-----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, L8cIEEg1bIavWNsxdc1pw7XUSqDitiNpXXUqtE9gJFibnRs6lzlW30lXqX5m/aaQ +gmdFDNSFA10su241mCF3g== 0000702808-98-000002.txt : 19980505 0000702808-98-000002.hdr.sgml : 19980505 ACCESSION NUMBER: 0000702808-98-000002 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980504 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: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-12404 FILM NUMBER: 98609096 BUSINESS ADDRESS: STREET 1: 50 E RIVERCENTER BLVD STREET 2: 12TH FLOOR CITY: COVINGTON STATE: KY ZIP: 41011 BUSINESS PHONE: 6066552267 MAIL ADDRESS: STREET 1: 50 EAST RIVERCENTER BLVD 12TH FLOOR CITY: COVINGTON STATE: KY ZIP: 41011 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 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 50 East RiverCenter Blvd. 12th Floor Telephone (606) 655-2267 Covington, Kentucky 41011 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value Common Stock Purchase Warrants expiring September 18, 2001 Common Stock Purchase Warrants expiring February 27, 2002 Liquid Yield Option Notes due 2011 Liquid Yield Option Notes due 2018 Other securities for which reports are submitted pursuant to Section 15(d) of the Act: 10 1/8% Senior Subordinated Notes due 2006 9 3/4% Senior Subordinated Notes due 2006 8 3/4% Senior Subordinated Notes due 2007 8% Senior Subordinated Notes due 2010 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of the voting stock held by nonaffiliates of Registrant as of March 2, 1998 was $2,052,536,556. The number of common shares outstanding as of March 2, 1998 was 50,757,782. There are 95 pages in this document. The index of exhibits appears on page 80. Documents incorporated by Reference: Portions of Registrant's definitive Proxy Statement to be filed during April 1998 in connection with the Annual Meeting of Shareholders presently scheduled to be held on May 20, 1998 are incorporated by reference into Part III of this Form 10-K. Item 8. Financial Statements and Supplementary Data Page Report of Independent Accountants 44 Consolidated Balance Sheets: December 31, 1997 and 1996 45 Consolidated Statements of Operations: Years ended December 31, 1997, 1996 and 1995 46 Consolidated Statements of Shareholders' Equity: Years ended December 31, 1997, 1996 and 1995 47 Consolidated Statements of Cash Flows: Years ended December 31, 1997, 1996 and 1995 49 Notes to Consolidated Financial Statements 51 Quarterly Financial Data 74 PART III The information required by the following items will be included in Jacor Communications, Inc.'s definitive Proxy Statement which will be provided within 120 days after the end of the Registrant's fiscal year: Item 10 Directors and Executive Officers of the Registrant Item 11 Executive Compensation Item 12 Security Ownership of Certain Beneficial Owners and Management Item 13 Certain Relationships and Related Transactions REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Jacor Communications, Inc. We have audited the accompanying consolidated balance sheets of Jacor Communications, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Jacor Communications, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Cincinnati, Ohio February 11, 1998 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996 (In thousands, except share amounts)
1997 1996 ASSETS Current assets: Cash and cash equivalents $ 28,724 $ 78,137 Accounts receivable, less allowance for doubtful accounts of $6,195 in 1997 and $3,950 in 1996 135,073 79,502 Prepaid expenses and other 33,790 8,963 Total current assets 197,587 166,602 Property and equipment, net 206,809 131,488 Intangible assets, net 2,128,718 1,290,172 Other assets 68,764 116,680 Total assets $ 2,601,878 $ 1,704,942 LIABILITIES Current liabilities: Accounts payable $ 17,294 $ 12,600 Accrued expenses and other 68,971 30,774 Accrued payroll 15,246 7,562 Accrued income taxes 16,738 4,596 Total current liabilities 118,249 55,532 Long-term debt 987,500 670,000 Liquid Yield Option Notes 125,300 118,682 Deferred tax liability 338,867 264,878 Other liabilities 115,611 108,914 Commitments and contingencies SHAREHOLDERS' EQUITY Preferred Stock, authorized and unissued 4,000,000 shares - - Common Stock, no par value, $0.01 per share stated value; authorized 100,000,000 shares, issued and outstanding shares: 45,689,677 in 1997 and 31,287,221 in 1996 457 313 Additional paid-in capital 863,086 432,721 Common stock warrants 31,500 26,500 Unrealized gain on investments - 2,042 Retained earnings 21,308 25,360 Total shareholders' equity 916,351 486,936 Total liabilities and shareholders' equity $ 2,601,878 $ 1,704,942 The accompanying notes are an integral part of the consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended December 31, 1997, 1996 and 1995 (In thousands, except per share amounts)
1997 1996 1995 Broadcast revenue $ 595,229 $ 250,461 $ 133,103 Less agency commissions 64,655 26,700 14,212 Net revenue 530,574 223,761 118,891 Broadcast operating expenses 356,783 151,065 87,290 Depreciation and amortization 78,485 23,404 9,483 Corporate general and administrative expenses 14,093 9,932 3,501 Operating income 81,213 39,360 18,617 Interest expense (82,315) (32,244) (1,444) Gain on sale of assets 11,135 2,539 - Other income, net 2,971 5,716 1,092 Income before income taxes and extraordinary loss 13,004 15,371 18,265 Income tax expense (9,600) (7,300) (7,300) Income before extraordinary loss 3,404 8,071 10,965 Extraordinary loss, net of income tax benefit (7,456) (2,966) - Net (loss) income $ (4,052) $ 5,105 $ 10,965 Basic net (loss) income per common share: Before extraordinary loss $ .08 $ .32 $ .58 Extraordinary loss (.18) (.12) - Net (loss) income per common share $(.10) $ .20 $ .58 Diluted net (loss) income per common share: Before extraordinary loss $ .08 $ .30 $ .53 Extraordinary loss (.18) (.11) - Net (loss) income per common share $(.10) $ .19 $ .53 Number of common shares used in Basic calculation 40,460 25,433 18,908 Number of common shares used in Diluted calculation 42,163 26,442 20,532 The accompanying notes are an integral part of the consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the years ended December 31, 1997, 1996 and 1995 (In thousands)
