-----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, RxhX+xpYgCPRgEupv2gs50f5fXAlRKn/162kJzJKk7W2wmwI51uUOTwHdP3H6yFd 2U5Y+2jYR9xOZR9Q74lVfA== 0000702808-97-000011.txt : 19971114 0000702808-97-000011.hdr.sgml : 19971114 ACCESSION NUMBER: 0000702808-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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-Q SEC ACT: SEC FILE NUMBER: 000-12404 FILM NUMBER: 97714345 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-Q 1 FORM 10-Q 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, 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 Covington, KY 41011 Telephone (606) 655-2267 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 At November 5, 1997, 45,564,401 shares of common stock were outstanding. JACOR COMMUNICATIONS, INC. INDEX Page Number PART I. Financial Information Item 1. - Financial Statements Condensed Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 3 Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. Other Information Item 6. - Exhibits and Reports on Form 8-K 17 Signatures 20 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data)
September 30, December 31, 1997 1996 ASSETS Current assets: Cash and cash equivalents $ 18,779 $ 78,137 Accounts receivable, less allowance for doubtful accounts of $5,436 in 1997 and $3,950 in 1996 118,500 79,502 Prepaid expenses and other current assets 32,417 8,963 Total current assets 169,696 166,602 Property and equipment, net 175,567 131,488 Intangible assets, net 2,003,526 1,290,172 Other assets 57,743 116,680 Total assets $ 2,406,532 $ 1,704,942 LIABILITIES Current liabilities: Accounts payable, accrued expenses and other current liabilities $ 86,504 $ 55,532 Total current liabilities 86,504 55,532 Long-term debt 834,500 670,000 5 1/2% Liquid Yield Option Notes 123,619 118,682 Other liabilities 114,927 108,914 Deferred tax liability 334,549 264,878 Commitments and contingencies SHAREHOLDERS' EQUITY Preferred Stock, authorized and unissued 4,000,000 shares - - Common Stock, $0.01 per share par value; authorized 100,000,000 shares, issued and outstanding shares: 45,564,401 in 1997 and 31,287,221 in 1996 455 313 Additional paid-in capital 860,530 432,721 Common stock warrants 31,500 26,500 Unrealized gain on investments - 2,042 Retained earnings 19,948 25,360 Total shareholders' equity 912,433 486,936 Total liabilities and shareholders' equity $ 2,406,532 $ 1,704,942 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, 1997 and 1996 (In thousands, except per share amounts) (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Broadcast revenue $ 161,733 $ 60,143 $ 413,689 $ 142,176 Less agency commissions 17,173 5,817 44,748 14,656 Net revenue 144,560 54,326 368,941 127,520 Broadcast operating expenses 93,734 38,273 251,513 91,694 Depreciation and amortization 21,900 5,166 53,097 10,601 Corporate general and administrative expenses 3,406 1,658 9,240 4,080 Operating income 25,520 9,229 55,091 21,145 Interest expense (20,951) (6,844) (60,081) (13,397) Gain on sale of radio stations - - 10,801 2,539 Other income, net 214 3,160 2,733 4,701 Income before income taxes and extraordinary loss 4,783 5,545 8,544 14,988 Income taxes 4,300 3,445 6,500 7,285 Income before extraordinary loss 483 2,100 2,044 7,703 Extraordinary loss, net of income tax credit (1,900) (2,015) (7,456) (2,966) Net (loss) income $ (1,417) $ 85 $ (5,412) $ 4,737 NET (LOSS) INCOME PER COMMON SHARE: Before extraordinary loss $ 0.01 $ 0.06 $ 0.05 $ 0.31 Extraordinary loss (0.04) (0.06) (0.18) (0.12) Net (loss) income per common share $(0.03) $ 0.00 $(0.13) $ 0.19 Number of common shares used in per share computations 49,113 33,303 41,647 24,880 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, 1997 and 1996 (In thousands) (UNAUDITED)
1997 1996 Cash flows from operating activities: Net cash provided by operating activities $ 31,109 $ 17,656 Cash flows from investing activities: Deposits paid on broadcast properties (26,225) - Capital expenditures (12,485) (7,506) Cash paid for acquisitions (542,074) (827,941) Proceeds from sale of investments 73,813 - Proceeds from sale of radio stations 19,450 6,595 Loans originated and other - (7,147) Net cash used by investing activities (487,521) (835,999) Cash flows from financing activities: Proceeds from issuance of long-term debt 324,700 703,000 Proceeds from issuance of 8 3/4% Notes 150,000 - Proceeds from issuance of LYONs - 115,172 Proceeds from issuance of common stock 246,154 317,109 Repayment of