-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BVXfNlUdA2eXny95wGpgzrczImbgfcAIZ2EiSOnZlVF3MhP/nN6uIt5UEtvLzz6t DsmWCeUI3leatlve3F3Yvw== 0000702808-97-000001.txt : 19970220 0000702808-97-000001.hdr.sgml : 19970220 ACCESSION NUMBER: 0000702808-97-000001 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19970203 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACOR COMMUNICATIONS INC CENTRAL INDEX KEY: 0000702808 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 310978313 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-12404 FILM NUMBER: 97516449 BUSINESS ADDRESS: STREET 1: 1300 PNC CENTER STREET 2: 201 E FIFTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5136211300 10-Q/A 1 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-12404 JACOR COMMUNICATIONS, INC. A Delaware Corporation Employer Identification No. 31-0978313 Commission File No. 1-8283 CITICASTERS INC. (Successor by merger to JCAC, Inc.) A Florida Corporation Employer Identification No. 59-2054850 1300 PNC Center 201 East Fifth Street Cincinnati, Ohio 45202 Telephone (513) 621-1300 Indicate by check mark whether the Registrant, Jacor Communications, Inc., (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 twelve 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 ninety days. Yes X No Indicate by check mark whether the Co-Registrant, Citicasters Inc. (the successor by merger to JCAC, Inc.), (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 twelve months (or for such shorter period that the Co-Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes X No Indicate by check mark whether the Co-Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No At November 1, 1996, 31,254,338 shares of the Registrant's common stock were outstanding. At November 1, 1996, 100 shares of the Co-Registrant's common stock were outstanding, all of which shares are owned by the Registrant. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES (the "Company") INDEX Page Number PART I. Financial Information Item 1. - Financial Statements Condensed Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 3 Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II. Other Information Item 5. - Other Information 21 Item 6. - Exhibits and Reports on Form 8-K 38 Signatures 40 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data)
September 30, December 31, 1996 1995 ASSETS Current assets: Cash and cash equivalents $ 52,821 $ 7,437 Accounts receivable, less allowance for doubtful accounts of $3,877 in 1996 and $1,606 in 1995 70,782 25,262 Other current assets 12,897 3,916 Total current assets 136,500 36,615 Property and equipment, net 141,259 30,801 Intangible assets, net 1,295,286 127,158 Other assets 98,032 14,265 Total assets $ 1,671,077 $ 208,839 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, accrued expenses and other current liabilities $ 51,898 $ 12,180 Total current liabilities 51,898 12,180 Long-term debt 626,250 45,500 5.5% Liquid Yield Option Notes 117,090 - Deferred taxes and other liabilities 393,728 12,086 Shareholders' equity: Common stock, $.01 par value 312 182 Additional paid-in capital 430,307 118,248 Common stock warrants 26,500 388 Retained earnings 24,992 20,255 Total shareholders' equity 482,111 139,073 Total liabilities and shareholders' equity $ 1,671,077 $ 208,839 The accompanying notes are an integral part of the condensed consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the three months and nine months ended September 30, 1996 and 1995 (In thousands, except per share amounts) (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Broadcast revenue $ 60,143 $ 36,116 $ 142,176 $ 97,648 Less agency commissions 5,817 3,822 14,656 10,472 Net revenue 54,326 32,294 127,520 87,176 Broadcast operating expenses 38,273 23,129 91,694 65,241 Depreciation and amortization 5,166 2,442 10,601 6,783 Corporate general and administrative expenses 1,658 824 4,080 2,564 Operating income 9,229 5,899 21,145 12,588 Interest expense (6,844) (384) (13,397) (593) Gain on sale of radio stations - - 2,539 - Other income, net 3,160 348 4,701 1,052 Income before income taxes and extraordinary loss 5,545 5,863 14,988 13,047 Income taxes 3,445 2,375 7,285 5,279 Income before extraordinary loss 2,100 3,488 7,703 7,768 Extraordinary loss, net of income tax credit (2,015) - (2,966) - Net income $ 85 $ 3,488 $ 4,737 $ 7,768 NET INCOME PER COMMON SHARE: Before extraordinary loss $ 0.06 $ 0.17 $ 0.31 $ 0.37 Extraordinary loss (0.06) - (0.12) - Net income per common share $ 0.00 $ 0.17 $ 0.19 $ 0.37 Number of common shares used in per share computations 33,303 21,009 24,880 21,136 The accompanying notes are an integral part of the condensed consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended September 30, 1996 and 1995 (In thousands) (UNAUDITED)
1996 1995 Cash flows from operating activities: Net income $ 4,737 $ 7,768 Adjustments to reconcile net income to net cash used by operating activities: Depreciation 3,989 2,306 Amortization of intangibles 6,612 4,476 Extraordinary loss 2,966 Non-cash interest expense 2,525 Deferred income tax provision (benefit) 636 (352) Gain on sale of radio stations (2,539) Other (201) 197 Change in current assets and current liabilities net of effects of acquisitions and disposals: Accounts receivable (7,769) (1,146) Other current assets (2,556) (265) Accounts payable, accrued expenses and other current liabilities 9,256 3,976 Net cash provided by operating activities 17,656 16,960 Cash flows from investing activities: Capital expenditures (7,506) (3,664) Cash paid for acquisitions (827,941) (33,338) Purchase of intangible assets - (15,183) Proceeds from sale of radio stations 6,595 - Loans