agreement, dated April 13, 1990, between the
Company and KTNQ/KLVE, Inc. (formerly Hispanic Broadcasting
of California, Inc.), together with the Assignment and
Assumption Agreement dated April 13, 1990 between the
Company and The Tower Company (incorporated by reference to
Exhibit 10.16 of Company'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 Company'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 Company's S-1).
10.5 Stock Option Plan (incorporated by reference to Exhibit 10.4
of Company's S-1).
10.6 Form of Indemnification Agreement (incorporated by reference
to Exhibit 10.22 of Company's S-1).
10.7 Registration Rights Agreement, dated February 14, 1997, by
and among the Company, 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 Company's Form 8-K filed
March 3, 1997).
10.8 Employment Agreement, dated February 14, 1997, by and
between the Company and McHenry T. Tichenor, Jr.
(incorporated by reference to Exhibit 10.2 to the Company's
Form 8-K filed March 3, 1997).
10.9 Stockholders Agreement, dated February 14, 1997, by and
among the Company 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).
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ------------------------------------------------------------------
<S> <C>
10.10 Registration Rights Agreement, dated February 14, 1997, by
and among the Company and Clear Channel Communications, Inc.
(incorporated by reference to Exhibit 10.4 to the Company's
Form 8-K filed March 3, 1997).
10.11 Credit Agreement among the Company 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 Company's Form 8-K filed on May 14, 1997).
10.12 Credit Agreement Amendment No. 1 among the Company and its
subsidiaries, the Chase Manhattan Bank, as administrative
agent, and certain other lenders, dated May 6, 1999 without
Exhibits (Schedules omitted).
10.13 Hispanic 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)).
10.14 Hispanic Broadcasting Corporation Amended and Restated 1997
Employee Stock Purchase Plan (incorporated by reference to
the Company's Form S-8 filed on December 31, 1997).
10.15 Asset Purchase Agreement, dated April 28, 1999, by and among
Golden West Broadcasters, Jacqueline Autry and Stanley B.
Schneider, as co-trustees of the Autry Qualified Interest
Trust, KTNQ/KLVE, Inc., HBC License Corporation and Heftel
Broadcasting Corporation (incorporated by reference to the
Company's Form 10-Q filed on May 14, 1999).
10.16 Asset Exchange Agreement, dated April 14, 1999, by and
between Glendale Broadcasting, Inc., KLNZ License Company,
LLC, and Heftel Broadcasting Corporation (incorporated by
reference to the Company's Form 10-Q filed on August 12,
1999).
10.17 First Amendment To Asset Exchange Agreement, dated May 14,
1999, by and between Glendale Broadcasting, Inc., KLNZ
License Company, LLC, and Heftel Broadcasting Corporation
(incorporated by reference to the Company's Form 10-Q filed
on August 12, 1999).
10.18 Bridge Loan Agreement, dated May 21, 1999, by and between
Sunburst Texas, LP, Heftel Broadcasting Texas, L.P., and
Heftel Broadcasting Corporation (incorporated by reference
to the Company's Form 10-Q filed on August 12, 1999).
10.19 Asset Purchase Agreement, dated July 6, 1999, by and between
SBT Communications Statutory Trust and HBC Broadcasting
Texas, L.P. (incorporated by reference to the Company's Form
10-Q filed on August 12, 1999).
10.20 Time Brokerage Agreement dated September 22, 1999, by and
between SBT Communications Statutory Trust and Sunburst
Dallas, LP (incorporated by reference to the Company's Form
10-Q filed on November 1, 1999).
10.21 Asset Purchase Agreement dated October 15, 1999, by and
between Cox Radio, Inc. and Hispanic Broadcasting
Corporation (incorporated by reference to the Company's Form
10-Q filed on November 1, 1999).
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ------------------------------------------------------------------
<S> <C>
10.22 Asset Purchase Agreement dated March 4, 2000, by and between
Clear Channel Broadcasting, Inc., Clear Channel Broadcasting
Licenses, Inc., AMFM Radio Licenses LLC, AMFM Ohio, Inc.,
AMFM Houston, Inc. and Hispanic Broadcasting Corporation.
11 Statement Regarding Computation of Per Share Earnings.
12.1 Statement Regarding Computation of Ratio of Earnings to
Fixed Charges.
12.2 Statement Regarding Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
21 Subsidiaries of the Company.
23 Consent of KPMG 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.
(b)
REPORTS ON FORM 8-K
The Company filed a report on Form 8-K dated October 7, 1999,
disclosing the acquisition of radio stations KSCA(FM) and KLNO(FM).
The Company filed a report on Form 8-K on October 15, 1999,
which included the unaudited pro forma condensed consolidated statement
of operations for the year ended December 31, 1998.
50
<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 30, 1999.
HISPANIC 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 March 30, 2000
- ------------------------------------ Chairman of the Board of Directors
McHenry T. Tichenor, Jr.
/s/ Jeffrey T. Hinson Senior Vice President, Chief Financial March 30, 2000
- ------------------------------------ Officer and Treasurer
Jeffrey T. Hinson (Principal Financial Officer)
/s/ David P. Gerow
- ------------------------------------ Vice President and Controller March 30, 2000
David P. Gerow (Principal Accounting Officer)
/s/ McHenry T. Tichenor Director March 30, 2000
- ---------------------------
McHenry T. Tichenor
/s/ Robert W. Hughes Director March 30, 2000
- ------------------------------------
Robert W. Hughes
/s/ James M. Raines Director March 30, 2000
- ------------------------------------
James M. Raines
/s/ Ernesto Cruz Director March 30, 2000
- ------------------------------------
Ernesto Cruz
</TABLE>
51
<PAGE>
EXHIBIT 10.12
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of May 6, 1999 among HEFTEL BROADCASTING
CORPORATION (the "BORROWER"); the SUBSIDIARY GUARANTORS listed on the
signature pages hereto; the LENDERS listed on the signature pages hereto (the
"LENDERS"); and THE CHASE MANHATTAN BANK, as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"ADMINISTRATIVE AGENT").
The Borrower, the Subsidiary Guarantors, the Lenders and the
Administrative Agent are parties to a Credit Agreement dated as of February
14, 1997 (as heretofore modified and supplemented and in effect on the date
hereof, the "CREDIT AGREEMENT") providing, subject to the terms and conditions
thereof, for extensions of credit to be made by said Lenders to the Borrower.
The Borrower, the Subsidiary Guarantors, the Lenders and the Administrative
Agent wish to amend the Credit Agreement in certain respects, and accordingly,
the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement (as amended hereby) are
used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the
date hereof, the Credit Agreement shall be amended as follows:
2.01. References in the Credit Agreement (including references to
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be
deemed to be references to the Credit Agreement as amended hereby.
2.02. Section 2.17(b) of the Credit Agreement shall be amended by
replacing the dollar amount of "$30,000,000" therein in clause (i) of the last
sentence thereof with "$75,000,000".
2.03. Section 7.03(i) of the Credit Agreement is hereby amended by
replacing the dollar amount of "$30,000,000" therein with the dollar amount
"$75,000,000".
Section 3. REPRESENTATIONS AND WARRANTIES. The Borrower represents
and warrants to the Lenders that the representations and warranties set forth
in Article IV of the Credit Agreement are true and complete on the date hereof
as if made on and as of the date hereof and as if each reference in said
Article IV to the Credit Agreement included reference to the Credit Agreement
as amended by this Amendment No. 1.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2 above,
the amendments to the Credit Agreement set forth in said Section 2 shall
become effective, as of the
<PAGE>
-2-
date hereof, upon the execution and delivery by each of the Borrower, the
Subsidiary Guarantors, and Lenders representing Required Lenders.
Section 5. MISCELLANEOUS. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 1 may be executed in any number of counterparts, all of which taken
together shall constitute one and the same amendatory instrument and any of
the parties hereto may execute this Amendment No. 1 by signing any such
counterpart. This Amendment No. 1 shall be governed by, and construed in
accordance with, the law of the State of New York.
<PAGE>
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed and delivered as of the day and year first above
written.
HEFTEL BROADCASTING CORPORATION
By: /s/ Jeffrey T. Hinson
-------------------------------
Title: Senior Vice President
SUBSIDIARY GUARANTORS
---------------------
HEFTEL BROADCASTING TEXAS, L.P.
By Heftel GP Texas, Inc.,
its general partner
HBC BROADCASTING TEXAS, INC.
HBC CHICAGO, INC.
HBC FLORIDA, INC.
HBC-LAS VEGAS, INC.
HBC NEW YORK, INC.
HBC TEXAS, INC.
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-AM LICENSE CORP.
KTNQ/KLVE, INC.
LA OFERTA, INC.
LICENSE CORP. NO. 1
LICENSE CORP. NO. 2
MI CASA PUBLICATIONS, INC.
SPANISH COAST-TO-COAST, LTD.