Common Stock Additional Common Unrealized Shares Stated Paid-In Stock Gain on Retained Value Capital Warrants Investments Earnings Total - --------------------------------------------------------------------------------------------- Balances, December 31, 1994 19,590 $196 $139,168 $390 - $9,290 $149,044 Purchase and retirement of stock (1,515) (15) (21,679) - - - (21,694) Employee stock purchases 44 1 474 - - - 475 Exercise of stock options 28 - 195 - - - 195 Other 10 - 90 (2) - - 88 Net income - - - - - 10,965 10,965 - --------------------------------------------------------------------------------------------- Balances, December 31, 1995 18,157 182 118,248 388 - 20,255 139,073 Common stock offering 11,250 113 301,636 - - - 301,749 Employee stock purchases 48 - 672 - - - 672 Exercise of stock options 106 1 650 - - - 651 Conversion of warrants 1,726 17 14,704 (374) - - 14,347 Purchase of warrants - - (5,080) (14) - - (5,094) Issuance of warrants - - - 26,500 - - 26,500 Unrealized gain on investments - - - - $2,042 - 2,042 Stock related compensation - - 1,891 - - - 1,891 Net income - - - - - 5,105 5,105 - --------------------------------------------------------------------------------------------- Balances, December 31, 1996 31,287 $313 $432,721 $26,500 $ 2,042 $25,360 $486,936 - --------------------------------------------------------------------------------------------- (Continued) The accompanying notes are an integral part of the consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the years ended December 31, 1997, 1996 and 1995 (In thousands) (Continued)
Common Stock Additional Common Unrealized Shares Stated Paid-In Stock Gain on Retained Value Capital Warrants Investments Earnings Total - --------------------------------------------------------------------------------------------- Balances, December 31, 1996 31,287 $313 $432,721 $26,500 $ 2,042 $25,360 $486,936 Common stock offering 8,321 83 246,079 - - - 246,162 Stock issued for Acquisitions 5,774 58 179,370 - - - 179,428 Employee stock purchases 87 1 2,137 - - - 2,138 Exercise of stock options 220 2 3,030 - - - 3,032 Issuance of warrants - - - 5,000 - - 5,000 Sale of investments - - - - (2,042) - (2,042) Other - - (251) - - - (251) Net loss - - - - - (4,052) (4,052) - --------------------------------------------------------------------------------------------- Balances, December 31, 1997 45,689 $457 $863,086 $31,500 - $21,308 $916,351 The accompanying notes are an integral part of the consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 1997, 1996 and 1995 (In thousands)
1997 1996 1995 Cash flows from operating activities: Net (loss) income $ (4,052) $ 5,105 $10,965 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 17,836 7,661 3,251 Amortization of intangible assets 60,649 15,743 6,232 Extraordinary loss 7,456 2,966 - Non-cash interest expense 6,618 4,327 - Provision for bad debts and other 1,155 1,870 1,374 Deferred income taxes (6,648) (233) (560) Gain on sale of assets (11,135) (2,539) - Changes in operating assets and liabilities, net of effects of acquisitions and disposals: Accounts receivable (37,495) (18,626) (2,344) Prepaid expense and other assets (9,637) (4,076) 1,029 Accounts payable 4,694 10,054 (424) Accrued expenses and other liabilities 26,599 2,655 1,102 Net cash provided by operating activities 56,040 24,907 20,625 (Continued) The accompanying notes are an integral part of the consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 1997, 1996 and 1995 (In thousands) (Continued)
1997 1996 1995 Cash flows from investing activities: Capital expenditures $ (19,980) $ (11,852) $(4,969) Cash paid for acquisitions (680,206) (826,302) (34,008) Deposits on broadcast stations (51,410) (23,608) - Purchase of intangible assets - - (15,536) Proceeds from sale of assets 93,263 6,595 - Loans originated and other - (4,097) (9,827) Net cash used by investing activities (658,333) (859,264) (64,340) Cash flows from financing activities: Issuance of long-term debt 627,700 973,000 45,500 Issuance of common stock 246,161 316,726 758 Repayment of long-term debt (310,200) (471,600) - Payment of financing costs (13,659) (27,435) - Stock options exercised 2,272 - - Issuance of LYONs - 115,172 - Purchase of common stock - - (21,694) Other 606 (806) (387) Net cash provided by financing activities 552,880 905,057 24,177 Net (decrease) increase in cash and cash equivalents (49,413) 70,700 (19,538) Cash and cash equivalents at beginning of year 78,137 7,437 26,975 Cash and cash equivalents at end of year $ 28,724 $ 78,137 $ 7,437 Supplemental disclosures of cash flow information: Cash paid for: Interest $ 72,191 $ 5,300 $ 1,400 Income taxes $ 5,383 $ 4,992 $ 6,662 Supplemental schedule of non-cash investing and financing activities: Fair value of assets exchanged $ 120,000 $ 170,000 - Liabilities assumed in acquisitions $ 120,325 $ 296,187 - The accompanying notes are an integral part of the consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS Description of Business As of December 31, 1997 the Company owned and/or operated 159 radio stations and one television station in 39 broadcast areas throughout the United States. The Company also engages in businesses complementary to its radio and television stations, including producing and distributing syndicated programs, traffic reporting services for radio and television, and research services. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Jacor Communications, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Revenues Revenues for commercial broadcasting advertisements are recognized when the commercial is broadcast. Revenues from syndicated program fees are recognized over the term of the contracts. Barter Transactions Barter transactions are reported at the estimated fair value of the product or service received. Revenue from barter transactions (advertising provided in exchange for goods and services) is recognized as income when advertisements are broadcast, and merchandise or services received are charged to expense when received or used. If merchandise or services are received prior to the broadcast of the advertising, a liability (deferred barter revenue) is recorded. If the advertising is broadcast before the receipt of the goods or services, a receivable is recorded. Consolidated Statements of Cash Flows For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. The effect of barter transactions has been eliminated. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and accounts receivable. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company's customer base and their dispersion across many different geographic areas of the country. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS, Continued Property and Equipment Property and equipment are stated at cost less accumulated depreciation; depreciation is provided on the straight-line basis over the estimated useful lives of the assets as follows: Land improvements 20 Years Buildings 25 Years Equipment 3 to 20 Years Furniture and fixtures 5 to 12 Years Leasehold improvements Life of lease Intangible Assets Intangible assets are stated at cost less accumulated amortization; amortization is provided principally on the straight-line basis over the following lives: Broadcasting licenses 40 Years Goodwill 40 Years Contracts and other intellectual property 3 to 25 Years The carrying value of intangible assets is reviewed by the Company when events or circumstances suggest that the recoverability of an asset may be impaired. If this review indicates that goodwill and licenses will not be recoverable, as determined based on the undiscounted cash flows of the entity over the remaining amortization period, the carrying value of the goodwill and licenses will be reduced accordingly. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Fair Value of Financial Instruments The fair value of the Company's publicly traded debt is based on quoted market prices. It was not practicable to estimate the fair value of borrowings under the Company's Credit Facility since there is no liquid market for this debt. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS, Continued Earnings Per Share Basic earnings per share equals net earnings divided by the weighted average number of common shares outstanding. Diluted earnings per share equals net earnings divided by the weighted average number of common shares outstanding after giving effect to other dilutive securities. Earnings per share calculations have been made in compliance with Statement on Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 became effective for the fourth quarter of 1997 calculations. Prior year calculations have been restated to reflect the adoption of SFAS 128. Stock Based Compensation Plans The Company accounts for its employee and director stock based compensation plans in accordance with APB Opinion No. 25. The Company has elected not to adopt the cost recognition provisions of Statement of Financial Accounting Standards No. 123, ("SFAS 123") "Accounting for Stock Based Compensation". The Company follows only the disclosure provisions of SFAS 123 as permitted by the statement. Reclassifications Certain prior year amounts have been reclassed to conform to 1997 presentation. These changes had no impact on previously reported results of operations or shareholders' equity. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS Completed 1997 Radio Station Acquisitions and Dispositions During 1997, the Company completed acquisitions of 86 radio stations in 33 broadcast areas for a purchase price consisting of (i) $344.4 million in cash, of which $26.1 million was placed in escrow in 1996, (ii) the issuance of approximately 4.3 million shares of common stock valued at $126.8 million, and (iii) the issuance of warrants to acquire 500,000 shares of common stock at $40 per share valued at $5.0 million. As a result of the acquisitions, approximately $49.8 million in goodwill was recorded by the Company, representing acquisition costs in excess of the fair value of identifiable tangible and intangible assets acquired. The Company also completed three separate like-kind exchanges of broadcast properties, exchanging five stations and net cash of $11.0 million, of which $3.6 million was placed in escrow in 1996, for nine stations. The Company sold one station in San Diego, California for $6.0 million and one station in Lexington, Kentucky for $3.5 million. Completed 1997 Broadcasting Services Acquisitions In June 1997, the Company acquired by merger a company that produces syndicated network radio programs and services which it distributes in exchange for commercial broadcast time that it resold to national advertisers. The total consideration paid by the Company including payment for certain Premiere Radio Networks, Inc. ("Premiere") warrants and stock options, was $189.8 million, consisting of $138.8 million in cash and the issuance of 1,416,886 shares of common stock. Approximately $104.0 million in goodwill was recorded by the Company in conjunction with the acquisition. In April 1997, the Company acquired substantially all of the assets relating to the broadcast distribution and related print and electronic media publishing businesses of Radio- Active Media (formerly EFM Media Management), for $50.0 million in cash. Additionally, in October 1997,the Company acquired the rights to The Dr. Laura Schlessinger Show from Synergy Broadcasting, Inc. and the assets of Multiverse Networks, L.L.C., a network radio sales representation firm for $71.5 million in cash. The Company completed the acquisition of two additional broadcasting service companies for a purchase price of approximately $29.0 million. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS, Continued Completed 1996 Radio Station Acquisitions and Exchanges In 1996, the Company effected the following transactions: acquired 36 radio stations and two television stations in 14 broadcast areas; acquired the right to provide programming to and sell air time for two radio stations in one broadcast area; exchanged via like-kind exchange one television station for 6 radio stations in two existing broadcast areas and one new broadcast area, and; financed the purchase of a 40% interest in a newly formed, limited liability company. For the above transactions, the Company paid approximately $974.0 million in cash. All of the above acquisitions have been accounted for as purchases. The excess cost over the fair value of net assets acquired is being amortized over 40 years. The results of operations of the acquired businesses are included in the Company's financial statements since the respective dates of acquisition. Assuming each of the 1997 and 1996 acquisitions had taken place at the beginning of 1996 and 1997, unaudited pro forma consolidated results of operations would have been as follows: Pro Forma (Unaudited) Year Ended December 31, 1997 1996 Net revenue $ 591,093 $ 542,089 Net income (loss) before extraordinary loss 403 (12,614) Diluted income (loss) per common share $.01 ($.28) These unaudited pro forma amounts do not purport to be indicative of the results that might have occurred if the foregoing transactions had been consummated on the indicated dates. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS, Continued Radio Station Acquisitions Completed Subsequent to December 31, 1997 The Company completed the purchase of eight radio stations in three existing broadcast areas and one new broadcast area for $25.5 million in cash, and completed a like-kind exchange of six radio stations in one broadcast area for four radio stations in one broadcast area. Broadcasting Services Acquisitions Completed Subsequent to December 31, 1997 The Company acquired two radio broadcasting service companies for $3.1 million in cash, plus additional contingent consideration of up to $1.6 million payable over three years. Pending Acquisitions and Dispositions In December 1997 the Company entered into a binding agreement to purchase the assets of Nationwide Communications, Inc.'s 17 radio stations (the "Nationwide Transaction") for $620.0 million, of which $30.0 million was placed in escrow in 1997. The stations are located in Dallas, Houston, Minneapolis, Phoenix, Baltimore, San Diego, Cleveland and Columbus. The Company anticipates this transaction will close in the second quarter of 1998. The Company has signed a letter of intent to sell two radio stations in the San Diego broadcast area for $65.2 million upon the consummation of the Nationwide Transaction. In January 1998, the Company entered into a binding agreement to acquire all of the stock of Chancellor Broadcasting Co., syndicator of Art Bell's national network radio programs, Talk Radio Network, Inc., syndicator of 17 radio programs, and radio station KOPE-FM in Medford, Oregon, for approximately $9.0 million. In February 1998, the Company entered into a binding agreement with Smith Broadcasting, Inc. to purchase a construction permit for a new FM radio station in Vancouver, Washington for approximately $20.7 million in cash, all of which was paid in escrow in 1998. The Company has entered into agreements to purchase FCC licenses and substantially all of the broadcast assets of 14 stations in nine of the Company's existing broadcast areas and in two new broadcast areas for a total purchase price of approximately $68.1 million in cash, of which $12.0 million has already been paid in escrow through December 31, 1997, and to exchange the assets of one station for another station in one broadcast area. The Company has also entered into agreements to sell the FCC licenses and substantially all of the broadcast assets of two radio stations in one broadcast area for approximately $0.2 million in cash. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. SUBSEQUENT OFFERINGS In February 1998, the Company completed offerings of debt and equity securities, as described below. The Company completed an offering of 5,073,000 shares of Common Stock at $50.50 per share net of underwriting discounts of $2.02 per share (the "Stock Offering"). Net proceeds to the Company from the Stock Offering were approximately $245.9 million. The Company issued $120.0 million in aggregate principal amount at maturity of 8% Senior Subordinated Notes (the "8% Notes") due 2010. Net proceeds to the Company were $117.1 million. The Company issued 4 3/4% Liquid Yield Option Notes due 2018 in the aggregate principal amount at maturity of $426.9 million. Each 1998 LYON had an issue price of $391.06 and a principal amount at maturity of $1,000. The 1998 LYONs are convertible, at the option of the holder, at any time on or prior to maturity, into Common Stock at a conversion rate of 6.245 shares per each 1998 LYON, for an aggregate of approximately 2.7 million shares of common stock. Net proceeds from the issuance of the 1998 LYONs were $161.9 million. A portion of the net proceeds from the above transactions was used to pay off the Revolving Credit Facility. The remainder will be used to fund the pending acquisitions, and are currently held in short-term, highly liquid securities. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. PROPERTY AND EQUIPMENT Property and equipment at December 31, 1997 and 1996 consist of the following (in thousands): 1997 1996 Land and land improvements $ 21,128 $ 14,269 Buildings 26,077 20,249 Equipment 162,885 97,491 Furniture and fixtures 19,919 7,524 Leasehold improvements 8,006 5,872 238,015 145,405 Less accumulated depreciation (31,206) (13,917) $206,809 $131,488 5. INTANGIBLE ASSETS Intangible assets at December 31, 1997 and 1996 consist of the following (in thousands): 1997 1996 Broadcasting licenses $1,465,020 $ 987,953 Goodwill 404,684 250,884 Contracts and other intellectual assets 355,668 86,489 2,225,372 1,325,326 Less accumulated amortization (96,654) (35,154) $2,128,718 $1,290,172 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. OTHER ASSETS The Company's other assets at December 31, 1997 and 1996 consist of the following (in thousands): December 31, December 31, 1997 1996 News Corp Warrants $ - $ 39,800 Acquisition escrows 51,410 30,804 Marketable securities - 13,965 Other 17,354 32,111 $ 68,764 $116,680 In February 1997, the Company sold its investment in the News Corp Warrants for $44.5 million in cash and recorded a pretax gain of $4.7 million. In May 1997, the Company sold its investment in Paxson Communications Corporation stock for $20.3 million in cash and recorded a pretax gain of $6.1 million. JACOR COMMUNICATIONS,INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. LONG-TERM DEBT The Company's debt obligations at December 31, 1997 and 1996 consist of the following (in thousands): 1997 1996 Credit Facility borrowings........ $567,500 $400,000 10 1/8% Senior Subordinated Notes, due 2006....................... 100,000 100,000 9 3/4% Senior Subordinated Notes, due 2006....................... 