originated and other (7,147) (4,397) Net cash used by investing activities (835,999) (56,582) Cash flows from financing activities: Proceeds from issuance of long-term debt 703,000 33,500 Proceeds from issuance of LYONs 115,172 - Proceeds from issuance of common stock 317,109 254 Repayment of long-term debt (248,500) Repurchase of common stock - (15,076) Repurchase of warrants (1,379) - Payment of finance costs (21,342) - Other (333) (375) Net cash provided by financing activities 863,727 18,303 Net increase (decrease) in cash and cash equivalents 45,384 (21,319) Cash and cash equivalents at beginning of period 7,437 26,975 Cash and cash equivalents at end of period $ 52,821 $ 5,656 The accompanying notes are an integral part of the condensed consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. FINANCIAL STATEMENTS The December 31, 1995 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, the Company believes that the disclosures are adequate to make the information presented not misleading and reflect all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of results of operations for such periods. Results for interim periods may not be indicative of results for the full year. It is suggested that these financial statements be read in conjunction with the consolidated financial statements for the year ended December 31, 1995 and the notes thereto. 2. ACQUISITIONS Completed Acquisitions In February 1996, the Company agreed to acquire Noble Br oadcast Group, Inc. ("Noble"), for approximately $152 million in cash plus related costs and expenses. Noble owned ten radio stations serving Denver (two AM and two FM), St. Louis (one AM, two FM) and Toledo (one AM, two FM). The Company entered into an agreement with the stockholders of Noble to acquire all of the outstanding capital stock of Noble for approximately $12.5 million. At the same time, the Company also purchased a warrant for approximately $52.8 million entitling the Company to acquire a 79.1% equity interest in Noble (the "Noble Warrant"). On July 15, 1996, the Company consummated the purchase of the outstanding Noble capital stock from the Noble stockholders and exercised the Noble Warrant, resulting in the Company owning 100% of the equity interests in Noble. Also, in February 1996, a wholly owned subsidiary of the Company purchased for approximately $47 million certain assets from Noble relating to Noble's San Diego operations. As part of Noble's San Diego operations, Noble provided programming to and sold the air time for two radio stations serving San Diego (one AM, one FM), which programming and air time is now provided and sold by the Company. In addition, another wholly owned subsidiary of the Company provided a credit facility to Noble in the amount of $41 million of which $40 million was drawn down. Such amount became part of the purchase consideration upon consummation of the transaction on July 15, 1996. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. Completed Acquisitions, Continued In February 1996, the Company entered into an agreement to acquire Citicasters Inc. ("Citicasters") through a merger of Citicasters with and into a wholly owned Jacor subsidiary (the "Citicasters Merger"). Citicasters owned and/or operated 19 radio stations, located in Atlanta, Phoenix, Tampa, Portland, Kansas City, Cincinnati, Sacramento, Columbus and two television stations, one located in Tampa and one in Cincinnati. The Company consummated the Citicasters Merger in September 1996 for an approximate aggregate value of $801.2 million, which included the purchase of all outstanding shares of Citicasters common stock, the assumption of Citicasters outstanding indebtedness and the issuance of warrants to purchase an aggregate of 4,400,000 shares of Common Stock. Each Citicasters Warrant is exercisable for .2035247 of a share of the Company's common stock at an exercise price of $28.00 per full share. In March 1996, the Company entered into an agreement to acquire the FCC licenses of WCTQ-FM and WAMR-AM in Venice, Florida and to purchase certain real estate and transmission facilities necessary to operate the stations. In June 1996, the Company consummated this acquisition for a purchase price of approximately $4.4 million. In June 1996, the Company entered into an agreement to acquire the FCC licenses of WLAP-AM, WMXL-FM and WWYC-FM in Lexington, Kentucky and to purchase real estate and transmission facilities necessary to operate the stations. In August 1996, the Company consummated this acquisition for a purchase price of approximately $14.0 million. In June 1996, the Company financed the purchase by Critical Mass Media, Inc. ("CMM") of a 40% interest in a newly formed limited liability company which purchased for $540,000 the assets of Duncan American Radio, Inc. CMM is a marketing research and radio consulting business which is owned by a limited partnership of which the Company is the 5% general partner and a corporation wholly owned by Randy Michaels, the Chief Executive Officer of the Company, is the 95% limited partner. The completed acquisitions are accounted for as purchases. The excess cost over the fair value of identifiable net assets acquired will be amortized over 40 years. Assuming each of these acquisitions had taken place at the beginning of 1996 and 1995, respectively, unaudited pro forma consolidated results of operations would have been as follows (in thousands except per share amounts): JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. Completed Acquisitions, Continued Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Net revenue $ 85,887 $ 79,171 $242,548 $225,259 Loss before extraordinary items (1,817) (846) (4,487) (7,234) Net loss per share $ (0.06) $ (0.03) $ (0.14) $ (0.23) Pending Acquisitions In May 1996, the Company entered into an agreement to acquire the FCC licenses and certain operating assets of WIOT-FM and WCWA-AM in Toledo, Ohio for $13 million in cash, which funds have been placed in escrow pending the closing of the transaction. Subject to certain conditions, pending the closing of this transaction, the Company has entered into a time brokerage agreement with respect to these stations. In July 1996, the Company entered into an agreement with New Wave Communications, L.P. and New Wave Broadcasting, Inc. to acquire the FCC licenses of WSPB-AM, WSRZ-FM and WYNF-FM in Sarasota, Florida and to purchase certain real estate and transmission facilities necessary to operate the stations. The purchase price for the assets is $12.5 million, of which $3 million has been placed in escrow, subject to a maximum purchase price of $15.0 million based on the timing of the closing. In September 1996, the Company entered into a binding agreement with a subsidiary of Gannett Co., Inc. ("Gannett") to effect an exchange of the Company's Tampa television station, WTSP-TV, acquired by the Company in the Citicasters Merger, for six of Gannett's radio stations (the "Gannett Exchange"). The stations to be acquired by the Company are KIIS-FM and KIIS-AM in Los Angeles, KSDO-AM and KKBH-FM in San Diego and WDAE-AM in Tampa-St. Petersburg. The Company will also acquire the licenses and operating assets of WUSA- FM in Tampa-St. Petersburg while Gannett will retain the call letters. The assets to be exchanged are valued by the Company and Gannett at approximately $190.0 million. The Company anticipates that this transaction will constitute a tax-free like-kind exchange. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Pending Acquisitions, Continued In October 1996, the Company entered into a definitive merger agreement with Regent Communications, Inc. ("Regent") whereby Regent will merge with and into the Company (the "Regent Merger"). Regent owns, operates or represents 20 radio stations located in Kansas City, Salt Lake City, Las Vegas, Louisville and Charleston, S.C. The merger consideration to be paid by the Company to the Regent stockholders consists of 3.55 million shares of Common Stock, subject to adjustment pursuant to the terms of the merger agreement, up to $64.0 million in cash to be used to repay outstanding Regent indebtedness, and warrants to acquire an aggregate of 500,000 shares of Common Stock at an exercise price of $40 per full share. In the event that the value of the Common Stock to be received by the Regent stockholders is less than $116.0 million, at the Company's option: (a) Jacor may make up the difference by the delivery of additional shares of Common Stock; (b) pay the difference in cash; or (c) pay all of the merger consideration in cash. In October 1996, the Company also entered into binding agreements with Par Broadcasting Company ("Par") to purchase four radio stations in San Diego, KOGO-AM, KCBQ-AM, KIOZ-FM and KKLQ-FM, for $72.0 million in cash and with Entertainment Communications, Inc. ("Entercom") to sell the Company's two radio stations in Sacramento, KSEG-FM and KRXQ- FM, for $45.0 million in cash. Approximately $3.7 million of the purchase price has been placed in escrow. Although these transactions are not directly contingent upon each other, the Company anticipates that these transactions will occur in a manner that permits the transactions to be treated as a tax-free like-kind exchange. Par has entered into a Local Marketing Agreement ("LMA") with the Company such that the Company will commence operating the San Diego stations upon the expiration or termination of the applicable waiting periods under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"). The Company has entered into an LMA with Entercom such that Entercom will commence operating the Sacramento stations upon the expiration or termination of the applicable waiting periods under the HSR Act. In October 1996, the Company entered into a binding exchange agreement with Nationwide Communications, Inc. ("Nationwide") whereby the Company will exchange the assets of its two radio stations in Phoenix, KSLX-AM and KSLX-FM, for the assets of Nationwide's two radio stations in San Diego, KGB-FM and KPOP-AM. The assets to be exchanged are valued by the Company and Nationwide at approximately $45.0 million. The Company anticipates that this transaction will constitute a tax-free like-kind exchange. This transaction is contingent upon the successful closing of Nationwide's agreement to purchase KGB-FM and KPOP-AM from KGB, Inc. Nationwide has assigned to the Company its rights under an LMA with KGB, Inc. such that the Company will commence operating the San Diego stations upon the expiration or termination of the applicable waiting periods under the HSR Act. The Company has entered into an LMA with Nationwide such that Nationwide will commence operating the Phoenix stations upon the expiration or termination of the applicable waiting periods under the HSR Act. In connection with entering into the exchange agreement with Nationwide, the Company also announced that it intends to sell KCBQ-AM in San Diego, upon its acquisition from Par, to EXCL Communications, Inc. ("EXCL") for $6.0 million in cash. No binding agreement has yet been entered into with EXCL. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Pending Acquisitions, Continued In addition, in October 1996, Jacor entered into three separate binding agreements with three unaffiliated radio broadcast companies whereby the Company will acquire the FCC licenses and assets of a total of nine radio stations. These agreements are with Palmer Broadcasting Limited Partnership ("Palmer") to acquire WHO-AM and KLYF-FM in Des Moines and WMT-AM and WMT-FM in Cedar Rapids for a purchase price of $52.5 million, providing the Company with a leading position with four powerful broadcast signals; with Clear Channel Radio, Inc. to purchase KTWO-AM, KMGW-FM and the Wyoming Radio Network, in Casper, Wyoming for a purchase price of $1.9 million; and with Colfax Communications to acquire KIDO-AM and KLTB-FM in Boise, Idaho and KARO-FM in Caldwell, Idaho for a purchase price of $11.0 million in cash. An aggregate of $5.9 million has been placed in escrow in connection with these acquisitions. 3. OTHER ASSETS The Company's other assets at September 30, 1996 and December 31, 1995 consist of the following (in thousands): September 30, December 31, 1996 1995 New World Warrants $ 39,800 $ - Hanna Barbera Escrow 13,700 - Acquisition escrows 16,000 - Other 28,532 14,265 $ 98,032 $ 14,265 The New World Warrants and Hanna Barbera Escrow were included in the Citicasters acquisition. The Hanna Barbera Escrow is expected to be received in December 1996. Terms of the New World Warrants allow the Company to purchase 5 million shares of New World Common Stock at $16.00 per share until September 1999. 4. LONG-TERM DEBT The Company's debt obligations at September 30, 1996 and December 31, 1995 consist of the following (in thousands): September 30, December 31, 1996 1995 Credit facility borrowings $ 400,000 $ 45,000 9 3/4% Senior Subordinated Notes 126,250 10 1/8% Senior Subordinated Notes, due 2006 $ 100,000 - $ 626,250 $ 45,000 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. LONG-TERM DEBT, Continued Former Credit Facility On February 20, 1996 the Company entered into a credit facility (the "Former Credit Facility") with a group of banks. The Company borrowed approximately $200 million under the facility in conjunction with the Noble and other acquisitions. In June 1996, outstanding borrowings were repaid from a portion of the proceeds from public debt and common stock offerings (see notes 4, 5 and 6). New Credit Facility In June 1996, the Company entered into a new credit facility (the "New Credit Facility"). The New Credit Facility is with a syndicate of banks and other financial institutions. The New Credit Facility provides availability of up to $600 million of loans in three components: (i) a revolving credit facility of up to $200 million with mandatory semi-annual commitment reductions beginning in December 1998 and a final maturity date of October 21, 2003; (ii) a term loan of up to $300 million with scheduled semi-annual reductions beginning December 1997 and a final maturity date of September 18, 2003; and (iii) a term loan of up to $100 million with scheduled semi-annual reductions beginning December 1998 and a final maturity date of September 18, 2004. Borrowings under the New Credit Facility bear interest at rates that fluctuate with a bank base rate and/or the Eurodollar rate. The weighted average interest rate at September 30, 1996 was 7.73%. Loans under the New Credit Facility are guaranteed by the Company and each of the Company's direct and indirect subsidiaries other than certain immaterial subsidiaries. The Company's obligations with respect to the New Credit Facility and each guarantor's obligations with respect to the related guaranty is collateralized by substantially all of their respective assets, and, in the case of the Company's subsidiaries, capital stock. The New Credit Facility contains covenants and provisions that restrict, among other things, the Company's ability to: (i) incur additional indebtedness; (ii) incur liens on its property; (iii) make investments and advances; (iv) enter into guarantees and other contingent obligations; (v) merge or consolidate with or acquire an other person or engage in other fundamental changes; (vi) engage in certain sales of assets; (vii) make capital expenditures; (viii) enter into leases; (ix) engage in certain transactions with affiliates; and (x) make restricted junior payments. The New Credit Facility also requires satisfaction of certain financial performance criteria (including a consolidated interest coverage ratio, a leverage-to-operating cash flow ratio and a consolidated operating cash flow available for fixed charges ratio) and the repayment of loans under the New Credit Facility with proceeds of certain sales of assets and debt issuances, and with 50% of the Company's Consolidated Excess Cash Flow (as defined in the New Credit Facility). JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. LONG-TERM DEBT, Continued 10 1/8% Senior Subordinated Notes Due 2006 In June 1996, the Company completed an offering of $100 million of its 10 1/8% Senior Subordinated Notes (the "Notes"). The Notes will mature on June 15, 2006. Interest on the Notes is payable semi-annually on June 15 and December 15 of each year, commencing December 15, 1996. The Company will not be required to make any mandatory redemption or sinking fund payment with respect to the Notes prior to maturity. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after June 15, 2001. The redemption prices commence at 105.063% and are reduced by 1.688% annually until June 15, 2004 when the redemption price is 100%. The Notes are general, unsecured obligations of the Company subordinated in right of payment to all senior debt of the Company including the New Credit Facility. The Note Indenture contains certain covenants which impose certain limitations and restrictions on the ability of the Company to incur additional indebtedness, pay dividends or make other distributions, make certain loans and investments, apply the proceeds of asset sales (and use the proceeds thereof), create liens, enter into certain transactions with affiliates, merge, consolidate or transfer substantially all its assets and make investments in unrestricted subsidiaries. 