WADO-AM LICENSE CORP.
WGLI-AM LICENSE CORP.
WLXX-AM LICENSE CORP.
WPAT-AM LICENSE CORP.
WQBA-AM LICENSE CORP.
WQBA-FM LICENSE CORP.
WADO RADIO, INC.
TC TELEVISION, INC.
TICHENOR LICENSE CORPORATION
TMS ASSETS CALIFORNIA, INC.
TMS LICENSE CALIFORNIA, INC.
By: /s/ Jeffrey T. Hinson
-------------------------------
Title: Senior Vice President
<PAGE>
-4-
SUBSIDIARY GUARANTORS (continued)
---------------------------------
HBC HOUSTON LICENSE CORP.
HBC HOUSTON, INC.
HBC SAN DIEGO LICENSE CORP.
HBC SAN DIEGO, INC.
TICHENOR MEDIA SYSTEM, INC.
HEFTEL GP TEXAS, INC.
HBC TOWER COMPANY, INC.
MOMENTUM RESEARCH, INC.
HBC PHOENIX, INC.
HBC NETWORK, INC.
By: /s/ Jeffrey T. Hinson
--------------------------------
Title: Senior Vice President
LENDERS
-------
THE CHASE MANHATTAN BANK
for itself, as Administrative Agent, and as
Issuing Bank
By: /s/ Tracey Navin Ewing
-------------------------------
Title: Vice President
BANK OF MONTREAL
By: /s/ Ola Anderssen
--------------------------
Title: Director
THE BANK OF NOVA SCOTIA
By: /s/ P. A. Weissenberger
-------------------------------
Title: Authorized Signatory
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Jenny Dongo
-----------------------------
Title: Assistant Vice President
CIBC, INC.
By: /s/ Harold Birk
--------------------------------------
Title: Executive Director
CIBC World Markets Corp. as Agent
FLEET BANK, N.A.
By: /s/ Tanya M. Crossley
-------------------------------
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By: /s/ Carol Brandt
----------------------------
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ Eric R. Hollingsworth
------------------------------------
Title: Vice President
By: /s/ Diego Puiggari
------------------------------------
Title: Group Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Craig Welch
---------------------------------
Title: First Vice President
By: /s/ Michael G. Haggarty
---------------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ John R. Ciulla
--------------------------------
Title: Senior Vice President
SUNTRUST BANK, CENTRAL
FLORIDA, N.A.
By: /s/ David J. Edge
--------------------------------
Title: Vice President
MELLON BANK, N.A.
By: /s/ Jennifer Livengood
---------------------------------
Title: Officer
BANK OF HAWAII
By: /s/ Bernadine M. Havertine
-------------------------------------
Title: Assistant Vice President
MICHIGAN NATIONAL BANK
By: /s/ Draga B. Palincas
-------------------------------------
Title: Relationship Manager
<PAGE>
EXHIBIT 10.22
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of March 4,
2000 among the company or companies designated as Seller on the signature page
hereto (collectively, "Seller") and the company or companies designated as Buyer
on the signature page hereto (collectively, "Buyer").
RECITALS
A. Seller owns and operates the following radio broadcast stations
(collectively, the "Stations," and each individually a "Station") pursuant to
certain authorizations issued by the Federal Communications Commission (the
"FCC"):
KEYI-FM, San Marcos, Texas
KXPK-FM, Evergreen, Colorado
KKFR(FM), Glendale, Arizona
B. Subject to the terms and conditions set forth herein, Buyer desires
to acquire the Station Assets (defined below).
C. Clear Channel Communications, Inc. (Clear Channel Broadcasting,
Inc.'s and Clear Channel Broadcasting Licenses, Inc.'s parent), CCU Merger
Sub, Inc. and AMFM Inc. are parties to an Agreement and Plan of Merger dated
October 2, 1999 (the "AMFM Agreement").
AGREEMENT
NOW, THEREFORE, taking the foregoing into account, and in consideration
of the mutual covenants and agreements set forth herein, the parties, intending
to be legally bound, hereby agree as follows:
ARTICLE 1: PURCHASE OF ASSETS
0.1. STATION ASSETS. On the terms and subject to the conditions
hereof, on the Closing Date (defined below), Seller shall sell, assign,
transfer, convey and deliver to Buyer, and Buyer shall purchase and acquire
from Seller, all of the right, title and interest of Seller in and to all of
the assets, properties, interests and rights of Seller of whatsoever kind and
nature, real and personal, tangible and intangible, which are used
exclusively in the operation of the Stations AND specifically described in
this Section 1.1, but excluding the Excluded Assets as hereafter defined (the
"Station Assets"):
(1) all licenses, permits and other authorizations which are
issued to Seller by the FCC with respect to the Stations (the "FCC Licenses")
AND described on SCHEDULE 1.1(a), including any renewals or modifications
thereof between the date hereof and Closing;
(2) all equipment, electrical devices, antennae, cables,
tools, hardware, office furniture and
<PAGE>
fixtures, office materials and supplies, inventory, motor vehicles, spare
parts and other tangible personal property of every kind and description
which are used exclusively in the operation of the Stations AND listed on
SCHEDULE 1.1(b), except any retirements or dispositions thereof made between
the date hereof and Closing in the ordinary course of business and consistent
with past practices of Seller (the "Tangible Personal Property");
(3) all Time Sales Agreements and Trade Agreements (both
defined in Section 2.1), Real Property Leases (defined in Section 7.7), and
other contracts, agreements, and leases which are used in the operation of
the Stations AND listed on SCHEDULE 1.1(c), together with all contracts,
agreements, and leases made between the date hereof and Closing in the
ordinary course of business that are used in the operation of the Stations
(the "Station Contracts");
(4) all of Seller's rights in and to the Stations' call
letters and Seller's rights in and to the trademarks, trade names, service
marks, franchises, copyrights, computer software, programs and programming
material, jingles, slogans, logos, and other intangible property which are
used exclusively in the operation of the Stations AND listed on SCHEDULE 1.1(d)
(the "Intangible Property");
(5) Seller's rights in and to all the files, documents,
records, and books of account (or copies thereof) relating exclusively to the
operation of the Stations, including the Stations' local public files,
programming information and studies, blueprints, technical information and
engineering data, and logs, but excluding records relating to Excluded Assets
(defined below); and
(6) any real property which is used exclusively in the
operation of the Stations (including any of Seller's appurtenant easements
and improvements located thereon) AND described on SCHEDULE 1.1(f) (the "Real
Property").
The Station Assets shall be transferred to Buyer free and
clear of liens, claims and encumbrances ("Liens") except for (i) Assumed
Obligations (defined in Section 2.1), (ii) liens for taxes not yet due and
payable and for which Buyer receives a credit pursuant to Section 3.3, (iii)
such liens, easements, rights of way, building and use restrictions,
exceptions, reservations and limitations that do not in any material respect
detract from the value of the property subject thereto or impair the use
thereof in the ordinary course of the business of the Stations, and (iv) any
items listed on SCHEDULE 1.1(b) (collectively, "Permitted Liens").
1.2. EXCLUDED ASSETS. Notwithstanding anything to the contrary
contained herein, the Station Assets shall not include the following assets
along with all rights, title and interest therein (the "Excluded Assets"):
(1) all cash and cash equivalents of Seller, including without
limitation certificates of deposit, commercial paper, treasury bills,
marketable securities, asset or money market accounts and all such similar
accounts or investments;
(2) all accounts receivable or notes receivable arising in the
operation of the Stations prior to Closing;
(3) all tangible and intangible personal property of Seller
disposed of or consumed in the ordinary course of business of Seller between
the date of this Agreement and Closing;
(4) all Station Contracts that terminate or expire prior to
Closing in the ordinary course of business of Seller;
(5) Seller's name, corporate minute books, charter documents,
corporate stock record books and such other books and records as pertain to
the organization, existence or share capitalization of Seller, duplicate
copies of the records of the Stations, and all records not relating
exclusively to the operation of the Stations;
(6) contracts of insurance, and all insurance proceeds or
claims made thereunder;
<PAGE>
(7) except as provided in Section 10.4, all pension, profit
sharing or cash or deferred (Section 401(k)) plans and trusts and the assets
thereof and any other employee benefit plan or arrangement and the assets
thereof, if any, maintained by Seller; and
(8) all Seller's FM towers and FM tower sites, all rights,
properties and assets described on SCHEDULE 1.2(h), and all rights,
properties and assets not specifically described in Section 1.1.
1.3. LEASE AGREEMENTS. At Closing, Buyer and Seller shall enter into
the lease agreements described on SCHEDULE 1.2(h) pursuant to lease in the
form of EXHIBIT A attached hereto.
