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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): May 2, 1997
CHANCELLOR RADIO BROADCASTING COMPANY
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
<TABLE>
<S> <C>
33-80534 75-2544623
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(Commission File Number) (I.R.S. Employer Identification No.)
12655 North Central Expressway
Suite 405
Dallas, Texas 75243
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(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(972) 239-6220
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On May 2, 1997, Chancellor Radio Broadcasting Company, a Delaware
corporation (the "Company"), commenced its offer (the "Tender Offer") to
purchase for cash, upon the terms and subject to the conditions set forth in
its Offer to Purchase and Consent Solicitation Statement dated May 2, 1997 (the
"Offer to Purchase"), and related Consent and Letter of Transmittal (the
"Consent and Letter of Transmittal"), all of its outstanding 12-1/2% Senior
Subordinated Notes due 2004 (the "Notes"). The consideration to be paid for
the Notes tendered pursuant to the Tender Offer will be the greater of (x)
$1,145 per $1,000 principal amount, and (y) the price resulting from a yield to
the Earliest Redemption Date (as defined in the Offer to Purchase) equal to the
sum of (i) the yield on the 6.00% U.S. Treasury Note due October 15, 1999,
based on the bid price as of 2:00 p.m. New York City time on May 16, 1997, plus
(ii) 100 basis points, plus, in each case, accrued and unpaid interest up to
but not including the Expiration Date (as defined).
In conjunction with the Tender Offer, the Company is also soliciting (the
"Solicitation") the consents (the "Consents") to certain proposed amendments to
the indenture (as amended, the "Indenture") governing the Notes, which
amendments would eliminate substantially all of the restrictive covenants
contained in the Indenture. The Tender Offer and Solicitation is scheduled to
expire at 12:00 midnight, New York City time, on Friday, May 30, 1997, unless
extended (such time and date, as extended, the "Expiration Date").
The Company is commencing the Tender Offer and Solicitation as a part of
its overall plan of financing for its previously announced acquisition of
certain subsidiaries of Viacom International, Inc. ("Viacom") that own and
operate 2 FM radio stations in Los Angeles, California, 1 FM station in
Chicago, Illinois, and 1 FM station in Detroit, Michigan (the "Company Viacom
Acquisition"). Subsequent to the announcement of the Company Viacom
Acquisition, the Company has entered into an agreement with an affiliate of
Capital Cities/ABC Radio to sell WDRQ-FM in Detroit, Michigan (the "Detroit
Disposition"), which the Company will acquire in the Viacom Acquisition.
In connection with the Tender Offer and Solicitation, the Company included
certain pro forma capitalization and financial statements in the Offer to
Purchase that was mailed to the holders of Notes. This pro forma information
is set forth below.
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As used herein:
(A) "Completed Transactions" means (i) the acquisition of Trefoil
Communications, Inc. ("Shamrock") consummated in February 1996, (ii) the
disposition of WWWW-FM and WDFN-AM in Detroit, Michigan consummated in
January 1997, (iii) the acquisition of KIMN-FM and KALC-FM in Denver,
Colorado in exchange for KTBZ-FM (acquired in the Shamrock acquisition) and
cash consummated in July 1996 (the "Denver Exchange"), (v) the disposition
of KTBZ-FM in the Denver Exchange, (vi) the January 1997 acquisition (the
"Colfax Acquisition") of 12 radio stations from Colfax Communications, Inc.
("Colfax") and the subsequent divestiture of two radio stations serving
Milwaukee, Wisconsin which were acquired from Colfax (the "Colfax
Transaction"), (vii) the February 1997 acquisition (the "Omni Acquisition")
of eight radio stations located in Florida from OmniAmerica Group ("Omni")
and subsequent exchange of three stations acquired from Omni in West Palm
Beach, Florida for 1 AM station in Sacramento, California plus cash, and
(viii) the financing of each of the foregoing;
(B) "Pending Transactions" means (i) the pending exchange of two
stations acquired from Omni in Jacksonville, Florida and cash for 3 FM
stations and 1 AM station in Long Island, New York (the "Jacksonville/Long
Island swap"), (ii) the Company Viacom Acquisition, (iii) the Detroit
Disposition, (iv) the Tender Offer (assuming the Company receives
$30,001,000 in principal amount of Notes (the "Minimum Condition")), and
(v) the financing of each of the foregoing;
(C) "New Credit Agreement" means the Company's credit agreement
entered into in connection with the Colfax Acquisition on January 23, 1997;
and
(D) "Restated Credit Agreement" means the Company's credit agreement
that is currently being negotiated with various lenders, which the Company
intends to use to refinance the New Credit Agreement and fund a portion of
the purchase price for the Company Viacom Acquisition.
In addition to the above-referenced Pending Transactions, the Company and
its direct parent, Chancellor Broadcasting Company ("Chancellor") have
previously disclosed its anticipated merger (the "Evergreen Merger") with and
into Evergreen Media Corporation ("Evergreen"). In addition, Chancellor, the
Company and Evergreen have previously announced that, concurrently with the
Company Viacom Acquisition, Evergreen will purchase certain subsidiaries of
Viacom that own and operate 2 FM stations in New York, New York and 2 FM and 2
AM stations serving Washington, D.C. (the "Evergreen Viacom Acquisition" and,
collectively with the Company Viacom Acquisition, the "Viacom Acquisition").
