-----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, HpNDCfIZ8k/2e7pzKCh/qDx+XE/F63/iT3I3nqKL59EU7x+tvNGzwVgFdn5js9ym ed/B7Yz2yZzJCErzhxwwdw== 0000702808-98-000003.txt : 19980518 0000702808-98-000003.hdr.sgml : 19980518 ACCESSION NUMBER: 0000702808-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: 98621946 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 March 31, 1998 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, Kentucky 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 May 1, 1998, 50,902,698 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 March 31, 1998 and December 31, 1997 3 Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. Other Information Item 6. - Exhibits and Reports on Form 8-K 18 Signatures 20 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (UNAUDITED)
March 31, December 31, 1998 1997 ASSETS Current assets: Cash and cash equivalents $ 343,439 $ 28,724 Accounts receivable, less allowance for doubtful accounts of $6,702 in 1998 and $6,195 in 1997 128,850 135,073 Prepaid expenses and other 39,340 33,790 Total current assets 511,629 197,587 Property and equipment, net 212,398 206,809 Intangible assets, net 2,157,393 2,128,718 Other assets 83,619 68,764 Total assets $ 2,965,039 $ 2,601,878 LIABILITIES Current liabilities: Accounts payable, accrued expenses and other current liabilities $ 114,759 $ 118,249 Total current liabilities 114,759 118,249 Long-term debt 939,542 987,500 Liquid Yield Option Notes 294,920 125,300 Deferred tax liability 342,684 338,867 Other liabilities 116,880 115,611 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: 50,898,868 in 1998 and 45,689,677 in 1997 509 457 Additional paid-in capital 1,109,835 863,086 Common stock warrants 31,500 31,500 Retained earnings 14,410 21,308 Total shareholders' equity 1,156,254 916,351 Total liabilities and shareholders' equity $ 2,965,039 $ 2,601,878' The accompanying notes are an integral part of the condensed consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME for the three months ended March 31, 1998 and 1997 (in thousands, except per share data) (UNAUDITED)
1998 1997 Broadcast revenue $159,192 $100,153 Less agency commissions 17,164 11,325 Net revenue 142,028 88,828 Broadcast operating expenses 107,353 67,305 Depreciation and amortization 27,450 13,369 Corporate general and administrative expenses 3,644 2,762 Operating income 3,581 5,392 Interest expense (23,958) (17,176) Gain on sale of assets - 4,695 Other income, net 2,479 405 Loss before income taxes and extraordinary loss (17,898) (6,684) Income tax benefit 11,000 4,100 Loss before extraordinary loss (6,898) (2,584) Extraordinary loss, net of income tax benefit - (5,556) Net loss (6,898) (8,140) Other comprehensive income, net of tax: Unrealized gains on securities - 6,149 Income tax expense related to items of other comprehensive income - (2,460) Other comprehensive income, net of tax - 3,689 Comprehensive loss $ (6,898) $ (4,451) Basic and diluted net loss per common share: Before extraordinary loss $ (0.14) $ (0.08) Extraordinary loss - (0.17) Net loss per common share $ (0.14) $ (0.25) Number of common shares used in basic and diluted calculation 48,419 32,588 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 three months ended March 31, 1998 and 1997 (in thousands) (UNAUDITED)
1998 1997 Cash flows from operating activities: Net cash provided by operating activities $19,391 $ 4,503 Cash flows from investing activities: Capital expenditures (4,795) (4,860) Cash paid for acquisitions (34,485) (133,215) Deposits on broadcast stations (23,783) (2,975) Proceeds from News Corp. Warrants sale - 44,495 Net cash used by investing activities (63,063) (96,555) Cash flows from financing activities: Issuance of long-term debt 149,539 77,000 Common stock proceeds, net of issuance costs 244,939 - Issuance of Liquid Yield Option Notes 166,950 - Repayment of long-term debt (197,500) (50,000) Payment of finance costs (7,403) (667) Other 1,862 - Net cash provided by financing activities 358,387 26,333 Net increase (decrease) in cash and cash equivalents 314,715 (65,719) Cash and cash equivalents at beginning of period 28,724 78,137 Cash and cash equivalents at end of period $ 343,439 $ 12,418 Supplemental schedule of non-cash investing and financing activities: Common shares issued in acquisitions - $105,900 Warrants issued in acquisitions - 5,000 Fair value of assets exchanged, net of cash $ 70,000 - Liabilities assumed in acquisitions 2,687 5,616 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, 1997 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, 1997 and the notes thereto. 