9 3/4% Senior Subordinated Notes In September 1996, as a result of the merger with Citicasters, the Company assumed obligations of Citicasters' outstanding 9 3/4% Senior Subordinated notes due 2004 (the "9 3/4% Notes"). As a result of a change of control covenant in the 9 3/4% Notes, the holders had the option to cause the Company to purchase the 9 3/4% Notes at 101%, and in October 1996, approximately $107 million par value of the 9 3/4% Notes were put to the Company pursuant to this covenant. 5. LIQUID YIELD OPTION NOTES In June 1996, the Company issued 5.5% Liquid Yield Option Notes ("LYONs") due 2011 in the aggregate principal amount at maturity of $259,900,000. Each LYON had an issue price of $443.14 and a principal amount at maturity of $1,000. At September 30, 1996 the accreted value of the LYONs was $117.1 million which included $1.6 million of accretion during the third quarter. Each LYON is convertible, at the option of the Holder, at any time on or prior to maturity, unless previously redeemed or otherwise purchased, into Common Stock at a conversion rate of 13.412 shares per LYON. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. LIQUID YIELD OPTION NOTES, Continued The LYONs are not redeemable by the Company prior to June 12, 2001. Thereafter, the LYONs are redeemable for cash at any time at the option of the Company, in whole or in part, at redemption prices equal to the issue price plus accrued original issue discount to the date of redemption. The LYONs will be purchased by the Company, at the option of the Holder, on June 12, 2001 and June 12, 2006, for a Purchase Price of $581.25 and $762.39 (representing issue price plus accrued original issue discount to each date), respectively, representing a 5.50% yield per annum to the Holder on such date, computed on a semiannual bond equivalent basis. The Company, at its option, may elect to pay the purchase price on any such purchase date in cash or Common Stock, or any combination thereof. 6. CAPITAL STOCK Issuance of Additional Common Stock In June 1996, the Company issued pursuant to a public offering (the "1996 Stock Offering"), 11,250,000 shares of its Common Stock at a price of $28.00 per share. Net proceeds to the Company from this 1996 Offering were approximately $303.6 million. The Company used a portion of the net proceeds to repay all of its indebtedness under the Former Credit Facility (approximately $196.5 million). 1993 Warrants In connection with the 1996 Stock Offering, the Company determined that it would convert the 1,983,605 outstanding 1993 Warrants into the right to receive the Fair Market Value (as defined in the 1993 Warrant) calculated to be $19.70 per Warrant. This resulted in the issuance by the Company of an additional 1,726,004 shares of Common Stock with proceeds aggregating approximately $14.3 million. The Company used approximately $5.1 million of these proceeds to fund the conversion of the remaining 1993 Warrants presented for redemption. Citicasters Warrants The Company issued the Citicasters Warrants pursuant to the terms of the Citicasters Merger Agreement. If all of the Citicasters Warrants are exercised, 4,400,000 shares of Common Stock would be issued. Each Citicasters Warrant initially entitles the holder thereof to purchase .2035247 of a share of Common Stock at a price of $28.00 per full share through September 18, 2001. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Completed Acquisitions In March 1996, the Company entered into an agreement to acquire the FCC licenses of WCTQ-FM and WAMR-AM in Venice, Florida and to purchase certain real estate and transmission facilities necessary to operate the stations. In June 1996, the Company consummated this acquisition for a purchase price of approximately $4.4 million. In June 1996, the Company entered into an agreement to acquire the FCC licenses of WLAP-AM, WMXL-FM and WWYC-FM in Lexington, Kentucky and to purchase real estate and transmission facilities necessary to operate the stations. In August 1996, the Company consummated this acquisition for a purchase price of approximately $14.0 million. In July 1996, the Company completed the acquisition of Noble, which owned ten radio stations serving Denver, St. Louis and Toledo. Previously, the Company purchased Noble's operating assets in San Diego which included an exclusive sales agency agreement under which Noble, and now the Company, provides programming to and sells air time for two radio stations serving San Diego (XTRA-AM and XTRA-FM). The aggregate value of the completed Noble acquisition is approximately $160.0 million, including related fees and expenses. In September 1996, the Company completed the acquisition of Citicasters through a merger of Citicasters with and into a wholly owned Jacor subsidiary. Citicasters owned and/or operated 19 radio stations, located in the United States in Atlanta, Phoenix, Tampa, Portland, Kansas City, Cincinnati, Sacramento, Columbus and two television stations, one located in Tampa and one in Cincinnati. The Company consummated the Citicasters merger for an approximate aggregate value of $802.1 million, which included (i) the purchase of all outstanding shares of Citicasters common stock at $29.50 per share for approximately $624.5 million in cash, (ii) the assumption of Citicasters 9 3/4% notes ($125 million), (iii) the payoff of Citicasters outstanding bank loan ($20 million), and (iv) the issuance of warrants to purchase an aggregate of 4.4 million shares of common stock (valued at $26.5 million). Citicasters' outstanding 9 3/4% Notes became obligations of the surviving corporation in the merger. As a result of a change in control covenant in the indenture pursuant to which such Notes were issued, the holders of the 9 3/4% Notes were permitted to cause the Company to purchase the Notes at 101% of the principal amount thereof. In October 1996, approximately $107 million of the 9 3/4% notes were put to the Company pursuant to the change in control covenant. The put was funded from borrowings under the New Credit Facility. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Completed Acquisitions, Continued The completed acquisitions were funded as follows: (i) $303.6 million proceeds from the public offering of 11.25 million shares of Common Stock, (ii) $115.2 million in proceeds from the Liquid Yield Option Notes public offering, (iii) $100.0 million from the 10 1/8% Senior Subordinated Notes public offering, and (iv) $400 million in borrowings under the New Credit Facility. Pending Acquisitions In September 1996, the Company entered into a binding agreement with a subsidiary of Gannett to effect an exchange of the Company's Tampa television station. WTSP-TV was acquired by the Company in the Citicasters Merger, for six of Gannett's radio stations. The stations to be acquired by the Company are KIIS-FM and KIIS-AM in Los Angeles, KSDO-AM and KKBH-FM in San Diego and WDAE-AM in Tampa-St. Petersburg. The Company will also acquire the licenses and operating assets of WUSA-FM in Tampa-St. Petersburg while Gannett will retain the call letters. The exchange will enhance the Company's existing station portfolios in San Diego and Tampa and will create a new multiple radio station platform in the Los Angeles broadcast area. The assets to be exchanged are valued by the Company and Gannett at approximately $190.0 million. The Company anticipates that this transaction will constitute a tax-free like-kind exchange. In October 1996, the Company entered into a definitive merger agreement with Regent whereby Regent will merge with and into the Company. Regent owns, operates or represents 20 radio stations located in Kansas City, Salt Lake City, Las Vegas, Louisville and Charleston. The merger consideration to be paid by the Company to the Regent stockholders consists of 3.55 million shares of Common Stock and up to $64.0 million in cash to be used to repay outstanding Regent indebtedness, and warrants to acquire an aggregate of 500,000 shares of Common Stock at an exercise price of $40 per full share, subject to adjustment pursuant to the terms of the merger agreement. In the event that the value of the Common Stock to be received by the Regent stockholders is less than $116.0 million, at the Company's option: (a) the Company may make up the difference by the delivery of additional shares of Common Stock; (b) pay the difference in cash; or (c) pay all of the merger consideration in cash. The Company also has acquisitions pending in the following markets: (i) in Sarasota, Florida, (ii) Toledo, Ohio, (iii) San Diego, California, (iv) Des Moines and Cedar Rapids, Iowa, (v) Casper, Wyoming, (vi) and Boise, Idaho. The net cash to be paid for these acquisitions after giving effect to escrow deposits of $25.6 million, totals approximately $150 million. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Credit Facilities and Other In June 1996, the Company entered into the New Credit Facility which provides for availability of $600.0 million pursuant to a $200.0 million reducing revolving facility under which the aggregate commitments would reduce on a semi-annual basis commencing in December 1998; a $300.0 million amortizing term loan that would reduce on a semi-annual basis commencing in December 1997; and a $100.0 million amortizing term loan that would reduce on a semi-annual basis commencing in December 1998. The New Credit Facility bears interest at floating rates based on a Eurodollar rate or a bank base rate. The New Credit Facility also provides the Company with additional credit for future acquisitions as well as working capital and other general corporate purposes. As of November 1, 1996 the Company had incurred $500.0 million of outstanding indebtedness under the New Credit Facility. The pending acquisitions will be primarily funded by the remaining $100 million available under the New Credit Facility and excess cash on hand, which will include the Hanna Barbera Escrow proceeds of $13.7 million which will be received during the fourth quarter. The Company believes that various sources are available for the additional funds required to complete the acquisitions and is currently exploring those alternatives. Such alternatives include increased availability under the Company's credit facilities as well as the possible issuance of additional equity and/or debt securities of the Company. The issuance of additional debt will negatively impact the Company's debt-to-equity ratio and its results of operations and cash flows due to higher amounts of interest expense, although the issuance of additional equity will soften this impact to some extent. RESULTS OF OPERATIONS In the following analysis, management discusses station operating income excluding depreciation and amortization. Station operating income excluding depreciation and amortization should not be considered in isolation from, or as a substitute for, operating income, net income or cash flow and other consolidated income or cash flow statement data computed in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. Although this measure of performance is not calculated in accordance with generally accepted accounting principles, it is widely used in the broadcasting industry as a measure of a company's operating performance because it assists in comparing station performance on a consistent basis across companies without regard to depreciation and amortization, which can vary significantly depending on accounting methods (particularly where acquisitions are involved) or non-operating factors such as historical cost bases. Station operating income excluding depreciation and amortization also excludes the effect of corporate general and administrative expenses, which generally do not relate directly to station performance. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995 Broadcast revenue for the first nine months of 1996 was $142.2 million, an increase of $44.5 million or 45.6% from $97.6 million during the first nine months of 1995. This increase resulted primarily from the revenue generated at those properties owned or operated during the 1996 first nine-months but not during the comparable 1995 period, and to a lesser extent, from an increase in advertising rates in both local and national advertising. On a "same station" basis - reflecting results from stations operated in the first nine months of both 1996 and 1995 - broadcast revenue for the 1996 period was $104.9 million, an increase of $10.7 million or 11.3% from $94.2 million for the 1995 period. Agency commissions for the first nine months of 1996 were $14.7 million, an increase of $4.2 million or 40.0% from $10.5 million during the first nine months of 1995 due to the increase in broadcast revenue. Broadcast operating expenses for the first nine months of 1996 were $91.7 million, an increase of $26.5 million or 40.5% from $65.2 million during the first nine months of 1996. These expenses increased as a result of expenses incurred at those properties owned or operated during the first nine months of 1996 but not during the comparable 1995 period and, to a lesser extent, increased selling and other payroll costs and programming costs. On a "same station" basis, broadcast operating expenses for the 1996 period were $66.3 million, an increase of $4.1 million or 6.6% from $62.2 million for the 1995 period. Station operating income excluding depreciation and amortization for the nine months ended September 30, 1996 was $35.8 million, an increase of $13.9 million or 63.3% from the $21.9 million for the nine months ended September 30, 1995. On a "same station" basis, station operating income excluding depreciation and amortization for the 1996 period was $27.4 million, an increase of $5.6 million or 25.6% from $21.8 million for the 1995 period. Depreciation and amortization for the first nine months of 1996 and 1995 was $10.6 million and $6.8 million, respectively. The increase from period-to-period resulted primarily from the acquisitions made by the Company during the last quarter of 1995 and the first nine months of 1996. Operating income for the first nine months of 1996 was $21.1 million, an increase of $8.5 million or 68.0% from an operating income of $12.6 million during the first nine months of 1995. Interest expense for the first nine months of 1996 and 1995 was $13.4 million and $0.6 million, respectively. The increase in interest expense resulted principally from the increase in the Company's outstanding Credit Facility borrowings and the issuance of the 10 1/8% Senior Subordinated Notes and Liquid Yield Option Notes which are primarily related to the Company's acquisition strategy. The gain on sale of radio stations in the first nine months of 1996 resulted from the Company's February sale of two FM radio stations in Knoxville. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995, Continued The extraordinary item in the first nine months of 1996 represents the write-off of unamortized costs associated with the Company's 1993 Credit Agreement which was replaced in February 1996 by the Company's Former Credit Facility and the write-off of unamortized costs associated with the Company's Former Credit Facility which was replaced by the Company's New Credit Facility in June 1996. Net income for the first nine months of 1996 and 1995 was $4.7 and $7.8 million, respectively. THE THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1995 Broadcast revenue for the third quarter of 1996 was $60.1 million, an increase of $24.0 million or 66.5% from $36.1 million during the third quarter of 1995. This increase resulted primarily from the revenue generated at those properties owned or operated during the 1996 third quarter but not during the comparable 1995 period, and to a lesser extent, from an increase in advertising rates in both local and national advertising. On a "same station" basis - reflecting results from stations operated in the third quarter of both 1996 and 1995 - broadcast revenue for the 1996 period was $38.6 million, an increase of $4.2 million or 12.4% from $34.4 million for the 1995 period. Agency commissions for the third quarter of 1996 were $5.8 million, an increase of $2.0 million or 52.2% from $3.8 million during the third quarter of 1995 due to the increase in broadcast revenue. Broadcast operating expenses for the third quarter of 1996 were $38.3 million, an increase of $15.2 million or 65.5% from $23.1 million during the third quarter of 1995. These expenses increased as a result of expenses incurred at those properties owned or operated during the 1996 second quarter but not during the comparable 1995 period and, to a lesser extent, increased selling and other payroll costs and programming costs. On a "same