ARTICLE 2: ASSUMPTION OF OBLIGATIONS
2.1. ASSUMED OBLIGATIONS. On the Closing Date, Buyer shall assume
the obligations of Seller (the "Assumed Obligations") arising after Closing
under the Station Contracts, including without limitation all agreements for
the sale of advertising time on the Stations for cash in the ordinary course
of business ("Time Sales Agreements") and all agreements for the sale of
advertising time on the Stations for non-cash consideration ("Trade
Agreements").
2.2. RETAINED OBLIGATIONS. Buyer does not assume or agree to
discharge or perform and will not be deemed by reason of the execution and
delivery of this Agreement or any agreement, instrument or document delivered
pursuant to or in connection with this Agreement or otherwise by reason of
the consummation of the transactions contemplated hereby, to have assumed or
to have agreed to discharge or perform, any liabilities, obligations or
commitments of Seller of any nature whatsoever whether accrued, absolute,
contingent or otherwise and whether or not disclosed to Buyer, other than the
Assumed Obligations (the "Retained Obligations").
ARTICLE 3: PURCHASE PRICE
3.1. PURCHASE PRICE. In consideration for the sale of the Station
Assets to Buyer, in addition to the assumption of the Assumed Obligations,
Buyer shall at Closing (defined below) deliver to Seller by wire transfer of
immediately available funds the sum of (i) ONE HUNDRED TWENTY SEVEN MILLION
DOLLARS ($127,000,000), subject to adjustment pursuant to Sections 3.3, plus
(ii) the Reserve Adjustment (as defined in Section 3.5 below) (the "Purchase
Price").
3.2. DEPOSIT. Within three (3) business days from the date of this
Agreement with no Cure Period as defined below, Buyer shall deposit an amount
in cash (which cash amount may thereafter be exchanged with an irrevocable
letter of credit from a nationally recognized commercial bank in such face
amount, such letter of credit subject to prior approval by Seller) equal to
25% of the Purchase Price (the "Deposit") with NationsBank/Bank of America
(the "Escrow Agent") pursuant to the Escrow Agreement (the "Escrow
Agreement") of even date herewith among Buyer, Seller and the Escrow Agent.
At Closing, the Deposit shall be applied to the Purchase Price and any
interest accrued thereon shall be disbursed to Buyer. If this Agreement is
terminated by Seller due to Buyer's failure to consummate the Closing on the
Closing Date or if this Agreement is otherwise terminated by Seller pursuant
to Section 16.1(c), the Deposit and any interest accrued thereon shall be
disbursed to Seller. If this Agreement is terminated for any other reason,
the Deposit and any interest accrued thereon shall be disbursed to Buyer.
3.3. PRORATIONS AND ADJUSTMENTS. Except as otherwise provided
herein, all deposits, reserves and prepaid and deferred income and expenses
relating to the Station Assets or the Assumed Obligations and arising from
the conduct of the business and operations of the Stations shall be prorated
between Buyer and Seller in accordance with generally accepted accounting
principles as of 11:59 p.m. on the date immediately preceding the Closing
Date. Such prorations shall include, without limitation, all ad valorem, real
estate and other property taxes (but excluding taxes arising by reason of the
transfer of the Station Assets as contemplated hereby which shall be paid as
set forth in Section 13.1), business and license fees, music and other
license fees (including any retroactive adjustments thereof), utility
expenses, amounts due or to become due under Station Contracts, rents, lease
payments
<PAGE>
and similar prepaid and deferred items. Real estate taxes shall be
apportioned on the basis of taxes assessed for the preceding year, with a
reapportionment, if any, as soon as the new tax rate and valuation can be
ascertained. Except as otherwise provided herein, the prorations and
adjustments contemplated by this Section 3.3, to the extent practicable,
shall be made on the Closing Date. As to those prorations and adjustments not
capable of being ascertained on the Closing Date, an adjustment and proration
shall be made within ninety (90) calendar days of the Closing Date. In the
event of any disputes between the parties as to such adjustments, the amounts
not in dispute shall nonetheless be paid at the time provided herein and such
disputes shall be determined by an independent certified public accountant
mutually acceptable to the parties, and the fees and expenses of such
accountant shall be paid one-half by Seller and one-half by Buyer.
3.4. ALLOCATION. The Purchase Price shall be allocated among the
Station Assets in a manner as mutually agreed between the parties based upon
an appraisal prepared by Bond & Pecaro (whose fees shall be paid one-half by
Seller and one-half by Buyer). Seller and Buyer agree to use the allocations
determined pursuant to this Section 3.4 for all tax purposes, including
without limitation, those matters subject to Section 1060 of the Internal
Revenue Code of 1986, as amended.
3.5. RESERVE. At the Closing, Seller shall set aside and pay to
Buyer a portion of the Purchase Price (the "Reserve") equal to the sum of (i)
One Million Dollars ($1,000,000), plus (ii) the Reserve Adjustment. Buyer
shall be entitled to use the Reserve in its sole discretion in order to
satisfy certain obligations assumed under the Time Sales Agreements, Trade
Agreements and Station Contracts. The Buyer shall be entitled to retain any
amounts of the Reserve which are not so used. As used herein, the "Reserve
Adjustment" shall be the amount in excess of $1,000,000 which Buyer
reasonably estimates to be the cost of terminating the Time Sales Agreements,
Trade Agreements and Station Contracts which Buyer would not otherwise assume
but for the convenience of Seller hereunder. Buyer will provide Seller with
written notification of its preliminary calculation of the amount of the
Reserve Adjustment at least three (3) days prior to Closing and will pay such
amount to Seller as part of the Purchase Price. Buyer will complete its
calculation of the Reserve Adjustment within ninety (90) days after the
Closing. To the extent such final calculation of the Reserve Adjustment is
higher than the preliminary calculation, Buyer will remit such excess to
Seller as additional Purchase Price, and Seller will set aside and pay such
amount to Buyer as additional Reserve.
ARTICLE 4: CLOSING
4.1. CLOSING. The consummation of the sale and purchase of the
Station Assets (the "Closing") shall occur on a date (the "Closing Date") and
at a time and place designated solely by Seller after FCC Consent (defined
below), subject to satisfaction or waiver of the conditions to Closing
contained herein (other than those to be satisfied at Closing). Seller shall
provide Buyer with notice of the Closing Date at least three (3) business
days prior to Closing, however, Seller reserves the right to extend the
Closing Date without penalty. If requested by Seller, prior to Closing the
parties shall hold a pre-closing conference at a time and place designated by
Seller, at which the parties shall provide (for review only) all documents to
be delivered at Closing under this Agreement, each duly executed but undated,
and otherwise confirm their ability to timely consummate the Closing.
ARTICLE 5: GOVERNMENTAL CONSENTS
Closing is subject to and conditioned upon (i) prior FCC consent (the
"FCC Consent") to the assignment of the FCC Licenses to Buyer, (ii) United
States Department of Justice ("DOJ") prior approval (the "DOJ Consent") of the
transactions contemplated hereby, including without limitation any such approval
as may be necessary to enable Seller to consummate the merger under the AMFM
Agreement, and (iii) expiration or termination of any applicable
<PAGE>
waiting period ("HSR Clearance") under the HSR Act (defined below).
5.1. FCC. On a date designated by Seller, Buyer and Seller shall
file an application with the FCC (the "FCC Application") requesting the FCC
Consent. Buyer and Seller shall diligently prosecute the FCC Application and
otherwise use their best efforts to obtain the FCC Consent as soon as
possible. If the FCC Consent imposes upon Buyer any condition (including
without limitation any divestiture condition), Buyer shall timely comply
therewith.
5.2. HSR. If not previously filed, then within five (5) business
days after the execution of this Agreement, Buyer and Seller shall make any
required filings with the Federal Trade Commission and the DOJ pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") with respect to the transactions contemplated hereby (including a
request for early termination of the waiting period thereunder), and shall
thereafter promptly respond to all requests received from such agencies for
additional information or documentation.
5.3. GENERAL. Buyer and Seller shall notify each other of all
documents filed with or received from any governmental agency with respect to
this Agreement or the transactions contemplated hereby. Buyer and Seller
shall furnish each other with such information and assistance as such the
other may reasonably request in connection with their preparation of any
governmental filing hereunder. If Buyer becomes aware of any fact relating to
it which would prevent or delay the FCC Consent, the DOJ Consent or HSR
Clearance, Buyer shall promptly notify Seller thereof and take such steps as
necessary to remove such impediment, including but not limited to divesting
any stations and terminating any agreements to acquire or program or market
any stations.
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to
Seller:
6.1. ORGANIZATION AND STANDING. Buyer is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and is qualified to do business in each jurisdiction in which
the Station Assets are located. Buyer has the requisite power and authority
to execute and deliver this Agreement and all of the other agreements and
instruments to be executed and delivered by Buyer pursuant hereto
(collectively, the "Buyer Ancillary Agreements"), to consummate the
transactions contemplated hereby and thereby and to comply with the terms,
conditions and provisions hereof and thereof.