2. ACQUISITIONS AND DISPOSITIONS Completed Radio Station Acquisitions and Dispositions January Transactions The Company acquired WKNR-AM in Cleveland, Ohio from CV Radio Associates, L.P. for $8.4 million in cash, all of which was placed in escrow in 1997. The Company acquired KFXD-AM in Nampa, Idaho from Doubledee Broadcasting Group for $1.8 million in cash, of which $0.1 million was placed in escrow in 1997. The Company acquired KLDZ-AM (formerly KIST-AM) in Santa Barbara, California from Engles Enterprises, Inc. for $0.9 million in cash, of which $0.1 million was placed in escrow in 1997. The Company completed a like-kind exchange, whereby the assets of WDAF-AM, KYYS-FM, KUDL-FM, and KMXV-FM in Kansas City, Missouri were exchanged for the assets of WMMX-FM, WTUE-FM, WLQT-FM, WXEG-FM, WBTT-FM, and WONE-AM in Dayton, Ohio. February Transactions The Company acquired WMRN-AM, WMRN-FM and WDIF-FM of Marion, Ohio, WQTL-FM of Ottawa, Ohio and WHMQ-FM of North Baltimore, Ohio from Marion Broadcasting Company for $14.5 million in cash, of which $0.8 million was placed in escrow in 1997. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS AND DISPOSITIONS, Continued March Transactions The Company acquired KCIX-FM of Garden City, Idaho and KXLT-FM of Eagle, Idaho from LMS of Boise, Inc. and LMS Licenses,Inc. for $8.0 million in cash, all of which was placed in escrow in 1997. The Company sold WLOH-AM in Columbus, Ohio for $0.1 million in cash. Completed Broadcasting Services Acquisitions February Transactions The Company acquired Hot Mix Radio Network, Inc., producer of seven nationally syndicated "dance mix" radio programs in four major radio formats, for $2.3 million in cash, plus additional contingent consideration of up to $1.6 million payable over three years. The Company acquired the "Invasion" production music library from Brandon D'Amore Productions for $0.8 million in cash. March Transactions The Company acquired Chancellor Broadcasting Co., Inc. and Talk Radio Network, Inc., syndicator of two Art Bell network radio programs, as well as 17 other talk radio programs, for $8.5 million in cash. The above acquisitions and all 1997 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 above acquisitions had taken place at the beginning of 1997 and that the 1997 acquisitions, which were completed at various dates in 1997, had taken place at the beginning of 1997, unaudited pro forma consolidated results of operations would have been as follows (in thousands except per share amounts): Pro forma (Unaudited) Three Months Ended March 31,
1998 1997 Net revenue $143,739 $128,539 Net loss before extraordinary items $ (6,666) $ (5,262) Diluted net loss per common share before extraordinary items $ (0.13) $ (0.10)
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. ACQUISITIONS AND DISPOSITIONS, Continued Radio Station Acquisitions and Dispositions Completed Subsequent to March 31, 1998 The Company completed the acquisitions of two radio stations in two broadcast areas for $3.5 million in cash. The Company also completed the sale of 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. Pending Radio Station 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 third 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 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 $20.8 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 17 stations in seven of the Company's existing broadcast areas and in seven new broadcast areas for a total purchase price of approximately $75.3 million, of which $5.6 million has already been paid in escrow through March 31, 1998, and to exchange the assets of one station for another station in one broadcast area 3. ISSUANCE OF COMMON STOCK In February 1998, the Company completed an offering of 4,560,000 shares of common stock at $50.50 per share net of underwriting discounts of $2.02 per share (the "Offering"). The over-allotment option was also exercised by the underwriters resulting in the issuance of an additional 513,000 shares. Net proceeds to the Company from the Offering were approximately $244.9 million. 4. ISSUANCE OF SUBORDINATED NOTES In February 1998, the Company issued $120.0 million of 8% Senior Subordinated Notes (the "8% Notes"). Net proceeds to the Company were $117.1 million. The 8% Notes will mature on February 15, 2010. Interest on the 8% Notes is payable semi-annually. The 8% Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after February 15, 2003. The redemption prices commence at 104.00% and are reduced by .80% annually until February 15, 2008 when the redemption price is 100%. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4. ISSUANCE OF SUBORDINATED NOTES, Continued The 8% Notes are obligations of Jacor Communications Company ("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 8% Notes do restrict the ability of JCC and of the Subsidiary Guarantors to make distributions to the Registrant. 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. Summarized financial information with respect to Jacor, JCC and with respect to the Subsidiary Guarantors on a combined basis as of March 31, 1998 and for each of the periods ended March 31, 1998 and 1997 is as follows: JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4. ISSUANCE OF SUBORDINATED NOTES, Continued