It is
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currently anticipated that the Company and Evergreen will consummate the Viacom
Acquisition prior to the consummation of the Evergreen Merger. In addition to
the Evergreen Viacom Acquisition, Evergreen has entered into agreements
relating to several additional pending acquisitions, dispositions and station
swaps (the "Evergreen Pending Transactions").
THE PRO FORMA INFORMATION CONTAINED IN THIS FORM 8-K DOES NOT GIVE EFFECT
TO THE EVERGREEN MERGER, THE EVERGREEN PENDING TRANSACTIONS, OR THE FINANCING
THEREOF.
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CAPITALIZATION
The following table sets forth the historical capitalization of the Company
("Historical") at December 31, 1996 and the capitalization of the Company as of
December 31, 1996, as adjusted to give effect to (i) the Completed Transactions,
(ii) the Completed Transaction and the Tender Offer (assuming satisfaction
solely of the Minimum Condition), and (iii) the Completed Transaction and the
Pending Transactions. This table should be read in conjunction with the
Consolidated Financial Statements of Chancellor Radio Broadcasting Company and
Subsidiaries and the Pro Forma Financial Statements, and, in each case, the
related notes thereto filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and set forth elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA AS
ADJUSTED ADJUSTED FOR THE ADJUSTED FOR THE
FOR THE COMPLETED COMPLETED
COMPLETED TRANSACTIONS AND TRANSACTIONS AND THE
HISTORICAL TRANSACTIONS THE TENDER OFFER PENDING TRANSACTIONS
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<S> <C> <C> <C> <C>
Long-term Debt (including current
maturities):
Credit Agreement:
Revolving Loans.................... $ 20,345 $ -- $ -- $ --
Term Loans......................... 74,968 -- -- --
New Credit Agreement(1)............... -- 225,917 260,268 --
Restated Credit Agreement(2).......... -- -- 589,587
12 1/2% Senior Subordinated Notes due
2004(3)............................ 60,000 60,000 29,999 29,999
9 3/8% Senior Subordinated Notes due
2004............................... 200,000 200,000 200,000 200,000
-------- ---------- ---------- ----------
Total Long-term Debt.......... 355,313 485,917 490,267 819,586
-------- ---------- ---------- ----------
12 1/4% Senior Exchangeable Preferred
Stock due 2008(4)..................... 107,222 107,222 107,222 107,222
12% Exchangeable Preferred Stock due
2009(5)............................... -- 191,817 191,817 191,817
Stockholders' Equity:
Common Stock.......................... 1 1 1 1
Additional Paid-in Capital(6)......... 219,519 340,065 340,065 488,565
Accumulated Deficit(7)................ (18,529) (19,992) (23,082) (24,806)
-------- ---------- ---------- ----------
Total Stockholder's Equity.... 200,991 320,074 316,984 463,760
-------- ---------- ---------- ----------
Total Capitalization.......... $663,526 $1,105,030 $1,106,290 $1,582,385
======== ========== ========== ==========
</TABLE>
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(1) The Company entered into the New Credit Agreement in conjunction with the
refinancing of its prior credit agreement (the "Credit Agreement") and the
consummation of the Colfax Acquisition in January 1997. The New Credit
Agreement consists of a $225.0 million term loan facility and a $120.0
million revolving loan facility.
(2) The Restated Credit Agreement will be entered into by the Company in
conjunction with the refinancing of the New Credit Agreement and the
consummation of the Company Viacom Acquisition. For purposes of this table,
the Company has assumed that it consummates the Detroit Disposition
concurrently with the closing of the Company Viacom Acquisition. The Company
anticipates that the Restated Credit Agreement will consist of a $400.0
million term loan facility and a $350.0 million revolving loan facility;
however, the terms of the Restated Credit Agreement are subject to
negotiation with its lenders.
(3) The foregoing table illustrates the pro forma effects of the Tender Offer
assuming only that the Minimum Condition is met. The Company expects to use
funds under its revolving credit facility to repurchase tendered Notes at an
assumed cost of 114.5% of the aggregate principal amount of the tendered
Notes. If the Company receives tenders of more than $30,001,000 Notes, the
amount of Notes outstanding on a
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pro forma basis will be reduced and revolving credit borrowings will
increase in the same proportions as currently reflected in the table.
(4) The $100.0 million initial liquidation preference of the 12 1/4% Senior
Exchangeable Preferred Stock has been reduced by approximately $4.0 million
of transaction costs and increased by approximately $11.2 million of
dividends and accretion.
(5) The $200.0 million initial liquidation preference of the 12% Exchangeable
Preferred Stock has been reduced by approximately $8.2 million of
transaction costs.
(6) Adjusted for (i) the value of the assets acquired by Chancellor and
contributed to the Company in conjunction with the Omni Acquisition and (ii)
the contribution by Chancellor of the net proceeds of $148.5 million of the
$150.0 million bridge facility (the "Bridge Facility") which will be entered
into in connection with the Company Viacom Acquisition.
(7) On a pro forma basis, as if the refinancing of the Credit Agreement took
place on December 31, 1996, the Company would have incurred an extraordinary
charge of $2.8 million, net of tax benefit of $1.9 million. On January 23,
1997, the date the Company actually refinanced the Credit Agreement, the
Company incurred an extraordinary charge of $2.7 million, net of tax benefit
of $1.8 million. In connection with the Tender Offer, assuming satisfaction
solely of the Minimum Condition, the Company expects to incur an
extraordinary charge of $3.1 million, net of tax benefit of $2.1 million.
Also, in connection with the refinancing of the New Credit Agreement, which
will be consummated in connection with the Company Viacom Acquisition, the
Company expects to incur extraordinary charges of $1.7 million, net of tax
benefit of $1.2 million.