long-term debt (310,200) (248,500) Payment of finance costs (13,927) (21,342) Other 327 (1,712) Net cash provided by financing activities 397,054 863,727 Net (decrease) increase in cash and cash equivalents (59,358) 45,384 Cash and cash equivalents at beginning of period 78,137 7,437 Cash and cash equivalents at end of period $ 18,779 $ 52,821 Supplemental schedule of non-cash investing and financing activities: Common stock issued in acquisitions $ 179,428 $ - Warrants issued in acquisitions 5,000 26,500 Liabilities assumed in acquisitions 36,851 233,135 Fair value of assets exchanged, net of cash 104,000 - The accompanying notes are an integral part of the condensed consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. FINANCIAL STATEMENTS The December 31, 1996 condensed 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, 1996 and the notes thereto. 2. ACQUISITIONS AND DISPOSITIONS Completed Radio Station Acquisitions and Dispositions First Six Months Transactions In the first six months of 1997, the Company completed acquisitions of 52 stations in 20 broadcast areas for a purchase price consisting of (i) $225.8 million in cash, of which $26.1 million was placed in escrow in 1996, (ii) the issuance of approximately 3.55 million shares of common stock valued at $105.9 million, and (iii) the issuance of warrants to acquire 500,000 shares of common stock at $40 per share valued at $5.0 million. The Company also completed three separate like-kind exchanges of broadcast properties, exchanging five stations and $27.0 million in cash, of which $3.6 million was placed in escrow in 1996, for nine stations and $16.0 million in cash. The Company sold one station in San Diego, California for $6.0 million. July Transactions The Company acquired WLTF-FM and WTAM-AM in Cleveland, Ohio from Secret Communications, Inc. for approximately $45.0 million consisting of 750,000 shares of Jacor common stock valued at approximately $21.0 million as of the signing of the agreement and cash of approximately $24.0 million. The Company acquired WXZZ-FM and WTKT-AM in Georgetown, Kentucky and WKQQ-FM in Lexington, Kentucky for $24.0 million in cash from Village Communications, Inc. The Company acquired WLEC-AM and WCPZ-FM in Sandusky, Ohio for $7.7 million in cash from Erie Broadcasting II, Inc. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS AND DISPOSITIONS, Continued The Company acquired WLKT-FM in Lexington, Kentucky for $5.1 million in cash from Newport Communications L.L.C., BRC Media Management, Inc., James E. Champlin and Martin F. Beck. The Company acquired KBKK-FM in Spanish Fork, Utah for approximately $4.5 million in cash from Garcia Broadcasting, L.L.C. August Transactions The Company acquired WITS-AM and WYMR-FM in Sebring, Florida for approximately $0.7 million in cash from Outback Broadcasters, Inc. The Company acquired KMXN-AM in Santa Rosa, California for approximately $0.1 million in cash from Cardinal Communications, Inc. The Company disposed of WXZZ-FM in Lexington, Kentucky for approximately $3.5 million in cash. September Transactions The Company acquired KAHS-AM in Thousand Oaks, California for approximately $0.4 million in cash from Buenaventura Communications, Inc. The Company acquired WCBW-FM in St. Louis, Missouri for $13.2 million in cash from Continental Broadcasting Group, Inc. Completed Broadcasting Services Acquisitions In the first nine months of 1997, the Company completed acquisitions of four broadcasting services companies for a purchase price consisting of (i) $216.5 million in cash, and (ii) the issuance of approximately 1.48 million shares of common stock valued at $52.7 million. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS AND DISPOSITIONS, Continued 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 the first nine months acquisitions in 1997 and all of the 1996 acquisitions had taken place at the beginning of 1996, unaudited pro forma consolidated results of operations would have been as follows (in thousands except per share amounts): Pro forma (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Net revenue $145,348 $136,173 $414,480 $386,383 Net income (loss) before extraordinary items $ 1,531 $ (1,130) $ 2,387 $ (7,812) Net (loss) income $ (369) $ (3,145) $ (5,069) $(10,778) Net income (loss) per common share before extraordinary items $ 0.03 $ (0.02) $ 0.05 $ (0.17) Net (loss) income per common share $ (0.01) $ (0.07) $ (0.10) $ (0.24) Recently Completed Acquisitions Subsequent to