Jacor _________JCC__________ March 31, March 31, March 31, March 31, 1998 1997 1998 1997 Operating Statement Data (in thousands): Net revenue - - - - Equity in earnings of subsidiaries $ (5,484) $ (7,072) $ (6,463) $ (3,516) Operating loss (9,398) (9,940) (6,463) (3,516) Loss before extraordinary items (6,898) (8,140) (5,484) (1,516) Net loss (6,898) (8,140) (5,484) (7,072) Balance Sheet Data (in thousands): Current assets $ 164,197 $ 186,589 Non-current assets 1,411,924 2,178,339 Current liabilities 28,208 22,498 Non-current liabilities 391,659 1,670,528 Shareholders' equity 1,156,254 671,902 Combined Subsidiary Guarantors March 31, March 31, 1998 1997 Operating Statement Data (in thousands): Net revenue $ 142,664 $ 88,828 Equity in earnings of subsidiaries - - Operating income 7,495 8,260 Loss before extraordinary items (6,463) (3,516) Net loss (6,463) (3,516) Balance Sheet Data (in thousands): Current assets $ 160,843 Non-current assets 2,426,078 Current liabilities 64,053 Non-current liabilities 1,366,614 Shareholders' equity 1,156,254
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5. LIQUID YIELD OPTION NOTES In February 1998, the Company issued 4 3/4% Liquid Yield Option Notes due 2018 (the "1998 LYONs") 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 $1,000.00. 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. 6. EARNINGS PER SHARE Basic earnings per share ("EPS") for the first quarter of 1998 and 1997 are computed by dividing net loss by the weighted average number of common shares outstanding for each period. The Company's 1996 Liquid Yield Option Notes and 1998 LYONs (collectively, the "LYONs") can be converted into approximately 6.2 million shares of common stock at the option of the holder. The effect of the Company's LYONs, warrants, stock options and other dilutive securities have not been included in the calculation of diluted EPS because they are antidilutive due to net losses for the quarters ended March 31, 1998 and 1997. 7. RECENT PRONOUNCEMENTS In the first quarter of 1998, the Company adopted 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. 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. 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. 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 forward-looking statements that may be made to reflect any future events or circumstances. 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. LIQUIDITY AND CAPITAL RESOURCES Recent liquidity needs have been driven by the Company's acquisition strategy. The Company's acquisitions since 1996 have been financed with funds raised through a combination of debt and equity instruments. An important factor in management's financing decisions includes maintenance of leverage ratios consistent with their long-term growth strategy. The Company currently has cash on hand and additional borrowing capacity to finance the Company's pending acquisitions, with financing available to pursue other acquisitions. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES, Continued Based upon current levels of the Company's operations and anticipated growth, it is expected that operating cash flow will be sufficient to meet expenditures for operations, administrative expenses and debt service. Financing Activities Cash provided by financing activities for the first quarter of 1998 was $358.4 million compared to $26.3 million for the first quarter of 1997. The change between years is due primarily to funds raised in the first quarter of 1998 for the acquisition of radio stations and broadcasting related service companies. Credit Facilities The Company has a $1.15 billion credit facility (the "Credit Facility") with a syndicate of banks and other financial institutions. The Credit Facility provides loans to the Company in two components: (i) a reducing revolving credit facility (the "Revolving Credit Facility") of up to $750 million under which the aggregate commitments will reduce on a semi-annual basis commencing in June 2000; and (ii) a $400 million amortizing term loan (the "Term Loan")that would reduce on a semi-annual basis commencing in December 1999. The Term Loan and the Revolving Credit Facility expire on December 31, 2004. Amounts repaid or prepaid under the Term Loan may not be reborrowed. The Credit Facility bears interest at a rate that fluctuates, with an applicable margin ranging from 0.00% 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 May 1, 1998, the average interest rate on Credit Facility borrowings was 6.57%. 