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PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements (the "Pro Forma
Financial Statements") give effect to the Company's completed and pending
acquisitions, dispositions, exchanges and financing transactions not previously
reflected in the Company's historical financial statements as of the date
hereof. The Pro Forma Financial Statements and accompanying notes should be
read in conjunction with the financial statements included or incorporated by
reference herein. The Pro Forma Financial Statements are not necessarily
indicative of either future results of operations or the results that might
have occurred if the foregoing transactions had been consummated on the
indicated dates.
The pro forma condensed statement of operations for the year ended December
31, 1996 gives effect to the consummation of the Completed Transactions and the
Pending Transactions as if each such transaction had occurred on January 1,
1996. The pro forma condensed balance sheet at December 31, 1996 has been
prepared as if any such transaction not yet consummated on that date had
occurred on that date.
The Completed Transactions and Pending Transactions referred to above were
or will be accounted for using the purchase method of accounting with the total
cost of the acquisitions and exchanges allocated to the tangible and intangible
assets and liabilities acquired based upon their respective fair values. The
allocation of the aggregate purchase prices reflected in the Pro Forma
Financial Statements is preliminary. The final allocation of the purchase
prices is contingent upon the receipt of final appraisals of the acquired
assets and analysis of liabilities assumed; however, such allocations are not
expected to differ materially from the preliminary amounts.
THE PRO FORMA FINANCIAL STATEMENTS DO NOT GIVE EFFECT TO THE EVERGREEN
MERGER OR THE EVERGREEN PENDING TRANSACTIONS, OR THE FINANCING THEREOF.
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CHANCELLOR RADIO BROADCASTING COMPANY
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS ADJUSTED
FOR THE
COMPLETED
PRO FORMA AS ADJUSTED PRO FORMA TRANSACTIONS
ADJUSTMENTS FOR THE ADJUSTMENTS FOR AND THE
FOR THE COMPLETED COMPLETED THE PENDING PENDING
HISTORICAL TRANSACTIONS(1) TRANSACTIONS TRANSACTIONS(2) TRANSACTIONS
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<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets.......................... $ 53,127 $ 13,750(a) $ 66,877 $ 12,031(a) $ 78,908
Property and equipment, net............. 49,123 20,072(a) 69,195 6,033(a) 75,228
Intangible assets, net.................. 551,406 431,811(a) 983,217 461,074(a) 1,444,291
Other assets............................ 37,087 (20,400)(a) 14,924 (173)(b) 14,751
(1,763)(b)
-------- -------- ---------- -------- ----------
Total assets............................ $690,743 $443,470 $1,134,213 $478,965 $1,613,178
======== ======== ========== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current portion of long-term debt....... $ 400 $ 12,100(c) $ 12,500 $(12,500)(c) $ --
Other current liabilities............... 23,808 3,821(a) 27,629 4,819(a) 32,448
-------- -------- ---------- -------- ----------
Total current liabilities..... 24,208 15,921 40,129 (7,681) 32,448
Long-term debt, excluding current
portion............................... 354,913 127,730(a) 473,417 325,819(a) 819,586
(12,100)(c) 12,500(c)
2,874(b) 34,351(d)
(30,001)(d)
3,500(b)
Deferred tax liabilities................ 2,606 (1,855)(b) 751 (1,469)(b) (2,458)
(1,740)(d)
Other liabilities....................... 803 -- 803 -- 803
-------- -------- ---------- -------- ----------
Total liabilities............. 382,530 132,570 515,100 335,279 850,379
Redeemable preferred stock.............. 107,222 191,817(a) 299,039 -- 299,039
-------- ---------- ----------
Stockholder's equity:
Common Stock............................ 1 1 -- 1
Additional paid-in capital.............. 219,519 120,546(a) 340,065 148,500(a) 488,565
Accumulated deficit..................... (18,529) 1,319(a) (19,992) (2,610)(d) (24,806)
(2,782)(b) (2,204)(b)
-------- -------- ---------- -------- ----------
Total stockholder's equity.... 200,991 119,083 320,074 143,686 463,760
-------- -------- ---------- -------- ----------
Total liabilities and stockholder's
equity................................ $690,743 $443,470 $1,134,213 $478,965 $1,613,178
======== ======== ========== ======== ==========
</TABLE>
See accompanying Notes to Pro Forma Financial Statements
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CHANCELLOR RADIO BROADCASTING COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS ADJUSTED
FOR THE
NET PRO FORMA COMPLETED
ADJUSTMENTS AS ADJUSTED PRO FORMA TRANSACTIONS
FOR THE FOR THE PENDING ADJUSTMENTS FOR AND THE
COMPLETED COMPLETED TRANSACTIONS THE PENDING PENDING
HISTORICAL TRANSACTIONS(3) TRANSACTIONS HISTORICAL(4) TRANSACTIONS(5) TRANSACTIONS
---------- --------------- ------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Gross revenues..................... $203,188 $ 73,271 $276,459 $57,789 $ (1,963)(a) $332,285
Less: agency commissions........... (24,787) (10,233) (35,020) (9,152) -- (44,172)