September 30, 1997 The Company acquired KXIC-AM and KKRQ-FM in Iowa City, Iowa for $8.0 million in cash from Iowa City Broadcasting Company, Inc. and Thomas E. Ingstad. The Company acquired KIGN-FM, KOLZ-FM, KGAB-AM and KLEN-FM in Cheyenne and Orchard Valley, Wyoming for $5.5 million in cash from Magic City Media. The Company acquired WNCD-FM and WNIO-AM in Niles, Ohio through a purchase of the outstanding stock of WN Broadcasting Corp. for $3.4 million in cash. The Company acquired the rights to The Dr. Laura Schlessinger Show from Synergy Broadcasting, Inc. and the assets of Multiverse Networks, L.L.C., one of the nation's top network radio sales representation firms and the outside sales representation arm of The Dr. Laura Schlessinger Show, for $71.5 million in cash. Pending Radio Station Acquisitions and Dispositions In June 1997, the Company entered into a binding agreement with American Radio Systems, Inc. whereby Jacor will exchange the assets of WDAF-AM, KYYS-FM, KUDL-FM, and KMXV- FM in Kansas City, Missouri for the assets of WMMX-FM, WTUE- FM, WLQT-FM, WXEG-FM, WBTT-FM, and WONE-AM in Dayton, Ohio. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS AND DISPOSITIONS, Continued In August 1997, the Company entered into a binding agreement with Trumper Communications, Inc., whereby Jacor will exchange the assets of KBKK-FM in Spanish Fork, Utah for the assets of KISN-AM in Salt Lake City, Utah. In October 1997, the Company entered into a letter of intent to purchase the assets of Nationwide Communications, Inc.'s 17 radio stations for $620.0 million (the "Nationwide Transaction"). 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 also entered into agreements to purchase FCC licenses and substantially all of the broadcast assets of 27 stations in seven of the Company's existing broadcast areas and in five new broadcast areas for a total purchase price of $99.2 million, of which $26.8 million has already been paid in escrow. 3. ISSUANCE OF COMMON STOCK In May 1997, the Company completed an offering of 6,650,000 shares of common stock at $31.00 per share net of underwriting discounts of $1.31 per share (the "Offering"). The over-allotment option was also exercised by the underwriters resulting in the issuance of an additional 997,500 shares. Net proceeds to the Company from the Offering were approximately $226.0 million. Concurrently with the Offering, the Company issued 673,628 shares of common stock for $20.0 million to affiliated designees of the Company's largest shareholder, The Zell/Chilmark Fund L.P. 4. ISSUANCE OF SUBORDINATED NOTES In June 1997, the Company issued $150.0 million of 8 3/4% Senior Subordinated Notes (the "Notes") in a private placement offering. In connection with the Notes Offering the Company entered into a registration rights agreement, which will require the Company within 180 days to exchange the Notes for identical notes registered with the Securities and Exchange Commission. Net proceeds to the Company were $147.0 million. The Notes will mature on June 15, 2007. Interest on the Notes is payable semi-annually. The Notes will be redeemable at the option of the Company, in whole or in part, at any time 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%. The Notes are general, unsecured obligations of the Company subordinated in right of payment to all senior debt of the Company including the Credit Facility. The Notes are jointly and severally, fully and unconditionally guaranteed on a senior subordinated basis by Jacor and substantially all subsidiaries of Jacor (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. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4. ISSUANCE OF SUBORDINATED NOTES, Continued The 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. 5. LONG-TERM DEBT New Credit Facility In September 1997, the Company 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 June 1996 Credit Facility, giving the Company an additional $400 million in borrowing capacity, 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 September 30, 1997, the outstanding balance of the term loan was $400.0 million. The Credit Facility is collateralized by a first priority perfected pledge of all capital stock owned by the Company and loans under the Credit Facility are guaranteed by the Company and each of the Company's direct and indirect subsidiaries. The Company's obligations with respect to the Credit Facility and each guarantor's obligations with respect to the related guaranty are collateralized by substantially all of their respective assets, and, in the case of the Company's subsidiaries, capital stock. During the first nine months of 1997 the Company recognized an extraordinary loss of approximately $7.5 million, net of income tax credit, related to the write-off of debt financing costs. 