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. As of May 1, 1998, the Company had $400.0 million of outstanding indebtedness under the Term Loan and available borrowings of $750.0 million. Debt and Equity Offerings In February 1998, the Company completed offerings of 5.1 million shares of common stock, 8% Senior Subordinated Notes due 2010, and 4 3/4% Liquid Yield Option Notes (collectively the "February 1998 Offerings"). Net proceeds from the February 1998 Offerings were $525.0 million, of which $197.5 million was used to pay off the then outstanding balance of the Revolving Credit Facility. The remaining proceeds are currently held in short-term highly liquid securities. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES, Continued Investing Activities Cash flows used for investing activities were $63.1 million for the first quarter of 1998 as compared to $96.6 million for the first quarter of 1997. The variations from year to year are related to station acquisition activity, as described below, as well as the sale of the Company's investment in the News Corp. Warrants. Completed Acquisitions and Dispositions During the first quarter of 1998, the Company completed the following: acquisitions of ten radio stations in six broadcast areas; one like-kind exchange, whereby the Company exchanged four stations in one broadcast area for six stations in another broadcast area; the disposition of one station, and; acquisitions of four broadcasting related businesses. The Company paid cash consideration for the above transactions of approximately $27.9 million in the first quarter of 1998, in addition to approximately $17.3 million placed in escrow in 1997, and received cash consideration of approximately $0.1 million for the sale of one station. The acquisitions were funded through borrowings under the Credit Facility. Acquisitions and Dispositions Completed Subsequent to March 31, 1998 Through May 1, 1998, the Company completed acquisitions of two radio stations in two broadcast areas for $3.5 million in cash. The Company also completed the sale of 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. 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 third quarter of 1998. 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 $20.8 million in cash, all of which was paid in escrow in 1998. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES, Continued The Company has also entered into agreements to purchase FCC licenses and substantially all of the broadcast assets of 17 stations in seven of the Company's existing broadcast areas and in seven new broadcast areas for a total purchase price of approximately $75.3 million, of which $5.6 million has already been paid in escrow through May 1, 1998, and to exchange the assets of one station for another station in one broadcast area. The Company will finance its pending acquisitions from a combination of the net proceeds from the February 1998 Offerings and borrowings under the Revolving Credit Facility. The Company anticipates after financing all pending acquisitions, available borrowings under the Revolving Credit Facility will be approximately $480.0 million. Additionally, 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 May 1998, the Company filed an omnibus shelf registration statement with the Securities and Exchange Commission to register the possible future issuance of up to $500 million of additional equity and/or debt securities. The issuance of additional debt would negatively impact the Company's debt-to-equity ratio and its results of operations and cash flows due to higher amounts of interest expense. Any issuance of additional equity would soften this impact to some extent. Capital Expenditures The Company had capital expenditures of $4.8 million and $4.9 million for the quarters ended March 31, 1998 and 1997, respectively. The Company's capital expenditures consist primarily of purchases related to the Company's ongoing strategic technology plan, broadcasting equipment and tower upgrades. Operating Activities For the quarter ended March 31, 1998, cash