6.2. AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Buyer Ancillary Agreements by Buyer have been duly
authorized and approved by all necessary action of Buyer and do not require
any further authorization or consent of Buyer. This Agreement is, and each
Buyer Ancillary Agreement when executed and delivered by Buyer and the other
parties thereto will be, a legal, valid and binding agreement of Buyer
enforceable in accordance with its respective terms, except in each case as
such enforceability may be limited by bankruptcy, moratorium, insolvency,
reorganization or other similar laws affecting or limiting the enforcement of
creditors' rights generally and except as such enforceability is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
6.3. NO CONFLICTS Neither the execution and delivery by Buyer of
this Agreement and the Buyer Ancillary Agreements or the consummation by
Buyer of any of the transactions contemplated hereby or thereby nor
compliance by Buyer with or fulfillment by Buyer of the terms, conditions and
provisions hereof or thereof will: (i) conflict with any organizational
documents of Buyer or any law, judgment, order or decree to which Buyer is
subject; or (ii) require the approval, consent, authorization or act of, or
the making by Buyer of any declaration, filing or registration with, any
third party or any foreign, federal, state or local court, governmental or
regulatory authority or body, except the FCC Consent and DOJ Consent, and, if
applicable, HSR Clearance.
6.4. QUALIFICATION. Buyer is legally, financially and otherwise
qualified to be the licensee of, acquire, own and operate the Stations under
the Communications Act of 1934, as amended (the "Communications Act") and
<PAGE>
the rules, regulations and policies of the FCC. There are no facts that
would, under existing law and the existing rules, regulations, policies and
procedures of the FCC, disqualify Buyer as an assignee of the FCC Licenses or
as the owner and operator of the Stations. No waiver of any FCC rule or
policy is necessary for the FCC Consent to be obtained. There is no action,
suit or proceeding pending or threatened against Buyer which questions the
legality or propriety of the transactions contemplated by this Agreement or
could materially adversely affect Buyer's ability to perform its obligations
hereunder. Buyer has and will have available on the Closing Date sufficient
funds to enable it to consummate the transactions contemplated hereby.
6.5. NO FINDER. Other than Star Media (the fees and expenses of
which are to be paid by Buyer), no broker, finder or other person is entitled
to a commission, brokerage fee or other similar payment in connection with
this Agreement or the transactions contemplated hereby as a result of any
agreement or action of Buyer or any party acting on Buyer's behalf.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyer:
7.1. ORGANIZATION. Each Seller is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization,
and is qualified to do business in each jurisdiction in which the Station
Assets are located. Seller has the requisite power and authority to execute
and deliver this Agreement and all of the other agreements and instruments to
be executed and delivered by Seller pursuant hereto (collectively, the
"Seller Ancillary Agreements"), to consummate the transactions contemplated
hereby and thereby and to comply with the terms, conditions and provisions
hereof and thereof.
7.2. AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Seller Ancillary Agreements by Seller have been duly
authorized and approved by all necessary action of Seller and do not require
any further authorization or consent of Seller. This Agreement is, and each
Seller Ancillary Agreement when executed and delivered by Seller and the
other parties thereto will be, a legal, valid and binding agreement of Seller
enforceable in accordance with its respective terms, except in each case as
such enforceability may be limited by bankruptcy, moratorium, insolvency,
reorganization or other similar laws affecting or limiting the enforcement of
creditors' rights generally and except as such enforceability is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
7.3. NO CONFLICTS. Neither the execution and delivery by Seller of
this Agreement and the Seller Ancillary Agreements or the consummation by
Seller of any of the transactions contemplated hereby or thereby nor
compliance by Seller with or fulfillment by Seller of the terms, conditions
and provisions hereof or thereof will: (i) conflict with any organizational
documents of Seller or any law, judgment, order, or decree to which Seller is
subject or, except as set forth on SCHEDULE 1.1(c), any Station Contract; or
(ii) require the approval, consent, authorization or act of, or the making by
Seller of any declaration, filing or registration with, any third party or
any foreign, federal, state or local court, governmental or regulatory
authority or body, except the FCC Consent and DOJ Consent and, if applicable,
HSR Clearance.
7.4. FCC LICENSES. Seller (or one of the companies comprising
Seller) is the holder of the FCC Licenses described on SCHEDULE 1.1(a). The
FCC Licenses are in full force and effect and have not been revoked,
suspended, canceled, rescinded or terminated and have not expired. There is
not pending any action by or before the FCC to revoke, suspend, cancel,
rescind or materially adversely modify any of the FCC Licenses (other than
proceedings to amend FCC rules of general applicability), and there is not
now issued or outstanding, by or before the FCC, any order to show cause,
notice of violation, notice of apparent liability, or notice of forfeiture
against Seller with respect to the Stations. The Stations are operating in
compliance in all material respects with the FCC Licenses, the Communications
Act, and the rules, regulations and policies of the FCC.
7.5. TAXES. Seller has, in respect of the Stations' business, filed
all foreign, federal, state, county and local income, excise, property,
sales, use, franchise and other tax returns and reports which are required to
have
<PAGE>
been filed by it under applicable law and has paid all taxes which have
become due pursuant to such returns or pursuant to any assessments which have
become payable.
7.6. PERSONAL PROPERTY. SCHEDULE 1.1(b) contains a list of all
material items of Tangible Personal Property included in the Station Assets.
Seller has title to the Tangible Personal Property free and clear of Liens
other than Permitted Liens. The Tangible Personal Property is in good
condition and working order.
7.7. REAL PROPERTY. SCHEDULE 1.1(f) contains a description of all
Real Property included in the Station Assets. Seller has fee simple title to
the owned Real Property ("Owned Real Property") free and clear of Liens other
than Permitted Liens. SCHEDULE 1.1(f) includes a description of each lease of
Real Property or similar agreement included in the Station Assets (the "Real
Property Leases"). The Owned Real Property includes, and the Real Property
Leases provide, access to the Stations' facilities. To Seller's knowledge,
the Real Property is not subject to any suit for condemnation or other taking
by any public authority.
7.8. CONTRACTS. Each of the Station Contracts (including without
limitation each of the Real Property Leases) is in effect and is binding upon
Seller and, to Seller's knowledge, the other parties thereto (subject to
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights generally). Seller has
performed its obligations under each of the Station Contracts in all material
respects, and is not in material default thereunder, and to Seller's
knowledge, no other party to any of the Station Contracts is in default
thereunder in any material respect.
7.9. ENVIRONMENTAL. Except as set forth in any environmental report
delivered by Seller to Buyer prior to the date of this Agreement and except
as set forth on SCHEDULE 1.1(f), to Seller's knowledge, no hazardous or toxic
substance or waste regulated under any applicable environmental, health or
safety law has been generated, stored, transported or released on, in, from
or to the Real Property included in the Station Assets. Except as set forth
in any environmental report delivered by Seller to Buyer prior to the date of
this Agreement and except as set forth on SCHEDULE 1.1(f), to Seller's
knowledge, Seller has complied in all material respects with all
environmental, health and safety laws applicable to the Stations.
7.10. INTANGIBLE PROPERTY. SCHEDULE 1.1(d) contains a description of
the material Intangible Property included in the Station Assets. Except as
set forth on SCHEDULE 1.1(d), Seller has received no notice of any claim that
its use of the Intangible Property infringes upon any third party rights.
Except as set forth on SCHEDULE 1.1(d), Seller owns or has the right to use
the Intangible Property free and clear of Liens other than Permitted Liens.
7.11. COMPLIANCE WITH LAW. Seller has complied in all material
respects with all laws, regulations, rules, writs, injunctions, ordinances,
franchises, decrees or orders of any court or of any foreign, federal, state,
municipal or other governmental authority which are applicable to the
operation of the Stations. There is no action, suit or proceeding pending or
threatened against Seller in respect of the Stations that will subject Buyer
to liability or which questions the legality or propriety of the transactions
contemplated by this Agreement. To Seller's knowledge, there are no
governmental claims or investigations pending or threatened against Seller in
respect of the Stations (except those affecting the industry generally).
7.12. NO FINDER. Other than Star Media (the fees and expenses of
which are to be paid by Buyer), no broker, finder or other person is entitled
to a commission, brokerage fee or other similar payment in connection with
this Agreement or the transactions contemplated hereby as a result of any
agreement or action of Seller or any party acting on Seller's behalf.
7.13. FINANCIAL STATEMENTS. Seller has delivered to Buyer copies of
the unaudited results of operations of the Stations for the nine months ended
September 30, 1999, prepared in accordance with the books and records of the
Stations.