6. RECENTLY ISSUED ACCOUNTING STANDARDS In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share". The Company will implement the Statement in the fourth quarter 1997. Diluted Earnings Per Share, as defined by the Statement, is expected to approximate the Company's fully diluted Earnings Per Share, as currently calculated. The Company will also be required to present basic earnings per share, which will be calculated using the weighted average shares of common stock outstanding for the reporting period without giving effect to outstanding options, warrants or other potentially dilutive securities. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. GENERAL The following discussion should be read in conjunction with the financial statements beginning on page 3. 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 the 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. This Report includes certain forward-looking statements within the meaning of Section 27A of the Securities Act. When used in this Report, the words "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. 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 as a result of the matters discussed in this Report generally. The Company undertakes no obligation to publicly release the result of any revisions to these forwardlooking statements that may be made to reflect any future events or circumstances. LIQUIDITY AND CAPITAL RESOURCES Completed Acquisitions and Dispositions In the first nine months of 1997, the Company completed acquisitions of: 66 radio stations in 26 different broadcast areas; substantially all of the assets relating to the broadcast distribution and related print and electronic media publishing businesses of EFM Media; the assets of NSN Network Services, a leading provider of satellite and network services for the radio broadcasting industry; the assets of Airwatch Communications, Inc. and Airtraffic Communications, Inc.; and effected a merger with Premiere Radio Networks, Inc. These acquisitions required cash consideration in the aggregate of approximately $571.9 million, of which approximately $29.8 million was placed in escrow in 1996. The acquisitions were funded through: (i) net proceeds of $246.2 million from a common stock offering, (ii) net proceeds of $147.0 million from the issuance of 8 3/4% notes, (iii) borrowings under the Credit Facility, and (iv) proceeds of approximately $93.3 million from the sale of certain investments and two radio stations. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES, Continued Recently Completed Acquisitions Subsequent to September 30, 1997 In October 1997, the Company completed acquisitions of eight radio stations in three broadcast areas for aggregate cash consideration of approximately $16.9 million. Additionally, the Company acquired the rights to The Dr. Laura Schlessinger Show from Synergy Broadcasting, Inc. and the assets of Multiverse Networks, L.L.C., one of the nation's top network radio sales representation firms and the outside sales representation arm of The Dr. Laura Schlessinger Show, for $71.5 million in cash. The acquisitions were funded from borrowings under the Credit Facility. Pending Acquisitions and Dispositions In October 1997, the Company entered into a letter of intent to purchase the assets of Nationwide Communications, Inc.'s 17 radio stations for $620.0 million. 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 also entered into agreements to purchase FCC licenses and substantially all of the broadcast assets of 27 stations in seven of the Company's existing broadcast areas and in five new broadcast areas for a total purchase price of $99.2 million, of which $26.8 million has already been paid in escrow through November 5, 1997. Pending Acquisition Financing As of November 5, 1997, the Company had $517.5 million of outstanding indebtedness under the Credit Facility, which includes all borrowings used to fund the recently completed transactions, and available borrowings of $632.5 million. The Company will finance its pending acquisitions from a combination of one or more of the following sources: utilizing available borrowings under the Credit