-------- -------- -------- ------- -------- --------
Net revenues....................... 178,401 63,038 241,439 48,637 (1,963) 288,113
Station operating expenses
excluding depreciation and
amortization..................... 111,210 40,633 151,843 24,562 (4,000)(a) 172,405
Depreciation and amortization...... 20,877 14,555 35,432 6,427 5,797(b) 47,656
Corporate general and
administrative expenses.......... 4,845 509 5,354 2,347 (1,807)(c) 5,894
Stock option compensation.......... 3,800 -- 3,800 -- -- 3,800
-------- -------- -------- ------- -------- --------
Operating income (loss)............ 37,669 7,341 45,010 15,301 (1,953) 58,358
Interest expense................... 35,704 12,410 48,114 6,374 19,436(d) 73,924
Other (income) expense............. 68 (216) (148) -- -- (148)
-------- -------- -------- ------- -------- --------
Income (loss) before income
taxes............................ 1,897 (4,853) (2,956) 8,927 (21,389) (15,418)
Income tax expense (benefit)....... 4,612 (1,794) 2,818 4,422 (9,407)(e) (2,167)
-------- -------- -------- ------- -------- --------
Net income (loss) before
extraordinary loss............... (2,715) (3,059) (5,774) 4,505 (11,982) (13,251)
Preferred stock dividends and
accretion........................ 11,557 26,843 38,400 -- -- 38,400
-------- -------- -------- ------- -------- --------
Income (loss) attributable to
common stockholder............... $(14,272) $(29,902) $(44,174) $ 4,505 $(11,982) $(51,651)
======== ======== ======== ======= ======== ========
Deficiency of earnings to fixed
charges(6)....................... $ 17,365 $ 79,418
======== ========
</TABLE>
See accompanying Notes to Pro Forma Financial Statements
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NOTES TO PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. PRO FORMA BALANCE SHEET -- COMPLETED TRANSACTIONS
(a) Reflects the Completed Transactions as follows:
<TABLE>
<CAPTION>
PROPERTY
PURCHASE/ AND ASSETS INTANGIBLE
COMPLETED (SALES) CURRENT EQUIPMENT, HELD FOR ASSETS, CURRENT ACCUMULATED
TRANSACTIONS PRICE ASSETS NET(I) SALE NET(I) LIABILITIES DEFICIT
------------ --------- ------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Colfax(ii).............................. $383,700 $13,750 $14,624 $ 41,253 $317,894 $(3,821) $ --
WMIL-FM/ WOKY-FM(iii)................... (41,253) -- -- (41,253) -- -- --
Omni(iv)................................ 181,046 -- 9,209 -- 171,837 -- --
KSTE-FM(v).............................. (33,000) -- (525) -- (32,475) -- --
WWWW-FM/ WDFN-AM(vi).................... (30,000) -- (3,236) -- (25,445) -- (1,319)
-------- ------- ------- -------- -------- ------- -------
Total............................ $460,493 $13,750 $20,072 $ -- $431,811 $(3,821) $(1,319)
======== ======= ======= ======== ======== ======= =======
<CAPTION>
INCREASE
(DECREASE) INCREASE IN
DECREASE IN REDEEMABLE ADDITIONAL
COMPLETED IN OTHER LONG-TERM PREFERRED PAID-IN
TRANSACTIONS ASSETS DEBT STOCK CAPITAL
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<S> <C> <C> <C> <C>
Colfax(ii).............................. $20,400 $ 65,937 $191,817 $105,546
WMIL-FM/ WOKY-FM(iii)................... -- (41,253) -- --
Omni(iv)................................ -- 166,046 -- 15,000
KSTE-FM(v).............................. -- (33,000) -- --
WWWW-FM/ WDFN-AM(vi).................... -- (30,000) -- --
------- -------- -------- --------
Total............................ $20,400 $127,730 $191,817 $120,546
======= ======== ======== ========
</TABLE>
(i) The amounts allocated to net property and equipment and net
intangible assets are based upon appraisals of the assets acquired
(except for WWWW-FM and WDFN-AM in Detroit which represent the
historical balances of net property and equipment and net
intangible assets and are based upon information provided by the
management of the Company).
(ii) On January 23, 1997, the Company consummated the Colfax
Acquisition consisting of 12 radio stations (8 FM and 4 AM)
located in 4 markets (Minneapolis-St. Paul, Phoenix, Washington,
D.C. and Milwaukee markets). The assets of the Milwaukee stations
are classified as assets held for sale in connection with the
purchase price allocation of the Colfax Acquisition (see (iii)
below). The total purchase price, including acquisition costs,
allocated to net assets acquired was approximately $383,700. The
Colfax Acquisition was financed through (i) a private placement of
$200,000 of 12% Exchangeable Preferred Stock with net proceeds of
$191,817; (ii) a private placement of $110,000 by Chancellor of 7%
Convertible Preferred Stock with net proceeds of $105,546 which is
reflected as a capital contribution to the Company; (iii)
additional bank borrowings under the New Credit Agreement of
$65,937 and (iv) $20,400 of escrowed funds (previously paid and
classified as other assets at December 31, 1996).
(iii) On March 31, 1997, the Company sold WMIL-FM and WOKY-AM in
Milwaukee, acquired as part of the Colfax Acquisition, for $41,253
million in cash. The assets of these stations are classified as
assets held for sale in connection with the purchase price
allocation of the Colfax Acquisition with no gain or loss
recognized.