ARTICLE 8: ACCOUNTS RECEIVABLE
<PAGE>
8.1. ACCOUNTS RECEIVABLE. All accounts receivable arising prior to
the Closing Date in connection with the operation of the Stations, including
but not limited to accounts receivable for advertising revenues for programs
and announcements performed prior to the Closing Date and other broadcast
revenues for services performed prior to the Closing Date, shall remain the
property of Seller (the "Accounts Receivable") and Buyer shall not acquire
any right or interest therein. To the extent Buyer receives any payment in
respect of the Accounts Receivable, it shall promptly remit the same to
Seller.
ARTICLE 9: COVENANTS OF SELLER
9.1. SELLER'S COVENANTS. Seller covenants and agrees with respect
to the Stations that, between the date hereof and Closing, except as
permitted by this Agreement or with the prior written consent of Buyer, which
shall not be unreasonably withheld, Seller shall:
(1) operate the Stations in the ordinary course of business
consistent with past practice and in all material respects in accordance with
FCC rules and regulations and with all other applicable laws, regulations,
rules and orders;
(2) not, other than in the ordinary course of business in
accordance with past practice, sell, lease or dispose of or agree to sell,
lease or dispose of any of the Station Assets, or create, assume or permit to
exist any Liens upon the Station Assets, except for Permitted Liens; ,
(3) furnish Buyer with such information relating to the
Station Assets as Buyer may reasonably request, at Buyer's expense and
provided such request does not interfere unreasonably with the business of
the Stations;
(4) not enter into new Station Contracts with a term greater
than one year and an aggregate value greater than $25,000 which cannot be
canceled with ninety (90) days prior written notice, without providing prior
written notice to Buyer, or enter into Trade Agreements which in the
aggregate exceed related barter assets;
(5) use good faith efforts to satisfy, prior to Closing, all
of the obligations of the Stations under the Trade Agreement; and
(6) upon the written request of Buyer, promptly send notices
of non-renewal or early termination in respect of any Station Contract in
which such notice would not constitute a breach of such Station Contract.
9.2. FINANCIAL STATEMENTS. Seller shall cooperate with Buyer in
order to enable Buyer to have its independent auditors prepare financial
statements (at Buyer's expense) for the Stations as may be required of Buyer
pursuant to federal securities laws.
ARTICLE 10: JOINT COVENANTS
Buyer and Seller hereby covenant and agree that between the date hereof
and Closing:
10.1. COOPERATION. Subject to express limitations contained
elsewhere herein, each party (i) shall cooperate fully with one another in
taking any reasonable actions (including without limitation, reasonable
actions to obtain the required consent of any governmental instrumentality or
any third party) necessary or helpful to accomplish the transactions
contemplated by this Agreement, including but not limited to the prompt
satisfaction of any condition to Closing set forth herein, and (ii) shall not
take any action that conflicts with its obligations hereunder or that causes
its representations and warranties to become untrue in any material respect.
10.2. CONTROL OF STATIONS. Buyer shall not, directly or indirectly,
control, supervise or direct the
<PAGE>
operations of the Stations prior to Closing. Such operations, including
complete control and supervision of all Station programs, employees and
policies, shall be the sole responsibility of Seller.
10.3. CONSENTS TO ASSIGNMENT. The parties shall use commercially
reasonable efforts to obtain any third party consents necessary for the
assignment of any Station Contract (which shall not require any payment to
any such third party). To the extent that any Station Contract may not be
assigned without the consent of any third party, and such consent is not
obtained prior to Closing, this Agreement and any assignment executed
pursuant hereto shall not constitute an assignment thereof, but to the extent
permitted by law shall constitute an equitable assignment by Seller and
assumption by Buyer of Seller's rights and obligations under the applicable
Station Contract, with Seller making available to Buyer the benefits thereof
and Buyer performing the obligations thereunder on Seller's behalf; provided,
however, that Seller shall indemnify Buyer from and against all costs,
expenses and damages incurred by Buyer as a result of Seller's failure to
have obtained a consent to assignment with respect to any of the leases for
the main transmitter sites listed on SCHEDULE 1.1(f) from which the Stations'
signals are broadcast. Seller shall be released from all indemnification
obligations with respect to Seller's failure to have obtained a consent to
assignment with respect to any of the leases for the main transmitter sites
from which the Stations' signals are broadcast six (6) months after the
Closing Date, except to the extent that written notice of such
indemnification claim is given by Buyer to Seller within the six month time
period.
10.4. EMPLOYEE MATTERS.
(1) Prior to Closing, Seller shall deliver to Buyer a list of
substantially all the employees who work for KKFR(FM) and a list of employees
of who work for KEYI-FM and KXPK-FM that Seller does not intend to retain
after Closing. Buyer may interview and elect to hire such listed employees,
but not any other employees of Seller. Buyer is obligated to hire only those
employees that are under employment contracts (and assume Seller's
obligations and liabilities under such employment contracts) which are
included in the Station Contracts. Certain of the employees under employment
contracts will be terminated as of the Closing by Buyer, and Buyer will be
responsible for all amounts owed to such employees in respect of periods on
and after the Closing. With respect to employees hired by Buyer ("Transferred
Employees"), to the extent permitted by law, Seller shall provide Buyer
access to its personnel records and such other information as Buyer may
reasonably request prior to Closing. With respect to such hired employees,
Seller shall be responsible for the payment of all compensation payable by it
with respect to periods prior to Closing and thereafter Buyer shall be
responsible for all such obligations payable by it under the terms of
applicable employee benefits plans. Buyer shall cause all employees it hires
to be eligible to participate in its "employee welfare benefit plans" and
"employee pension benefit plans" (as defined in Section 3(1) and 3(2) of
ERISA, respectively) in which similarly situated employees are generally
eligible to participate; provided, however, that all such employees and their
spouses and dependents, who are currently covered by Seller's plan(s), shall
be eligible for coverage immediately after Closing (and shall not be excluded
from coverage on account of any pre-existing condition unless such persons
are excluded from Seller's plan on account of any pre-existing condition,
such persons to receive credit towards any pre-existing condition waiting
period under Buyer's plan(s) to the extend such credit was earned towards any
pre-existing waiting period under Seller's plan(s)) to the extent provided
under such plans. For purposes of any length of service requirements, waiting
periods, vesting periods or differential benefits based on length of service
in any such plan for which such employees may be eligible after Closing,
Buyer shall ensure that service with Seller shall be deemed to have been
service with the Buyer. In addition, Buyer shall ensure that each such
employee receives credit under any welfare benefit plan of Buyer for any
deductibles and co-payments paid by such employees and dependents for the
current plan year under a plan maintained by Seller, and at Buyer's request,
Seller will produce a report of such credits as soon as administratively
possible. Notwithstanding any other
<PAGE>
provision contained herein, Buyer shall grant credit to each such employee
for all unused sick leave accrued as of Closing as an employee of Seller.
Buyer shall assume and discharge Seller's liabilities for the payment of all
unused vacation leave accrued by such employees as of Closing.
(2) At such time as the Seller can represent to the Buyer as
to the tax-qualified status of the 401(k) savings plan(s) in which
Transferred Employees retain account balances with the Seller or its
subsidiaries (the "Saving Plan(s)") and furnish to Buyer a favorable Internal
Revenue Service determination letter as to the tax-qualified status of such
Savings Plan(s) under Section 401(a) of the Code (or an opinion of counsel
that the form of the Savings Plan(s) is so qualified), Buyer and Seller shall
enter into a 401(k) plan asset transfer agreement pursuant to which Buyer
shall establish a defined contribution plan (or cover Transferred Employees
under an existing defined contribution plan sponsored by Buyer) for the
benefit of Transferred Employees who were participants in the Savings
Plan(s). Such Transferred Employees are referred to hereinafter as the
"Savings Plan Employees."
(c) Following execution of the agreement contemplated in
clause (b) above, Seller shall cause to be transferred from the Savings
Plan(s) to the plan covering the Savings Plan Employees (the "Transferee
Savings Plan") the liability for the account balances of the Savings Plan
Employees (including outstanding loan balances of Savings Plan Employees),
together with cash, cash equivalents or other mutually acceptable property,
the value of which on such transfer date is equal to such liability, and
Buyer shall cause the Transferee Savings Plan to accept such transfer, all in
accordance with the rules and regulations under Section 414(l) of the Code.
(d) Pending completion of the transfers described in this
Section, Seller and Buyer shall make arrangements for any distributions, if
any, to the Savings Plan Employees from the Savings Plan(s). Seller and Buyer
shall provide each other with access to information reasonably necessary in
order to carry out the provisions of this paragraph. In addition, until the
asset transfer is effectuated, Buyer shall cooperate with the reasonable
requests of Seller to continue to withhold from the pay checks of Transferred
Employees' who have outstanding loan balances in the Savings Plan(s) and
Buyer shall remit such withheld amounts to the Seller in a timely fashion
such that the outstanding loans do not go into default.