flow provided by operating activities was $19.4 million, as compared to $4.5 million for the quarter ended March 31, 1997. The change is primarily due to an increase in operating income related to acquisitions. RESULTS OF OPERATIONS The Quarter Ended March 31, 1998 Compared to The Quarter Ended March 31, 1997 Broadcast revenue for the first quarter of 1998 was $159.2 million, an increase of $59.0 million or 58.9% from $100.2 million during the same quarter of 1997. This increase resulted primarily from the revenue generated at those properties owned or operated during the first quarter of 1998 but not during the comparable 1997 period, including revenues generated from commercial broadcast time received and rights fees from syndicated programming. On a "same station" basis - reflecting results from stations operated in the first quarter of both 1998 and 1997 - broadcast revenue for 1998 was $100.4 million, an increase of $10.3 million or 11.4% from $90.1 million for 1997. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS, Continued Agency commissions for the first quarter of 1998 were $17.2 million, an increase of $5.9 million or 52.2% from $11.3 million during the first quarter of 1997 due to the increase in broadcast revenue. On a "same station" basis, agency commissions for the first quarter of 1998 were $11.3 million, an increase of $1.1 million or 10.8% from $10.2 million for the first quarter of 1997. Broadcast operating expenses for the first quarter of 1998 were $107.4 million, an increase of $40.1 million or 59.6% from $67.3 million during the comparable period of 1997. These expenses increased primarily as a result of expenses incurred at those properties, including broadcast related service businesses, owned or operated during the first quarter of 1998 but not during the comparable period of 1997. On a "same station" basis, broadcast operating expenses for the first quarter of 1998 were $66.2 million, an increase of $5.4 million or 8.9% from $60.8 million for the comparable period of 1997. Depreciation and amortization for the first quarter of 1998 and 1997 was $27.5 million and $13.4 million, respectively. The increase was due to acquisitions during 1997 and the first quarter of 1998. Operating income for the first quarter of 1998 was $3.6 million, a decrease of $1.8 million or 33.3% from an operating income of $5.4 million for the same period of 1997. The decrease in operating income is primarily the result of increased amortization and depreciation expense due to acquisitions made at various dates in 1997 and 1998. Interest expense for the first quarter of 1998 was $24.0 million, an increase of $6.8 million or 39.5% from $17.2 million for the comparable period in 1997. Interest expense increased due to an increase in outstanding debt that was incurred in connection with acquisitions. The gain on the sale of assets in the first quarter of 1997 resulted from the sale of the Company's investment in News Corp. Warrants in February 1997. Income tax benefit was $11.0 million for the first quarter of 1998 and $4.1 million for the first quarter of 1997. The Company recognized an extraordinary loss of $5.6 million, net of income tax credit, in 1997 related to the write off of debt financing costs due to significant amendments to the Company's Credit Facility. Net loss for the first quarter of 1998 was $6.9 million, compared to net loss of $8.1 million reported by the Company for the comparable period in 1997. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS, Continued Year 2000 Computer System Compliance The Year 2000 issue ("Y2K") is the result of computer programs written with date sensitive codes that contain two digits (rather than four) to define the year. As the year 2000 approaches, certain computer systems may be unable to accurately process certain date-based information as the program may interpret the year 2000 as 1900. The Company has substantially completed a Y2K assessment inventory of its computer, broadcast and environmental systems. Additionally, the Company purchased an enterprise license for Y2K compliance testing and repair software. The software has been distributed throughout the Company's locations, where it will be used to assess and repair PC based hardware for Y2K compliance. The Company has also begun a process of requesting Y2K compliance certificates from the appropriate vendors and is instituting policies to ascertain that all future purchases of equipment are Y2K compliant. The Company believes that its Y2K compliance issues will be resolved on a timely basis and that any related costs will not have a material impact on the Company's operations, cash flows or financial condition of future periods. Recent Pronouncements 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. 