(iv) On February 13, 1997, the Company acquired substantially all of the
assets and assumed certain liabilities of the Omni Stations
consisting of 8 radio stations (7 FM and 1 AM) located in 3 markets
(Orlando, West Palm Beach and Jacksonville). The total purchase
price, including acquisition costs, allocated to net assets
acquired was approximately $181,046. The Omni Acquisition was
financed through (i) additional bank borrowings under the New
Credit Agreement of $166,046 and (ii) $15,000 of Chancellor's Class
A Common Stock. The assets acquired by Chancellor were contributed
to the Company. Prior to the consummation of the Omni Acquisition,
the Company had entered into an agreement to operate the stations
under a time brokerage agreement effective July 1, 1996.
Additionally, prior to consummation of the West Palm Beach Exchange
on March 28, 1997 (see (v) below) and the Jacksonville Exchange
(see 2(a)(i) below), the Company entered into time brokerage
agreements to sell substantially all of the broadcast time of
WEAT-FM/AM and WOLL-FM in West Palm Beach and WAPE-FM and WFYV-FM
in Jacksonville effective July 1, 1996.
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NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(v) On March 28, 1997, the Company exchanged WEAT-FM/AM, and WOLL-FM in
West Palm Beach, Florida, which were acquired as part of the Omni
Acquisition (see (iv) above), for KSTE-FM in Sacramento and $33,000
in cash (the "West Palm Beach Exchange") with no gain or loss
recognized.
(vi) On January 31, 1997, the Company sold WWWW-FM and WDFN-AM in
Detroit, which were acquired on February 14, 1996 as part of the
Shamrock Acquisition, to Evergreen for $30,000 in cash. Prior to
the completion of the sale, the Company had entered into a time
brokerage agreement to sell substantially all of the broadcast time
of WWWW-FM and WDFN-AM to Evergreen since February 14, 1996.
(b) Reflects the write-off as an extraordinary item of the unamortized balance
of deferred loan fees of $2,782 (net of a tax benefit of $1,855) at
December 31, 1996 and the new loan fees of approximately $2,874 incurred in
connection with the Company's New Credit Agreement.
(c) On January 23, 1997, the Company's term and revolving credit facilities
were refinanced under a new bank credit agreement (the "New Credit
Agreement"). The Company's New Credit Agreement provides for a $225,000
term loan facility and a $120,000 revolving loan facility. Reflects the
additional current portion of $12,100 of long term debt under the Company's
New Credit Agreement, which aggregate $12,500.
NOTE 2. PRO FORMA BALANCE SHEET -- PENDING TRANSACTIONS
(a) Reflects the Pending Transactions as follows:
<TABLE>
<CAPTION>
PURCHASE/ PROPERTY AND ASSETS
PENDING (SALES) CURRENT EQUIPMENT, HELD FOR INTANGIBLE CURRENT
TRANSACTIONS PRICE ASSETS NET SALE ASSETS, NET LIABILITIES
------------ --------- ------- ------------ -------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Nassau-Suffolk(i)....................... $ 11,000 $ -- $1,494(ii) $ -- $ 9,506(ii) $ --
Viacom (L.A., Chicago, Detroit)(iii).... 500,319 12,031 4,539(iv) 37,000 451,568(iv) (4,819)
WDRQ-FM(v).............................. (37,000) -- -- (37,000) -- --
-------- ------- ------ -------- -------- -------
Total........................... $474,319 $12,031 $6,033 $ -- $461,074 $(4,819)
======== ======= ====== ======== ======== =======
<CAPTION>
INCREASE
(DECREASE) IN INCREASE IN
PENDING LONG-TERM ADDITIONAL
TRANSACTIONS DEBT PAID-IN CAPITAL
------------ ------------- ---------------
<S> <C> <C>
Nassau-Suffolk(i)....................... $ 11,000 $ --
Viacom (L.A., Chicago, Detroit)(iii).... 351,819 148,500
WDRQ-FM(v).............................. (37,000) --
-------- --------
Total........................... $325,819 $148,500
======== ========
</TABLE>
(i) On July 1, 1996, the Company entered into an agreement to exchange
WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired
as part of the Omni Acquisition, see 1(a)(iv)), and $11,000 in
cash for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Nassau-Suffolk,
New York (the "Jacksonville Exchange").
(ii) The amounts allocated to net property and equipment and net
intangible assets are based upon appraisals of the assets to be
acquired.
(iii) On February 19, 1997, the Company and Evergreen entered into a
joint purchase agreement whereby in the event that consummation of
the stock purchase agreement between Evergreen and Viacom occurs
prior to the consummation of the Merger, the Company will be
required to purchase certain Viacom stations for $480,000 plus
working capital ($7,319 at December 31, 1996) and estimated
acquisition costs of $13,000. The stations to be acquired by the
Company include KYSR-FM and KIBB-FM in Los Angeles, WLIT-FM in
Chicago and WDRQ-FM in Detroit. The assets of WDRQ-FM are
classified as assets held for sale in connection with the purchase
price allocation of the Company Viacom Acquisition (see (v)
below). The Company expects to finance the acquisition through
borrowings under the Restated Credit Agreement and the net
proceeds of $148,500 of the Bridge Facility which will be
contributed to the Company by Chancellor.
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NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(iv) The Company has assumed that historical balances of net property
and equipment approximate fair value for the preliminary allocation
of the purchase price and are based primarily on information
provided by management of the Viacom stations to be acquired in the
Pending Transactions.
(v) On April 11, 1997, the Company entered into an agreement to sell
WDRQ-FM in Detroit (to be acquired as part of the Company Viacom
Acquisition) for $37,000 in cash. The assets of WDRQ-FM are
classified as assets held for sale in connection with the purchase
price allocation of the Company Viacom Acquisition and no gain or
loss will be recognized.