10.5. 1031 EXCHANGE. At or prior to Closing, Seller may assign its
rights under this Agreement (in whole or in part) to a qualified intermediary
(as defined in Treasury regulation section 1.1031(k)-1(g)(4)) or similar
entity or arrangement ("Qualified Intermediary"). Upon any such assignment,
Seller shall promptly give written notice thereof to Buyer, and Buyer shall
cooperate with the reasonable requests of Seller and any Qualified
Intermediary in connection therewith. Without limiting the generality of the
foregoing, if Seller gives notice of such assignment, Buyer shall (i)
promptly provide Seller with written acknowledgment of such notice and (ii)
at Closing, pay the Purchase Price (or any portion thereof designated by the
Qualified Intermediary) to or on behalf of the Qualified Intermediary (which
payment shall, to the extent thereof, satisfy the obligations of Buyer to
make such payment hereunder). Seller's assignment to a Qualified Intermediary
will not relieve Seller of any of its duties or obligations herein. Except
for the obligations of Buyer set forth in this Section, Buyer shall not have
any liability or obligation to Seller for the failure of the contemplated
exchange to qualify as a like-kind exchange under Section 1031 of the
Internal Revenue Code unless such failure is the result of the material
breach or default by Buyer under this Agreement.
10.6. TRUST. Notwithstanding anything in this Agreement to the
contrary, Seller may at it option assign
<PAGE>
this Agreement (in whole or part) and assign and transfer the Station Assets
(in whole or in part) to a trustee to hold and operate pursuant to a trust
agreement, provided such trustee assumes Seller's duties and obligations
hereunder with respect to the Station Assets held in such trust.
10.7. KXTA-AM TOWER LEASE. At or prior to Closing, Buyer shall amend
the KXTA-AM, Los Angeles, California License Agreement between KTNQ/KLVE,
Inc. and Citicasters Co. dated December 10, 1997, pursuant to which Buyer is
the landlord and Seller is the tenant in the form attached hereto ("KXTA
Lease Amendment").
ARTICLE 11: CONDITIONS OF CLOSING BY BUYER
The obligations of Buyer hereunder are, at its option, subject to
satisfaction, at or prior to Closing, of each of the following conditions:
11.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of Seller made in this Agreement shall be true and correct in
all material respects as of the Closing Date except for changes permitted or
contemplated by the terms of this Agreement, and the covenants and agreements
to be complied with and performed by Seller at or prior to Closing shall have
been complied with or performed in all material respects. Buyer shall have
received a certificate dated as of the Closing Date from Seller, executed by
an authorized officer of Seller to the effect that the conditions set forth
in this Section have been satisfied.
11.2. GOVERNMENTAL CONSENTS. The FCC Consent and DOJ Consent, and,
if applicable, HSR Clearance, shall have been obtained, and no court or
governmental order prohibiting Closing shall be in effect.
ARTICLE 12: CONDITIONS OF CLOSING BY SELLER
The obligations of Seller hereunder are, at its option, subject to
satisfaction, at or prior to Closing, of each of the following conditions:
12.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of Buyer made in this Agreement shall be true and correct in
all material respects as of the Closing Date except for changes permitted or
contemplated by the terms of this Agreement, and the covenants and agreements
to be complied with and performed by Buyer at or prior to Closing shall have
been complied with or performed in all material respects. Seller shall have
received a certificate dated as of the Closing Date from Buyer, executed by
an authorized officer of Buyer, to the effect that the conditions set forth
in this Section have been satisfied.
12.2. GOVERNMENTAL CONSENTS. The FCC Consent and DOJ Consent, and,
if applicable, HSR Clearance, shall have been obtained, and no court or
governmental order prohibiting Closing shall be in effect.
12.3. AMFM CLOSING. The closing under the AMFM Agreement shall have
been consummated.
ARTICLE 13: EXPENSES
13.1. EXPENSES. Each party shall be solely responsible for all costs
and expenses incurred by it in connection with the negotiation, preparation
and performance of and compliance with the terms of this Agreement, except
that (i) all recordation, transfer and documentary taxes, fees and charges,
and any excise, sales or use taxes, applicable to the transfer of the Station
Assets shall be paid by Buyer, (ii) all FCC filing fees shall be paid equally
by Buyer and Seller, and (iii) all HSR Act filing fees and expenses shall be
paid by Buyer.
ARTICLE 14: DOCUMENTS TO BE DELIVERED AT CLOSING
14.1. SELLER'S DOCUMENTS. At Closing, Seller shall deliver or cause
to be delivered to Buyer:
(1) certified copies of resolutions authorizing its execution,
delivery and performance of this
<PAGE>
Agreement, including the consummation of the transactions contemplated hereby;
(2) the certificate described in Section 11.1; and
(3) such bills of sale, assignments, special warranty deeds,
documents of title and other instruments of conveyance, assignment and
transfer as may be necessary to convey, transfer and assign the Station
Assets to Buyer, free and clear of Liens, except for Permitted Liens.
14.2. BUYER'S DOCUMENTS. At Closing, Buyer shall deliver or cause to
be delivered to Seller:
(1) the certified copies of resolutions authorizing its
execution, delivery and performance of this Agreement, including the
consummation of the transactions contemplated hereby;
(2) the certificate described in Section 12.1;
(3) such documents and instruments of assumption as may be
necessary to assume the Assumed Obligations, and the Purchase Price in
accordance with Section 3.1 hereof; and,
(4) the KXTA Lease Amendment described in Section 10.7.
ARTICLE 15: SURVIVAL; INDEMNIFICATION.
15.1. SURVIVAL. The covenants, agreements, representations and
warranties in this Agreement shall survive Closing for a period of six (6)
months from the Closing Date whereupon they shall expire and be of no further
force or effect, except those under (i) this Article 15 that relate to
Damages (defined below) for which written notice is given by the indemnified
party to the indemnifying party prior to the expiration, which shall survive
until resolved and (ii) the following provisions (the "Expense Provisions"):
Sections 2.1 (Assumed Obligations), 3.3 (Adjustments), 3.4 (Allocation), 8.1
(Accounts Receivable) and 13.1 (Expenses), and indemnification obligations
with respect to such provisions, which shall survive until performed.
15.2. INDEMNIFICATION.
(1) From and after the Closing, Seller shall defend, indemnify
and hold harmless Buyer from and against any and all losses, costs, damages,
liabilities and expenses, including reasonable attorneys' fees and expenses
("Damages") incurred by Buyer arising out of or resulting from: (i) any
breach or default by Seller under this Agreement; (ii) the Retained
Obligations; or (iii) the business or operation of the Stations before
Closing; provided, however, that after Closing, except for Expenses
Provisions (which shall not be subject to such limitations), (i) Seller shall
have no liability to Buyer hereunder until, and only to the extent that,
Buyer's aggregate Damages exceed $500,000 and (ii) the maximum liability of
Seller hereunder shall be $5,000,000.
(2) From and after the Closing, Buyer shall defend, indemnify
and hold harmless Seller from and against any and all Damages incurred by
Seller arising out of or resulting from: (i) any breach or default by Buyer
under this Agreement; (ii) the Assumed Obligations; or (iii) the business or
operation of the Stations after Closing; provided however, that after
Closing, except for the Expense Provisions (which shall not be subject to
such limitations), (i) Buyer shall have no liability to Seller hereunder
until, and only to the extent that, Seller's aggregate Damages exceed
$500,000 and (ii) the maximum liability of Buyer hereunder shall be
$5,000,000.
15.3. PROCEDURES. The indemnified party shall give prompt written
notice to the indemnifying party of any demand, suit, claim or assertion of
liability by third parties or other circumstances that could give rise to an
indemnification obligation hereunder against the indemnifying party (a
"Claim"), but a failure to give such notice or delaying such notice shall not
affect the indemnified party's right to indemnification and the indemnifying
party's obligation to indemnify as set forth in this Agreement, except to the
extent the indemnifying party's ability to
<PAGE>
remedy, contest, defend or settle with respect to such Claim is thereby
prejudiced. The obligations and liabilities of the parties with respect to
any Claim shall be subject to the following additional terms and conditions:
(1) The indemnifying party shall have the right to undertake,
by counsel or other representatives of its own choosing, the defense or
opposition to such Claim.
(2) In the event that the indemnifying party shall elect not
to undertake such defense or opposition, or, within twenty (20) days after
written notice (which shall include sufficient description of background
information explaining the basis for such Claim) of any such Claim from the
indemnified party, the indemnifying party shall fail to undertake to defend
or oppose, the indemnified party (upon further written notice to the
indemnifying party) shall have the right to undertake the defense,
opposition, compromise or settlement of such Claim, by counsel or other
representatives of its own choosing, on behalf of and for the account and
risk of the indemnifying party (subject to the right of the indemnifying
party to assume defense of or opposition to such Claim at any time prior to
settlement, compromise or final determination thereof).