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 Indenture dated as of February 9, 1998 among Jacor Communications, Inc. ("Jacor"), Jacor Communications Company ("JCC"), the Subsidiary Guarantors named therein and the Bank of New York for JCC's 8% Senior Subordinated Notes due 2010 and Jacor's and the Subsidiary Guarantors Guaranty thereof. Incorporated by reference to Exhibit 4.20 of the Company's Form S-3 Registration Statement, File No. 333-51489. * 4.2 Indenture dated as of February 9, 1998 between Jacor and the Bank of New York for Jacor's Liquid Yield Option Notes due 2018. Incorporated by reference to Exhibit 4.21 of the Company's Form S-3 Registration Statement, File No. 333-51489. * 27 Financial Data Schedule 21 ___________ * Incorporated by reference. (b) Reports on Form 8-K 1. Form 8-K dated January 5, 1998. This Form 8-K described the Company's entering into of a definitive agreement to purchase the assets of 17 radio stations from Nationwide Communications, Inc. and its affiliated entities for a purchase price of $620.0 million. This Form 8-K was subsequently amended in a January 21, 1998 filing with the Commission to include the historical audited financial statements of Nationwide Communications for the nine months ended September 30, 1997 and the unaudited pro forma financial statements reflecting the financial statement effect of such acquisition on the Company. The January 21, 1998 amendment also disclosed the Company's filing of its preliminary prospectus supplements relating to its proposed public offerings of common stock, liquid yield option notes and senior subordinated notes. This Form 8-K was again amended on April 30, 1998 to include the historical audited financial statements of Nationwide Communications for the year ended December 31, 1997 and the unaudited pro forma financial statements reflecting the financial statement effect of such acquisition on the Company. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION (b) Reports on Form 8-K 2. Form 8-K dated February 4, 1998. This Form 8-K described the Company's filing of its definitive prospectus supplements relating to the offer for sale of 5,073,000 shares of common stock in an underwritten public offering, of $426,917,000 aggregate principal amount at maturity of liquid yield option notes due 2018 and of $120.0 million in aggregate principal amount at maturity of 8% Senior Subordinated Notes due 2011. This Form 8-K was subsequently amended in a February 20, 1998 filing with the Commission to revise certain exhibits to the initial filing reflecting the total amount of each security sold in the three public offerings. 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: May 14, 1998 BY /s/ R. Christopher Weber R. Christopher Weber, Senior Vice President and Chief Financial Officer JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES EXHIBIT 27 Financial Data Schedule for the three months ended March 31, 1998
Fiscal-Year-End December 31, 1998 Period-End March 31, 1998 Item Description Amount (1) Cash and cash items 343,439 Marketable securities - Notes and accounts receivable-trade 135,552 Allowances for doubtful accounts 6,702 Inventory - Total current assets 511,629 Property, plant and equipment 249,371 Accumulated depreciation 36,973 Total assets 2,965,039 Total current liabilities 114,759 Bonds, mortgages and similar debt 1,234,462 Preferred stock-mandatory redemption - Preferred stock-no mandatory redemption - Common stock 509 Other stockholders' equity 1,155,745 Total liabilities and stockholders' equity 2,965,039 Net sales of tangible products - Total revenues 159,192 Cost of tangible goods sold - Total costs and expenses applicable to sale and revenues 124,517 Other costs and expenses 31,094 Provision for doubtful accounts and notes 507 Interest and amortization of debt discount 23,958 Income before taxes and other items (17,898) Income tax expense (11,000) Income/loss continuing operations (6,898) Discontinued operations - Extraordinary items - Cumulative effect - changes in accounting principles - Net income (6,898) Earnings per share - primary (.14) Earnings per share - fully diluted (.14) (1) Dollars in thousands except per share amounts.
EX-27 2
5 1000 3-MOS DEC-31-1998 MAR-31-1998 343439 0 135552 6702 0 511629 249371 36973 2965039 114759 1234462 0 0 509 1155745 2965039 0 159192 0 124517 31094 507 23958 (17898) (11000) (6898) 0 0 0 (6898) (.14) (.14)
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