(b) Reflects the write-off as an extraordinary item of the unamortized balance
of deferred loan fees of $2,204 (net of a tax benefit of $1,469) incurred
in connection with the Tender Offer and the Company's New Credit Agreement
and estimated new loan fees of $3,500 to be incurred in connection with the
Restated Credit Agreement.
(c) In connection with the Company Viacom Acquisition, the Company will be
required to refinance the New Credit Agreement (the "Restated Credit
Agreement"). Reflects the expected maturities of long term debt under the
Restated Credit Agreement, which is subject to negotiation.
(d) Reflects an extraordinary charge of $2,610 for estimated early call
premiums and fees of $4,350 (less a tax benefit of $1,740) to be incurred
in connection with the purchase of the tendered Notes. The purchase will be
financed through additional borrowings of $34,351 under the Company's
Restated Credit Agreement.
12
<PAGE> 13
NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. PRO FORMA STATEMENT OF OPERATIONS -- COMPLETED TRANSACTIONS
The net effect of pro forma adjustments related to the Completed Transactions
are summarized below:
<TABLE>
<CAPTION>
DETROIT DENVER
WWWW-FM/ KIMN-FM/ HOUSTON
SHAMROCK WDFN-AM KALC-FM KTBZ-FM COLFAX KOOL-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1/1-2/14(A) 1/1-2/14 1/1-3/31(B) 1/1-2/14(B) 1/1-12/31(C) 1/1-3/31(C)
----------- ---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Gross revenues(e).................... $ 9,698 $(839) $2,010 $(399) $51,745 $1,665
Less: agency commissions............. (1,234) 102 (259) 48 (6,626) (234)
------- ----- ------ ----- ------- ------
Net revenues......................... 8,464 (737) 1,751 (351) 45,119 1,431
Station operating expenses excluding
depreciation and amortization....... 7,762 (815) 1,523 (521) 28,584 852
Depreciation and amortization........ 595 (45) 511 (42) 4,494 229
Corporate general and administrative
expenses............................ 2,215 -- -- -- -- --
------- ----- ------ ----- ------- ------
Operating income (loss).............. (2,108) 123 (283) 212 12,041 350
Interest expense..................... 1,380 -- -- -- 4,369 299
Other (income) expense............... 49 -- 312 -- (179) --
------- ----- ------ ----- ------- ------
Net income (loss) before
income taxes................. (3,537) 123 (595) 212 7,851 51
Income tax expense (benefit).........
------- ----- ------ ----- ------- ------
Net income (loss).................... (3,537) 123 (595) 212 7,851 51
Preferred stock dividends and
accretion...........................
------- ----- ------ ----- ------- ------
Income (loss) attributable to common
stockholder......................... $(3,537) $ 123 $ (595) $ 212 $ 7,851 $ 51
======= ===== ====== ===== ======= ======
<CAPTION>
NET
MILWAUKEE PRO FORMA PRO FORMA
WMIL-FM/ ORLANDO SACRAMENTO ADJUSTMENTS ADJUSTMENTS
SUNDANCE WOKY-AM OMNI KSTE-FM FOR THE FOR THE
HISTORICAL HISTORICAL HISTORICAL HISTORICAL COMPLETED COMPLETED
1/1-9/12(C) 1/1-12/31(C) 1/1-6/30(D) 1/1-7/31(D) TRANSACTIONS TRANSACTIONS
----------- ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Gross revenues(e).................... $13,844 $(9,552) $ 8,710 $1,411 $ (5,022)(f) $ 73,271
Less: agency commissions............. (1,740) 1,070 (1,211) (149) -- (10,233)
------- ------- ------- ------ -------- --------
Net revenues......................... 12,104 (8,482) 7,499 1,262 (5,022) 63,038
Station operating expenses excluding
depreciation and amortization....... 7,678 (4,896) 4,985 1,244 (5,763)(f) 40,633
Depreciation and amortization........ 1,242 (539) 1,458 375 7,831(g) 14,555
(1,554)(h)
Corporate general and administrative
expenses............................ -- -- -- -- (1,706)(i) 509
------- ------- ------- ------ -------- --------
Operating income (loss).............. 3,184 (3,047) 1,056 (357) (3,830) 7,341
Interest expense..................... -- -- -- -- 6,362(j) 12,410
Other (income) expense............... 25 (19) (404) -- -- (216)
------- ------- ------- ------ -------- --------
Net income (loss) before
income taxes................. 3,159 (3,028) 1,460 (357) (10,192) (4,853)
Income tax expense (benefit)......... (1,794)(k) (1,794)
------- ------- ------- ------ -------- --------
Net income (loss).................... 3,159 (3,028) 1,460 (357) (8,398) (3,059)
Preferred stock dividends and
accretion........................... 26,843(l) 26,843
------- ------- ------- ------ -------- --------
Income (loss) attributable to common
stockholder......................... $ 3,159 $(3,028) $ 1,460 $ (357) $(35,241) $(29,902)
======= ======= ======= ====== ======== ========
</TABLE>
13
<PAGE> 14
NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(a) On February 14, 1996, the Company acquired 19 radio stations (11 FM and 8
AM) located in 10 markets (Los Angeles, New York, San Francisco, Houston,
Atlanta, Detroit, Denver, Minneapolis-St. Paul, Phoenix and Pittsburgh) in a
purchase transaction from Shamrock.