170,000 170,000 8 3/4% Senior Subordinated Notes, due 2007....................... 150,000 - $987,500 $670,000 New Credit Facility In September 1997, the Company, through Jacor Communications Company ("JCC"), entered into a new $1.15 billion credit facility (the "Credit Facility") with a syndicate of banks and other financial institutions. The Credit Facility replaces the Company's previous credit facility entered into in June 1996, as amended. The Credit Facility increased the Company's borrowing capacity by $400 million and consists of two components: (i) a revolving credit facility of up to $750 million with a mandatory commitment reduction of $50.0 million on June 30, 2000 continuing semi-annually through June 2003, and a final maturity date of December 31, 2004; and (ii) a term loan of up to $400 million with a scheduled reduction of $35.0 million on December 31, 1999 with increasing semi-annual reductions thereafter and a final maturity date of December 31, 2004. At December 31, 1997, the outstanding balance of the term loan was $400.0 million. Amounts repaid or prepaid under the Term Loan may not be reborrowed. The loans under the Credit Facility are guaranteed by each of the Company's direct and indirect subsidiaries other than certain immaterial subsidiaries. JCC's obligations under the Credit Facility are secured by a first priority lien on the capital stock of the Company's subsidiaries, an assignment of all intercompany debt and of certain time brokerage agreements, and by the guarantee of JCC's parent company, Jacor Communications Inc. ("Jacor"). The Credit Facility bears interest at a rate that fluctuates with an applicable margin, with a minimum applicable margin to a maximum of 1.75%, based on the Company's ratio of total debt to earnings before interest, taxes, depreciation and amortization for the four consecutive fiscal quarters then most recently ended (the "Leverage Ratio"), plus a bank base rate or a Eurodollar base rate, as applicable. At December 31, 1997, the average interest rate on Credit Facility borrowings was 6.60%. The Company pays interest on the unused portion of the Revolving Credit Facility at a rate ranging from 0.250% to 0.375% per annum, based on the Company's Leverage Ratio. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. LONG-TERM DEBT, Continued The 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 another person or engage in other fundamental changes; (vi) engage in certain sales of assets; (vii) engage in certain transactions with affiliates; and (viii) make restricted junior payments. The Credit Facility also requires the satisfaction of certain financial performance criteria (including a consolidated interest coverage ratio, a debt-to-operating cash flow ratio and a consolidated operating cash flow available for fixed charges ratio) and the repayment of loans under the Credit Facility with proceeds of certain sales of assets and debt issuances. In 1997 and 1996, the Company recognized extraordinary losses of approximately $7.5 million and $3.0 million, respectively, net of income tax credit, related to the write off of debt financing costs due to significant amendments to the Company's Credit Facility. 10 1/8% Senior Subordinated Notes Due 2006 Interest on the 10 1/8% Senior Subordinated Notes (the "10 1/8% Notes") is payable semi-annually. The 10 1/8% 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%. At December 31, 1997, the market value of the 10 1/8% Notes exceeded carrying value by approximately $8.6 million. At December 31, 1996 the market value of the 10 1/8% Notes exceeded carrying value by approximately $3.0 million. 9 3/4% Senior Subordinated Notes Due 2006 Interest on the 9 3/4% Senior Subordinated Notes (the "9 3/4% Notes") is payable semi-annually. The 9 3/4% Notes will be redeemable at the option of the Company, in whole or part, at any time on or after December 15, 2001. The redemption prices commence at 104.875% and are reduced by 1.625% annually until December 15, 2004 when the redemption price is 100%. At December 31, 1997, the market value of the 9 3/4% Notes exceeded carrying value by approximately $12.1 million. At December 31, 1996 the market value of the 9 3/4% Notes exceeded carrying value by approximately $3.4 million. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. LONG-TERM DEBT, Continued 8 3/4% Senior Subordinated Notes Due 2007 In June 1997, the Company completed an offering of $150 million of its 8 3/4% Senior Subordinated Notes (the "8 3/4% Notes"). The 8 3/4% Notes will mature on June 15, 2007. Interest on the 8 3/4% Notes is payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 1997. The 8 3/4% Notes will be redeemable at the option of the Company, in whole or in part, at anytime on or after June 15, 2002. The redemption prices commence at 104.375% and are reduced by 1.458% annually until June 15, 2005 when the redemption price is 100%. At December 31, 1997 the market value of the 8 3/4% Notes exceeded carrying value by approximately $3.8 million. The 10 1/8% Notes, 9 3/4% Notes and 8 3/4% Notes (the "Notes") are obligations of JCC, and are jointly and severally, fully and unconditionally guaranteed on a senior subordinated basis by Jacor and by all of the Company's subsidiaries (the "Subsidiary Guarantors"). JCC and each of the Subsidiary Guarantors are wholly owned direct or indirect subsidiaries of Jacor. Separate financial statements of JCC and each of the Subsidiary Guarantors are not presented because Jacor believes that such information would not be material to investors. The direct and indirect non-guarantor subsidiaries of Jacor are inconsequential, both individually and in the aggregate. Additionally, there are no current restrictions on the ability of the Subsidiary Guarantors to make distributions to JCC, except to the extent provided by law generally. JCC's credit facility and the terms of the indentures governing the Notes do restrict the ability of JCC and of the Subsidiary Guarantors to make distributions to the Registrant. Summarized financial information with respect to Jacor and with respect to the Subsidiary Guarantors on a combined basis as of December 31, 1997, 1996 and 1995 and for each of the three years in the period ended December 31, 1997; and with respect to JCC as of December 31, 1997 and 1996 and for the year ended December 31, 1997 and for the period from June 6, 1996 to December 31, 1996 is as follows: JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. LONG-TERM DEBT, Continued