Facility; the Company's working capital; and/or proceeds that may be raised through private and/or public offerings of additional equity and/or debt securities of the Company, some of which could be sold to the Company's existing security holders including without limitation the Zell/Chilmark Fund L.P. or its affiliates or designees. The Company has not made any definitive decisions as to which of these funding sources will be utilized nor as to the relative amounts that may be obtained from such sources. Additionally, the Company anticipates that there will be certain dispositions of radio stations related to the Nationwide Transaction, although no such dispositions have yet been determined. Credit Facilities and Other In September 1997, a new Credit Facility replaced the June 1996 Credit Facility, resulting in expanded availability of up to $1.15 billion. The interest rate pricing on the Credit Facility has been reduced to reflect the Company's improved capitalization and current market terms. The Credit Facility provides loans to the Company in two components: (i) a reducing revolving credit facility of up to $750.0 million under which the aggregate commitments would reduce on a semi-annual basis commencing in June 2000; and (ii) a $400.0 million amortizing term loan that would reduce on a semi-annual basis commencing in December 1999. Year to date, through November 1, 1997, the average interest rate on Credit Facility borrowings was 7.68%. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES, Continued The issuance of additional debt would negatively impact the Company's debt-toequity ratio and its results of operations and cash flows due to higher amounts of interest expense. Any issuance of additional equity would lessen this impact. RESULTS OF OPERATIONS The Nine Months Ended September 30, 1997 Compared to the Nine Months Ended September 30, 1996 Broadcast revenue for the first nine months of 1997 was $413.7 million, an increase of $271.5 million or 190.9% from $142.2 million during the first nine months of 1996. This increase resulted primarily from the revenue generated at those properties owned or operated during the first nine months of 1997 but not during the comparable 1996 period. On a "same station" basis - reflecting results from stations operated in the first nine months of both 1997 and 1996 - broadcast revenue for 1997 was $125.4 million, an increase of $14.1 million or 12.7% from $111.3 million for 1996. This increase resulted primarily from the growing benefits of the Company's strategy of radio station clustering and a strong advertising environment. Agency commissions for the first nine months of 1997 were $44.7 million, an increase of $30.0 million or 204.1% from $14.7 million during the first nine months of 1996 due to the increase in broadcast revenue. On a "same station" basis, agency commissions for the first nine months of 1997 were $13.4 million, an increase of $1.9 million or 16.5% from $11.5 million for 1996 due to the increase in broadcast revenue. Broadcast operating expenses for the first nine months of 1997 were $251.5 million, an increase of $159.8 million or 174.3% from $91.7 million during the first nine months of 1996. These expenses increased primarily as a result of expenses incurred at those properties owned or operated during the first nine months of 1997 but not during the comparable 1996 period. On a "same station" basis, broadcast operating expenses for the first nine months of 1997 were $79.4 million, an increase of $7.2 million or 10.0% from $72.2 million for the first nine months of 1996. This increase resulted primarily from increased selling costs. Depreciation and amortization for the first nine months of 1997 and 1996 was $53.1 million and $10.6 million, respectively. This increase was due to acquisitions in 1996 and the first nine months of 1997. Operating income for the first nine months of 1997 was $55.1 million, an increase of $34.0 million or 161.1% from an operating income of $21.1 million for the first nine months of 1996. Interest expense in the first nine months of 1997 was $60.1 million, an increase of $46.7 million from $13.4 million in the first nine months of 1996. Interest expense increased due to an increase in outstanding debt that was incurred in connection with acquisitions. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS, Continued The gain on the sale of assets in 1997 resulted from the sale of the Company's investment in News Corp. Warrants in February 1997 and in Paxson Communications Corporation ("Paxson") stock in May, 1997. The gain on the sale of assets in 1996 resulted from the sale of two FM radio stations in Knoxville. Income tax expense was $6.5 million for the first nine months of 1997 and income tax expense for the first nine months of 1996 was $7.3 million. The effective tax rate increased in the first nine months of 1997 due to an increase in non-deductible goodwill resulting from acquisitions. In the first nine months of 1997 the Company recognized an extraordinary loss of approximately $7.5 million, net of income tax credit, related to the write off of debt financing costs. In the first nine months of 1996, the Company recognized an extraordinary loss of approximately $3.0 million, net of income tax credit, related to the write off of debt financing costs. Net loss for the first nine months of 1997 was $5.4 million, compared to net income of $4.7 million reported by the Company for the first nine months of 1996. The Three Months Ended September 30, 1997 Compared to the Three Months Ended September 30, 1996 Broadcast revenue for the third quarter of 1997 was $161.7 million, an increase of $101.6 million or 169.1% from $60.1 million during the third quarter of 1996. This increase resulted primarily from the revenue generated at those properties owned or operated during the third quarter of 1997 but not during the comparable 1996 period. On a "same station" basis reflecting results from stations operated in the third quarter of both 1997 and 1996 - broadcast revenue for 1997 was $45.3 million, an increase of $4.4 million or 10.8% from $40.9 million for 1996. This increase resulted primarily from the growing benefits of the Company's strategy of radio station clustering and a strong advertising environment. Agency commissions for the third quarter of 1997 were $17.2 million, an increase of $11.4 million or 196.6% from $5.8 million during the third quarter of 1996 due to the increase in broadcast revenue. On a "same station" basis, agency commissions for the third quarter of 1997 were $5.1 million, an increase of $0.9 million or 21.4% from $4.2 million for 1996 due to the increase in broadcast revenue. Broadcast operating expenses for the third quarter of 1997 were $93.7 million, an increase of $55.4 million or 144.6% from $38.3 million during the third quarter of 1996. These expenses increased primarily as a result of expenses incurred at those properties owned or operated during the third quarter of 1997 but not during the comparable 1996 period. On a "same station" basis, broadcast operating expenses for the third quarter of 1997 were $27.7 million, an increase of $1.7 million or 6.5% from $26.0 million for the third quarter of 1996. This increase resulted primarily from increased selling costs. Depreciation and amortization for the third quarter of 1997 and 1996 was $21.9 million and $5.2 million, respectively. This increase was due to the acquisitions in the last six months of 1996 and the first nine months of 1997. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS, Continued Operating income for the third quarter of 1997 was $25.5 million, an increase of $16.3 million or 177.2% from an operating income of $9.2 million for the third quarter of 1996. Interest expense in the third quarter of 1997 was $21.0 million, an increase of $14.2 million from $6.8 million in the third quarter of 1996. Interest expense increased due to an increase in outstanding debt that was incurred in connection with acquisitions. Income tax expense was $4.3 million for the third quarter of 1997 and income tax expense for the third quarter of 1996 was $3.4 million. The effective tax rate increased in the third quarter of 1997 due to an increase in nondeductible goodwill resulting from acquisitions. In the third quarter of 1997 the Company recognized an extraordinary loss of approximately $1.9 million, net of income tax credit, related to the writeoff of debt financing costs. In the third quarter of 1996 the Company recognized an extraordinary loss of approximately $2.0 million, net of income tax credit, related to the write-off of debt financing costs. Net loss for the third quarter of 1997 was $1.4 million, compared to net income of $0.1 million reported by the Company for the third quarter of 1996. CASH FLOWS Cash flows provided by operating activities, inclusive of working capital, were $31.1 million and $17.7 million for the nine months ended September 30, 1997 and 