(b) On July 31, 1996, the Company exchanged KTBZ-FM in Houston (which was
acquired from Shamrock) and $5,600 in cash for KIMN-FM and KALC-FM in
Denver. The Company had previously entered into a time brokerage agreement
to sell substantially all of the broadcast time of KTBZ-FM effective
February 14, 1996. In addition, the Company had been previously purchasing
substantially all of the broadcast time of KIMN-FM and KALC-FM under a time
brokerage agreement since April 1, 1996.
(c) The historical financial data of Colfax for the year ended December 31, 1996
excludes the results of operations of certain stations in Boise, Idaho which
the Company did not acquire. The Colfax results of operations do not include
the following: (i) KOOL-FM for the period January 1, 1996 to March 31, 1996
and (ii) WMIL-FM and WOKY-AM in Milwaukee and KZON-FM, KISO-AM, KYOT-FM and
KOY-AM in Phoenix which were owned and operated by Sundance Broadcasting,
Inc. ("Sundance") for the period January 1, 1996 to September 12, 1996.
(d) The historical financial data of Omni for the period January 1, 1996 to June
30, 1996 represents the results of operations for the Orlando stations
(WOMX-FM, WXXL-FM and WJHM-FM) acquired as part of the Omni Acquisition on
February 13, 1997. The results of operations for WEAT-FM/AM and WOLL-FM in
West Palm Beach and WAPE-FM and WFYV-FM in Jacksonville are not included as
the acquisition and disposition of these stations is deemed to have occurred
on January 1, 1996. Adjustment also reflects the results of operations for
KSTE-FM, which the Company acquired in the Omni Transaction, for the period
January 1, 1996 to July 31, 1996. The Company purchased substantially all of
the broadcast time of KSTE-FM under a time brokerage agreement since August
1, 1996.
(e) Gross revenues of the Completed Transactions exclude any LMA payments
received from the Company.
(f) Reflects the elimination of LMA fees received and paid by the Company as
follows:
<TABLE>
<CAPTION>
MARKET PERIOD REVENUE EXPENSE
------ ------ ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM......................... Detroit 2/14-12/31 $(2,937) $ (598)
KTBZ-FM................................. Houston 2/14-7/31 (1,113) (265)
WOMX-FM, WXXL-FM, WJHM-FM............... Orlando 7/1-12/31 -- (3,900)
WEAT-FM/AM and WOLL-FM.................. West Palm Beach 7/1-12/31 (972) (1,000)
------- -------
Total adjustment for decrease
in gross revenues and
expenses.................... $(5,022) $(5,763)
======= =======
</TABLE>
(g) Reflects incremental amortization related to the Completed Transactions
based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INTANGIBLE HISTORICAL ADJUSTMENT
ASSETS, AMORTIZATION AMORTIZATION FOR NET
COMPLETED TRANSACTIONS PERIOD NET EXPENSE(1) EXPENSE INCREASE
---------------------- --------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Shamrock................................ 1/1-2/14 361,425 1,104 393 711
KIMN-FM/KALC-FM......................... 1/1-3/31 8,285 52 341 (289)
Omni.................................... 1/1-12/31.. 171,837 4,296 161 4,135
Colfax.................................. 1/1-12/31 317,894 7,947 3,861 4,086
KSTE-FM................................. 1/1-12/31 (32,475) (812) -- (812)
------- ------ ----- -----
Total................................... 826,966 12,587 4,756 7,831
======= ====== ===== =====
</TABLE>
- ---------------
(1) Intangible assets consist primarily of broadcast licenses and are
amortized on a straight-line basis over a weighted average period of 40
years.
14
<PAGE> 15
NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
Historical depreciation expense of the Completed Transactions is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation and
amortization may differ based upon final purchase price allocations.
(h) Reflects the elimination of disposed stations' historical depreciation and
amortization expense of $1,554 (KTBZ-FM of $642 and WWWW-FM/WDFN-AM of $912
for the period of February 14, 1996 to December 31, 1996) recognized by the
Company during the LMA holding period.
(i) Reflects the elimination of estimated duplicate corporate expenses of $1,706
related to the Completed Transactions.
(j) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Transactions as follows:
<TABLE>
<S> <C>
Interest expense on $566,004
additional bank borrowings
($667,383 related to completed
acquisitions and $2,874 of new
loan fees related to the New
Credit Agreement offset by net
proceeds of $30,000 for the
dispositions of WWWW-FM/WDFN-AM,
$33,000 for the exchange of
WEAT-FM/AM and WOLL-FM and $41,253
for the dispositions of
WMIL-FM/WOKY-AM) related to the
Completed Transactions at
8.125%............................ $ 16,070
Less: historical interest expense
of stations acquired in the
Completed Transactions............ (6,048)
--------
Adjustment for gross increase in
interest expense.................. 10,022
--------
Less:
Reduction in interest expense on
bank debt related to the
application of the net proceeds of
the following:
February 1996 offering proceeds of
$155,475 for the period January 1,
1996 to February 14, 1996 at
8.125%............................ (1,544)
August 1996 capital contribution of
$23,000 for the period January 1,
1996 to August 9, 1996 at
8.125%............................ (1,139)
12 1/4% Redeemable Preferred Stock
proceeds of $96,171 for the period
January 1, 1996 to February 14,
1996.............................. (977)
--------
Adjustment for gross decrease in
interest expense.................. (3,660)
--------
Total adjustment for net increase
in interest expense............... $ 6,362
========
</TABLE>
(k) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income taxes
for historical and pro forma adjustment amounts.