station" basis, broadcast operating expense for the 1996 period were $24.0 million, an increase of $2.3 million or 10.6% from $21.7 million for the 1995 period. Station operating income excluding depreciation and amortization for the three months ended September 30, 1996 was $16.1 million, an increase of $6.9 million or 75.2% from the $9.2 million for the three months ended September 30, 1995. On a "same station" basis, station operating income excluding depreciation and amortization for the 1996 period was $10.6 million, an increase of $1.6 million or 17.4% from $9.0 million for the 1995 period. Depreciation and amortization for the third quarter of 1996 and 1995 was $5.2 million and $2.4 million, respectively. The increase from quarter-to-quarter resulted primarily from the acquisitions made by the Company during the fourth quarter of 1995 and the first nine months of 1996. Operating income for the third quarter of 1996 was $9.2 million, an increase of $3.3 million or 56.5% from $5.9 million during the third quarter of 1995. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1995, Continued Interest expense for the third quarter of 1996 and 1995 was $6.8 million and $0.4 million, respectively. The increase in interest expense resulted principally from the increase in the Company's outstanding Credit Facility borrowings which are primarily related to the Company's acquisition strategy and the issuance of the 10 1/8% Senior Subordinated Notes and Liquid Yield Option Notes. The extraordinary item in the third quarter represents the write- off of unamortized costs associated with the Company's Former Credit Facility which was replaced by the Company's New Credit Facility in June 1996. Net income for the third quarter of 1996 was $0.1 million, compared to net income of $3.5 million reported by the Company for the third quarter of 1995. The 1996 period includes $2.1 million of income tax expense while the 1995 period includes $2.4 million of income tax expense. CASH FLOWS Cash flows provided by operating activities, inclusive of working capital, were $17.7 million and $17.0 million for the nine months ended September 30, 1996 and 1995, respectively. Cash flows provided by operating activities for the first nine months of 1996 resulted primarily from the add-back of $10.6 million of depreciation and amortization together with the add-back of $3.0 million for the extraordinary loss net of ($2.5) million from the gain on sale of radio stations together with the ($1.3) million net change in working capital to net income of $4.7 million for the period. The additional $3.1 million resulted principally from the add back of $.6 million net change in deferred taxes and $2.5 million of non-cash interest. Cash flows provided by operating activities for the comparable 1995 period resulted primarily from the add-back of $6.8 million of depreciation and amortization together with the net change in working capital of $2.8 million to net income of $7.8 million for the period. The additional ($.4) million resulted from the deferred income tax benefit. Cash flows used by investing activities were ($836.0) million and ($56.6) million for the nine months ended September 30, 1996 and 1995, respectively. Investing activities include capital expenditures of $7.5 million and $3.7 million for the first nine months of 1996 and 1995, respectively. Investing activities during the first nine months of 1996 include expenditures of $827.9 million and $7.1 million, respectively, for acquisitions, loans made in connection with the Company's joint sales agreements and other. Additionally, investing activities for the 1996 period includes $6.6 million of proceeds from the sale of radio stations WMYU-FM and WWST-FM in Knoxville. Investing activities during the first nine months of 1995 include expenditures of $48.5 million and $4.4 million, respectively for acquisitions and loans made in connection with the Company's joint sales agreements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CASH FLOWS, Continued Cash flows from financing activities were $863.7 million and $18.3 million for the nine months ended September 30, 1996 and 1995, respectively. Cash flows provided by financing activities during the first nine months of 1996 resulted primarily from the $818.2 million of proceeds from the issuance of public debt, Liquid Yield Option Notes and borrowings under the Existing Credit Facility, together with $317.1 million in proceeds received from the issuance of common stock net of the $248.5 million repayment of long-term debt and $21.3 million of paid debt related finance costs. Cash flows used from financing activities during the comparable 1995 nine-month period resulted primarily from the $15.1 million repurchase of the Company's common stock net of the $33.5 million in borrowings under the Company's Former Credit Agreement. The foregoing discussion sets forth forward looking statements within the meaning of Section 27A of the Securities Act of 1933. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially from those described in the forward looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the ability to consummate the pending acquisitions, interest rates, competition and the economy and industry conditions in general. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant and Co-Registrant has each duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. JACOR COMMUNICATIONS, INC. (Registrant) and CITICASTERS INC. (Co-Registrant) DATED: February 3, 1997 BY /s/ R. Christopher Weber R. Christopher Weber, Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer of Registrant and Co-Registrant) -----END PRIVACY-ENHANCED MESSAGE-----