1996, respectively. Cash flows provided by operating activities for the first nine months of 1997 resulted primarily from the add-back of $59.4 million of non- cash expenses together with the add-back of $7.5 million for the extraordinary loss net of $(10.8) million from the gain on sale of assets together with the $(19.6) million net change in working capital to a net loss of $(5.4) million for the period. Cash flows provided by operating activities for the comparable 1996 period resulted primarily from the addback of $13.8 million of non-cash expenses 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, other costs of $(0.2) million and $(1.1) million net change in working capital to net income of $4.7 million for the period. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CASH FLOWS, Continued Cash flows used by investing activities were $(487.5) million and $(836.0) million for the nine months ended September 30, 1997 and 1996, respectively. Investing activities included capital expenditures of $(12.5) million and $(7.5) million for the first nine months of 1997 and 1996, respectively. Investing activities during the first three quarters of 1997 resulted primarily from the acquisition of broadcast properties of $(542.1) million and payment of escrow deposits of $(26.2) million, partially offset by the proceeds from the sale of the News Corp. Warrants, Paxson stock, and Australia's Wonderland investment of $73.8 million. Additionally, investing activities for the first three quarters of 1997 is net of $16.0 million of the proceeds from the like- kind exchange of WKRQ-FM in Cincinnati, Ohio for WVOR-FM, WHAM-AM and WHTK-AM in Rochester, New York, and proceeds from the sale of WXZZ-FM in Lexington, Kentucky of $3.5 million. Investing activities during the first three quarters of 1996 included expenditures of $(827.9) million and $(7.2) million for acquisitions, and loans made to Noble and in connection with the Company's JSAs and other, respectively. Additionally, investing activities for the 1996 period is net of $6.6 million of proceeds from the sale of radio stations WMYU-FM and WWST-FM in Knoxville. Cash flows provided by financing activities were $397.1 million and $863.7 million for the nine months ended September 30, 1997 and 1996, respectively. Cash flows provided by financing activities during the first three quarters of 1997 resulted primarily from $150.0 million in proceeds from the issuance of 8 3/4% Senior Subordinated Notes, $247.9 million from the issuance of common stock, and $14.5 million of net borrowings under the credit facility, partially offset by payment of finance costs of $(13.9) million and other of $(1.4) million. Cash flows provided by financing activities during the first nine months of 1996 resulted primarily from the $454.5 million in net borrowings under the former credit facility, together with $115.2 million in proceeds from the issuance of Liquid Yield Option Notes, $317.1 million from the issuance of common stock, $(21.3) million of paid finance costs, and $(1.8) million of other costs. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Number Description Page 4.1 Effectiveness Agreement dated as of September 16, 1997 among Jacor Communications Company ("JCC"), the Lenders named therein (the "Lenders"), the Chase Manhattan Bank, as Administrative Agent, Banque Paribas, as Documentation Agent, and Bank of America Illinois, as Syndication Agent (omitting schedules and exhibits not deemed material). Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated September 30,1997. * 4.2 Credit Agreement dated as of June 12, 1996 as Amended and Restated as of February 14, 1997 and as Further Amended and Restated as of September 16, 1997 among JCC, the Lenders, Bank of America National Trust and Savings Association (as successor by merger to Bank of America Illinois), as Syndication Agent, Banque Paribas, as Documentation Agent, and the Chase Manhattan Bank, as Administrative Agent (omitting schedules and exhibits not deemed material)(included as Exhibit A to Effectiveness Agreement) ("Restated Credit Agreement"). Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated September 30, 1997. * 4.3 Parent Guarranty dated as of June 12, 1996 and as Amended and Restated as of September 16, 1997, by the Company in favor or The Chase Manhattan Bank, as Administrative Agent for the Agents, the Lenders and any Interest Rate Hedge Providers (each as defined in the Restated Credit Agreement). Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K dated September 30, 1997. * 4.4 Reaffirmation Agreement dated as of September 16, 1997 between The Chase Manhattan Bank, as Administrative Agent for the benefit of the Agents, the Issuing Banks, the Lenders and any Interest Rate Hedge Providers (each as defined in the Restated Credit Agreement), the Company, JCC and each subsidiary of JCC. Incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K dated September 30, 1997. * JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Number Description Page 4.5 First Supplemental Indenture Dated as of September 16, 1997 (Supplemental to Indenture Dated as of June 12, 1996) between JCC, the Company and First Trust National Association for JCC's 10 1/8% Senior Subordinated Notes due 2006 and Jacor's Guaranty thereof. Incorporated by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K dated September 30, 1997. * 4.6 First Supplemental Indenture Dated as of September 16, 1997 (Supplemental to Indenture Dated as of December 17, 1996) between JCC, the Company, the Subsidiary Guarantors named therein, and The Bank of New York for JCC's 9 3/4% Senior Subordinated Notes due 2006 and the Company's and the Subsidiary Guarantors' Guaranty thereof. Incorporated by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K dated September 30, 1997. * 4.7 First Supplemental Indenture Dated as of September 16, 1997 (Supplemental to Indenture Dated as of June 17, 1997) between JCC, the Company, the Subsidiary Guarantors named therein, and The Bank of New York for JCC's 8 3/4% Senior Subordinated Notes due 2007 and Jacor's and the Subsidiary Guarantors' Guaranty thereof. Incorporated by reference to Exhibit 4.7 to the Company's Current Report on Form 8-K dated September 30, 1997. * 11 Computation of Consolidated Income (Loss) Per Common Share 21 27 Financial Data Schedule 22 [FN] * Incorporated by reference. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION (b) Reports on Form 8-K The following Forms 8-K were filed during the third quarter of 1997: 1. Form 8-K dated August 29, 1997. This Form 8-K described the Company's interest in acquiring American Radio Systems. 2. Form 8-K dated September 30, 1997. This Form 8-K described the Company's amendment and restatment of its existing Credit Facility. This Form 8-K also described the Company's agreement to acquire the rights to the Dr. Laura Schlessinger Show from Synergy Broadcasting, Inc. and the assets of Multiverse Networks, L.L.C. for $71.5 million as well as Company transactions involving the acquisition and disposition of radio stations. In addition, the following Form 8-K was filed during the fourth quarter of 1997: 1. Form 8-K dated November 4, 1997. This Form 8-K described the Company's signing of a letter of intent to purchase the assets of 17 radio stations from Nationwide Communications, Inc. and its affiliated entities for a purchase price of $620.0 million as well as Company transactions involving the acquisition and disposition of radio stations. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. JACOR COMMUNICATIONS, INC. (Registrant) DATED: November 12, 1997 BY /s/ R. Christopher Weber R. Christopher Weber, Senior Vice President and Chief Financial Officer EXHIBIT 11 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES Computation of Consolidated Income Per Common Share for the three months and nine months ended September 30, 1997 and 1996 (In thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30 September 30 1997 1996 1997 1996 Income (loss) for primary and fully diluted computation: Income before extraordinary item $ 483 $2,100 $ 2,044 $ 7,703 (Loss) income $ (1,417) $ 85 $(5,412) $ 4,737 Primary (1.): Weighted average common shares and all other dilutive securities: Common stock 45,362 31,250 39,007 23,499 Stock options, Citicasters warrants and Regent warrants 3,451 1,753 2,340 1,081 Contingently issuable common shares 300 300 300 300 49,113 33,303 41,647 24,880 Primary (loss) income per common share: Before extraordinary loss $ 0.01 $ 0.06 $ 0.05 $ 0.31 Net (loss) income $ (0.03) $ 0.00 $(0.13) $ 0.19 NOTES: 1. Fully diluted earnings per share is not presented since it approximates primary income per share.
EX-27 2
5 1,000 9-MOS DEC-31-1997 SEP-30-1997 18,779 0 123,936 5,436 0 169,696 201,783 26,216 2,406,532 86,504 958,119 455 0 0 911,978 2,406,532 0 413,689 0 296,261 62,337 1,367 60,081 8,544 6,500 2,044 0 7,456 0 (5,412) (0.13) (0.13)
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