(3) Anything herein to the contrary notwithstanding: (i) the
indemnified party shall have the right, at its own cost and expense, to
participate in the defense, opposition, compromise or settlement of the
Claim; (ii) the indemnifying party shall not, without the indemnified party's
written consent, settle or compromise any Claim or consent to entry of any
judgment which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the indemnified party of a release from
all liability in respect of such Claim; and (iii) in the event that the
indemnifying party undertakes defense of or opposition to any Claim, the
indemnified party, by counsel or other representative of its own choosing and
at its sole cost and expense, shall have the right to consult with the
indemnifying party and its counsel or other representatives concerning such
Claim and the indemnifying party and the indemnified party and their
respective counsel or other representatives shall cooperate in good faith
with respect to such Claim.
(4) All claims not disputed shall be paid by the indemnifying
party within thirty (30) days after receiving notice of the Claim. "Disputed
Claims" shall mean claims for Damages by an indemnified party which the
indemnifying party objects to in writing within thirty (30) days after
receiving notice of the Claim. In the event there is a Disputed Claim with
respect to any Damages, the indemnifying party shall be required to pay the
indemnified party the amount of such Damages for which the indemnifying party
has, pursuant to a final determination, been found liable within ten (10)
days after there is a final determination with respect to such Disputed
Claim. A final determination of a Disputed Claim shall be (i) a judgment of
any court determining the validity of a Disputed Claim, if no appeal is
pending from such judgment and if the time to appeal therefrom has elapsed;
(ii) an award of any arbitration determining the validity of such disputed
claim, if there is not pending any motion to set aside such award and if the
time within which to move to set aside such award has elapsed; (iii) a
written termination of the dispute with respect to such claim signed by the
parties thereto or their attorneys; (iv) a written acknowledgment of the
indemnifying party that it no longer disputes the validity of such claim; or
(v) such other evidence of final determination of a disputed claim as shall
be acceptable to the parties. No undertaking of defense or opposition to a
Claim shall be construed as an acknowledgment by such party that it is liable
to the party claiming indemnification with respect to the Claim at issue or
other similar Claims.
ARTICLE 16: TERMINATION
16.1. TERMINATION. This Agreement may be terminated at any time
prior to Closing as follows:
(1) by mutual written consent of Buyer and Seller;
(2) by written notice of Buyer to Seller if Seller (i) does
not satisfy the conditions or perform the obligations to be satisfied or
performed by it on the Closing Date; or (ii) otherwise breaches in any
material respect any of its representations or warranties or defaults in any
material respect in the performance of any of its covenants or agreements
herein contained and such breach or default is not cured within the Cure
Period (defined
<PAGE>
below);
(3) by written notice of Seller to Buyer if Buyer (i) does not
satisfy the conditions or perform the obligations to be satisfied or
performed by it on the Closing Date; or (ii) otherwise breaches in any
material respect any of its representations or warranties or defaults in any
material respect in the performance of any of its covenants or agreements
herein contained and such breach or default is not cured within the Cure
Period (defined below);
(4) by written notice of Buyer to Seller, or by Seller to
Buyer, if the FCC denies the FCC Application;
(5) by written notice of Seller to Buyer if the Closing shall
not have been consummated on or before the date four months after the date of
this Agreement; or
(6) by written notice of Seller to Buyer if the AMFM Agreement
is terminated or expires.
The term "Cure Period" as used herein means a period commencing the
date Buyer or Seller receives from the other written notice of breach or
default hereunder and continuing until the earlier of (i) thirty (30) days
thereafter or (ii) the Closing Date; provided, however, that if the breach or
default cannot reasonably be cured within such period but can be cured before
the Closing Date, and if diligent efforts to cure promptly commence, then the
Cure Period shall continue as long as such diligent efforts to cure continue,
but not beyond the Closing Date. Except as set forth below, the termination
of this Agreement shall not relieve any party of any liability for breach or
default under this Agreement prior to the date of termination.
Notwithstanding anything contained herein to the contrary, Section 13.1 shall
survive any termination of this Agreement.
16.2. REMEDIES. The parties recognize that if either party refuses
to consummate the Closing pursuant to the provisions of this Agreement or
either party otherwise breaches or defaults such that the Closing has not
occurred ("Breaching Party"), monetary damages alone will not be adequate to
compensate the non-breaching party ("Non-Breaching Party") for its injury.
Such Non-Breaching Party shall therefore be entitled to obtain specific
performance of the terms of this Agreement in lieu of, and not in addition
to, any other remedies, including but not limited to monetary damages, that
may be available to it; provided however, that Seller may elect to recover
liquidated damages in lieu of obtaining specific performance. If any action
is brought by the Non-Breaching Party to enforce this Agreement, the
Breaching Party shall waive the defense that there is an adequate remedy at
law. In the event of a default by the Breaching Party which results in the
filing of a lawsuit for damages, specific performance, or other remedy, the
Non-Breaching Party shall be entitled to reimbursement by the Breaching Party
of reasonable legal fees and expenses incurred by the Non-Breaching Party,
provided that the Non-Breaching Party is successful in such lawsuit.
16.3. LIQUIDATED DAMAGES. If Seller terminates this Agreement due to
Buyer's failure to consummate the Closing on the Closing Date or if this
Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), then
the Deposit and any interest accrued thereon shall be paid to Seller, and
such payment shall constitute liquidated damages. It is understood and agreed
that such liquidated damages amount represents Buyer's and Seller's
reasonable estimate of actual damages and does not constitute a penalty.
ARTICLE 17: MISCELLANEOUS PROVISIONS
17.1. CASUALTY LOSS. In the event any loss or damage of the Station
Assets exists on the Closing Date, Buyer and Seller shall consummate the
Closing and Seller shall assign to Buyer the proceeds of any insurance
payable to Seller on account of such damage or loss.
17.2. FURTHER ASSURANCES. After the Closing, Seller shall from time
to time, at the request of and without further cost or expense to Buyer,
execute and deliver such other instruments of conveyance and transfer and
<PAGE>
take such other actions as may reasonably be requested in order to more
effectively consummate the transactions contemplated hereby to vest in Buyer
good title to the Station Assets, and Buyer shall from time to time, at the
request of and without further cost or expense to Seller, execute and deliver
such other instruments and take such other actions as may reasonably be
requested in order more effectively to relieve Seller of any obligations
being assumed by Buyer hereunder.
17.3. ASSIGNMENT. Except as set forth in Sections 10.5 (1031
Exchange) and 10.6 (Trust), neither party may assign this Agreement without
the prior written consent of the other party hereto; provided, however, that
either party may assign this Agreement to one or more direct or indirect
subsidiaries so long as (i) the assigning party remains liable hereunder,
(ii) the assignment is made prior to any filings with the FCC, FTC, DOJ,
including any HSR filing, and (ii) such assignment will not delay any consent
required to be obtained hereunder, including but not limited to HSR
Clearance, DOJ Consent and FCC Consent, or delay the Closing in any respect.
With respect to any permitted assignment, the parties shall take all such
actions as are reasonably necessary to effectuate such assignment, including
but not limited to cooperating in any appropriate filings with the FCC or
other governmental authorities. All covenants, agreements, statements,
representations, warranties and indemnities in this Agreement by and on
behalf of any of the parties hereto shall bind and inure to the benefit of
their respective successors and permitted assigns of the parties hereto.
17.4. AMENDMENTS. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
17.5. HEADINGS. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction
of the provisions of this Agreement.
17.6. GOVERNING LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of Texas without giving
effect to the choice of law provisions thereof.
17.7. NOTICES. Any notice, demand or request required or permitted
to be given under the provisions of this Agreement shall be in writing,
including by facsimile, and shall be deemed to have been received on the date
of personal delivery, on the third day after deposit in the U.S. mail if
mailed by registered or certified mail, postage prepaid and return receipt
requested, on the day after delivery to a nationally recognized overnight
courier service if sent by an overnight delivery service for next morning
delivery or when delivered by facsimile transmission, and shall be addressed
as follows (or to such other address as any party may request by written
notice):
<PAGE>
if to Seller: c/o Clear Channel Broadcasting, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: President
Facsimile: (210) 822-2299
with a copy (which shall not
constitute notice) to: Graydon, Head & Ritchey
1900 Fifth Third Center
511 Walnut Street
Cincinnati, Ohio 45202
Attention: John J. Kropp, Esq.
Facsimile: (513) 651-3836
if to Buyer: c/o Hispanic Broadcasting Corporation
3102 Oak Lawn Avenue, Suite 215
Dallas, Texas 75219
Attention: President
Facsimile: (214) 525-7750
with a copy (which shall not
constitute notice) to: Hallett & Perrin
717 N. Harwood, 14th Flr.
Dallas, Texas 75201
Attention: Bruce H. Hallett, Esq.
Facsimile: (214) 953-0576
17.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
17.9. NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any
person or entity other than the parties hereto and their successors or
permitted assigns, any rights or remedies under or by reason of this
Agreement.