Jacor _______JCC_______ 1997 1996 1995 1997 1996 Operating Statement Data (in thousands): Net revenue - - - - - Equity in earnings of subsidiaries $ (1,958) $10,237 $ 10,965 $ 3,191 $11,864 Operating (loss) income (15,387) 305 10,965 3,191 11,864 (Loss) income before extraordinary items (4,052) 5,105 10,965 5,498 13,203 Net (loss) income (4,052) 5,105 10,965 (1,958) 10,237 Balance Sheet Data (in thousands): Current assets $ 1,316 $ 1,538 $ 41,203 $ 75,626 Non-current assets 1,165,970 722,918 2,122,648 1,615,504 Current liabilities 28,853 16,253 13,184 9,975 Non-current liabilities 222,082 221,267 1,478,765 1,056,348 Shareholders' equity 916,351 486,936 671,902 273,384
Combined Subsidiary Guarantors
1997 1996 1995 Operating Statement Data (in thousands): Net revenue $ 530,574 $223,761 $118,891 Equity in earnings of subsidiaries - - - Operating income 95,306 49,292 18,617 Income before extraordinary items 3,191 11,864 18,617 Net income 3,191 11,864 10,965 Balance Sheet Data (in thousands): Current assets $ 155,068 $ 89,438 Non-current assets 2,446,810 1,615,504 Current liabilities 76,212 29,304 Non-current liabilities 1,609,315 1,188,702 Shareholders' equity 916,351 486,936
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. LIQUID YIELD OPTION NOTES In June 1996, the Company issued 5 1/2% Liquid Yield Option Notes ("LYONs") due 2011 in the aggregate principal amount at maturity of $259.9 million. Each LYON had an issue price of $443.14 and a principal amount at maturity of $1,000. At December 31, 1997 the accreted value of the LYONs was $125.3 million which included $6.6 million of interest accreted during 1997. At December 31, 1996 the accreted value of the LYONs was $118.7 million which included $3.5 million of interest accreted during 1996. Each LYON is convertible, at the option of the holder, at any time on or prior to maturity, into Common Stock at a conversion rate of 13.412 shares per LYON. 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 1/2% yield per annum to the holder on such date. 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. At December 31, 1997, the market value of the LYONs exceeded the carrying value by approximately $64.4 million. At December 31, 1996, the market value of the LYONs was less than the carrying value by approximately $3.0 million. 9. CAPITAL STOCK Warrants In connection with a 1997 acquisition, the Company issued warrants to acquire 500,000 shares of common stock with an exercise price of $40 per share. The warrants expire in February 2002. In connection with a 1996 acquisition, the Company issued warrants to acquire 4,400,000 shares of common stock with an exercise price of $28 per share. The warrants expire in September 2001. In connection with a 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) calculated to be $19.70 per Warrant. Prior to the conversion, the Company issued 1,726,004 shares of Common Stock with proceeds aggregating approximately $14.3 million upon exercise of such warrants by the holders. The Company used approximately $5.1 million of these proceeds to fund the conversion of the remaining 1993 Warrants presented for redemption. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. STOCK BASED COMPENSATION PLANS 1993 Stock Option Plan Under the Company's 1993 stock option plan (the "1993 Plan"), options to acquire up to 2,769,218 shares of common stock can be granted to directors, officers and key employees at no less than the fair market value of the underlying stock on the date of grant. The 1993 Plan permits the granting of non-qualified stock options (NQSOs)as well as incentive stock options(ISOs). Between 25% and 30% of the options vest on the date of grant and between 20% and 30% vest on each of the next three anniversaries of the grant date. Options expire 10 years after grant and the plan will terminate no later than February 7, 2003. At December 31, 1997, 618 shares were available for grant. 1997 Long-Term Incentive Stock Plan In April 1997, the Board of Directors of the Company adopted the 1997 Long-Term Incentive Stock Plan ("the Long-Term Plan"). The Long-Term Plan authorizes the issuance of up to 1,800,000 shares of Common Stock pursuant to the grant or exercise of stock options, including NQSOs and ISOs, restricted stock, stock appreciation rights (SARs), and certain other instruments to executive officers and other key employees, subject to board approval and certain other restrictions. Stock options may not be granted at less than the fair market value of the underlying stock on the date of grant. Twenty-five percent of the options vest on the date of the grant and 25% vest on each of the next three anniversaries of the grant date. Options expire 10 years after grant. At December 31, 1997, 1,166,312 shares were available for grant. 1997 Non-Employee Directors Stock Plan and Stock Purchase Plan In April 1997, the Board of Directors of the Company adopted the 1997 Non-Employee Directors Stock Plan (the "Directors Stock Plan"). The Directors Stock Plan authorizes the issuance of up to 350,000 shares of Jacor Common Stock pursuant to the grant or exercise of NQSOs, SARs, restricted stock and other performance instruments. Stock options may not be granted at less than the fair market value of the underlying stock on the date of grant. Twenty-five percent of the options vest on the date of the grant and 25% vest on each of the next three anniversaries of the grant date. Options expire 10 years after grant. At December 31, 1997, 310,000 shares were available for grant. Also, the Company adopted a stock purchase plan for its non-employee directors authorizing the issuance of up to 150,000 shares of Jacor common stock. Stock may be purchased at a 15% discount from fair value and purchases are limited to $100,000 per director in a calendar year. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. STOCK BASED COMPENSATION PLANS, Continued Information pertaining to the plans for the years ended December 31, 1995, 1996 and 1997 is as follows: Number of Weighted Average Shares Exercise Price 1995: Outstanding at beginning of year.. 1,351,310 $ 6.16 Granted........................... 