(l) Reflects dividends and accretion totaling $26,843 as follows: (i) dividends
and accretion on the 12 1/4% Senior Exchangeable Preferred Stock of $1,441
for the period January 1, 1996 to February 26, 1996, and (ii) dividends and
accretion on the 12% Exchangeable Preferred Stock of $25,402 for the year
ended December 31, 1996.
15
<PAGE> 16
NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. PRO FORMA STATEMENT OF OPERATIONS -- PENDING TRANSACTIONS -- HISTORICAL
The detail of the historical financial data of the stations to be acquired
in the Pending Transactions for the year ended December 31, 1996 has been
obtained from the historical financial statements of the respective companies
and is summarized below:
<TABLE>
<CAPTION>
WBAB-FM
WBLI-FM
WGBB-AM VIACOM
WHFM-FM STATIONS PENDING
HISTORICAL HISTORICAL TRANSACTIONS
1/1-6/30(I) 1/1-12/31(II) HISTORICAL
----------- -------------- ------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Gross revenues............................... $5,726 $52,063 $57,789
Less: agency commissions..................... (619) (8,533) (9,152)
------- ------- -------
Net revenues................................. 5,107 43,530 48,637
Station operating expenses excluding
depreciation and amortization.............. 3,676 20,886 24,562
Depreciation and amortization................ 2,141 4,286 6,427
Corporate general and administrative
expenses................................... 1,024 1,323 2,347
------- ------- -------
Operating income (loss)...................... (1,734) 17,035 15,301
Interest expense............................. -- 6,374 6,374
------- ------- -------
Net income (loss)............................ (1,734) 10,661 8,927
Income tax expense........................... -- 4,422 4,422
------- ------- -------
Net income (loss)............................ $(1,734) $ 6,239 $ 4,505
======= ======= =======
</TABLE>
- ---------------
(i) On July 1, 1996, the Company entered into an agreement to exchange
WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired
as part of the Omni Acquisition), and $11,000 in cash for WBAB-FM,
WBLI-FM, WGBB-AM, and WHFM-FM in Nassau-Suffolk, New York.
(ii) On February 19, 1997, the Company and Evergreen entered into the
Joint Purchase Agreement whereby in the event that consummation of
the stock purchase agreement between Evergreen and Viacom occurs
prior to the consummation of the Merger, the Company will be
required to purchase certain Viacom stations for $480,000 plus
working capital ($7,319 at December 31, 1996) and estimated
acquisition costs of $13,000. The stations to be acquired by the
Company include KYSR-FM and KIBB-FM in Los Angeles ("LA"), WLIT-FM
in Chicago ("Chicago") and WDRQ-FM in Detroit ("Detroit"). On
April 11, 1997, the Company entered into an agreement to sell
WDRQ-FM in Detroit (to be acquired as part of the Company Viacom
Acquisition) for $37,000 in cash; consequently, only the results
of operations of LA and Chicago have been given effect in the Pro
Forma Financial Statements.
NOTE 5. PRO FORMA STATEMENT OF OPERATIONS -- PENDING TRANSACTIONS -- ADJUSTMENTS
(a) Reflects the elimination of LMA fees received and paid by the Company as
follows:
<TABLE>
<CAPTION>
MARKETS PERIOD REVENUE EXPENSE
-------------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM.................... Jacksonville 7/1-12/31 $(1,963) $(2,000)
WBAB-FM, WBLI-FM, WGBB-AM,
WHFM-FM........................... Nassau-Suffolk 7/1-12/31 -- (2,000)
------- -------
Total adjustment for decrease
in gross revenues and
expenses..................... $(1,963) $(4,000)
======= =======
</TABLE>
16
<PAGE> 17
NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(b) Reflects incremental amortization related to the Pending Transactions and
is based on the following allocation to intangible assets:
<TABLE>
<S> <C>
Amortization expense on $461,074 additional intangible
assets amortized on a straight-line basis over a period
of 40 years............................................. $11,527
Less: historical amortization expense of the stations
being acquired in the Pending Transactions.............. (5,730)
-------
Adjustment for net increase in amortization expense....... $ 5,797
=======
</TABLE>
Historical depreciation expense of the Pending Transactions is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
(c) Reflects the elimination of estimated duplicate corporate expenses of
$1,807 related to the Pending Transactions.
(d) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Transactions:
<TABLE>
<S> <C>
Interest expense on $329,319 additional bank debt
borrowings ($362,819 related to pending acquisitions and
$3,500 of new loan fees related to the Restated Credit
Agreement offset by net proceeds of $37,000 for the
disposition of WDRQ-FM) at 8.125%........................ $26,757
Less: interest expense savings attributable to the
consummation of the Tender Offer and redemption of the
$30,001 principle amount of Notes through borrowings
under the New Credit Agreement........................... (947)
Less: historical interest expense of the stations being
acquired in the Pending Transactions..................... (6,374)
-------
Adjustment for net increase in interest expense............ $19,436
=======
</TABLE>
(e) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
NOTE 6. PRO FORMA STATEMENT OF OPERATIONS -- DEFICIENCY OF EARNINGS TO FIXED
CHARGES:
For purposes of this calculation, "earnings" consist of income (loss)
before income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of deferred financing costs and the component of rental expense
believed by management to be representative of the interest factor thereon.
Preferred stock dividends and accretion are included in fixed charges where
appropriate.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHANCELLOR RADIO BROADCASTING COMPANY
Date: May 13, 1997 By: /s/ JACQUES D. KERREST
----------------------------------------------
Jacques D. Kerrest
Senior Vice President and
Chief Financial Officer