17.10. SEVERABILITY. The parties agree that if one or more
provisions contained in this Agreement shall be deemed or held to be invalid,
illegal or unenforceable in any respect under any applicable law, this
Agreement shall be construed with the invalid, illegal or unenforceable
provision deleted, and the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected or impaired
thereby.
17.11. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto and supersedes any and all
prior agreements, arrangements and understandings relating to the matters
provided for herein. This Agreement does not supersede any confidentiality
agreement relating to the Stations.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
SIGNATURE PAGE(S) TO ASSET PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
SELLER: CLEAR CHANNEL BROADCASTING, INC.
By: /s/ Jerome L. Kersting
-----------------------------------------
Jerome L. Kersting, Senior Vice President
CLEAR CHANNEL BROADCASTING LICENSES, INC.
By: /s/ Jerome L. Kersting
-----------------------------------------
Jerome L. Kersting, Senior Vice President
AMFM RADIO LICENSES LLC
By: /s/ William S. Banowsky, Jr.
-----------------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
AMFM OHIO, INC.
By: /s/ William S. Banowsky, Jr.
-----------------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
AMFM HOUSTON, INC.
By: /s/ William S. Banowsky, Jr.
-----------------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
<PAGE>
BUYER: HISPANIC BROADCASTING CORPORATION
By: /s/ Jeffrey T. Hinson
-----------------------------------------
Jeffrey T. Hinson, Senior Vice President and
Chief Financial Officer
<PAGE>
Exhibit 11
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended September 30,
------------------------------ December 31, ------------------------
1999 1998 1997 1996 1996 1995
------- ------- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) from continuing
operations $34,176 $26,884 $18,772 $2,064 $(29,157) $4,319
Preferred stock dividends -- -- -- -- 23 27
------- ------- ------- ------ -------- ------
Net income (loss) applicable to
common stockholders $34,176 $26,884 $18,772 $2,064 $(29,180) $4,292
======= ======= ======= ====== ======== ======
BASIC EARNINGS PER SHARE:
Continuing operations $ 0.67 $ 0.55 $ 0.45 $ 0.09 $ (1.41) $ 0.21
Discontinued operations -- -- -- -- (0.49) (0.03)
Extraordinary loss -- -- -- -- (0.36) --
------- ------- ------- ------ -------- ------
Net income (loss) per share $ 0.67 $ 0.55 $ 0.45 $ 0.09 $ (2.26) $ 0.18
======= ======= ======= ====== ======== ======
DILUTED EARNINGS PER SHARE:
Continuing operations $ 0.66 $ 0.54 $ 0.45 $ 0.09 $ (1.41) $ 0.20
Discontinued operations -- -- -- -- (0.49) (0.03)
Extraordinary loss -- -- -- -- (0.36) --
------- ------- ------- ------ -------- ------
Net income (loss) per share $ 0.66 $ 0.54 $ 0.45 $ 0.09 $ (2.26) $ 0.17
======= ======= ======= ====== ======== ======
NUMBER OF SHARES ON WHICH
NET INCOME (LOSS) PER SHARE
IS BASED:
Weighted average common shares
before dilutive effect of
common stock equivalents 50,783 49,021 41,671 23,095 20,590 20,021
Common stock equivalents:
Stock options 674 318 121 -- -- 1,590
Employee Stock Purchase Plan 7 9 -- -- -- --
------- ------- ------- ------ -------- ------
Weighted average common shares 51,464 49,348 41,792 23,095 20,590 21,611
======= ======= ======= ====== ======== ======
</TABLE>
<PAGE>
Exhibit 12.1
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands except ratio)
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended September 30,
------------------------------- December 31, ------------------------
1999 1998 1997 1996 1996 1995
-------- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) from continuing
operations before income taxes $ 57,989 $ 44,624 $ 31,389 $ 2,164 $(29,092) $ 4,469
Fixed charges 3,054 3,292 4,863 2,965 11,793 7,055
-------- -------- -------- ------- -------- -------
Earnings as adjusted (A) $ 61,043 $ 47,916 $ 36,252 $ 5,129 $(17,299) $11,524
======== ======== ======== ======= ======== =======
FIXED CHARGES:
Interest expense $ 1,607 $ 2,046 $ 3,947 $ 2,867 $ 11,241 $ 6,607
Interest portion of rental
expense (1) 1,447 1,246 916 98 552 448
-------- -------- -------- ------- -------- -------
Total fixed charges (B) $ 3,054 $ 3,292 $ 4,863 $ 2,965 $11,793 $ 7,055
======== ======== ======== ======= ======== =======
Ratio of earnings to fixed charges
(A) divided by (B) 20.0 14.6 7.5 1.7 - 1.6
Deficiency of earnings to cover
fixed charges (B) minus (A) $ - $ - $ - $ - $ 29,092 $ -
</TABLE>
(1) Management of the Company believes one-third of rent expense is
representative of the interest component of rent expense.
<PAGE>
Exhibit 12.2
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(in thousands except ratio)
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended Year Ended September 30,
------------------------------- December 31, ------------------------
1999 1998 1997 1996 1996 1995
-------- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) from continuing
operations before income taxes $ 57,989 $ 44,624 $ 31,389 $ 2,164 $(29,092) $ 4,469
Fixed charges 3,054 3,292 4,863 2,965 11,793 7,055
-------- -------- -------- ------- -------- -------
Earnings as adjusted (A) $ 61,043 $ 47,916 $ 36,252 $ 5,129 $(17,299) $11,524
======== ======== ======== ======= ======== =======
FIXED CHARGES:
Interest expense $ 1,607 $ 2,046 $ 3,947 $ 2,867 $ 11,241 $ 6,607
Interest portion of rental
expense (1) 1,447 1,246 916 98 552 448
-------- -------- -------- ------- -------- -------
Total fixed charges 3,054 3,292 4,863 2,965 11,793 7,055
Preferred stock dividends (2) - - - - 20 75
-------- -------- -------- ------- -------- -------
Total fixed charges and preferred
stock dividends (B) $ 3,054 $ 3,292 $ 4,863 $ 2,965 $ 11,813 $ 7,130
======== ======== ======== ======= ======== =======
Ratio of earnings to combined
fixed charges and preferred stock
dividends (A) divided by (B) 20.0 14.6 7.5 1.7 - 1.6
Deficiency of earnings to cover
combined fixed charges and preferred
stock dividends (B) minus (A) $ - $ - $ - $ - $ 29,112 $ -
</TABLE>
(1) Management of the Company believes approximately one-third of rent
expense is representative of the interest component of rent expense.
(2) Represents pretax earnings required to cover preferred stock dividends.
<PAGE>
EXHIBIT 21
Subsidiaries of Registrant
HBC Broadcasting Texas, L.P.
HBC Chicago, Inc.
HBC Florida, Inc.
HBC GP Texas, Inc.
HBC Houston License Corporation
HBCi, Inc.
HBC Illinois, Inc.
HBC-Las Vegas, Inc.
HBC License Corporation
HBC Network, Inc.
HBC New York, Inc.
HBC Phoenix, Inc.
HBC San Diego, Inc.
HBC Tower Company, Inc.
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.
Tichenor License Corporation
TMS Assets California, Inc.
TMS License California, Inc.
WADO Radio, Inc.
WADO-AM License Corp.
WLXX-AM License Corp.
WPAT-AM License Corp.
WQBA-AM License Corp.
WQBA-FM License Corp.
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Hispanic 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 Hispanic
Broadcasting Corporation of our report dated February 10, 2000, relating to the
consolidated balance sheets of Hispanic Broadcasting Corporation (formerly
Heftel Broadcasting Corporation) and subsidiaries as of December 31, 1999 and
1998 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1999, and the related financial statement schedule, which report appears in the
December 31, 1999 Annual Report on Form 10-K of Hispanic Broadcasting
Corporation.
/s/ KPMG LLP
Dallas, Texas
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, 1999
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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 215,136
<SECURITIES> 0
<RECEIVABLES> 42,476
<ALLOWANCES> 1,855
<INVENTORY> 0
<CURRENT-ASSETS> 256,582
<PP&E> 64,140
<DEPRECIATION> 23,217
<TOTAL-ASSETS> 1,157,138
<CURRENT-LIABILITIES> 25,445
<BONDS> 1,448
0
0
<COMMON> 54
<OTHER-SE> 1,026,199
<TOTAL-LIABILITY-AND-EQUITY> 1,157,138
<SALES> 0
<TOTAL-REVENUES> 197,920
<CGS> 0
<TOTAL-COSTS> 139,893
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,869
<INTEREST-EXPENSE> 1,607
<INCOME-PRETAX> 57,989
<INCOME-TAX> 23,813
<INCOME-CONTINUING> 34,176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,176
<EPS-BASIC> 0.67
<EPS-DILUTED> 0.66
</TABLE>