245,000 $14.61 Exercised......................... (27,790) $ 5.81 Outstanding at end of year........ 1,568,520 $ 7.52 Exercisable at end of year........ 1,093,340 $ 6.57 Available for grant at end of year 1,092,618 1996: Outstanding at beginning of year.. 1,568,520 $ 7.52 Granted........................... 594,500 $23.63 Exercised......................... (106,410) $ 6.10 Outstanding at end of year........ 2,056,610 $12.26 Exercisable at end of year........ 1,507,000 $ 8.68 Available for grant at end of year 523,118 1997: Outstanding at beginning of year.. 2,056,610 $12.26 Granted........................... 1,196,188 $24.92 Exercised......................... (212,679) $11.61 Surrendered....................... (15,490) $26.71 Outstanding at end of year........ 3,024,629 $17.20 Exercisable at end of year........ 2,228,095 $13.72 Available for grant at end of year 1,476,930 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. STOCK BASED COMPENSATION PLANS, Continued The fair value of each stock option granted is estimated on the date of grant using the Black-Sholes option-pricing model with the following assumptions for grants in 1997, 1996 and 1995, respectively: risk-free interest rates are different for each grant and range from 5.24% to 6.51%; the expected lives of options are 5 years; and volatility of approximately 35% for all grants. A summary of the fair value of options granted in 1997, 1996 and 1995 follows: 1997 1996 1995 Weighted-average fair value of options granted at-the-money $12.26 $ 9.42 $ 5.70 Weighted-average fair value of options granted at a premium - $ 8.46 $ 5.33 Weighted-average fair value of options granted at a discount $28.15 - - Weighted-average fair value of all options granted during the year $16.29 $ 9.07 $ 5.44 The options granted at a discount in 1997 were related to approximately 304,000 options outstanding to purchase Premiere common stock, which were converted to equivalent Jacor NQSOs at the time of the merger. The following table summarizes information about stock options outstanding at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE Weighted Weighted Weighted Range of Number Average Average Number Average Exercise Outstanding Remaining Exercise Exercisable Exercise Prices at 12/31/97 Life Price at 12/31/97 Price $5.74 to $9.65 1,239,865 5.44 $ 6.29 1,239,865 $ 6.29 $12.70 to $19.96 356,641 7.91 $15.94 299,341 $15.89 $21.25 to $30.66 1,379,123 9.02 $26.53 676,638 $25.84 $37.25 to $45.94 49,000 9.56 $39.57 12,250 $39.80 $ 5.74 to $45.94 3,024,629 7.43 $17.20 2,228,095 $13.72
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. STOCK BASED COMPENSATION PLANS, Continued Employee Stock Purchase Plan Under the 1995 Employee Stock Purchase Plan, the Company is authorized to issue up to 700,000 shares of common stock to its full-time and part-time employees, all of whom are eligible to participate. Under the terms of the Plan, employees can choose each year to have up to 10 percent of their annual base earnings withheld to purchase the Company's common stock. The purchase price of the stock is 85% of the lower of its beginning-of-period or end-of-period market price. Under the Plan, the Company sold 74,767 shares for approximately $23.27 per share and 12,376 shares for approximately $32.19 per share in 1997, 47,232 shares for $14.24 per share in 1996 and 43,785 shares for $10.84 per share in 1995. The fair market value of the right to acquire common stock under the Stock Purchase Plan was $8.40 per share granted on January 1 and $9.80 per share granted on July 1 in 1997, $4.81 per share in 1996 and $3.71 per share in 1995. Had the compensation cost for the Company's stock-based compensation plans been determined consistent with SFAS 123, the Company's net income (loss) and net income (loss) per common share for 1997, 1996 and 1995 would approximate amounts below (in thousands, except per share amounts): 1997 1996 1995 Net (loss)income: As reported $ (4,052) $ 5,105 $10,965 Pro forma $(10,691) $ 3,826 $10,398 Diluted net (loss)income per common share: As reported $ (0.10) $ 0.19 $ 0.52 Pro forma $ (0.25) $ 0.14 $ 0.50 In 1996, the Company recorded compensation expense of approximately $1.9 million related to stock units issued to officers and directors and stock options issued to non-employees of the Company. The expense related to the stock units was equal to the fair value of the stock for which the units can be converted into on the date of grant. The fair value of the options was determined using the Black-Sholes option pricing model and the following assumptions: risk-free interest rate of 5.79%; expected life of 5 years; and volatility of approximately 35%. The options were 100% vested on the date of grant. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INCOME TAXES Income tax expense for the years ended December 31, 1997, 1996 and 1995 is summarized as follows (in thousands): Federal State Total 1997: Current $13,200 $ 3,000 $16,200 Deferred (5,400) (1,200) (6,600) 7,800 1,800 9,600 Tax benefit from extraordinary loss (4,000) (900) (4,900) $ 3,800 $ 900 $ 4,700 1996: Current $ 6,185 $1,348 $7,533 Deferred (185) (48) (233) 6,000 1,300 7,300 Tax benefit from extraordinary loss (1,631) (346) (1,977) $ 4,369 $ 954 $5,323 1995: Current $ 6,600 $1,260 $7,860 Deferred (500) (60) (560) $ 6,100 $1,200 $7,300 The provisions for income tax differ from the amount computed by applying the statutory federal income tax rate due to the following: 1997 1996 1995 Federal income tax at the statutory rate $ 5,173 $ 5,627 $ 6,393 Amortization not deductible 3,449 1,262 606 State income taxes, net of any current federal income tax benefit 589 620 780 Other 389 (209) (479) $ 9,600 $ 7,300 $ 7,300 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INCOME TAXES, continued The tax effects of the significant temporary differences which comprise the deferred tax liability at December 31, 1997, 1996 and 1995 are as follows: 1997 1996 1995 Deferred tax assets: Accrued expenses and reserves $ (7,479) $(11,104) $(1,992) Net operating loss carryforwards (11,461) (12,000) - Other (4,047) (2,098) (142) (22,987) (25,202) (2,134) Deferred tax liabilities: Property and equipment 35,614 32,427 12,208 Intangibles 326,240 257,653 (1,457) 361,854 290,080 10,751 Net liability $338,867 $264,878 $ 8,617 At December 31, 1997 the Company had net operating loss carryforwards of $28,653. The loss carryforwards expire in the years 2008 through 2011 if not used. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. COMMITMENTS AND CONTINGENCIES Lease and Contractual Obligations The Company and its subsidiaries lease certain land and facilities used in their operations. The Company also has various employment agreements with broadcast personalities that provide base compensation. Future minimum payments under leases and employment agreements as of December 31, 1997 are payable as follows (in thousands): 1998 $18,122 1999 15,674 2000 11,328 2001 7,538 2002 4,799 Thereafter 9,980 $67,441 Rental expense was approximately $8,010, $3,996 and $3,471 for the years ended December 31, 1997, 1996 and 1995, respectively. Legal Proceedings From time to time, the Company becomes involved in various claims and lawsuits that are incidental to its business. In the opinion of the Company's management, there are no material legal proceedings pending against the Company. 13. RETIREMENT PLAN The Company maintains a defined contribution retirement plan covering substantially all employees who have met eligibility requirements. The Company matches participating employee contributions at a rate of 50% of the employee's first 4% contributed, up to $160,000 of annual compensation. Total expense related to this plan was $1,977,052, $756,618 and $334,253 in 1997, 1996 and 1995, respectively. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. EARNINGS PER SHARE The following is a reconciliation of the numerators and denominators of the basic and diluted Earnings Per Share ("EPS") computations for income before extraordinary items for the years ended December 31, as follows (in thousands except per share amounts): 1997 1996 1995 Net income before extraordinary item $ 3,404 $ 8,071 $10,965 Weighted average shares - basic 40,460 25,433 18,908 Effect of dilutive securities: Stock options 996 658 413 Warrants 357 - 911 Other 350 351 300 Weighted average shares - diluted 42,163 26,442 20,532 Basic EPS $ .08 $ .32 $ .58 Diluted EPS $ .08 $ .30 $ .53 The Company's LYONs can be converted into approximately 3.5 million shares of Jacor common stock at the option of the holder. Assuming conversion of the LYONs as of January 1, 1997 and 1996 would result in an increase in per share amounts before extraordinary items, therefore, the LYONs are not included in the computation of diluted EPS. In February 1998, the Company completed an offering of 5.1 million shares of common stock and Liquid Yield Option Notes which can be converted into approximately 2.7 million shares of common stock at the option of the holder. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income". SFAS 130 requires the reporting of comprehensive income in financial statements by all entities that provide a full set of financial statements. The term "comprehensive income" describes the total of all components of comprehensive income including net income. The statement only deals with reporting and display issues. It does not consider recognition or measurement issues. The Company will implement SFAS 130 in the first quarter of 1998. Also in June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("SFAS 131") "Disclosures about Segments of an Enterprise and Related Information". SFAS 131 provides accounting guidance for reporting information about operating segments in annual financial statements and requires such enterprises to report selected information about operating segments in interim financial reports. The statement uses a "management approach" to identify operating segments and provides specific criteria for operating segments. SFAS 131 is effective for the year ended December 31, 1998 and will be required for interim periods in 1999. The Company is currently evaluating the impact SFAS 131 will have on its financial statements, if any. Supplementary Data Quarterly Financial Data for the years ended December 31, 1997 and 1996 (Unaudited)
First Second Third Fourth Total Quarter Quarter Quarter Quarter Year 1997 Net revenue $ 88,828 $ 135,553 $ 144,560 $ 161,633 $ 530,574 Operating income 5,392 24,179 25,520 26,122 81,213 Net (loss) income before extraordinary loss (2,584) 4,145 483 1,360 3,404 Net (loss) income (8,140) 4,145 (1,417) 1,360 (4,052) Basic net (loss) income per common share: (1)(2) Before extraordinary loss (0.08) 0.ll 0.01 0.03 0.08 Extraordinary loss (0.17) 0.00 (0.04) 0.00 (0.18) Basic net (loss) income per common share (0.25) 0.11 (0.03) 0.03 (0.10) Diluted net (loss) income per common share: (1)(2) Before extraordinary loss (0.08) 0.10 0.01 0.03 0.08 Extraordinary loss (0.17) 0.00 (0.04) 0.00 (0.18) Diluted net (loss) income per common share (0.25) 0.10 (0.03) 0.03 (0.10)
Quarterly Financial Data for the years ended December 31, 1997 and 1996 (Unaudited), Continued
First Second Third Fourth Total Quarter Quarter Quarter Quarter Year 1996 Net revenue $ 30,074 $ 43,120 $ 54,326 $ 96,241 $223,761 Operating income 2,544 9,372 9,229 18,215 39,360 Net income before extraordinary loss 1,842 3,761 2,100 368 8,071 Net income 891 3,761 85 368 5,105 Basic net income per common share: (1)(2) Before extraordinary loss 0.10 0.18 0.07 0.01 0.32 Extraordinary loss (0.05) 0.00 (0.06) 0.00 (0.12) Basic net income per common share 0.05 0.18 0.01 0.01 0.20 Diluted net income per common share: (1)(2) Before extraordinary loss 0.09 0.17 0.06 0.01 0.30 Extraordinary loss (0.05) 0.00 (0.06) 0.00 (0.11) Diluted net income per common share 0.04 0.17 0.00 0.01 0.19 NOTES: (1) Earnings per share calculations have been made in accordance with Statement on Financial Accounting Standards No. 128 "Earnings Per Share",("SFAS 128"). SFAS 128 became effective for fourth quarter 1997 calculations. Prior quarter and prior year calculations have been restated to reflect the adoption of SFAS 128. (2) The sum of the quarterly net income (loss) per share amounts does not equal the annual amount reported as per share amounts are computed independently for each quarter.
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